Categories Uncategorized More on the Four Year Recovery Plan Post author By Frank Barry Post date November 26, 2010 20 Comments on More on the Four Year Recovery Plan The Irish Times also published my reaction to the recovery plan yesterday. Related ← The Four-Year National Recovery Plan → Krugman on Ireland 20 replies on “More on the Four Year Recovery Plan” I like the article, I think it’s positive and uses historical perspective to remind people that all recessions end eventually. Sadly Frank I think this is a small countermeasure against the swath of profoundly negative sentiment in the media right now about our situation, which is frankly terrifying those who are taking it on face value. If Spain or Italy falls then I’ll start to worry, but for now I think the EU project is still on track. @John The light you see at the end of the tunnel is another train. Sadly concentrating on fiscal tinkering is missing the point. The Irish goverment largesse of the last decade had to happen as the hyperinflation in land asset prices set in motion by the CBs was merely followed and not led by goverment wage rises to enable these workers live withen 100 miles of their place of work. Now the Cbs want to drain the money supply after they inflated it – this will double the damage that they have already inflicted. The first priority of any goverment is to recognize the enemy and the enemy is the banks and their Shepard’s the CBs. However the executive is full of cuckoos and any civic minded civil servant or politican (Minority I guess) will be swamped by these usurious creatures efforts to create more debt. A limited action on behalf of the goverment should be the creation of a new ICC bank that will provide near zero interest credit for strategic objectives. But sadly even token actions such as this is frowned on by the “serious people” as radical by such great spokesmen of this mysterious status quo such as the likes of Dan o Brien and co. There efforts to shift and turn to the winds of reason in a effort to be one step ahead of any meaningful reform is sickening. Ps I would like to see a meaningful debate about efforts to increase the capitalization of commercial banks to 12%. Will this “emergency” merely decrease the money supply still further or do deposits have any meaningful role in the creation of credit in the first place. @ Frank Barry, “Can we really believe that the medical consultants and barristers, many of whom make most of their money from the public purse, will be tackled?” “On the other hand, I think it is appropriate to bring down the minimum wage. It never made sense to me to prevent jobs being taken at wages to which both parties agree.” On the ball Frank, on the ball. But as Michael Hennigan says, the more things change, the more they stay the same. @Sporthog Surely most of the minimum wages are in the catering and service sectors. These are domestic captured activities – if I find a restaurant too expensive I can eat at home no problem and still spend the same money in a economy as I may have a few euros to spend on a pint. The minimum wage pressure must be coming from the black economy as honest employers are penalised by sharks.. A minimum wage may make sense for a individual business such as a restaurant but if expanded throughout the whole economy will merely reduce demand especially now since we live in a era when credit is no longer replacing wages as a demand pull on the economy. This is merely another example of the bankruptcy of economic and social discourse in this country where the previously middleclass wish to continue their high living on the backs of the working poor. If we want to increase the export potential of our manufactured low input goods then we need to reduce debt in symbosis with reduced wages. Again this is another sacrifice to the debt Gods so that they can continue to have a surplus over wages and productive capital. Ireland does not have enough doctors in almost any specialty compared to most advanced European countries. Not sure if the same can be said of academics. The recent survey of senior academic pay-scales in the Irish Independent (John Drennan?) didn’t attract any wincing on this blog i noticed. It all comes back to debt, doesn’t it? You the ex builder who bought a house in the sticks listen up. What we want you to do now is get a low paying job. And what about your mortgage ? Say a decade of the rosary. @Seafoid We are almost a futile experiment to prove that reducing wages and/or credit on the back of a expanding real debt load is achievable without implosion. Maybe 1 out of 100 such experiments can refute credibly a logical argument but is this 1 out of 100 chance a worthwhile endeavour as the predictable failure of this model will increase suffering once again. Maybe we Oirish are into suffering especially now as we need to purge the demons of past tigers – it feels especially good when you can save a extra few bob debt money on the back of a guy who took a reduction in his wage. Such is life in this false shambolic republic of ours……. or is it someones elses now – who knows ? All you need to know about the 4-year plan in a couple of paragraphs – nice work. Just one point. Frank writes: Can we really believe that the medical consultants and barristers, many of whom make most of their money from the public purse, will be tackled? I would distinguish between the medics and the barristers. The former contribute to society’s well-being, even at occasionally exorbitant costs. The latter are part of an adversary legal system that — in the immortal words of Richard Posner — is often nothing other than a ‘contest of liars’. Arguably barristers would cause harm to society even if they worked free of charge. After the Revolution, we can survive without the barristers but not without the physicians. @ Keith Cuneen, Interesting points, however I am not too sure I agree with you fully. You mention inequality between middle class and working poor. Well there has to be inquality between these two classes. Otherwise there would be no incentive to get out of bed, get an education, get a job, obtain experience, take the rough with the smooth and move on up in the world. I am sure you will agree there has to be an incentive for a person in Irish society to better themselves. If we are going to treat a middle class secondary school teacher who is educated the same as an uneducated person (who never did the L.Cert) then what one is proposing