Why neo-classical economists are shills of Ireland's capitalist class

synd

Never has the phrase ''know thy enemy'' been of greater importance. At present we face massive reductions in social expenditure, wage cuts and the virtual theft of our public assets. NAMA is quite literally the greatest appropriation of public wealth by a socio-economic elite since the Cromwellian plantation. Yet society is continuously being told by both politicians and economists that we must accept such barbarous assaults, we are being indoctrinated with the idea that the current acquisition of public wealth is a natural occurrence and that we have virtually no realistic alternative. Observing the claims of either the gov or economic commentators in isolation is of little use, we must understand and then de-construct the theoretical foundations of Ireland's socio economic elite.

What is it legitimizes gov policy at the moment ? The answer can be found in an antiquated theoretical economic perspective, largely grounded in what is known as the neo-classical school. Many aspects of neo-classical rationalism have been exposed as quack mysticism within contemporary economic research. However many political policies are directly predicated upon such ridiculous models. Economists who tout the govs line are well paid for their services - whether they work in academia or for IBEC.

The gov are at present calling for wage cuts/reduction in social expenditure. In reality this will lead to an invariable decrease in overall demand, therefore hasten the reduction in investment and exasperate the current recession. Removing money from circulation will increase the rate of economic decline - this is an unmitigated fact and one that the neo-classicists prefer people not to know about. Furthermore, those with a highest propensity towards consumption are the lower middle and working class, therefore to target these people is not only stupid (and wrong) but it would actually make more sense to provide them with (higher incomes). A higher marginal propensity to consume results in an increased factor of work being done, for instance (a propensity of 0.75 will mean that any decision to spend extra money will require four times as much labor to be done) ect.- so whatever may be borrowed has the knock on effect of creating more work, therefore generating more income, increasing investment ect. Among the most espoused excuses not to engage in greater public expenditure during the Celtic tiger was the fact that the price of land was too high - needless to say the funds going towards nama could be put towards immeasurably more useful projects. One rather practical solution would be to tax the rich and increase borrowing for lower income brackets - additionally the Laffer Curve is inconsequential given high earners tendency to hoard. The toxic debt run up by speculators should be repudiated and public banks created. With regards borrowing, although there may be obstacles - alternative borrowing arrangements can be facilitated.

The right wing fiscal/neo-classical solution is rather than stimulus, to let the recession ''bottom out''. Naturally, while we are waiting for the invisible hand to get its finger out of its invisible arse - thousands will lose their jobs, social welfare will be cut and our collective assets will be stolen/given away at a discount to the elite who created this mess. However, it is very important to understand that this is precisely what proponents of the neo-classical/neo-liberal line want.

These scum (and they are scum, make no mistake about it) believe that wages should be slashed in order to create an environment conductive to investment. They believe (and they dont like to tell people about this) that by forcing down wages and selling off/reducing peoples ability to use subsided social services - that peoples desperation and suffering will make them more receptive to the ''discipline of the market''. Its worth keeping in mind that most of these economists are on astronomical wages.

Behind the assault lie groups such as IBEC - the organization representing Irish capitalist class interests. They - in conjunction with the gov have spouted consistent waves of propaganda with regards public sector wages and the nature of our social services. To clear up a few myths espoused by IBEC

According to the OCED benefits and wages database Irish private sector wages are around 11% below the EU15 average. Employers benefit from the lowest social security contributions in Europe standing at 10% compared to 45% in France or 35% in Italy. Irish workers work nearly three weeks more per year than their European counterparts. Im really perplexed as to the suggestion that we are in someway ''uncompetitive'' with our European counterparts. The most comprehensive review of the Irish public sector was carried out by the OCED in 2008. Public spending increased 30% between 1995 and 2005. It did not entail an increase in borrowings, rather was retrieved from the greater share of surplus. Ireland ran a huge budget surplus until 2007. According to the OCED Ireland ranks third lowest with regards public expenditure in % of the GDP -ahead only of South Korea and Mexico.

As far as the pensions go public sector workers pay 6 and a half % of their wage towards it - where private sector schemes exist the average rate is 5%. Higher clerical officers for instance start on 24,255py and over the course of twelve years hit 36,977py - the average industrial wage. Support officers in an-post start at 24,024 - after 14 years reach 36,087. There (are) however administrators and consultants that receive astronomical wages - academics in UCD on 400,000py and many university admins on 250,000py. When these are calculated into the average it can naturally distort the overall picture, needless to say this strata of the public sector are un-unionized.

So what do these liberal propagandists mean when they say Ireland is uncompetitive when we take the above into consideration ?. What they mean is that we are uncompetitive with eastern European labor markets. Now, in order to compete with a Polish wage we would require a decrease in the region of 80% - something that is ridicules given the cost of living ect. However, it is important to understand that these liberal lapdogs who espouse IBECs line - are in favor of the very deregulation that institutionalizes such gross reductions in wage ect. They seek to remove restrictions on capital so it may relocate and undermine various regional agreements ect.

The neo-classical/neo-liberal line is essentially about making more immediate profit and the justification of large scale acquisition. Its about time that people in Ireland started to take action - however its important to understand the nature of what we are dealing with so we have a clear tactical line on how to deal with it. While I would be unopposed to Keynesian type policy to alliviete social suffering - It is worth noting that bubbles carry their own problems and represent a systemic inadequacy with capitalism itself. As a socialist I personally think that we eventually need to replace the entire system given its un-reliable/inefficient/disaster prone nature. Additionally people must realize that whatever mainstream party they vote for in a capitalist society - it is essentially IBEC and Mulitinational interest groups who determine political policy. Right wing economists are to the capitalist class today, what the priesthood was to the aristocracy during the feudal era. In order to democratize society we must do away with the mythology that legitimizes upper class exploitation.

Amhran Nua

Possibly you are confusing the neoclassical synthesis with Austrian school and later liberal free marketeer economics?

irish_bob

synd wrote: »

Never has the phrase ''know thy enemy'' been of greater importance. At present we face massive reductions in social expenditure, wage cuts and the virtual theft of our public assets. NAMA is quite literally the greatest appropriation of public wealth by a socio-economic elite since the Cromwellian plantation. Yet society is continuously being told by both politicians and economists that we must accept such barbarous assaults, we are being indoctrinated with the idea that the current acquisition of public wealth is a natural occurrence and that we have virtually no realistic alternative. Observing the claims of either the gov or economic commentators in isolation is of little use, we must understand and then de-construct the theoretical foundations of Ireland's socio economic elite.

What is it legitimizes gov policy at the moment ? The answer can be found in an antiquated theoretical economic perspective, largely grounded in what is known as the neo-classical school. Many aspects of neo-classical rationalism have been exposed as quack mysticism within contemporary economic research. However many political policies are directly predicated upon such ridiculous models. Economists who tout the govs line are well paid for their services - whether they work in academia or for IBEC.

The gov are at present calling for wage cuts/reduction in social expenditure. In reality this will lead to an invariable decrease in overall demand, therefore hasten the reduction in investment and exasperate the current recession. Removing money from circulation will increase the rate of economic decline - this is an unmitigated fact and one that the neo-classicists prefer people not to know about. Furthermore, those with a highest propensity towards consumption are the lower middle and working class, therefore to target these people is not only stupid (and wrong) but it would actually make more sense to provide them with (higher incomes). A higher marginal propensity to consume results in an increased factor of work being done, for instance (a propensity of 0.75 will mean that any decision to spend extra money will require four times as much labor to be done) ect.- so whatever may be borrowed has the knock on effect of creating more work, therefore generating more income, increasing investment ect. Among the most espoused excuses not to engage in greater public expenditure during the Celtic tiger was the fact that the price of land was too high - needless to say the funds going towards nama could be put towards immeasurably more useful projects. One rather practical solution would be to tax the rich and increase borrowing for lower income brackets - additionally the Laffer Curve is inconsequential given high earners tendency to hoard. The toxic debt run up by speculators should be repudiated and public banks created. With regards borrowing, although there may be obstacles - alternative borrowing arrangements can be facilitated.

