Baltic Meltdown Avoided?

Meltdown really is in the eye of the beholder. Ireland has lost a quarter of its GDP and more and is still not out of the woods. The Baltics states have lost that but are now back on track to jobs and growth(albeit aided by their ability to deflate their currency).

To Irish eyes, a 25% drop in GDP in exchange for an end to all of this would be a bargain.

Karl you have hit the “nail on the head”.

All three ex-Soviet Baltic states have real unemployment north of 20% despite the fact that Ireland is playing no small role in providing an immigration safety “valve” to Latvia and Lithuania while Estonians benefit from their closeness to Finland and Sweden.

In Northern Latvia (anecdotal evidence suggests) the generous Irish childrens allowance is a welcome monthly remittance.

A banking crisis was avoided in the Baltics simply because most of the Banks are owned by Scandinavian (particularly Swedish) banks.

Having survived a banking crisis (in the wake of of a real estate boom) in the late 80ś and 90ś Scandinavians have developed very strict banking rules. In Sweden, for example, bank nationalisation occurs automatically by law if capital ratios dip below 8%.

The recent austerity which Estonia is being praised for conceals the fact that the majority of the present government (i.e Reform Party) rejected Euro entry in 2007 prcisely because it “would have to stop serving drinks.” Having said that the junior coalition party (since April 2007) is no stranger to austerity as it carried out “Tatcherite” restructuring in the 1990ś enabling a stability fund to be set up and which Estonia was able to “tap into” in 2009.

Of the three ex Soviet Baltic states Latvia is the one that had the least share of Scandinavian owned banks. Of course we know which one has fared the worst.

It is also worth noting that having lived through a “spate of jitters” in 08-09 Sweden had begun to calm down about exposure to the Baltic market. However after the Irish “saga” nerves have started to rattle again in Sweden.

Apparently according to the Swedish Finance minister (as reported in media reports I have read) Swedish banks have loans equal to 3.5 times its GDP and feels this may be more than enough because Iceland had loans equal to 7 times GDP and Ireland 5 times GDP before their particular crises. A lot of these loans (again according to reported statements by the Swedish finance minister) are in the Baltic market.

I agree 100% that “meltdown is in the eye of the beholder”. In Ireland we have a major problem but with the right approach and right people in charge it is not impossible to emerge from it.

“devaluation and banking crises have been avoided” _ that appears to be the writer’s definition of a meltdown.

OK there was external debt, but why would “devaluation” be included along with the more reasonable “banking crises”?

Priorities……priorities…..

How is Ireland’s internal devaluation going anyhow? Anyone “negotiated” any reform yet – or is everyone still at the back of the que?

Odd logic.
1) It’s too early to say anything.
2) But we are going to say it’s a success
3) Because it has not been a complete disaster
4) Heres how we achieved the non-disaster that’s too early to call

20% unemployment in countries with massive markets either side of them isn’t much of a success.
All this article proves is that you can implement cuts and allow the banks to get their money back without an uprising.
The Baltics did have to put up with Hitler and Stalin so would take alot for them to revolt.
Note the word “experiement” too. We are all part of the Irish Experiment now my fellow labrats. Nice to know how the IMF see their interventions.

At first I thought this was another piece on Global Warming!

@Eureka
“The Baltics did have to put up with Hitler and Stalin so would take alot for them to revolt.”
Patronising much?

Estonia is a model for living within your means, as far as I can see. The few Estonians I know have very clear ideas on that, both personally and for the government.

By the way, it appears to me that the Estonia unemployment rate is the equivalent to our S3 rate. Measuring unemployment as registered unemployed gives an unemployment rate of about 15%… Our unemployment rate for Q3 was 14.6% (headline) and 22.6% (S3)…

Perhaps ‘pravda’ is another thing they don’t have time for over there.

http://www.monthlyreview.org/101001onaran.php

“The Baltic States and Bulgaria have currencies pegged to the Euro, and if they cannot maintain these pegs (which require these countries to have access to Euros with which to buy their own currencies to maintain the pegs in case of capital outflows), more devaluations will occur, and these will trigger further contagion effects in the region. For example, Swedish banks in the Baltic States and Austrian banks in Bulgaria, along with their governments, are pushing to maintain the pegs and avoid devaluation, in fear of high default rates on loans. Local governments also stand behind the pegs. However, preserving overvalued fixed exchange rates under the current policy framework will come at the cost of a very deep recession and deflation, which will create a de facto real devaluation. The mechanism for this seems to be massive wage cuts, as in Latvia.

The consequences of an unmanaged devaluation following a market-made currency crisis might lead to very severe distributional effects, as was the case during the Asian and Latin American crises. If a nation’s currency buys less foreign currency, imports become more expensive. If the economy depends on imports, as many do, devaluation in turn leads to inflation. Workers will suffer from this inflation more than the wealthy. So far, the depreciation rate has been moderate, and inflation has been restrained by a deflationary environment and falling commodity prices. However, both can become more severe in the future.

Unemployment in all the East European economies in the EU (New Member States) has grown significantly, with the sharpest increases taking place in the Baltic countries. Real wages have fallen in Hungary, the Baltic countries, Romania, the Czech Republic. The austerity programs in Hungary, Romania, and Latvia will further reinforce the pressures of the crisis.