is a race to the lowest common demoninator. There are many working class people who have a better standard of accomodation than the middle class who don’t have everything handed to them on a plate. I firmly believe in equality of opportunity for all classes. That is one of the great things about the Irish education system. But equality of outcome, where regardless of effort you end up all being treated the same is a recipe for disaster, that method was tried and failed in all communist countries. The problem with Irish society is that the gap between lower and middle classes is not BIG enough. @Sporthog – “The problem with Irish society is that the gap between lower and middle classes is not BIG enough.” …and there’s me labouring under a delusion we had made moves towards a more classless society in the past 20 years or so. Mind you, my in-laws still have a tradesmen’s entrance. Nuff said. @Joseph We can have a classless society but having a society where hard work is not allowed to earn a reward is unjust and immoral. I don’t care what “class” people are. The state certainly shouldn’t. However, I do care if people don’t work hard or they make bad decisions and they expect me to pay for their lack of endeavour or their bad decisions. I make enough of my own bad decisions. I don’t want to pay for other people’s. @Sporthog I never said that there should be no inequality between a teacher and a dishwater although a teacher is maybe a bad example. Given the propensity of muinteoirs to seek a poltical vocation it may be best to pay teachers over the market rates to stay in their oringinal jobs. As for barristers as mentioned by Carolus well the least said about them the better – they especially should not seek public office given their gift for duplicity. I would take a dishwasher over a barrister as minister for finance any day as they would at least understand what needs cleaning out. Also a dishwasher would generally make a better attorney general as they may have a better sense of right and wrong. @ Keith Cunneen, “Given the propensity of muinteoirs to seek a poltical vocation it may be best to pay teachers over the market rates to stay in their oringinal jobs.” Now that gave me one me one hell of a laugh!! Carolus If Ireland’s hospital consultants were like L’Oreal women and worth it they would be able to replicate their glorious incomes elsewhere in the eurozone. Nobody else wants them. @sporthog The minimum wage is not there for employers, it is there for society as an attempt to prevent escalating inequality and exploitation, a job at which it only partially succeeds. @Hugh Sheehy “We can have a classless society but having a society where hard work is not allowed to earn a reward is unjust and immoral. Absolutely, that is why miners, nursing home staff and laundry workers are so well paid. My little joke. What the right typically mean when they praise the virtues of hard work is that society should be arranged like a race with the few who finish in the top positions “earning” much more of the pot than the those who finished just behind them; many of the losers started the race with a burden. The winners are more often than not just lucky and even more often than that earned their place in the rankings by selecting the right parents (Gavin O’Reilly, I am talking about yooohooo.) Progressive taxation, the minimum wage and social welfare make life’s competition fairer, ensures that there is a reward for taking part and helps those who are temporarily or permanently unable to race. In 1940, Deputy James Dillon said in the Dáil in reference to the three year sentence to an industrial school, that was given to a child who had stolen some grapes: “Can you imagine the son or the daughter of a resident of Fitzwilliam Square being brought down to Morgan Place and sent from there to an industrial school because he stole 5/- (32 euro cent) worth of grapes?” How times have changed! Or maybe not. The IMF is possibly our best hope for a fairer society. From the early 1950s, when the Catholic Church opposed ‘socialised’ medicine and found common cause with devotees of the God Mammon in medicine, the protected professions have comfortably handled the schizophrenic existence of being both socialists and capitalists. Even the free market side operates via what is effectively a tax (health insurance) as a dual system is the main plank of public policy. The ‘cartel’ charges at consultant level are simply obscene. On independence, the English inspired legal system continued; why would any of the big wigs have changed it? Payments to barristers by the DPP rose 11% to €15.2m in 2009 despite an 8% cut; the Irish Times reported last April that its own columnist Noel Whelan was the 5th highest earner at €234,766 (inclusive of VAT). Lawyers become multimillionaires on the public payroll investigating corruption which should be confusing or ironic and besides reform of the underlying cause of one aspect of corruption, land rezoning, is a taboo issue. “If you’re not inside, you are outside, OK? the Gordan Gekko character says in Oliver Stone’s recently released ‘Wall Street.’ Robert Frank of Cornell University has written of “winner-take-all markets.” These are markets in which small differences in performance (or even small differences in the credentials used to predict performance) translate into extremely large differences in reward. While these markets have been evident in entertainment and sport for many years, when applied to professional cartels, it’s not just a pioneering surgeon like the late Maurice Neligan who gets big rewards but everyone who manages to get inside the circle. Then there is a cascade ripple effect beyond. American CEOs, for example, earned 419 times as much as the average worker last year, up from only 42 times as much in 1980. The top one percent of US earners have seen their real incomes more than double since 1979, a period during which the median income has remained essentially unchanged. Over time, some of these CEOs will be shown to be duds. As for the ‘independent figure’ proposed in the four-year plan, just three years ago, an ‘independent’ panel containing at least two multimillionaires proposed lavish hikes in the salaries of politicians and senior public officials. The Dublin City Manger, just 18 months in his job, got a hike of 36% as did his retired predecessors and so it went. In the legal world, to take silk should be more like taking nylon. The Competition