The right wing fiscal/neo-classical solution is rather than stimulus, to let the recession ''bottom out''. Naturally, while we are waiting for the invisible hand to get its finger out of its invisible arse - thousands will lose their jobs, social welfare will be cut and our collective assets will be stolen/given away at a discount to the elite who created this mess. However, it is very important to understand that this is precisely what proponents of the neo-classical/neo-liberal line want.

These scum (and they are scum, make no mistake about it) believe that wages should be slashed in order to create an environment conductive to investment. They believe (and they dont like to tell people about this) that by forcing down wages and selling off/reducing peoples ability to use subsided social services - that peoples desperation and suffering will make them more receptive to the ''discipline of the market''. Its worth keeping in mind that most of these economists are on astronomical wages.

Behind the assault lie groups such as IBEC - the organization representing Irish capitalist class interests. They - in conjunction with the gov have spouted consistent waves of propaganda with regards public sector wages and the nature of our social services. To clear up a few myths espoused by IBEC

According to the OCED benefits and wages database Irish private sector wages are around 11% below the EU15 average. Employers benefit from the lowest social security contributions in Europe standing at 10% compared to 45% in France or 35% in Italy. Irish workers work nearly three weeks more per year than their European counterparts. Im really perplexed as to the suggestion that we are in someway ''uncompetitive'' with our European counterparts. The most comprehensive review of the Irish public sector was carried out by the OCED in 2008. Public spending increased 30% between 1995 and 2005. It did not entail an increase in borrowings, rather was retrieved from the greater share of surplus. Ireland ran a huge budget surplus until 2007. According to the OCED Ireland ranks third lowest with regards public expenditure in % of the GDP -ahead only of South Korea and Mexico.

As far as the pensions go public sector workers pay 6 and a half % of their wage towards it - where private sector schemes exist the average rate is 5%. Higher clerical officers for instance start on 24,255py and over the course of twelve years hit 36,977py - the average industrial wage. Support officers in an-post start at 24,024 - after 14 years reach 36,087. There (are) however administrators and consultants that receive astronomical wages - academics in UCD on 400,000py and many university admins on 250,000py. When these are calculated into the average it can naturally distort the overall picture, needless to say this strata of the public sector are un-unionized.

So what do these liberal propagandists mean when they say Ireland is uncompetitive when we take the above into consideration ?. What they mean is that we are uncompetitive with eastern European labor markets. Now, in order to compete with a Polish wage we would require a decrease in the region of 80% - something that is ridicules given the cost of living ect. However, it is important to understand that these liberal lapdogs who espouse IBECs line - are in favor of the very deregulation that institutionalizes such gross reductions in wage ect. They seek to remove restrictions on capital so it may relocate and undermine various regional agreements ect.

The neo-classical/neo-liberal line is essentially about making more immediate profit and the justification of large scale acquisition. Its about time that people in Ireland started to take action - however its important to understand the nature of what we are dealing with so we have a clear tactical line on how to deal with it. While I would be unopposed to Keynesian type policy to alliviete social suffering - It is worth noting that bubbles carry their own problems and represent a systemic inadequacy with capitalism itself. As a socialist I personally think that we eventually need to replace the entire system given its un-reliable/inefficient/disaster prone nature. Additionally people must realize that whatever mainstream party they vote for in a capitalist society - it is essentially IBEC and Mulitinational interest groups who determine political policy. Right wing economists are to the capitalist class today, what the priesthood was to the aristocracy during the feudal era. In order to democratize society we must do away with the mythology that legitimizes upper class exploitation.

big deal , you believe ibec are scum , i believe jack o connor is scum , bo hoo

Permabear

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irish_bob

donegalfella wrote: »

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nice to see you back donegal , your absence was very noticable of late

oh and good post too

erictheviking

donegalfella wrote: »

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I don't know about that.....by far the lowest employer PRSI rate and low corporation tax

donegalfella wrote: »

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How dare those workers ask for a half decent wage:rolleyes:

donegalfella wrote: »

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How dare those workers ask for protection from unscrupulous employers:rolleyes:

donegalfella wrote: »

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This may be so, but they benefit from lower employer PRSI contributions etc. its swings and roundabouts.

donegalfella wrote: »

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Agree with this.

donegalfella wrote: »

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I completed a science course some 20 years ago and over half did not make it to the 2nd year so its been going on a while! Lets face it! Irish teenagers hate Maths!

your arguments all lean towards the rich getting even richer by living off the backs of the poor while the ordinary PAYE worker should take a pay cut and like it, then get used to the lifestyle of a siberian peasant.

Why should the ordinary PAYE paying irishman/woman make all the sacrifices?

Permabear

This post has been deleted.

Diarmuid

synd wrote: »

Employers benefit from the lowest social security contributions in Europe standing at 10% compared to 45% in France or 35% in Italy.

And I'd suggest you spend a little time living in France to experience first hand what it's like trying to get a job under that regime. I do and here's a bit of friendly advice, if anyone in Ireland tries to convince you that France's labour market model is a good one to copy, run a mile.

rumour

I just can't comphrehend the juvenile mindset that considers the baseline as borrow, borrow, borrow.

It is not a capiltalist conspiracy to face up to a situation. After borrowing so much money in the last few years we have run out of people to borrow from. Oh and by the way there is a credit crisis going on.

It is plausible that we might be asked how will we pay it back, in this country the answer currently by the organistaion for protection of the 'worker' is mobilise for stike action. Would you lend your money to these people?

So then maybe we can't borrow, well then lets put our collective socialist thinking caps on. Presto the solution. TAX the RICH.

Hell lets go one step further, lets confiscate everything they have, even the will to get up in the morning, that'll teach them economically illiterate neo-liberal idiots, spawn of satan and George Bush combined.

Fast forward six months maybe a year and the collective socialist brain storming session is required as again the money has run out. When the conclave of comrades puffs white smoke the solution is clear.

We must borrow.

Is this Zimbabwae or Ireland?

VEXED:mad:

rumour

Diarmuid wrote: »

And I'd suggest you spend a little time living in France to experience first hand what it's like trying to get a job under that regime. I do and here's a bit of friendly advice, if anyone in Ireland tries to convince you that France's labour market model is a good one to copy, run a mile.

Having many friends there and having lived there I couldn't agree more.

Lockstep

Diarmuid wrote: »

And I'd suggest you spend a little time living in France to experience first hand what it's like trying to get a job under that regime. I do and here's a bit of friendly advice, if anyone in Ireland tries to convince you that France's labour market model is a good one to copy, run a mile.

I did (Strasbourg); I found it to work fine.
Getting a job wasn't a problem for me, even when my French was limited to communicative.

Diarmuid

kickoutthejams wrote: »

I did (Strasbourg); I found it to work fine.
Getting a job wasn't a problem for me, even when my French was limited to communicative.

EU job by any chance?

In any case that's does not stack up with the general French experience. Even in good times 20%+ 18-25 year olds couldn't get jobs.
http://fr.wikipedia.org/wiki/Ch%C3%B4mage_en_France
Tell those people that "it isn't a problem"

Permabear

This post has been deleted.

Lockstep

Diarmuid wrote: »

EU job by any chance?

Nah, I went over straight after school. Quite a few places were taking on CVs, everywhere from bars, to Virgin, to McDonalds.

