Comments on: The Political Economy of the Current Crisis http://www.irisheconomy.ie/index.php/2009/01/16/the-political-economy-of-the-current-crisis/ Wed, 16 May 2012 21:31:15 +0000 http://wordpress.org/?v=2.6.3 By: Brendan Kennelly http://www.irisheconomy.ie/index.php/2009/01/16/the-political-economy-of-the-current-crisis/#comment-312 Brendan Kennelly Mon, 19 Jan 2009 20:48:40 +0000 http://www.irisheconomy.ie/?p=310#comment-312 I think the key political economy moment was the 1997 General Election when there was a narrow but decisive victory for a centre right response to the large budget surpluses that had begun to appear. McCreevey's first budget in January 1998 horrified many of the social democratic commentariat but was entirely consistent with the FF-PD manifesto. In retrospect it seems that it would have been much more sensible for more of the increases in tax revenues in the second half of the 1990's to have been spent on better public services. Instead many of the significant improvements in public services in recent years have been due to increases in tax revenues that are mainly related to the sale of assets. I think the key political economy moment was the 1997 General Election when there was a narrow but decisive victory for a centre right response to the large budget surpluses that had begun to appear. McCreevey’s first budget in January 1998 horrified many of the social democratic commentariat but was entirely consistent with the FF-PD manifesto. In retrospect it seems that it would have been much more sensible for more of the increases in tax revenues in the second half of the 1990’s to have been spent on better public services. Instead many of the significant improvements in public services in recent years have been due to increases in tax revenues that are mainly related to the sale of assets.

]]> By: karl deeter http://www.irisheconomy.ie/index.php/2009/01/16/the-political-economy-of-the-current-crisis/#comment-250 karl deeter Sat, 17 Jan 2009 17:12:57 +0000 http://www.irisheconomy.ie/?p=310#comment-250 this sums up what so many people have felt for so long, long before the credit crisis we had a credibility crisis and the worst part of it all is that this will take far longer to remedy than the markets. this sums up what so many people have felt for so long, long before the credit crisis we had a credibility crisis and the worst part of it all is that this will take far longer to remedy than the markets.

]]> By: Kevin O'Rourke http://www.irisheconomy.ie/index.php/2009/01/16/the-political-economy-of-the-current-crisis/#comment-248 Kevin O'Rourke Sat, 17 Jan 2009 16:47:50 +0000 http://www.irisheconomy.ie/?p=310#comment-248 In terms of solutions to our political economy problems, I have to say that outsourcing as much regulation as possible to Brussels seems a good idea to me, and it is probably going to happen now even if it is a bad idea. In terms of solutions to our political economy problems, I have to say that outsourcing as much regulation as possible to Brussels seems a good idea to me, and it is probably going to happen now even if it is a bad idea.

]]> By: Iulia Siedschlag http://www.irisheconomy.ie/index.php/2009/01/16/the-political-economy-of-the-current-crisis/#comment-232 Iulia Siedschlag Fri, 16 Jan 2009 17:45:13 +0000 http://www.irisheconomy.ie/?p=310#comment-232 I have pointed out the risks to macroeconomic and financial stability from the housing market and the adjustment needed in the Irish economy in a paper given in Kenmare at the Annual Economic Policy Conference in October 2006. Unfortunately, 2007 was an electoral year! The paper in the version published in the QEC Spring 2007 can be downloaded from http://ideas.repec.org/a/esr/qecsas/2007springtraistaru-siedschlag.html I have pointed out the risks to macroeconomic and financial stability from the housing market and the adjustment needed in the Irish economy in a paper given in Kenmare at the Annual Economic Policy Conference in October 2006. Unfortunately, 2007 was an electoral year! The paper in the version published in the QEC Spring 2007 can be downloaded from http://ideas.repec.org/a/esr/qecsas/2007springtraistaru-siedschlag.html

