Cutbacks....but what else?

an langer

Ok I'm no expert in economics apart from leaving cert which lets face it is a pile of dung. So I have a question for anyone out there that does....

The government is cutting back on expenditure which is understandable although a royal pain in the ass!

But what is the Dáil doing to get the Irish economy back up and running like normal? I mean like attracting investment from the US or developing some niche in green energy, something to get the money rolling back in? Do you know what I mean? Like, ok you're cutting back on expenditure BUT what are you doing to make more money?

Also, when will we be back to normal again? I heard rumours that we will be twice as rich if not richer than when the celtic tiger roared when we fully recover. When will this happen? a year? two years? or worse 10 years?

Thanks

WinstonSmith

Hey Langer. I have absolutely no formal qualifications in economics whatsoever! I am however interested in political theory and the economic systems inherent therein. I think the best way I can offer my opinion in answer to you is to answer each part of your post separately...

an langer wrote: »

Ok I'm no expert in economics apart from leaving cert which lets face it is a pile of dung. So I have a question for anyone out there that does....

The government is cutting back on expenditure which is understandable although a royal pain in the ass!

But what is the Dáil doing to get the Irish economy back up and running like normal?

Ok. True: government expenditure is being severely curtailed. This is due to a number of reasons. If the government has low taxes as it does presently then it will have less income than if taxes were higher. basic enough so far. now, companies are pulling out of the country because obviously they are concerned entirely with profits. they make more profits if they can pay people less to perform the same duties, then it is well worth their while economically, therefore by moving their business to eastern european countries then this will be the case. this will leave more people unemployed in Ireland and thus less people available to pay taxes. logical conclusion of this will be that government will have less money coming in through taxes and therefore can spens less on expenditure. hope you're still with me.
Now the natural response to this is to cut public spending, but as will be shown below this is not the case (and this is where it links back to political and economic theories and influences who you vote for and why)...

an langer wrote: »

I mean like attracting investment from the US or developing some niche in green energy, something to get the money rolling back in? Do you know what I mean? Like, ok you're cutting back on expenditure BUT what are you doing to make more money?

ok. To attract investment from elsewhere is very difficult at the moment, not least because companies are generally unwilling to invest and expand because there is a poor economic climate and higher risks involved (incidentally there is a poor economic climate and higher risks involved partly because businesses are less willing to invest and expand. It is most certainly a very vicious circle!). Since companies are concerned solely with profit and there is a higher risk than normal that they will not make a profit, the usual incentive is to give companies tax breaks, meaning that they do not have to pay the government taxes. This means that the government only acclaim the taxes from those people employed (which is low since the government has a low tax policy). Extra incentives can be offered to companies to invest but it is along the same lines as this and results in very little coming into the Irish economy in relation to what could be. This is what people mean when they say that the government has sold out and is in the pockets of private businesses. How do we make more money? My answer is to raise taxes and increase nationalisation of services so that the public have to pay for less and thus will have more money available to spend on luxuries which is what fuels the economy (you may have heard the debate on how the public should be encouraged to spend more). This is a basic tenet behind many forms of socialism. Basically the rich are taxed more and the poor taxed less. So encouragement of US firms may not necessarily be a good thing.

an langer wrote: »

Also, when will we be back to normal again? I heard rumours that we will be twice as rich if not richer than when the celtic tiger roared when we fully recover. When will this happen? a year? two years? or worse 10 years?

Thanks

This is complete poppycock. Absolutely nobody on the face of the Earth is able to say how well or badly the Irish economy will respond in the long term. It is unlikely that we will be richer given the current economic forecasts, but again, these are only forecasts and it is impossible to say. Ireland is being hit harder than most other countries precisely because of the Celtic tiger. During this period the government literally sold out to private businesses who grabbed as much profit as humanly possible before exporting their businesses to eastern europe to grab the profit there. Eventually what is happening in Ireland now will happen in these countries and they will move elsewhere. With companies exported, the Irish economy has been left in a catastrophic mess and yet the government at the moment wants to invite more private businesses to repeate the process. this is of course only my opinion, but it is why I oppose free market economics and support socialism which is the opposite of this. Feel free to query any of this.

gurramok

Eh Winstonsmith, alot of investment since at least 2002 was in property. Thats why OP, Ireland has really no home grown industries to rely on and we are being hit the hardest.

Basically, all the money went to investing in property to make a quick buck. When the property bubble burst, alot of people got burnt.