In the Eastern European economies, the record of GDP, employment, and real-wage growth over the past twenty years has been shocking: first a transition recession and then a global crisis. The gains in terms of growth and wages are far from spectacular. Employment has at best stagnated, and it has decreased in Romania, Estonia, Lithuania, and Hungary. Real wages have stagnated in Hungary and Slovenia, even fallen in Lithuania and Bulgaria. Real wage growth overall has lagged behind productivity growth. Even in Romania, where real-wage growth was maintained for a time, it never exceeded improvements in productivity. This does not look like a politically and socially viable balance sheet.”

@Mickey Hickey

If you were going to list countries to choose have a prickly political past relationship with, surely the UK would be a lot higher up that list than Russia?

The Baltics have suffered mightily for their embrace of the market, I am sure there are a few winners and many losers. Still, the important thing is that they have avoided the disaster of devaluation and that the financial sector is intact – the preservation of the value of assets being the primary responsibility of government.

@Michael Hennigan

The targeting of the public sector “inefficiencies” is a perfect example of psychological displacement.

Workers in the private sector (particularly in the US) find themselves suffering from increased working hours, alienation, the dramatic migration of rewards up the company/social hierarchy and, most crucially, job insecurity.

Naturally rather than confronting the problem of the power imbalance between workers and corporate power they choose to blame public sector workers for not suffering as much, rather than organize themselves into a union they would deny others its advantages.

Pathetic just about covers it. Just about.

The targeting of teachers for the auld stick/carrot treatment is a classic rightist meme and it distracts from the main source of bad educational outcomes – poverty and inequality. Perhaps the hope is that if teaching is turned into as mercenary an occupation as stockbroking the teachers will inculcate their charges with a love of the market, low taxation and “hard work”.

@ Brendan Walsh

“Consider the case of two newly hired security guards with the same level of education who work in downtown Los Angeles for Securitas, the nation’s largest security company, with $8.7 billion in worldwide revenues in 2009. Jose and Bill work in two of L.A.’s large office buildings. Jose’s starting pay is $11.50 an hour with paid health insurance as well as two sick days, five paid holidays, five vacation days (increasing to ten days after five years), three paid bereavement days, and a uniform allowance of $2 a day. Bill starts at $8 an hour (the state minimum wage) and gets no health insurance or any other benefits. What accounts for the difference? Jose is a member of the Service Employees International Union, which has a collective-bargaining agreement with Securitas, while Bill is on his own, with no union contract.”

Read more: http://www.utne.com/Politics/Good-Jobs-Stronger-American-Unions.aspx?page=2#ixzz1AjO2w75P

Consider what links the US and Pakistan :

Salmaan Taseer was assassinated by a fundamentalist.
Gabrielle Giffords was the subject of an attempted assassination by a fundamentalist.

In the US, union organisers are subject to violence and intimidation :

“According to Cornell University’s Kate Bronfenbrenner, it is standard practice for corporations to subject workers to threats, interrogation, harassment, surveillance, and retaliation for union activity during organizing campaigns” (Same UTNE article)

In Pakistan, union organisers are subject to violence and intimidation :

“But the tea stall meetings continued and the questions kept developing: What was the law there for? Why didn’t they get their legal wages? Why would the bosses refuse to register them with the legal authorities so that they could get a pension? Why is it that the police always attack them and harm them on the behest of the owners?”

http://www.monthlyreview.org/101201memon.php

@ Shay Begorrah

“Perhaps the hope is that if teaching is turned into as mercenary an occupation as stockbroking the teachers will inculcate their charges with a love of the market, low taxation and “hard work”.

Test scoring in the US has already been given the neoliberal makeover

“Scoring is particularly rushed when scorers are paid by piece-rate, as is the case when you are scoring from home, where a growing part of the industry’s work is done. At 30 to 70 cents per paper, depending on the test, the incentive, especially for a home worker, is to score as quickly as possible in order to earn any money: at 30 cents per paper, you have to score forty papers an hour to make $12 an hour, and test scoring requires a lot of mental breaks. ”

“Usually, within a day or two, when the scores we are giving are inevitably too low (as we attempt to follow the standards laid out in training), we are told to start giving higher scores, or, in the enigmatic language of scoring directors, to “learn to see more papers as a 4.” For some mysterious reason, unbeknownst to test scorers, the scores we are giving are supposed to closely match those given in previous years. So if 40 percent of papers received 3s the previous year (on a scale of 1 to 6), then a similar percentage should receive 3s this year. Lest you think this is an isolated experience, Farley cites similar stories from his fourteen-year test-scoring career in his book, reporting instances where project managers announced that scoring would have to be changed because “our numbers don’t match up with what the psychometricians [the stats people] predicted.” Farley reports the disbelief of one employee that the stats people “know what the scores will be without reading the essays.”2

I also question how these scores can possibly measure whether students or schools are improving. Are we just trying to match the scores from last year, or are we part of an elaborate game of “juking the stats,” as it’s called on HBO’s The Wire, when agents alter statistics to please superiors? For these companies, the ultimate goal is to present acceptable numbers to the state education departments as quickly as possible, beating their deadlines (there are, we are told, $1 million fines if they miss a deadline). Proving their reliability so they will continue to get more contracts”

http://www.monthlyreview.org/101201dimaggio.php

@ Shay Begorrah

Should read “or trying to get one started.”