Diarmuid wrote: »

In any case that's does not stack up with the general French experience. Even in good times 20%+ 18-25 year olds couldn't get jobs.

You mean that unemployment is increasing similar to Britian (7.9%), Germany (8.3%) amidst the worldwide recession?
Youth unemployment (16-24 year olds) in Britain is currently at 19.1%

Diarmuid wrote: »

http://fr.wikipedia.org/wiki/Ch%C3%B4mage_en_France

Ah come on; Wikipedia?

Diarmuid wrote: »

Tell those people that "it isn't a problem"

I said it wasn't a problem. I went over in 2007.

population

The op is just going off on one today. See his other post on sending people who disagree with him to Gulags.

Class act

anonymous_joe

I suppose non neo-classicist economists wouldn't be of the belief that some of the highest paid civil servants in Europe in a country with higher expenditure than income should have their wages reduced?

Permabear

This post has been deleted.

Lockstep

But all that gulag misery is offset by how damn happy we are when we're bringing in the harvest from the 5 year plan:(

book smarts

Resorting to Ad Hominem attacks just makes you look like a pr1ck.

synd

Ireland currently has a social welfare bill that exceeds 70 percent of total Exchequer revenue. The government has added over 85,000 employees to the public payroll over the past decade, increasing the state wage bill by €6 billion per annum since the year 2000. We have some of the highest paid public servants in Europe, with Irish teachers now getting paid 37 percent more than their counterparts in the UK. Of course we face massive reductions in social expenditure and public wages.

You are diverting attention from the main issue as usual. The central point is that reducing expenditure and lowering wages in order to create an environment conductive to investment rests on a failed economic model. If you take money out of economic circulation - in the short term you might see a spurt of profitability in savings made with regards expenditure however due to the consequent decrease in consumption - overall demand falls, thereafter investment declines. Essentially, the capitalist class in seeking to offset an immediate problem only serve to exasbherate the situation. Moreover the neo-classical tripe about reaching some ground zero is nothing more than hot air - the market tends towards disequilibrium, it always has and always will. The neo-classical prescription would deepen the recession - this is a fact.

But what is your "realistic alternative"? I quote: "As a socialist I personally think that we eventually need to replace the entire system...." Abolishing liberal capitalism is not a "realistic alternative," synd, despite your wishful thinking.

Liberal capitalism has never existed, its a Utopian abstraction. What exists in the real world (something you evidently don't know much about) is state capitalism, which to a greater or lesser extent consists of controlled markets. Furthermore - just to remind you of a fact that makes you cringe, the most successful economies of the developed world have historically advanced under highly regulated markets. As for a socialist economy - entirely visible, works both in reality (it functions today in many places) and theory, unlike your ''anarchist capitalism'' which works in neither. You advocate a non existent society where both the state and democracy have been abolished, virtually every commodity is privatized (including water) and law is owned by private business. You still havnt answered my question about what would happen if a wealthy financere raped an 8ry old and owned the police - the court and the jails. Don't get your high horse about "realistic alternatives'' DF

You complain that "NAMA is quite literally the greatest appropriation of public wealth by a socio-economic elite since the Cromwellian plantation"—but your socialist "solution" would see the greatest expropriation of private wealth ever seen in Ireland, placing all Irish assets at the disposal of the Party (i.e. an unelected elite). We know how well your brand of socialism worked for other countries. Are you aware that the average Cuban earns $17 a month?

NAMA is a morally reprehensible case of accumulation via dispossession on the part of this nations ruling class. However it is an intrinsic aspect of existing capitalism ie. (the socialization of risk and the privatization of reward). Considering the tendency towards upward re-distribution both in terms of surplus extraction and acquisition of public property in order to facilitate the process of private accumulation - we should In my opinion, end the scenario by taking capital under public ownership. On the issue of democracy, It is liberals like you who disagree with democracy - in fact, the system you advocate far closer resembles the militaristic organizational structure of USSR than the democratic libertarian socialism I propose . You advocate a board of directors (i.e. an unelected elite) in place of a politburo and managers in place of political officers. I believe the workplace should be organized along ''democratic'' lines - you don't. Instead you advocate a dictatorship of the rich and the consolidation of all socio-economic power into the hands of a few oligarchs. Neo-liberals are basically fascists in denial. Personally I have little time for political parties - although I make some exception in the case that the party mandate holds the democratization of the economy as a central component. Incidentally, Cuba (which is an anti democratic society) does have a higher living standard than the majority of developing nations running par - the state provides most basic facilities, such as health, education, housing, occupation ect. Compare that to say Somalia - which is perhaps the closest approximation of ''free market capitalism'' in existence.

Can you actually critique neoclassical economics, or can you just sling mud -- "quack mysticism," "ridiculous models" -- and hope that some of it sticks? Would you care to take an actual neoclassical economic model and tell us exactly why it is "ridiculous"?

Lets just take a random assumption such as perfect information for starts. The idea that all market actors are rational beings who have full knowladge of their respective transactions ect.

In other words, the government should continue paying hugely inflated public wage bills and social welfare bills with borrowed money, so as to "sustain demand"? Maybe we should just distribute borrowed billions on street corners instead.

Sustaining demand would be a step in the right direction, however the general idea would to be (increase demand) for rather obvious reasons. ''The problem is that the only way we can prevent the economy from contracting in a deflationary spiral is to engineer inflation by pumping money into society, dramatically easing credit conditions and forcing people to spend.'' McWilliams. The keynesian prescription makes sense in terms of the current situation. Of course you will disagree with this citing that ''demand cannot be forced'' and claim it must be natural, ''so sayeth the market gods'' ect - however this comes from your superstitious refusal to accept how real economies work. Capital to a large extent must create markets via the media for pre-produced goods - a fact that undermines a lot of your bull**** ideology. On the terminology, Mcwilliams obviously means influenced when he says ''forced'' - something apparent to the ordinary reader but likely to be misrepresented by a sophist like yourself. After all, people cannot literally be forced to buy things at gunpoint - (although Im sure you would represent McWilliams as having meant precisely that)

It's worth noting that many of these so-called "scum" economists warned the government about the consequences of runaway spending. They warned about the unsustainable property boom. They warned about policies that would erode Ireland's competitiveness. They understood that vote-grabbing increases in social welfare (weekly unemployment benefit rose by €80 a week in the space of six years, so that the increase in the Irish unemployment benefit since 2003 now exceeds the entire unemployment benefit paid to someone in the UK) would be difficult to reverse in a national fiscal crises. But the government ignored their good advice, got into bed with the social partners, and opened the coffers to the unions and the social programmes. Now we are all reaping the consequences of that folly. The "propagandists" mean, very simply, that nobody wants to invest in Ireland anymore, because the cost of doing business has become excessive. Companies who come to Ireland must pay vastly inflated wages and commercial rents; must deal with complex and rigid labour laws;

Im sensing an underlying connection that we somehow priced ourselves out of the market ?. If so, your delusional, while public spending increased during the boom it was at a slower rate than actual economic growth. Ireland ran a massive budget surplus until 2007. Our public sector spends less than virtually any other EU member state as a percentile of our overall GDP - employers pay among the lowest tax rates in the EU ect. From the perspective of capital Ireland is among the most competitive nations in the EU15. What caused the decline around 2002 was the fall off in US investment as eastern European govs began to lower there tax rates - this led to the subsequent de-regulation of the financial sector ect. You are correct to say that Ireland is uncompetitive - but not with the EU15, rather with eastern Europe. Needless to say your suggestion that we should compete with Poland really illustrates the insidious nature of your political philosophy. Cuts in the region of 20% would not place us in competitive relation with polish labor markets - in fact we would need to see reductions in the region of 80% - (impossible given the cost of living ect). There we have it anyway, DF being a stereotypical neo-liberal scumbag thinks that the people of Ireland should starve themselves in order to maintain capitalist profit rates.