Who knows what the govt are doing to ramp up Irish industry for the future, i have not seen anything yet.

My answer is to raise taxes and increase nationalisation of services so that the public have to pay for less and thus will have more money available to spend on luxuries which is what fuels the economy (you may have heard the debate on how the public should be encouraged to spend more).

Where will the money come from to pay for all of this extra on top of the public sector pay bill?

Its certainly not coming from the consumer\taxpayer who are on average up to their eyeballs in debt.

WinstonSmith

gurramok wrote: »

Eh Winstonsmith, alot of investment since at least 2002 was in property. Thats why OP, Ireland has really no home grown industries to rely on and we are being hit the hardest.

Basically, all the money went to investing in property to make a quick buck. When the property bubble burst, alot of people got burnt.

Who knows what the govt are doing to ramp up Irish industry for the future, i have not seen anything yet.



Where will the money come from to pay for all of this extra on top of the public sector pay bill?

Its certainly not coming from the consumer\taxpayer who are on average up to their eyeballs in debt.

If taxes are raised and the increased revenue used to nationalise services, such as transport, education, health etc.. (or progressively one at a time so as to spread the expenditure over time), then people will still be getting their salaries (even with a bigger bite from the government) but will not have to pay for as many everyday services and will have more money available to spend on luxuries, such as high street shopping. Over time, the average person would rise out of debt since education would be paid for them and the government would be able to both fund services and increase their revenue from increased private sector taxes. hope this answers your question.

Spudmonkey

WinstonSmith wrote: »

With companies exported, the Irish economy has been left in a catastrophic mess and yet the government at the moment wants to invite more private businesses to repeate the process. this is of course only my opinion, but it is why I oppose free market economics and support socialism which is the opposite of this. Feel free to query any of this.

A lot of employment came from the building sector in recent years. Thats all but gone now. Now we are going to have to rely on what multinationals are here. Ireland has no large indigenous industries which could be used to bring in money from exports. Unless someone sets these up, we need more foreign private businesses.

WinstonSmith

Ireland does have large amounts of natural resources such as limestone, potatoes, stone. these have not been utilised and because people are happy enough to rest on the private sector which has contributed towards the currect economic problems. 'The Path to Freedom' by Michael Collins touches on this slightly also.

Spudmonkey

Yeah we need to export our stone, the last thing we need in this country is stone. Lets hope that blight doesn't affect those potatoes either.

I think that something we could make better use of is out fishing industry, Europe has gotten far more from us than we've got from them.

Sand

Yeah stone...most of the planet has vast quantities of stone tbh. Being made of it and all.

Ireland has very few natural resources, barring rain/freshwater which might actually become valuable in the future if we can stop ****ting up most of it like in Galway. Ireland has even less infrastructure to exploit whatever natural resources it does have. So people talk in theoretical terms about the vast deposits of free money ( a.k.a. fish ) floating around our coasts without examining the cost of putting in place the infrastructure to extract such free money.

The established EU fishing fleets had such infrastructure, Ireland did not, and we decided to take cash up front rather than spend cash we didnt have to build infrastructure we didnt have to fish them ourselves to export them to .... well whoever we could afford to sell them to given we wouldnt have a free market inside the EU.

In terms of Irish economic growth in the future - there isnt much US investment to be had right now for obvious reasons. The best the Irish government can do is encourage moderation in wages and business costs to try recover Irelands competiveness in the international markets. Grinding poverty tends to do so regardless of government policy, so Ireland is well on the way to recovery around 2030 or so.

Mr.Micro

One question I would ask is who is going to invest in Ireland when they see the troupe of clowns that we have running the country? A building boom was created and now its gone that was our only ever resource ie money in the form of credit. Each month our credit rating as a nation seems to be losing another star. One resource was tourism but we priced ourselves out of that too. We need to start innovating instead of waiting for others to come here to do it for us.

Spudmonkey

Sand wrote: »

So people talk in theoretical terms about the vast deposits of free money ( a.k.a. fish ) floating around our coasts without examining the cost of putting in place the infrastructure to extract such free money.

If we were to exploit any sort of natural resources, the necessary infrastructure would have to be put in place.

WinstonSmith

Spudmonkey wrote: »

If we were to exploit any sort of natural resources, the necessary infrastructure would have to be put in place.

granted, but at least then we would be able to dictate the strength of our own economy instead of being overly reliant on foreign investment.