@Michael Hennigan

“In many countries including Ireland, there are also powerful combinations in the protected professional sectors, which act no differently to public sector unions.”

And nothing is changing. Letterkenny IT is set to receive a chunk of land which cost the taxpayer €6 million. No doubt the TUI are breaking down the Minister’s door pleading for special treatment.

And while all in sundry mouth the words for reform, efficiency and ‘savings’ it’s all a laugh really at the expense of the private sector. Rory Quinn was on Drive Time awhile ago praising Labour’s commitment to Third Level and the party’s recognition that the sector has been underfunded for a a long time. My head shook in disbelief. massive unemployment and emigration and knowledge economy fantasies are still being trotted out. Oh, the political convenience of it all.

If anything the sector is too diverse and geographically scattered but ‘reform’ would entail redundancies and no party politicians will countenance the loss of the middle class vote.

@ Michael H

From your artical

“Private-sector productivity has soared in the West over the past quarter-century, even in old industries such as steel and carmaking. Companies have achieved this because they have the freedom to manage—to experiment, to expand successful innovations, to close down bad ones, to promote talented people (see article).”

Why has the average salary in the US stalled (or in real terms) falling in the last 30 years while productivity has soared?

What we have seen since the rise of Neo-liberalism is transfer of power and wealth up the food chain. We now work part-time/temporary/low security jobs. While we still hope to make long term commitments in buying homes and starting familes. An increasing stressfull lifestyle that is having and will continue to have enormous effects.

Yes, I’m open to the arguement that Unions have shot themselves in the foot by arguing for too much; but who will protect us from the vested interest of the mobile corporate entity in the new economy.

@ Michael Hennigan

People in the private sector are only just beginning to understand how much of a banquet public-sector unions have been having at everybody else’s expense.

How long do you think you’d last working in an A&E department?

Its perfectly ok for firms to maximise profits, but not for workers to get higher wages? Anyway, the majority of ICTU members are in the private sector. rolleyes 🙄

@mickey hickey

Re “Countries with weak unions are countries where the middle class is miniscule or soon will be.”

“And we must look to that privileged position of the worker to explain how our own middle-class way of life can survive. Putting more money into education is a waste of effort. Putting more money into basic research is a waste of effort. We already spend enough. In fact, we have every factor of production going for us: We have more land, more labor, more capital, and higher levels of formal education. But with our flexible labor markets, we cannot develop the human capital or knowledge we need to wean ourselves away from turning out crap.

The answer to the problems of our country is education, but not the kind we’re pursuing, that is, jamming more kids into college or even teaching practical skills; instead, it’s teaching them how, politically, to cut themselves a better deal. As long as that’s going on, it’s impossible to write off the European or, more specifically, the German model”

http://www.utne.com/Politics/Unions-American-Working-Class-United-States-Europe.aspx?page=4

What’s emigration in the Baltics like at the moment?

@seafoid

Just because there is a waste of money at one level of government in the USA (Federal spending on “War On Terror”) is no argument in favour of waste of money at other levels of government (State and municipal). The public-sector unions in California (where I live) have been the milking the system for years and have managed to combine great benefits and pensions with dismal productivity and a bad attitude. From the same edition of the Economist (not sure if the full briefing is online)

Any public-sector worker can hide behind union power to game the system – 82% of California Highway Patrol officers discover a disabling injury about a year before they retire

In 2000-10 the Los Angeles school district spent $3.5m trying to get rid of seven of its 33,000 teachers, and succeeded with only five

In California the prison guards union has been one of the leading advocates of getting tough on crime. The result of this policy has been a dramatic increase in both the size of the state’s prison-industrial complex (from 12 prisons in 1980 to 33 in 2000) and the pay of the people who run it ($70,000 a year in base salary and $100,000 with overtime)

Milking the system also happens at city/municipal level – see here for a list of ridiculously paid city managers, who don’t have very much to do in the first place (cities and counties have direct revenue/tax raising powers).

I am amazed at how quickly diversionary tactics are always thrown up anytime the fact that public-sector unions can protect under-performing workers from being sacked is challenged. There is a deep-seated aversion to the concept that pay should be related to performance, since the goal is to protect the members/insiders at all costs, ignoring the cost (since someone else pays) and ignoring the impact on the quality of the service provided (since the goal is insider protection).

The CB taking on loans with NO discount (a mere 500m though. Lenihan could “invest” that before lunch).
http://www.independent.ie/business/irish/banks-tried-to-avoid-haircut-on-euro1bn-loans-to-nama-2491048.html

Cowen lost all credibility in relation to being truthful after the IMF arrived (and before that more farcically after Pontchartaingate). Everything he says should be IMF proofed. Irish Independent and reputedly Prime Time very good today.

It is also high time he was interviewed by Gardai. If he wasn’t a government politician he would have been hauled in long ago.

From politics.ie:
“The investigating Gardai into Anglo should now interview Brian Cowan concerning what was said between him and Sean Fitzpatrick as this is entirely relevant to their ongoing investigations.”