Additionally - it was your quack ideology that caused the US crash to begin with. Greenspan (libertarian) enacted the de-regulation of the financial market on the premise that the banking industry was ''self correcting'' and that ''rational individuals'' would make the ''right choices'' ect. Greenspan renounced his idiotic religion after he destroyed the global economy, here's a quote - ''I made a mistake in presuming that the self-interest of organizations, specifically banks and others, was capable of protecting their own shareholders and the equity in the firms'' - Greenspan. Likewise in Ireland however - the Dail enacted similar liberal legislation with the same assumptions in mind. The gov issued a white paper report in 2004 which states on p.23 ''we will regulate as lightly as possible given the circumstances and use more alternatives''.

What's all this about "desperation" and "suffering," by the way? You do realise that you are talking about some of the most pampered public servants and welfare recipients in the world?

Well we are talking about some of the most pampered capitalists in the world if you ask me, FDI in conjunction with the native construction and finance industry turned vast fortunes during the Celtic tiger. Neo-liberals will naturally blame (the greedy workers) for demanding higher wages in conjunction with soaring profits - take into account the fact that capital is generally is put out of use or re-located to find a higher rate of profit as opposed to suffering a decline in actual demand or productive output.

must pay the highest electricity costs in the EU;

Yes, energy prices are kept artificially high by the regulator to act as an incentive for potential investment.

and must hire from a poorly prepared workforce in core areas of science, technology, engineering, and mathematics (39 percent of DCU science and technology students do not get past the first year of their courses).

The Gov reduced the proportion of GDP spent on education from 5.2% in 1995 to 4.6% in 2005 - during the high point of profit accumulation FF where actively (decreasing) expenditure on public education. ’Spending levels at primary and second-level remain below average in international terms, at 79 per cent and 82 per cent of the respective OECD averages (OECD, 2005) - However in conjunction with this they where awarding an annual 103 million per year subsidy to exclusive private schools. Hardly surprising.

silverharp

synd wrote: »

Additionally - it was your quack ideology that caused the US crash to begin with. Greenspan (libertarian) enacted the de-regulation of the financial market on the premise that the banking industry was ''self correcting'' and that ''rational individuals'' would make the ''right choices'' ect. Greenspan renounced his idiotic religion after he destroyed the global economy, here's a quote - ''I made a mistake in presuming that the self-interest of organizations, specifically banks and others, was capable of protecting their own shareholders and the equity in the firms'' - Greenspan. Likewise in Ireland however - the Dail enacted similar liberal legislation with the same assumptions in mind. The gov issued a white paper report in 2004 which states on p.23 ''we will regulate as lightly as possible given the circumstances and use more alternatives''. .

Why did you put Libertarian after Greenspan's name? given that a core policy of Libertarian's is abolishing the Fed it makes no sense. You have been around these debates long enough to know what a Libertarian is or isnt. I would have have thought that you have got beyond the superficial rethoric of treating what politicians say as fact.

rumour

synd wrote: »

The Gov reduced the proportion of GDP spent on education from 5.2% in 1995 to 4.6% in 2005 - during the high point of profit accumulation FF where actively (decreasing) expenditure on public education. ’Spending levels at primary and second-level remain below average in international terms, at 79 per cent and 82 per cent of the respective OECD averages (OECD, 2005) - However in conjunction with this they where awarding an annual 103 million per year subsidy to exclusive private schools. Hardly surprising.

Yes this is despite increasing the budget year on year. The budget increases did not cover the required new schools adequate teachers etc they went on wage rises. This has been the error of our public servants. They have taken much needed funds and put them directly into current account bills rather than increasing the capital spent on education.

This is the equivalent of giving kids money for sweets instead of buying them clothes and books.

Bits_n_Bobs

First off anyone quoting comparisions with anything to do with Irish GDP is mad, ignorant or deliberately misleading. The Irish GDP is warped due to the activity of multinationals situated here. Please use Irish GNP for comparisions as these have some basis in reality.

Taking public spending as a percentage of GNP shows that public spending in 2008 accounted for 40.6% of GNP. This is about the OECD average. Leo Varadker reckoned that this would increase to 43% in 2009 - my own strong suspicion is that this figure will in fact be higher.

Am I the only one to think that what Synd is proposing bears a striking resemblance to what happened in the early 80's? If I am wrong on this perhaps Synd could explain the difference. Personally I do not want to go through the 80's once again.

Also I don't see what is wrong with a higher clerical worker getting paid the average industrial wage? It's an average job, it should get paid at the average rate. While I do not want to get involved in some sort of public v private pay debate, it never ceases to appall me when the average industrial wage is cited as some sort of level of penury by various union leaders.

Also dragging in NAMA to any debate about the current debacle in public finances is complete codswallop. The 20 billion hole in our finances is in no way caused by NAMA. Once again its either ignorant, mad or deliberately misleading to bring this into any debate on the current economic mess.

synd

Taking public spending as a percentage of GNP shows that public spending in 2008 accounted for 40.6% of GNP. This is about the OECD average. Leo Varadker reckoned that this would increase to 43% in 2009 - my own strong suspicion is that this figure will in fact be higher.

Red herring. Even if use an alternative form of messurement to reach closer to the average (such as GNP), the fact still stands that for prospective investors the nation remains more attractive than others. Ireland has a 12.5% corp tax, demands the lowest social security contributions in the EU15 - at 10%, actual labor costs stand 7% below the EU-15 average and we hold energy costs at artifcial rates to attract investors ect. The notion that Ireland ''priced itself out of the market'' is nonsence - the decline in growth based on export was a consoquence of our tax rate being undercut by nations who could offer exteremly low wages. So reduction in tax would do little good given the cost of produce ect.

Also I don't see what is wrong with a higher clerical worker getting paid the average industrial wage? It's an average job, it should get paid at the average rate. While I do not want to get involved in some sort of public v private pay debate, it never ceases to appall me when the average industrial wage is cited as some sort of level of penury by various union leaders.

Those in upper administrative sector of the civil service could be done away with altogether in my opinon. In fact most of these ''executive consultants'' who recieve ridiculas wages where put in place to re-configure the public sector along market lines. This is not an issue of public vs private sector - its an issue of those at the top vs those at the bottom. Naturally the elite class of this country will perpetuate propaganda designed to make supermarket workers angry at nurses and taxi drivers angry at busdrivers ect. Thankfully there exists a substantial portion of the population who arnt stupid enough to fall for IBECs propaganda -

Also dragging in NAMA to any debate about the current debacle in public finances is complete codswallop. The 20 billion hole in our finances is in no way caused by NAMA. Once again its either ignorant, mad or deliberately misleading to bring this into any debate on the current economic mess.

The debt is a direct consequence of the sub-prime crash of which NAMA is an extension. Public expendature was not the cause of the deficit as illustrated by the massive surplus we ran until around 2007 ect. Moreover my initial point stands intact - (despite your rhetoric) - namely that reductions in wage or social expenditure invariably deepen recession due to their deflationary effect ie. they remove money from circulation - reduce demand and eradicate investment. The subsequent increase in unemployment will result in a further deficit due to increased amounts required to facilitate welfare payments ect. The less we chose to borrow in the short term could actually result in a situation where we have to borrow more in the long run. Keynes explains the situation quite well. Put bluntly, neo-classical suggestions of autistry are both idiotic and antiquated. Of course we could follow the logic of every neo-liberal who uses this forum and just accept the ''reality of the market'' ie. (reduce welfare to the extent that migration to Poland would be a more admirable option).