Spudmonkey

We still need something that no-one else has but that everyone wants!

Time Magazine

Why do people always talk about our natural resources as a source of growth? If African nations can barely make a few dollars a day on fish, why do people think we can sustain wages of €40,000 each on the things? Agricultural prices have been falling for a century.

The irony of you guys not being able to find our greatest resource, and the product of which we can tap into and export very cheaply, is really amsuing . Here's a hint:

you're thinking with it.

solice

Spudmonkey wrote: »

We still need something that no-one else has but that everyone wants!

Energy!

Wind and Ocean (wave and tidal) is more abundant off the west coast of ireland than most of Europe! At the moment we rely on importing almost all of our energy requirements. This is a major drain on our economy. Turn the net loss into a net gain by developing this sector, ending our reliance on Russia and Middle East and become a net exporter of energy. Possible by the construction of the interconnector with the UK and open market across the EU.

IDA, EI and the govt need to attract investment in this area and develop the indigenous industry

Spudmonkey

The Economist wrote: »

Why do people always talk about our natural resources as a source of growth? If African nations can barely make a few dollars a day on fish, why do people think we can sustain wages of €40,000 each on the things? Agricultural prices have been falling for a century.

The irony of you guys not being able to find our greatest resource, and the product of which we can tap into and export very cheaply, is really amsuing . Here's a hint:

you're thinking with it.

I presume you don't mean landlocked African nations? If so I think I can point out why their fishing industry may not be a worldleader

I don't think our highly skilled workforce really separates us from other nations anymore. In fact I work with guys from countries who have what would be considered an inferior education system and they have graduates of a far higher quality than ours. I presume this is what you are getting at?

Spudmonkey

solice wrote: »

Energy!

Wind and Ocean (wave and tidal) is more abundant off the west coast of ireland than most of Europe! At the moment we rely on importing almost all of our energy requirements. This is a major drain on our economy. Turn the net loss into a net gain by developing this sector, ending our reliance on Russia and Middle East and become a net exporter of energy. Possible by the construction of the interconnector with the UK and open market across the EU.

IDA, EI and the govt need to attract investment in this area and develop the indigenous industry

Maybe, I'm not sure, I think it would take a huge investment just to get Ireland using completely green energy.

Also with a lot of europe using nuclear which is in itself a very clean way of generating power, I don't know why many european countries would favour imported energy over their own?

solice

Spudmonkey wrote: »

Maybe, I'm not sure, I think it would take a huge investment just to get Ireland using completely green energy.

Also with a lot of europe using nuclear which is in itself a very clean way of generating power, I don't know why many european countries would favour imported energy over their own?

There will always be a demand for more energy.

It will be costly to develop the industry here but the long term benefits are more people employed in indigenous industry and less susceptible to global economic downturns (airtricity announcing 200 people to be employed in wind energy last week)....cleaner and greener industry focus in ireland attracting other players in the industry, net exporter adding money to govt coffers, cheaper energy costs attracting more industry to the country.

And just a point, the cleanliness of nuclear power is a matter of opinion.

alan4cult

I think if we invest in green energy we can offer a flat rate energy cost to future business. An energy cost that doesn't go up and down with oil prices.

Spudmonkey

solice wrote: »

There will always be a demand for more energy.

It will be costly to develop the industry here but the long term benefits are more people employed in indigenous industry and less susceptible to global economic downturns (airtricity announcing 200 people to be employed in wind energy last week)....cleaner and greener industry focus in ireland attracting other players in the industry, net exporter adding money to govt coffers, cheaper energy costs attracting more industry to the country.

And just a point, the cleanliness of nuclear power is a matter of opinion.

I've no doubt that there will always be a need for more energy, it's the idea that we might produce it cheaper than other european countries that I can't see happening.

Don't get me wrong, if it happened, brilliant...

Nuclear is one of the cleanest ways of generating power out there, once it's handled properly. This is a debate for another forum however.

book smarts

Mr.Micro wrote: »

We need to start innovating

I love it when people say this. How exactly do we innovate?

They say some gibberish like: "Um, uh we um, need to encourage people and set up a commitee to review the status of innovation in this country, um ok?" (whatever the fukc that means).

A start up company is at its heart a person, a techie nerd probably, who had an idea and built a prototype or website or whatever at home. He came up with the idea himself and didn't need any fukcing committee to help. There is no culture of that in this country. Our education system doesn't encourage it, and our youth ridicule the "nerds".