And
“You would think that Seanie has already told the Gardai about his meetings with Cowen, as he hardly left this info out before spilling it to a journalist.

So the question is, have the Gardai already interviewed Mr Cowen in order to corroborate Seanies story?

If not, why not?

And if Seanie did not tell the Gardai, will they be interviewing him again?”

@Rory O
I have no particular problem with collective bargaining.

I have a problem with the classic tale of two wolves and a sheep voting on what to have for dinner. In many countries the public sector unions and the government have taken on the role of the wolves. Their ability to do this, and the rewards that have come from it, need to be removed.

Rent seeking is rent seeking. There are many different sorts of market distorting practices. In very brief, a few examples:

* warfare and political subversion to gain privileged access to crucial natural resources. eg Clive’s conquest of India or the western role in the Gulf. Prosperity has some unsavoury roots.
* building of national and international monopolies and monopsonies via regulatory capture, tax system arbitrage, transfer pricing and political graft. Think Michael Moore.
* monopolising the supply of public goods under the flag of professional ethical standards such as medicine, accountancy or law. Tribunals, VHI fees, bank scandals etc.
* restrictive practices within state agencies, designed to favour post holders, internal proteges and favoured contractors at the expense of agency functioning and staff productivity. Many more in the pipeline.

@ Paul Quigley

Rent seeking is only going to intensify as an out of control financial sector expands beyond the capacity of the real economy to feed it.

“Longtime hedge fund manager Mike Masters, who has worked with WDM, said: “Because there is already much more capital available in the world than hard commodities, speculators can increase the price of consumable commodities, like foodstuffs or energy, much higher than traditional consumers and producers can react.”
http://www.guardian.co.uk/environment/2010/oct/25/impending-global-food-crisis

Barclays bonuses are a good example.

The problem with constantly decrying the public sector is that it feeds into the agenda of those who would prefer us not to have it.
In the past there was no public sector apart from the military. There was no medical treatment for the poor and there was no universal education. States did not believe that they had a duty to provide these things.
There are those who still believe that the state has no duty to provide these services and that’s a fairly powerful lobby.
It was a major struggle to develop public services. They need overhaul and improvement – no doubt about it but we need to be careful. They have done some good.

@ Eureka

i completely agree that a strong and broad public sector, like a strong and broad social welfare system, is ultimately what is required in this country, and is ultimately what is wanted by the people of this country. However, both of these have gotten too big and too much of a burden on the overall economy, and are in dire dire need of massive reform and downsizing. Simply accepting, as many argue for, that the public sector remains more or less of a similar size and cost (a 10% reduction is a meaningless gesture) at a time of immense economic crisis, will only cause our current problems to get worse, not better. At the moment we have asked that public servants do their job better, take relatively modest paycuts, pay for their extremely attractive pension schemes, and take relatively attractive voluntary redundancy packages. Although we have termed this radical and aggressive change, private sector workers are asked to do this sort of thing all the time. In reality its not particularly radical, and is far short of what an IMF-assisted country would usually try to do with its public sector.

@Ludwig
“The public sector exists because of identified market failure.”

If there is a market failure that requires the state to provide – for instance – all medical services then how come bandages, medical oxygen, needles, hospital construction materials, uniforms, surgical instruments, etc, etc. etc. are all provided by private sector suppliers? The right to a service and even payment for a service might be state driven in response to a market failure, but the need to have state run service providers is far less clear.

Health, education, fire services, administration of social insurance, etc,. could all be easily provided by private sector suppliers. There could even (possibly) be a couple of private sector passport offices.

Of course, if public sector suppliers were run efficiently for the benefit of the customer and with due care for the rights of the taxpayer then there would be no need to consider such options. Public services in many countries are far from being run for the benefit of the customer or with the rights of the taxpayer in mind.

“Health, education, fire services, administration of social insurance, etc,. could all be easily provided by private sector suppliers”

So could television. You would end up with TV3. It should be noted that historically the private sector has left it to others to provide basic services. It was religious orders and not William Martin Murphy and his buddies who developed much of the State’s medical and educational infrastructure.

The meme that the private sector is efficient while the public sector isn’t has deep roots but is highly questionable.

Take the UK PFI industry. There is no evidence that PFI funding is more cost efficient than Government borrowing. Take the UK rail system. Private sector management has been a disaster.

Between 1997 and 2007 the Irish private sector allocated tens of billions of Euros worth of capital in property . Where is that money now?

@ Bond, Eoin Bond
Yes – small teams with clear chains of command and proper oversight.
Does not really matter where this is achieved but there are some public services that the private sector might not be able to do as well. I’m not sure a private company providing education across the state would work as well

@Michael Hennigan

“Unregulated, they tend to expand services, not because of consumer need but to enable the senior people to earn more.”

Isn’t it the same with the banks (cf Bob Diamond yesterday) , the Big 4 accountancy firms, the hospital consultants, the lawyers ? Gouging works across the spectrum and regardless of ownership structure. Modern professionals are, on the whole, shameless.

@Hugh Sheehy

Do you really think that this is the decade to talk about the efficiencies of the market in providing services and how what we really all need is a bigger private sector and a “freer” market?