]]> By: Jim O'Leary http://www.irisheconomy.ie/index.php/2009/01/16/the-political-economy-of-the-current-crisis/#comment-231 Jim O'Leary Fri, 16 Jan 2009 17:28:11 +0000 http://www.irisheconomy.ie/?p=310#comment-231 I don't like extinguishing glimmers of hope, Ronan, but I don't share your sanguine assessment of benchmarking. Sure, the principle of mirroring trends in private sector pay was an important one in the terms of reference of the Benchmarking Body, but it had precious little to do with the outcome of the exercise. Had it shaped the outcome in any meaningful way, many grades would have had their pay cut under the first round in 2002 and many more (if not most) would have suffered a similar fate last time around. Besides, we cannot afford to wait for the elaborate and slow-acting machinery of benchmarking to be cranked up in order to effect public sector pay cuts, even if it was realistic to suppose that the process could produce such a result; the cuts are needed now. While on the subject, I would suggest that benchmarking, the first round in particular, is responsible for much of the anti-public sector comment that has featured in recent public discourse about the economic/financial crisis. My feeling is that private sector workers have been nursing a deep sense of injustice/outrage on this score for the past few years. So, in my estimation, public sector pay cuts are required at this stage, not just for reasons to do with fiscal sustainability and competitiveness, but also to rebuild solidarity between employees in the two sectors and replenish the reservoir of goodwill towards the public sector that is essential to the proper functioning of a modern economy/society. (See my piece in today's Irish Times http://www.irishtimes.com/newspaper/finance/2009/0116/1231974457298.html ) I don’t like extinguishing glimmers of hope, Ronan, but I don’t share your sanguine assessment of benchmarking. Sure, the principle of mirroring trends in private sector pay was an important one in the terms of reference of the Benchmarking Body, but it had precious little to do with the outcome of the exercise. Had it shaped the outcome in any meaningful way, many grades would have had their pay cut under the first round in 2002 and many more (if not most) would have suffered a similar fate last time around. Besides, we cannot afford to wait for the elaborate and slow-acting machinery of benchmarking to be cranked up in order to effect public sector pay cuts, even if it was realistic to suppose that the process could produce such a result; the cuts are needed now.
While on the subject, I would suggest that benchmarking, the first round in particular, is responsible for much of the anti-public sector comment that has featured in recent public discourse about the economic/financial crisis. My feeling is that private sector workers have been nursing a deep sense of injustice/outrage on this score for the past few years. So, in my estimation, public sector pay cuts are required at this stage, not just for reasons to do with fiscal sustainability and competitiveness, but also to rebuild solidarity between employees in the two sectors and replenish the reservoir of goodwill towards the public sector that is essential to the proper functioning of a modern economy/society. (See my piece in today’s Irish Times http://www.irishtimes.com/newspaper/finance/2009/0116/1231974457298.html )

]]> By: Ronan Lyons http://www.irisheconomy.ie/index.php/2009/01/16/the-political-economy-of-the-current-crisis/#comment-229 Ronan Lyons Fri, 16 Jan 2009 16:39:17 +0000 http://www.irisheconomy.ie/?p=310#comment-229 It seems the Government is stuck in a pro-cyclical trap. Because it didn't spend money in the late 1980s and early 1990s, our infrastructure fell back and then it felt it had to spend with gay abandon in the late 1990s and particularly this decade. Now of course we have no capacity for economic stimulus - indeed cutbacks will be necessary, meaning that when we eventually get back to the good times, the pressure will still be there to spend to 'catch up' on the missed years of 2009-201x. McCreevy probably does have an awful lot to answer for. One glimmer of hope, perhaps from the naive, is that, for all it got wrong and has cost us since, benchmarking established a hugely important principle - public sector pay should mirror trends in the private sector. If private sector gross earnings fall between mid-2007 and mid-2009, then we have a case for another round of benchmarking. -10% anyone? It seems the Government is stuck in a pro-cyclical trap. Because it didn’t spend money in the late 1980s and early 1990s, our infrastructure fell back and then it felt it had to spend with gay abandon in the late 1990s and particularly this decade.

Now of course we have no capacity for economic stimulus - indeed cutbacks will be necessary, meaning that when we eventually get back to the good times, the pressure will still be there to spend to ‘catch up’ on the missed years of 2009-201x. McCreevy probably does have an awful lot to answer for.

One glimmer of hope, perhaps from the naive, is that, for all it got wrong and has cost us since, benchmarking established a hugely important principle - public sector pay should mirror trends in the private sector. If private sector gross earnings fall between mid-2007 and mid-2009, then we have a case for another round of benchmarking. -10% anyone?

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