Also there is no acceptance of failure, and a rich culture of blame. The media immediately looks for a scapegoat, someone to blame, a target. Anyone who fails is immediately shot down in flames by the ever present naysayers. The lesson is, never try.

That is why this "innovation" people talk about, will here only ever just be talked about, while the rest of the world just fukcing gets on with it.

Mr.Micro

book smarts wrote: »

I love it when people say this. How exactly do we innovate?

Just like everybody else at the beginning. If other countries do it why not us? Start in the education process. We must be one of the few countries where science is an optional subject for the leaving cert, and even those who take any science then are few in number. We need to get to grips with technology instead we have other countries do it for us.

djpbarry

book smarts wrote: »

A start up company is at its heart a person, a techie nerd probably, who had an idea and built a prototype or website or whatever at home.

Really? CRH, Smurfit, Ryanair, AIB, Kerry Group, Glanbia, Greencore, INM...

All began with 'techie nerds', did they?

book smarts wrote: »

Our education system doesn't encourage it, and our youth ridicule the "nerds".

I hardly think bullying can be used as an excuse for our current economic predicament.

book smarts

I'm talking about technological innovation, not business innovation. This is, at it's heart, "techie nerds". A techie nerd scientist or engineer who takes the problem home with him because he loves the problem solving process itself.

Tech innovation is one of the much heralded possible things to help us recover. It's better than the "innovation" of Ryanair in charging people to use the toilet on planes or the like.

And bullying is certainly one reason why kids who would otherwise have gotten into science and engineering don't and become estate agents or whatever.

djpbarry

book smarts wrote: »

I'm talking about technological innovation, not business innovation.

But an 'idea' doesn't necessarily have to be a scientific breakthrough for it to be economically significant. Ryanair is a case in point - very simple idea that has had massive economic implications. It doesn't even have to be that groundbreaking - it could be just something that you have a passion for and you think you can do a good job of it. For example, have a look at some of the businesses mentioned on the shortlist for the 2009 Ernst & Young Entrepreneur of the Year Award: Taxback.com, Irish Dog Foods, Flahavan’s, Paddywagon Tours, etc.

book smarts wrote: »

And bullying is certainly one reason why kids who would otherwise have gotten into science and engineering don't and become estate agents or whatever.

And of course we all know that bullying is a phenomenon that is unique to Ireland.

Tipsy Mac

Our economy was built on house sales and nothing more, we need to sell 70,000 each year and have the €100,000 taxation between levys and VAT per house to sustain the public service at it's current level, no other industry can save us.

WinstonSmith

Tipsy Mac wrote: »

Our economy was built on house sales and nothing more, we need to sell 70,000 each year and have the €100,000 taxation between levys and VAT per house to sustain the public service at it's current level, no other industry can save us.

Actually the Irish economy depends largely on accounting and legal services, tourism and stock broking. These types of industry contribute app 49% of GDP and 64% of employment, in contrast to the 24%(app) that are employed in the property sector. I do not claim that the property sector did not contribute a large part to our successes, and now our failings, but to suggest it as built on "house sales and nothing more" shows an ignorance of the Celtic Tiger and what it incorporated.

dvpower

WinstonSmith wrote: »

Actually the Irish economy depends largely on accounting and legal services, tourism and stock broking. These types of industry contribute app 49% of GDP and 64% of employment, in contrast to the 24%(app) that are employed in the property sector. I do not claim that the property sector did not contribute a large part to our successes, and now our failings, but to suggest it as built on "house sales and nothing more" shows an ignorance of the Celtic Tiger and what it incorporated.

Really? I'd like to see the evidence for that claim. Or do you mean the entire services sector?

book smarts

djpbarry wrote: »

But an 'idea' doesn't necessarily have to be a scientific breakthrough for it to be economically significant. Ryanair is a case in point - very simple idea that has had massive economic implications. It doesn't even have to be that groundbreaking - it could be just something that you have a passion for and you think you can do a good job of it. For example, have a look at some of the businesses mentioned on the shortlist for the 2009 Ernst & Young Entrepreneur of the Year Award: Taxback.com, Irish Dog Foods, Flahavan’s, Paddywagon Tours, etc.
And of course we all know that bullying is a phenomenon that is unique to Ireland.