We have just had the most significant failure of capitalism in eighty years, a failure that occurred in a fully privatized sector open to the so called “rigours of the market”, a failure that has had astonishing negative consequences for the wealth and well being of the nation (and indeed the world).

So what better time to suggest privatizing the fire service? It is bound to work out well.

Faith in the efficiencies of the market and the superiority of private sector solutions is just that – faith.

Faith that seems misplaced right now.

@ Shay

do you think that the efficiencies of the market have worked in technology, for instance? Or would government involvement there have helped with technological development?

@ Paul Quigley

the telecoms policy in this country was, is, awful. But you could argue that a primary reason for that was the slow pace of unbundling of the telecoms network, rather than just the sale of Eircom. Selling Eircom off in pieces, rather than as a dominant monopoly, would probably have been a much better decision in hindsight. It wasn’t the concept of privatisation that failed, but the execution of it.

Re the govt investment in technology – agreed that sometimes a large scale govt investment is required to get a project properly up and running. But generally the actual role-out and applied usage of such technologies are best managed by the private sector. The internet is a prime example of that. And, as you noted, most government created research and technology was a spin off, rather than the primary reason, of other projects (ie NASA, US military). We have neither of these sort of organisations in this country. Its possible you could argue for an agricultural-based (or fisheries?) R&D operation in this country that would merit large levels of government financing and which could create spin-offs, but aside from that i don’t see what role the government should, or could, have in that regard.

There was a letter missing

http://www.guardian.co.uk/artanddesign/gallery/2011/jan/02/photography-detroit?INTCMP=SRCH

@Eoin Bond

> do you think that the efficiencies of the market have worked in technology, for instance?

That is a reasonable question and without dismissing the idea of markets as a way of choosing who to buy things from I am going to say that the efficiencies of the market have not been the major driver of technological progress.

> Or would government involvement there have helped with technological development?

The Internet, MRI scanners, velcro, lasers, the integrated circuit.

Looking back at the twentieth century you could be forgiven for thinking that all the inventions that make our high technology existence possible were produced as the result of government funded research (or academic study just for the sake of it).

These developments did not benefit from the market and they were not intended, in any meaningful way, to meet the needs of the market. Now the market did benefit hugely from them because there were new things to sell and new ways in which to sell them but it is questionable how significant the contribution of the market (and indeed competition) is to technological development.

Many would argue that technological advance is first and foremost an example of human progress in science and engineering, something ongoing for quite a while without the direction of the market. Things have gotten better because we have gotten better at doing them, and we have gotten better at doing things because we are driven to do so by human nature.

Not let me ask you two questions.

How much of our current economic and societal malaise is related to the poor allocation of resources enabled, if not caused directly, by insufficient market regulation?

Do you think that the way capitalism gradually reallocates resources to the wealthiest is making the world a better or a worse place?

@ Christy

I don’t buy that.

58% of all income growth in the US between the 1976 and 2007 went to the top 1% of the population. The top 0.01% or 15000 households had 1.7% of all income in 1976 and 6.04% by 2007. By 2004 the top 1% of wealth holders in the US held 42% of all financial and real assets, the most unequal distribution since the 20s. The top 20% held 93% of such assets

The total wealth of Indian billionaires is more than a fifth of the nation’s GDP, equalled only by Russia.

@Christy
“Higher income or wealth for one person need not imply lower income or wealth for someone else.”

Wealth is a relative measure you can only be wealthy if someone else is poor. If everybody on the planet was given €1m would we all be wealthly?

@EBE

I can’t disagree that we should aim for value for money in public spending. Austerity should be a permanent feature of the budget i.e. they should justify every pound spend.

@ Michael H

Agreeed that monopolies are a problem, however I’d sooner have a state owned monoploy than a private owned one. I’d like to see a free market in Adam Smith’s design with multipy buyers and sellers as opposed to the oligopoly power that exits today with MNCs (and the resulting race to the bottom in employee rights etc)

It is often forgotten by free marketers that Smith mentioned the “helping hand” as least as often as the “invisible hand” – he only mentioned the latter once.

@seafoid

While I accept that recent decades have witnessed increased income inequality in western countries, a much broader view is required when determining whether capitalism as a system of organisation leads to gradually increasing wealth inequality.

The capitalist age could be argued to have started at the end of the middle ages and income and wealth are less unequal now then they were then.

Moreover, whether or not someone is well off is more related to their effort and ability than it was in the past and then it was or is in non capitalist countries.

More fundamentally, these households don’t hold on to their wealth through the generations to an extent that would raise concerns about the development of elite class or form of modern nobility. A large chunk of the wealth of the super wealthy is given away to charity or not invested wisely enough to maintain levels of wealth.

@Shay

“The increasingly unequal distribution of income leads naturally to a more unequal distribution of power – it’s one of the drivers of modern alienation, the feeling that our increasing material wealth is coupled with diminishing status.”

I’m not sure what specific power(s) you are getting at here -In any event, how big a concern is this? some people “feel” “alienated” because they think their relative lack of wealth gives them a lower “status”. I mean what percentage of a drop in people’s income would they accept in order to get rid of this “feeling” of “alienation”. I’d say f**k all. That this “feeling” of “alienation” is essentially not very important. (to the extent that it really exists at all)

Also, right thinking members of society don’t believe that the value of someone is determined by their wealth.