BTW - Im not being glib, this is actually what these people are suggesting.

Permabear

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Treora

donegalfella wrote: »

This post has been deleted.

False comparisons with no sources are so lazy.

85,000 new public workers in ten years. More importantly what were the % increase in workers versus the % increase in population. Looking at these stats it appears that the public service is continuously improving. Giving more output with relatively less inputs.

As a society we are matriarchal and place a high value on children and their welfare thus giving great leverage to their teachers. Thus the high cost of teachers, nurses and social welfare payments to mothers. Also what is the cost of living in comparison in the two countries, housing inflation might have something to do with that 37% difference.

Also there is never like for like comparison. Compare a private and public - solicitor, HR mgt, architect, Quant Surv, computer programmer - and they work side by side in some offices. A private professional (same experience, skills, qualifications) earns 60% - 260% more than a public one no matter where she works (big corp or gov contract). And pensions are the problem of people foolish enough to give their money to a fund manager just so she can take a cut and give you back no gain. One would make better returns with no commission costs just by running a self administered pension with an online share account and random generator programme to pick the stocks.

If Ireland wants to be competitive then cut the price of housing, rent, leases... in half tomorrow and then everyone will take a wage hit. But it is Galway tents, winning on the horses and finance ministers with safes instead of bank accounts that get things sticky to anyone not wearing a teflon suit.

Just a lazy post.

Permabear

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silverharp

synd wrote: »

Public expendature was not the cause of the deficit as illustrated by the massive surplus we ran until around 2007 ect.

so what? does it get to ignore what is happening to the private sector it feeds off?

synd wrote: »

Moreover my initial point stands intact - (despite your rhetoric) - namely that reductions in wage or social expenditure invariably deepen recession due to their deflationary effect ie. they remove money from circulation - reduce demand and eradicate investment. The subsequent increase in unemployment will result in a further deficit due to increased amounts required to facilitate welfare payments ect. The less we chose to borrow in the short term could actually result in a situation where we have to borrow more in the long run.

Where does the money come from, you cant make predictions unless you know where for example interest rates are going to be in 5 years time. By your definition , 2 civil servents stamping paper and handing it back and forth would be a valid economic activity that should not be cut back on as it would make everyone poorer, nonsense! as these two happy fools have to be supported by the rest of the economy the only logical conclusion is to cut back spending, release the 2 so that they have the opportunity of contributing to the economy and lower taxes so that the rest of the economy can pay down debt or invest , spend as they choose.

Your argument only works if you ignore the opportunity cost of your gov. spending decision.

andrew

synd wrote: »

reductions in wage or social expenditure invariably deepen recession due to their deflationary effect ie. they remove money from circulation - reduce demand and eradicate investment. The subsequent increase in unemployment will result in a further deficit due to increased amounts required to facilitate welfare payments ect.

No. A Reduction in wages would make Ireland more competitive. This would attract more investment, putting money into the economy and reducing the extent of the recession.

General social welfare payments increased by up to 67 per cent in real terms (i.e. after adjusting for inflation) between 2000 and 2008. The real danger in relation to some welfare payments is that the country may experience a return to the days of unemployment and poverty ‘traps’ whereby by taking on work means a fall, or little rise, in net income. In many ways the most important thing that can be provided for those in need in the economy is not a social welfare payment but an income derived from being in employment. (Source)*. This employment would also help to reduce the extent of the recession.

You should read an economics textbook. Saying that reducing (already high) wages and social welfare payments would be bad for the economy is just not true.

*This is the newly written preface to the book 'The Economy of Ireland'

Flamed Diving

Why do socialists always rely on such silly rhetoric?

Hydrosylator

I'd agree with you but I don't know what a shill is. Really though, bit of a long rant. I mostly agree with your sentiments and even I feel alienated.

I think economists aren't subject to enough scrutiny.
People need to stop taking what somebody says at face value based on their qualifications alone. Expertise is not equal to honesty. People, and especially the media, need to look at other motives. If an economist is getting paid a hundred grand a year by a fund management company, it's likely that he'll tell people what his financiers need people to believe more than actually telling the truth.

If a state-employed economist working in a university says something about the economy, should we take the source of his income into account also?

I don't know if there is such a thing as an unbiased Irish economist who gets quoted in the media.

Permabear

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synd

By your definition , 2 civil servents stamping paper and handing it back and forth would be a valid economic activity that should not be cut back on as it would make everyone poorer, nonsense!

Its not nonsense, its an unmitigated economic fact that deflationary policy exasperates the rate of economic decline. Keynes famously expressed that the gov should employ people to dig holes and fill them again. His point (lost on your sort apparently) was that policy conductive to increasing aggregate demand is sound. Your snide little analogy above entails the allusion that state enacted economic policy is inherently devoid of productive capacity, this a liberal delusion, one you should probably seek professional treatment for. Many social projects could be undertaken - broadband could be expanded, new rail networks constructed, schools upgraded ect.

as these two happy fools have to be supported by the rest of the economy the only logical conclusion is to cut back spending, release the 2 so that they have the opportunity of contributing to the economy and lower taxes so that the rest of the economy can pay down debt or invest , spend as they choose.

Typical liberal nonsense, no small country has ever recovered successfully from debt deflation by cutting spending and sticking with a hard currency. Your prescription for economic recovery essentially entails reducing wages to eastern European rates - newsflash, this isn't a solution its a disaster scenario for the vast majority of the population. Of course it will be of some benefit to the socio economic elite who your particular brand of economic theory is designed to insulate. After all your philosophy is that starvation among the working class is fine so long as the process of unhindered global accumulation can continue.

Ireland if it seriously wants to recover will prob need to increase its debt in order to stimulate demand - the subsequent revenue can be used to cover the increased debt service. Its either that or the neo-liberal ''solution'' ie. reduce living standards to polish levels in order to attract/retain investment.

Additionally your prescription would entail social ramifications that you should perhaps consider a little more carefully.

ei.sdraob

donegalfella wrote: »

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and they were told by the Government to "go and hang themselves"

last I checked the Government are part of the PS

so this mess is partly created/perpetrated by a subset of the PS

eoinbn

synd wrote: »

Its not nonsense, its an unmitigated economic fact that deflationary policy exasperates the rate of economic decline. Keynes famously expressed that the gov should employ people to dig holes and fill them again. His point (lost on your sort apparently) was that policy conductive to increasing aggregate demand is sound. Your snide little analogy above entails the allusion that state enacted economic policy is inherently devoid of productive capacity, this a liberal delusion, one you should probably seek professional treatment for. Many social projects could be undertaken - broadband could be expanded, new rail networks constructed, schools upgraded ect.




Typical liberal nonsense, no small country has ever recovered successfully from debt deflation by cutting spending and sticking with a hard currency. Your prescription for economic recovery essentially entails reducing wages to eastern European rates - newsflash, this isn't a solution its a disaster scenario for the vast majority of the population. Of course it will be of some benefit to the socio economic elite who your particular brand of economic theory is designed to insulate. After all your philosophy is that starvation among the working class is fine so long as the process of unhindered global accumulation can continue.

Ireland if it seriously wants to recover will prob need to increase its debt in order to stimulate demand - the subsequent revenue can be used to cover the increased debt service. Its either that or the neo-liberal ''solution'' ie. reduce living standards to polish levels in order to attract/retain investment.

Additionally your prescription would entail social ramifications that you should perhaps consider a little more carefully.

Maybe you missed the memo, but we are already borrowing 80%+ of our tax receipts. We are borrowing at the same rate as the US who have borrowed $800bn for a stimulus package, are fighting 2 wars and currently have a much higher debt repayment burden.