Some of those "ideas" are silly service fads, easily duplicated and hardly "innovative". If those are being considered for awards it's a pretty sad state of affairs. "Paddywagon tours"? Gimme a fukcin break. Compare that to some high tech chip manufacturer in Israel, for example. Which ultimately adds more intellectual value to the country? Which inspires and creates more offshoot companies? We should be concentrating on that kind of thing instead of silly gimmicks.

And maybe if science and engineering was considered cool like in Asian schools, we'd have comparable levels of people going into them.

djpbarry

book smarts wrote: »

Some of those "ideas" are silly service fads, easily duplicated and hardly "innovative".

So what? Are they of no value? Have a look at some of the industries represented on the Forbes Global 2000: business services and supplies, food markets, food, drink & tobacco, hotels, restaurants & leisure, household & personal products, media, retailing, transportation. None of ‘em are making IC’s, so I guess we should scrap the lot, eh?

book smarts wrote: »

And maybe if science and engineering was considered cool like in Asian schools, we'd have comparable levels of people going into them.

In my experience, the number one reason why kids in this country don’t do subjects like higher-level maths is laziness and nothing else. The likes of maths and physics are perceived as being too difficult and most kids I have taught just aren’t bothered putting the time in – the way they see it, they can get the same number of points doing something “easier”.

Having said that, some people just don’t have a head for that sort of thing. According to you, these people are economically worthless because they’re not going to develop the next Pentium.

Mr.Micro

book smarts wrote: »

And maybe if science and engineering was considered cool like in Asian schools, we'd have comparable levels of people going into them.

Since most technological advances come as result of R&D in both the above fields it is hard to see how Ireland can advance as the uptake of sciences and related subjects is very poor. Perhaps one area that could be developed is agricultural/horticultural expertise since we are food producing nation and farm/agricultural engineering and allied biosciences.

Darragh29

I'm really wondering where 500,000 jobs are going to come from. We are being told to "wait for the upturn", this philosophy is going to be the ruination of us. We have to create our own jobs, nobody is going to come here and do it for us, upturn, green shoots or not... This is when our ultimate downfall I think is going to come, when we discover that we cannot return people to employment...

WinstonSmith

dvpower wrote: »

Really? I'd like to see the evidence for that claim. Or do you mean the entire services sector?

well I actually mean the services sector, but I should have pointed that out and I should have included these links in the first post also:

http://www.cso.ie/

http://www.cso.ie/releasespublications/documents/economy/current/nie.pdf

irish_bob

WinstonSmith wrote: »

Actually the Irish economy depends largely on accounting and legal services, tourism and stock broking. These types of industry contribute app 49% of GDP and 64% of employment, in contrast to the 24%(app) that are employed in the property sector. I do not claim that the property sector did not contribute a large part to our successes, and now our failings, but to suggest it as built on "house sales and nothing more" shows an ignorance of the Celtic Tiger and what it incorporated.

half the legal professionals in the country spent all thier time working on property deals in the past ten years , accountants to a lesser degree but they were kept busy too

this economy was a one trick pony , the construction boom is gone forever and due to the redicolously high wages we pay ourselves , manufacturing isnt going to get us out of the ditch either

WinstonSmith

irish_bob wrote: »

half the legal professionals in the country spent all thier time working on property deals in the past ten years , accountants to a lesser degree but they were kept busy too

this economy was a one trick pony , the construction boom is gone forever and due to the redicolously high wages we pay ourselves , manufacturing isnt going to get us out of the ditch either

evidence?

irish_bob

WinstonSmith wrote: »

evidence?

house building is down 80% , multinationals are upping sticks and moving to cheaper labour markets , the corpse that is the irish economy , you just tripped over it , what more evidence do you want

gurramok

Look up finfacts Winston, plenty of analysis there.

Also, ask any solicitor. The work ain't no longer there for them so some are finding times very tough.

WinstonSmith

irish_bob wrote: »

multinationals are upping sticks and moving to cheaper labour markets

this i contend is not entirely due to the collapse of the property market. for example, the global dowwnturn and the possibility of cheaper labour in Eastern European countries were surely factors in multinationals deserting...

irish_bob

WinstonSmith wrote: »

this i contend is not entirely due to the collapse of the property market. for example, the global dowwnturn and the possibility of cheaper labour in Eastern European countries were surely factors in multinationals deserting...

never said it was , read my post again , i said wages were too high here

WinstonSmith

Granted bob, you didn't but other people did and they are the ones I was aiming this post at. Apologies for the crossed wires.