Second, a world where the rich are powerful is still a better world than one where the only way to become rich is to be powerful.

@Niall

I would measure wealth in euros / purchasing power

@ Shay Begorrah

Faith in the efficiencies of the market and the superiority of private sector solutions is just that – faith.

Places like Utopia and Heaven are for dreamers and faith in communism cost many millions of lives and related misery.

North Korea is the remaining remnant of this failed experiment; I can understand why it was alluring for people who had little.

How could capitalism be perfect? It can’t of course but there are plenty examples which still inspire optimism.

http://www.finfacts-blog.com/2008/02/irish-journalist-tom-mcgurk-pays.html

@ Michael Hennigan

laces like Utopia and Heaven are for dreamers and faith in communism cost many millions of lives and related misery.

Well luckily for us in Europe those vested interest trade unionists in Solidarnosc brought down communism.

They didn’t like the idea that somehow an all encompassing Party could have the true interests of the people at heart, doing away with the need for freedom of association or groupings.

@Christy

I’m not sure what specific power(s) you are getting at here -In any event, how big a concern is this? some people “feel” “alienated” because they think their relative lack of wealth gives them a lower “status”. I mean what percentage of a drop in people’s income would they accept in order to get rid of this “feeling” of “alienation”. I’d say f**k all. That this “feeling” of “alienation” is essentially not very important. (to the extent that it really exists at all)

Eh – power? Well lets say its the ability to effect change in society or government or to capture limited resources (like land or licenses or what have you).

It is a huge concern because inequality and the alienation it fuels undermines democracy and also the cohesion of society. The Spirit Level (which has been discussed here before) deals with many of these issues in depth and it is an easy read.

The factor which I suspect you disagree with me most on is that the “standard of living” has components other than income in it and at some level you think that purchasing power is the primary component in well being.

@Shay

“It is a huge concern because inequality and the alienation it fuels undermines democracy and also the cohesion of society. The Spirit Level (which has been discussed here) deals with many of these issues in depth and it is an easy read.”

Where is this undermining of democracy that you see?

What you are saying appears to be that inequality causes people on low incomes to feel they have low status. This makes them feel alienated from society and that this feeling (a little mysteriously) “undermines democracy and social cohesion”.

I would say that to the extent that this alienation exists it is not caused by a feeling of “low status”. I would say it is caused by a potentially justified concern that they are not getting a fair and/or adequate share. This talk of “low status” is a red herring.

Its the same sort of argument that rolled out in support of universal child benefit, something like, “Every family ought to feel like they are receiving from the state … because this is important for social cohesion”.

What annoys me about this is not just that I think that this benefit is unlikely to be realised but that the arguer often does not then proceed to consider the cost of this approach, i.e. hundreds of millions of euros. How much social cohesion does this policy buy? It better be a hell of alot at that price! I mean could we not just send out a few candles to each household, like we did for the millennium, and get everybody to light them at the same time, (perhaps we could all sing), and then spend the millions left over on other social programs.

” The factor which I suspect you disagree with me most on is that the “standard of living” has components other than income in it and at some level you think that purchasing power is the primary component in well being.”

I do think that material living standards are a valid and important goal for the state to pursue, while individuals, of course, ought to be more concerned with other goals. Material living standards are correlated with many things that really do matter like infant mortality, education and longevity and are associated with greater opportunities for more people.

@Karl Whelan
re
So they’ve lost quarter of their GDP but a meltdown was avoided? I guess this shows that the definition of a meltdown is in the eye of the beholder.

A 25% reduction would be and indeed may need to be quite doable in Ireland. The question is how to distribute the 25%.
From my perspective the real failure in Ireland has been the failure to distribute the pain to those who can bear it. There is still extraordinary rent seeking amongst the elite and professional classes mostly in the public sector, led at all times by a corrupt and clientelist political class.
There have been few commentators who have put their names to radical proposals to reduce rent seeking.

I do not know why Latvia seems to be emerging from crisis but suspect that the the principle reason is a national solidarity and honesty that is totally absent Ireland.

discussion on who should bear the pain.

It’s weird how the US measures economic recovery in terms of unemployment. Europe measures it in terms of GDP.
Wonder why

@seafóid
the Detroitus of capitalism!

@ Christy
There is a lot of relevant research. For example:

‘Although both material and social influences contribute to inequalities in health, the importance of relative standards implies that psychosocial pathways may be particularly influential’

http://www.bmj.com/content/314/7080/591.extract

With the greatest of respect for your thoughtful and considered views, there is a difference between ordinary boredom and chronic under-stimulation. Boring, poorly planned, under-resourced environments destroy lives.

Junk Culture is as big a hazard as Junk Food. No wonder the consumers develop mental and physical disorders. It may be very profitable to feed it to people at the bottom of the pile, but, as Michael Moore rightly points out, it sure ain’t right.

@Seafoid.
re: You’ll never die like common people .

It is rather hard that an old workman should have to find
his way to the gates of the tomb, bleeding and footsore, through the
brambles and thorns of poverty. We cut a new path for him, an easier
one, a pleasanter one, through fields of waving corn. We are raising
money to pay for the new road, aye, and to widen it, so that 200,000
paupers shall be able to join in the march. There are so many in the
country blessed by Providence with great wealth, and if there are
amongst them men who grudge out of their riches a fair contribution
towards the less fortunate of their fellow-countrymen they are very
shabby rich men.
Lloyd George –Limehouse speech.