Flamed Diving

ei.sdraob wrote: »

and they were told by the Government to "go and hang themselves"

last I checked the Government are part of the PS

so this mess is partly created/perpetrated by a subset of the PS

That's the beauty of being an economist. When they call for governments to save or try to take the heat out of a boom, they are called "doom and gloom merchants". When the bust eventually comes, "they didn't see it coming".

:rolleyes:

ei.sdraob

synd wrote: »

You are diverting attention from the main issue as usual. The central point is that reducing expenditure and lowering wages in order to create an environment conductive to investment rests on a failed economic model. If you take money out of economic circulation - in the short term you might see a spurt of profitability in savings made with regards expenditure however due to the consequent decrease in consumption - overall demand falls, thereafter investment declines.

just spotted a BIG PROBLEM in you reasoning @OP

what would you have to say about all of the money that will be taken out of the system in order to pay ever increasing interests on debts run up by the public sector?

ha! :eek: :cool:

Flamed Diving

ei.sdraob wrote: »

just spotted a BIG PROBLEM in you reasoning @OP

what would you have to say about all of the money that will be taken out of the system in order to pay ever increasing interests on debts run up by the public sector?

ha! :eek: :cool:

I imagine the answer running along the lines of:

1) This is a more gradual incremental release of capital from our economy.
2) Some kind of appeal to the benelovence of creditors.
3) All of the above.

ressem

synd wrote: »

Keynes famously expressed that the gov should employ people to dig holes and fill them again. His point (lost on your sort apparently) was that policy conductive to increasing aggregate demand is sound.

No he didn't. He said...

"To dig holes in the ground," paid for out of savings, will increase, not only employment, but the real national dividend of useful goods and services. It is not reasonable, however, that a sensible community should be content to remain dependent on such fortuitous and often wasteful mitigations when once we understand the influences upon which effective demand depends.

http://ebooks.adelaide.edu.au/k/keynes/john_maynard/k44g/chapter16.html

Note that it's to be paid from savings.
Because he states earlier in the chapter that

An act of individual saving ... is not a substitution of future consumption-demand for present consumption-demand,—it is a net diminution of such demand.

Extrapolating this to include massive borrowing to create demand might be stretching this too far.

sceptre

ei.sdraob wrote: »

and they were told by the Government to "go and hang themselves"

That's a little misleading, even if Bertie was being even less useful than his usual inarticulate self when he said what he actually said.

One would assume from your quote that it was an actual order or request (which it isn't) and actually issued by the government as an official statement (which it wasn't), keeping in mind that what Bertie actually said was more akin to wondering why people talking down the economy didn't just go and hang themselves. Now compare that to the above.

DeVore

Sceptre!!!! NEVER let the truth get in the way of a good rant...


pffff n00b!

DeV.

Flamed Diving

Not just truth; but troof.

silverharp

synd wrote: »

Its not nonsense, its an unmitigated economic fact that deflationary policy exasperates the rate of economic decline. Keynes famously expressed that the gov should employ people to dig holes and fill them again. His point (lost on your sort apparently) was that policy conductive to increasing aggregate demand is sound. Your snide little analogy above entails the allusion that state enacted economic policy is inherently devoid of productive capacity, this a liberal delusion, one you should probably seek professional treatment for. Many social projects could be undertaken - broadband could be expanded, new rail networks constructed, schools upgraded ect.

it makes no logical sense to "dig holes" as there is no additional production at the end of it , it fact it consumes valuable resources like energy and materials. You like the Fed is obsessed with consumption instead of production. Had for instance the Fed not pumped up the housing bubble after 2001 the global economy would not be at the edge of a cliff right now nor would be have had the commodity bubbles that created artificial shortages over the last few years. Your logic only works if you ignore the future consequences of present actions.

synd wrote: »

Typical liberal nonsense, no small country has ever recovered successfully from debt deflation by cutting spending and sticking with a hard currency. Your prescription for economic recovery essentially entails reducing wages to eastern European rates - newsflash, this isn't a solution its a disaster scenario for the vast majority of the population. Of course it will be of some benefit to the socio economic elite who your particular brand of economic theory is designed to insulate. After all your philosophy is that starvation among the working class is fine so long as the process of unhindered global accumulation can continue.

Ireland if it seriously wants to recover will prob need to increase its debt in order to stimulate demand - the subsequent revenue can be used to cover the increased debt service. Its either that or the neo-liberal ''solution'' ie. reduce living standards to polish levels in order to attract/retain investment.

Additionally your prescription would entail social ramifications that you should perhaps consider a little more carefully.

who mentioned Eastern Europe? Irish wages will settle bost bubble at whatever Euopeans etc are willing to pay us for our output. And let me get this correct, you are saying we need to borrow more so we can buy stuff, so we can pay off the debt? he he!

synd

it makes no logical sense to "dig holes" as there is no additional production at the end of it , it fact it consumes valuable resources like energy and materials.

You seem to have either missed/deliberately misrepresented the point. While a seemingly useless endeavour such as digging holes (for no reason) produces no material value in immediate terms, it does nevertheless keep money in circulation and therefore sustains demand, which in turn ensures that the productive process continues.

Your obviously right to point out that digging holes for no reason is a waste (provided the energy/resources used in the process exceed the cost of whatever value is created from the demand generated by the given activity). Its important to note however your liberal dogma entails the false premise that public works are necessarily devoid of value when in (reality) they to large extent facilitate value creation. The projection of public sector as a parasitic leach on the ''value producing'' private sector is liberal propaganda at its worst.

The labor of public sector to an enormous extent ''facilitates'' the activity of the private market. Its a symbiotic relation and always has been. For instance, the technicians who work in high tech industry are by and large trained in the public sector - scientists, tradesmen, engineers, architects, all receive their education in the public sector. The wealth generated in the private sector is inseparable from the public arena.

be atYou like the Fed is obsessed with consumption instead of production. Had for instance the Fed not pumped up the housing bubble after 2001 the global economy would not the edge of a cliff right now nor would be have had the commodity bubbles that created artificial shortages over the last few years.

Again - your misrepresenting the reality of what occurred. Sub-prime lending and the subsequent trade in derivatives are components of the current bust, but what facilitated this occurrence was the de-regulation of the financial sector both in the US and here. The liberalization of finance was enacted on the theoretical basis that free and consensual exchanges between rational market actors would yield positive economic results. Naturally, things like externalities and asymmetric information are missing from your antiquated brand of dogma.

Moreover - you don't address what (caused) the compulsion to expand investment into areas such as debt. Needless to say this is the central factor when examining the nature of the global crash. The tendency of the rate of profit to decline in areas such as manufacturing in the US/Euro caused a push towards opening up new sources of accumulation, the financial market was one such area, public services was another. Of course in order to de-regulate finance/attack organized labor and appropriate public facilities, a pseudo scientific justification was required - this was to be found in neo-classical/Austrian theory.

Your logic only works if you ignore the future consequences of present actions.

And yours only works if you ignore the immediate consequences of long term plans.

who mentioned Eastern Europe? Irish wages will settle bost bubble at whatever Euopeans etc are willing to pay us for our output.

No actually, while in your textbook on bourgeoisie economics wages will naturally fall and people re-configure their expectations in line with the demands of the market gods - this is not how real economies/societies work. Wages will stick - thanks to the brave efforts of organized labor.

Additionally - you are of the view that we need to become more competitive through wage reductions and tax cuts. Following this to its logical conclusion its hard to see how you don't advocate wage reductions in the region of 80% in order to match Polish rates. - Perhaps you can enlighten me ?

you are saying we need to borrow more so we can buy stuff, so we can pay off the debt? he he!