Authority (CA) says the legal profession in Ireland is organised into a highly rigid business model: access to barristers for legal advice is limited to a few approved clients, barristers cannot form partnerships or chambers or represent their employers in court. There is no profession of “conveyancers” in Ireland, as in other common-law countries, and this limits competition in conveyancing services; the title of senior counsel is inclined to distort rather than facilitate competition; junior counsel generally charge a fee equal to two-thirds of the senior counsel’s fee, regardless of the work done by each barrister, despite the fact that this practice was identified as anti-competitive in an independent report on the legal profession 16 years previously; establish objective criteria for awarding the title of senior counsel. The level of solicitors’ fees in the High Court increased by 4.2% above general inflation annually over the period 1984 to 2003 while the level of senior counsel fees in the High Court increased by 3.3% above general inflation annually over the same period. The public sector is the biggest customer of the legal profession as with other professional services. If not now, when will it change? Transparency and political will to clear the dust from several CA reports is all that’s needed. @Michael H, I can only applaud your tenacity and focus. But I expect, since you are as long in the tooth as I am, you realise that your Phillipics are likely to fall on deaf ears. At one level, it’ll be “Sure, it’s yer man Hennigan, off on one again”. At another more visceral level, the extent to which various groups of insiders effectively control the political factions makes them impervious to any critique. And, as the economic squeeze tightens, they will outdo the most diehard Paisleyite in the “Not an inch” stakes. It’s an unfortunate fact of human nature – and we’ve seen all before in the ’50s and ’80s. (The NRP is a blatant political attempt by FF and the Greens to placate their groups of insiders, while conceding support to Labour with a vague hope of forming a governing arrangement with them down the road – particularly as co-habitation with FG might very well fall apart.) And even on a site like this, devoted to the Irish economy, you will find ‘useful idiots’ saying that removing deadweight costs should not be a priority because the extra money being gouged from consumers is likely to stay in the economy. Deadweight costs are simply extra costs imposed on consumers over and above the efficient marginal cost of providing a good or service. And this is either a direct additional and unjustified cost (i.e., gouging) or indirect via inferior quantity or quality of service. Everyone in society, apart from the gougers, is worse off as a result. But it is at the third and deeper level that the malaise really takes hold. There is absolutely no recognition of the basic civic requirement to establish a rational basis of political and economic governance. Those who benefit from the current arrangements obviously have no incentive to make changes; those who are impoverished seem to have no voice, have little recognition of what could be achieved, decide to leave the country, nurse a vague hope that they may join the insiders or are in thrall to well-heeled demagogues who claim to advance their interest. You mention the Competition Authority. It is I am sure comprised of upstanding, professional staff. But it lacks the powers and resources to penalise and deter the anti-competitive, economically-damaging behaviour it encounters. And those who gain have no interest in seeing it change. It is sad and unfortunate, but, probably the least worst outcome, that our only hope for some barely rational economic governance will be provided by the Troika over the next 4 years. @ Shay Begorrah, All interesting points, however I would like to mention that hard work does not just involve lugging heavy items around like coal or laundry etc. There is physical ability (i.e. physical strength) and there is mental ability (to understand complex processes and manage them in a safe, economical and environmentally responsible manner). I am sure you agree that there is a difference. As we progress to a more complex technological world this difference becomes more apparent. Obviously it depends on what monetary value society and the market places on these different abilities. Hence the difference in salary. But if you have an army of Chinese coal miners earning $100 a month it is very hard to compete against them on cost grounds. I like your joke, some good points, however at the top there is not enough room for everybody. Hence there will always be a lot of people who are not up there. I firmly firmly believe that the best inheritance a child can obtain is based on two things, 1) Upstanding parents, regardless of class. Parents who display, live good lives and respect for the law and society. Parents who have high standards, they impart good values onto their children. This is very important for a childs development. 2) Good education to be given to the child all the way to 3rd level. But for the child to be educated, the child must have internal discipline, in control of their emotions. Discipline is a major problem in some second level schools. There is a 3rd form of inheritance, but it mainly applies to the family who can pass on a business or other form of wealth to the child. But again there are tax issues to deal with this etc. @Paul Hunt The local shysters and gougers are no different to any elite in the Third World. The argument that the removal of their privileges would benefit all including them doesn’t wash, for some reason. There may however be some hope in the fact that that the money now owed by Ireland isn’t owed to Irish people. Ireland will get out of this crisis somehow but can’t go ino the next one without serious reform. @ Paul Hunt Paul, Thanks for the comment! In haste as my mother used to write in letters… …on the other hand A report by the Comptroller and Auditor General says sick leave has jumped since the 1980’s in the Irish civil service with the absence rate rising from 3.3% to almost 5% of available working time, which was lost to sickness absence in 2007. On average, 59% of all staff employed availed of sick leave in that year. The average employee was absent for just over 11 days. http://www.finfacts.ie/irishfinancenews/article_1018282.shtml Comments are closed.