The shabby rich men have not gone away, you know!!

@Eureka

“It’s weird how the US measures economic recovery in terms of unemployment. Europe measures it in terms of GDP.
Wonder why”

Lack of automatic safety net I would suggest.

In Europe the automaticity makes recession more of a national problem. In the US, the fact that so many safety nets are either time limited, disccretionary, or non-existant, makes unemployment (a more individual experience) resonate more.

It is also a reason why many countries have high savings rates and I am surprised that the possibility of the US becoming a high savings rate economy for this reason has not been raised by the left in the US. Maybe it hasn’t occurred to Paul Krugman yet.

@ christy

Fair play to you for sticking with this, even if it is not necessarily the thread:

‘ pychosocial pathways! don’t know what they are, but I cant remember ever hearing of them being the cause of a heart attack! ‘

There is a lot of research. Genuinely. Google health inequaltiies. My take is that too many of our young ( and not so young) people people feel that their lives are empty and worthless. Why take care of your health if you don’t value yourself ?. That hopelessness eventuallly adds up to a huge economic and social cost for everyone, so we need to tackle it.

BTW heart attacks are not the most expensive problem, especially if you are obliging enough to pop your clogs early doors. It’s the stuff that leaves people in wheelchairs or needing massively expensive repeat treatments which is busting the healthcare budget.

I haven’t the slightest idea how a thread on the Baltic countries avoiding economic meltdown has turned into a discussion on mortality rates. However, if we are going to touch on the subject, we might as well get a few facts correct. One of the best reports on the subject of mortality in Ireland was produced by Professor Brendan Walsh. Here is the link.

http://www.comharsdc.ie/blog/?p=209

I hate to intrude on the discussion with facts. I know how much many people on this site hate them when they fail to support their prejudices. But, here are a few:

(a) Between 1997 and 2008, Ireland recorded the largest fall in mortality (age-standardised) in the OECD.

(b) In 1997, the mortality rate (age-standardised) in Ireland was 15 per cent above the EU27 average. By, 2008 it was lower than the EU27 average.

(c) In 1997, the mortality rate (age-standardised) in Republic of Ireland was 6 per cent above that in Northern Ireland. By 2008, it was lower in Republic of Ireland than in Northern Ireland.

(d) Denmark, mentioned by one of the posters above as a shining example of the beneficial effects of high taxation, has the highest mortality rate (age-standardised) in the EU15, about 10 per cent higher than in Ireland. Note: Scotland’s rate is higher than Denmark’s, but it isn’t yet a separate country.

(e) One of the factors that Professor Walsh gives for the dramatic fall in Ireland’s mortality rate (age-standardised) is the huge improvement in housing conditions. Those wicked FF/developers again: they’ll stop at nothing to get votes, including building modern houses for people so that they live longer.

@ JTO

The EU didn’t have 27 members in 1997.

Prof Walsh notes that “In Ireland, non-capital public expenditure on healthcare per head of population increased by 72 per cent between 1997 and 2006, and is continuing to grow”

It will be interesting to see the trend over the next 5 years.

I suspect that debt growth supporting lifestyles that weren’t possible in the absence of debt helped mortality to improve for those who had access to debt but wonder now how the stalling of the debt machine will play out. €200 per week dole doesn’t buy much access to a healthier lifestyle either.

The FF model would have been wonderful if it had been sustainable. But it wasn’t.

@JTO.

Perhaps the lower Irish mortality rates that you refer to are a result of the wave of emigration in late 40’s and 50’s rather than any improvement in the general well being of the Irish.

Perhaps we should be grateful to the “wicked FF developers” who so generously built ” modern houses for people so that they live longer”.
Come to think of it WE are being grateful. We are paying the banks for the mortgages, we are paying the banks for their money they gave away to their FF friends and we are bankrolling NAMA for the billions they are paying the banks for bogholes that the FF developers wanted to build on.
Sure if the Irish start to live any longer, they will end up supporting the world banking system as well as the FF developers.

@ JTO
“I haven’t the slightest idea how a thread on the Baltic countries avoiding economic meltdown has turned into a discussion on mortality rates”
There is a logic. Economies can be judged on the welfare of the people in them. Mortality can be a measure of that.
There’s no doubt that we have made great advances in the past several decades.
Emigration, closed A and E’s, underfunded schools – all of these things have an impact on wellbeing and mortality. So it’s important

@ Christy
“Also, above, people suggested that inequality was causing deaths. I remember hearing this regularly on Vincent Browne. Extra stress was put forward as the link between the two. This seems a tenuous link to me although I have not seen the studies etc.”

The most surprising finding for me in The Spirt Level was that people at all levels of income do worst in more unequal contries (when compared to people at similar social gradiants in more equal countries) not just those at the lowest level. The risks associcated with failure with are higher in more unequal countires as usually they don’t have the same safety nets. A surprising finding for Socal Darwins is that Denmark has the highest number of patents per capita – the fear of failure is less.

Why has he limited his study to developed countries?