In the short term yes - how you fail to understand the logic of this is beyond me. Cuts will deepen the reccession by initiating a deflationary spiral, this will result in a higher long term debt due to the amount required to maintain an unemployed population. Borrowing in the short term will soften the contraction. You are quite right however that continuing to borrow at current rates presents problems. Suspension of our euro membership - the reinstatement of the punt and monetary devaluation is what is required. This runs on the same principal ie. introducing more money into the economy/forced inflation.

Of course this solution wont crush the unions, heighten unemployment and drive the Irish population towards accepting soup as a viable form of payment - which is precisely why liberals are against it.

silverharp

synd wrote: »

You seem to have either missed/deliberately misrepresented the point. While a seemingly useless endeavour such as digging holes (for no reason) produces no material value in immediate terms, it does nevertheless keep money in circulation and therefore sustains demand, which in turn ensures that the productive process continues.

Your obviously right to point out that digging holes for no reason is a waste (provided the energy/resources used in the process exceed the cost of whatever value is created from the demand generated by the given activity). Its important to note however your liberal dogma entails the false premise that public works are necessarily devoid of value when in (reality) they to large extent facilitate value creation. The projection of public sector as a parasitic leach on the ''value producing'' private sector is liberal propaganda at its worst.

The labor of public sector to an enormous extent ''facilitates'' the activity of the private market. Its a symbiotic relation and always has been. For instance, the technicians who work in high tech industry are by and large trained in the public sector - scientists, tradesmen, engineers, architects, all receive their education in the public sector. The wealth generated in the private sector is inseparable from the public arena.

I am not arguing that the public service provides no value, you are distorting now. If we are talking about tradable goods and services the public service can provide these however I will argue at lower quality and higher cost. It also is involved in redistribution activities for instance regional development policy which may or may not create value or may or may not be affordable. if gov stimulus is going to be of value then they need to have a return, for instance completing a motorway. However if you look at the US , the cash for clunkers would be of dubious benefit and probably did more for Japans car business.

synd wrote: »

Again - your misrepresenting the reality of what occurred. Sub-prime lending and the subsequent trade in derivatives are components of the current bust, but what facilitated this occurrence was the de-regulation of the financial sector both in the US and here. The liberalization of finance was enacted on the theoretical basis that free and consensual exchanges between rational market actors would yield positive economic results. Naturally, things like externalities and asymmetric information are missing from your antiquated brand of dogma.

this all happened under Fed and gov. policy and probably the chinese vendor financing for good measure. If recessions are not allowed to happen and everyone is too big to fail then it would seem natural that risk would be priced out by the market. Moral hazard and all

synd wrote: »

And yours only works if you ignore the immediate consequences of long term plans.

not ignoring, making a judgement that borrow and spending can cause greater problems over the the longer term as at a minimum the interest has to be paid on top, or that the economy will tank anyway when the stimulus runs out and wont have restructured to the new reality.

synd wrote: »

No actually, while in your textbook on bourgeoisie economics wages will naturally fall and people re-configure their expectations in line with the demands of the market gods - this is not how real economies/societies work. Wages will stick - thanks to the brave efforts of organized labor.

Additionally - you are of the view that we need to become more competitive through wage reductions and tax cuts. Following this to its logical conclusion its hard to see how you don't advocate wage reductions in the region of 80% in order to match Polish rates. - Perhaps you can enlighten me ?.

forget the market gods , it starts with paddy and mary doing their shopping or getting their detal treatment in Newry or Hans or Tarquin choosing somewhere else to spend their holidays. If wages stick then it will be great for those that keep their jobs but there will be less jobs, unionised or not. Why would I advocate 80%? all I know is if they are too high the activity will drop here and move elsewhere. Rents are too high for sure so they need to drop as well as they are a drag on business.

synd wrote: »

In the short term yes - how you fail to understand the logic of this is beyond me. Cuts will deepen the reccession by initiating a deflationary spiral, this will result in a higher long term debt due to the amount required to maintain an unemployed population. Borrowing in the short term will soften the contraction. You are quite right however that continuing to borrow at current rates presents problems. Suspension of our euro membership - the reinstatement of the punt and monetary devaluation is what is required. This runs on the same principal ie. introducing more money into the economy/forced inflation.

You are making an assumption that a gov can spend its way out of recession in a consequence free way , does Irelands experience during the 70's and 80's not hint that sending most of your taxes abroad in interest payments is not a good idea. the fact that you would wish Icelands problems on us now is interesting, it would be good to see the back of mcdonalds though:P . Changing to the punt again would be a theft of the remaining saving left in the country assuming the smart money hadnt left in the first place. Just give me a weeks warning so that I can convert my savings to dollars. The smart thing would have been a forced debt for equity swap with our international creditors

andrew

synd wrote: »

No actually, while in your textbook on bourgeoisie economics wages will naturally fall and people re-configure their expectations in line with the demands of the market gods - this is not how real economies/societies work. Wages will stick - thanks to the brave efforts of organized labor.

Except that they aren't sticking. Wages here have already fallen (but need to fall more).

Additionally - you are of the view that we need to become more competitive through wage reductions and tax cuts. Following this to its logical conclusion its hard to see how you don't advocate wage reductions in the region of 80% in order to match Polish rates. - Perhaps you can enlighten me ?

Clearly you don't understand the differences between the Irish and Polish economies. Wages here don't have to fall to Polish levels for us to become competitive again because we produce different things.

In the short term yes - how you fail to understand the logic of this is beyond me. Cuts will deepen the reccession by initiating a deflationary spiral, this will result in a higher long term debt due to the amount required to maintain an unemployed population. Borrowing in the short term will soften the contraction. You are quite right however that continuing to borrow at current rates presents problems. Suspension of our euro membership - the reinstatement of the punt and monetary devaluation is what is required. This runs on the same principal ie. introducing more money into the economy/forced inflation.

The current deflation we're experiencing is a regression to the mean price level of the EU. There isn't going to be a deflationary spiral.

Cuts will help us regain our competitiveness and so help us out of the recession. How you think that cuts which will contribute to competitiveness will somehow make things worse is beyond me. Well, it's not that what your saying it beyond me, it's just that what you're saying is wrong.
And to say we should revoke our euro membership; you've got to be kidding me. Ireland is a regional economy. We've never had, and have never been/never will be able to have, a fully independent monetary policy. We could go and change back to the punt and all the crap that entails (and when I say crap i mean negative economic consequences), or...we could just lower wages and prices to make ourselves more competitive. I think it's pretty clear the latter option makes a lot load more sense. Sure the euro has some disadvantages, but to say that we should change back to the punt is just plain stupid. Yes, I know David McWilliams or some other such guy sad it, but it was stupid of him to suggest it too.

Also, your last comment about needing devaluation and forced inflation (quantitative easing) belies a complete ignorance of (at the very least Irish) economics. You don't know what you're talking about.

Flamed Diving

Does anyone get the impression that Synd half-read an upside-down, backwards, Chinese braille version of Kenye's General Theory, with half the pages ripped out?

optocynic

synd wrote: »

Never has the phrase ''know thy enemy'' been of greater importance. At present we face massive reductions in social expenditure, wage cuts and the virtual theft of our public assets. NAMA is quite literally the greatest appropriation of public wealth by a socio-economic elite since the Cromwellian plantation. Yet society is continuously being told by both politicians and economists that we must accept such barbarous assaults, we are being indoctrinated with the idea that the current acquisition of public wealth is a natural occurrence and that we have virtually no realistic alternative. Observing the claims of either the gov or economic commentators in isolation is of little use, we must understand and then de-construct the theoretical foundations of Ireland's socio economic elite.

What is it legitimizes gov policy at the moment ? The answer can be found in an antiquated theoretical economic perspective, largely grounded in what is known as the neo-classical school. Many aspects of neo-classical rationalism have been exposed as quack mysticism within contemporary economic research. However many political policies are directly predicated upon such ridiculous models. Economists who tout the govs line are well paid for their services - whether they work in academia or for IBEC.

The gov are at present calling for wage cuts/reduction in social expenditure. In reality this will lead to an invariable decrease in overall demand, therefore hasten the reduction in investment and exasperate the current recession. Removing money from circulation will increase the rate of economic decline - this is an unmitigated fact and one that the neo-classicists prefer people not to know about. Furthermore, those with a highest propensity towards consumption are the lower middle and working class, therefore to target these people is not only stupid (and wrong) but it would actually make more sense to provide them with (higher incomes). A higher marginal propensity to consume results in an increased factor of work being done, for instance (a propensity of 0.75 will mean that any decision to spend extra money will require four times as much labor to be done) ect.- so whatever may be borrowed has the knock on effect of creating more work, therefore generating more income, increasing investment ect. Among the most espoused excuses not to engage in greater public expenditure during the Celtic tiger was the fact that the price of land was too high - needless to say the funds going towards nama could be put towards immeasurably more useful projects. One rather practical solution would be to tax the rich and increase borrowing for lower income brackets - additionally the Laffer Curve is inconsequential given high earners tendency to hoard. The toxic debt run up by speculators should be repudiated and public banks created. With regards borrowing, although there may be obstacles - alternative borrowing arrangements can be facilitated.

The right wing fiscal/neo-classical solution is rather than stimulus, to let the recession ''bottom out''. Naturally, while we are waiting for the invisible hand to get its finger out of its invisible arse - thousands will lose their jobs, social welfare will be cut and our collective assets will be stolen/given away at a discount to the elite who created this mess. However, it is very important to understand that this is precisely what proponents of the neo-classical/neo-liberal line want.

These scum (and they are scum, make no mistake about it) believe that wages should be slashed in order to create an environment conductive to investment. They believe (and they dont like to tell people about this) that by forcing down wages and selling off/reducing peoples ability to use subsided social services - that peoples desperation and suffering will make them more receptive to the ''discipline of the market''. Its worth keeping in mind that most of these economists are on astronomical wages.

Behind the assault lie groups such as IBEC - the organization representing Irish capitalist class interests. They - in conjunction with the gov have spouted consistent waves of propaganda with regards public sector wages and the nature of our social services. To clear up a few myths espoused by IBEC

According to the OCED benefits and wages database Irish private sector wages are around 11% below the EU15 average. Employers benefit from the lowest social security contributions in Europe standing at 10% compared to 45% in France or 35% in Italy. Irish workers work nearly three weeks more per year than their European counterparts. Im really perplexed as to the suggestion that we are in someway ''uncompetitive'' with our European counterparts. The most comprehensive review of the Irish public sector was carried out by the OCED in 2008. Public spending increased 30% between 1995 and 2005. It did not entail an increase in borrowings, rather was retrieved from the greater share of surplus. Ireland ran a huge budget surplus until 2007. According to the OCED Ireland ranks third lowest with regards public expenditure in % of the GDP -ahead only of South Korea and Mexico.

As far as the pensions go public sector workers pay 6 and a half % of their wage towards it - where private sector schemes exist the average rate is 5%. Higher clerical officers for instance start on 24,255py and over the course of twelve years hit 36,977py - the average industrial wage. Support officers in an-post start at 24,024 - after 14 years reach 36,087. There (are) however administrators and consultants that receive astronomical wages - academics in UCD on 400,000py and many university admins on 250,000py. When these are calculated into the average it can naturally distort the overall picture, needless to say this strata of the public sector are un-unionized.

So what do these liberal propagandists mean when they say Ireland is uncompetitive when we take the above into consideration ?. What they mean is that we are uncompetitive with eastern European labor markets. Now, in order to compete with a Polish wage we would require a decrease in the region of 80% - something that is ridicules given the cost of living ect. However, it is important to understand that these liberal lapdogs who espouse IBECs line - are in favor of the very deregulation that institutionalizes such gross reductions in wage ect. They seek to remove restrictions on capital so it may relocate and undermine various regional agreements ect.

The neo-classical/neo-liberal line is essentially about making more immediate profit and the justification of large scale acquisition. Its about time that people in Ireland started to take action - however its important to understand the nature of what we are dealing with so we have a clear tactical line on how to deal with it. While I would be unopposed to Keynesian type policy to alliviete social suffering - It is worth noting that bubbles carry their own problems and represent a systemic inadequacy with capitalism itself. As a socialist I personally think that we eventually need to replace the entire system given its un-reliable/inefficient/disaster prone nature. Additionally people must realize that whatever mainstream party they vote for in a capitalist society - it is essentially IBEC and Mulitinational interest groups who determine political policy. Right wing economists are to the capitalist class today, what the priesthood was to the aristocracy during the feudal era. In order to democratize society we must do away with the mythology that legitimizes upper class exploitation.

Look at all the words I know...

Verbosity does not lend credence to your arguements!

I say keep your hands off the money of the wealthy. They EARN it, through hard work, and entrepeneurial endevors. They are entitled to keep it!... In fact, they are MUCH more entitled to it, that the sponges on the Dole are entitled to welfare!

Socialism is simply the politics of the lazy and the jealous!
They are the Green-Eyed-Monster party!

Time Magazine

Poor old Keynes. He really was a great economist and made magnificent breakthroughs in macroeconomic theory and, indeed, practice. It is such a shame that his theories are dragged through the mud by unions who completely overlook his nuanced arguments.

It's also kind of amusing that the OP lambastes modern neo-classical economics without realising that Keynes single-handedly provided about half of the entire knowledge of modern neo-classical economics.

There are several subtleties and nuances to Keynes theory of demand stimulation that simply have to be considered. Keynes spelled out many of these himself. Others have been discovered since his death.

First and foremost of these nuances is that fiscal stimulation in a recession (i.e. government pumping in money) absolutely requires fiscal contraction during a boom (e.g. FF holding back during the Celtic Tiger). Unfortunately, we didn't do this. For example, and this really is just one example, in 2004 the INTO called for increased funding in education. Fianna Fáil of course complied. Spending on education isn't necessarily a bad thing. Of course not. But every penny we spent in 2004 is a penny we cannot spend in 2009 and, quite frankly, we spent every penny we could.

There is no more money for a stimulus.

Next of the nuances is that, even if there were money, employing people to dig holes is not a good idea. If you abstract beyond a partial-equilibrium demand model, digging holes is not a good idea. It does not actually produce anything. There is no greater production.

Unfortunately, Keynes over-estimated the effects of the multiplier. He made the major neo-classical assumption of ceteris paribus -- all other things equal. See on pages 5 and 6 of these notes by Karl Whelan (who is by no means afraid of government intervention) and see that if the ceteris paribus fails to hold (for example, if people work less when taxed more -- what a crazy idea!), the old-school formula for the multiplier breaks down. Instead of a government injection of €100 causing a €150 increase in GDP, you have an increase of €105.70. It's much easier to make the argument that government bureaucracy will swallow up the gains if the gains are 5% rather than 50%.

Next up, and connected with the last point is that, unfortunately, there's just no evidence that huge stimuli work, ever. Usually when theoretical findings are not backed up by empirical evidence, people stop assuming they're true. Yet unions somehow don't apply this reasoning when it comes to Keynes.

Time Magazine

Philip Lane puts it well.

silverharp

here is some timeless wisdom on why digging holes or broken windows are not a vehicle for economic growth

The Broken Window
by Frederic Bastiat

[From "That Which Is Seen, and That Which Is Not Seen"]

http://mises.org/story/3804