The Authors have responded to many critisms:
http://www.equalitytrust.org.uk/docs/responses-to-all-critics.pdf

“It has been suggested that we should have included more, and poorer, countries in our analyses. We
aimed to examine only those countries where population health is no longer linked to average levels of
income – those on the upper flat part of the curve in figure 1.1 in The Spirit Level . Clearly poorer
countries need economic growth to provide their citizens with adequate material resources.
We selected our countries according to a strict set of rules – with no departures or exceptions. We
took the richest 50 countries ranked by wealth according to the Atlas method, which the World Bank
uses to classify countries into Low, Medium and High Income categories. Our source was the World
Development Indicators Database, World Bank, April 2004. From the richest 50 countries we excluded
those with populations of less than 3 million to exclude tax havens, and then used all the remaining
countries for which a comparable income distribution measure was available in the United Nations
Human Development Reports.
Rather than ‘cherry-picking’ the data and counting countries in or out according to whether they did or
did not fit our thesis, we included them ‘warts and all’. For example, we include Singapore in our
analysis of income inequality and infant mortality although it is a very significant outlier, claiming the
lowest infant mortality in the world despite being the most unequal country in our dataset (see Fig 6.4
http://www.equalitytrust.org.uk
in The Spirit Level). This is the exact opposite of our critics’ tactics of looking at the data in each
relationship and selectively adding or removing countries, in an attempt to make the relationships go
away. Our aim was to see if there was a consistent tendency among these countries for health and
social problems with social gradients to be more common in societies with bigger income differences.
And to double check that our findings were not just due to chance we repeated all the analyses among
the 50 states of the USA.”

Denmark-bashing is good fun but I think Ireland should be careful in doing so.

Denmark is funding their state themselves, Ireland is running record levels of deficit. It is definitely easier to provide services if cost is not an issue. Now cost will be an issue & whether or not Irish public services can be maintained on current levels remains to be seen.

Re the original Baltic thread, Edward Hugh has a nice exploration of the Estonian ‘recovery’ here

http://eurowatch.blogspot.com/

@Paul Hunt

This:
http://www.europeanvoice.com/article/2011/january/the-japan-myth/69887.aspx
relates to JtO’s oft-expressed views on the decline and stagnation of the big, developed economies.

JTO again:

Excellent link. Will you be standing in the election whenever it comes? I suggest that you consider it.

The article is very similar to what I posted on this site in summer 2009 and several times since. Namely:

(a) Comparisons between Ireland and Japan, which many ill-informed people make in relation to forecasts of a ‘lost decade’ in Ireland, are completely bonkers. Ireland and Japan are at the opposite ends of the demographic spectrum. As I have pointed out repeatedly on this site, Japan’s ‘lost decade’ is primarily due to its abysmal demographics: stagnant to falling population, rapidly-ageing population, more people dying than are being born, over-65s proportion of the population increasing dramatically. The author of this article is making exactly the same point.

(b) Thanks partly to industrialised abortion, Germany and many other continental countries are clearly heading down the same route as Japan. Germany’s population will soon start falling. But worse, it is rapidly-ageing and its population under 30 has been falling for several decades, while its over-65s proportion of the population will soon reach 25% (just under 11% currently in Ireland). With this demographic background, economists who are pinning their hopes on ageing Germany being the dynamic locomotive for European economic growth in the next decade are deluding themselves. It is the economic equivalent of the Irish rugby selectors pinning their hopes on ageing Sir Tony O’Reilly being the dynamic locomotive for the Irish rugby team in the next decade.

(c) The English-speaking countries are much better off demographically, with rapidly-growing populations and ageing at a far slower rate. And, although not included in the article, Ireland’s demographics are the best of all. That is why there was a housing boom in Ireland, the UK and the US, and not one in Germany. The population of the UK (now 60m) was forecast in a recent report to overtake that of Germany (now 82m) by 2050. I think myself it will be 2055, because the report failed to take into account the UK’s loss of 2m population when the North of Ireland exits the UK, but I digress. Even McWilliams touched on the matter in his Irish Independent article yesterday. Apparently, he’s in Austria and, in one of his rare perceptive moments, he wrote that one of the first things that he noticed in Austria was the huge absence of young people compared with Ireland. A couple of brownie points awarded for that. However, he wasn’t bright enough to work it out that that is the reason why Ireland needs to build a lot more houses than Austria.

The Latvians and Estonians are our competition now. We have to do better than them.
We are a low crime, low pop density, picturesque, politically stable, English speaking hospitable island close to Europe.
Continental Europe is overpopulated with old people and lacks libido.
Ehy not set up a scheme to encourage migration to here. The migrants apply to live here. They are given serious tax relief on their earnings so long as they stay for 10 years.
I’m not sure if I’m serious about this proposal yet but the more I think about it the more sense it makes.

Your ‘explanation’ is so pathetically ludicrous, so laughable to anyone who knows anything about how (age-standardised) mortality rates are calculated that I am reluctant to waste time refuting it. Suffice to say, the fall in mortality rates in Ireland since 1997 has been across all age-groups, including infant mortality, which has fallen from being one of the highest in the EU in 1997 to one of the lowest now. How emigration in the 1940s is responsible for the fall in infant mortality between 1997 and 2008 is beyond me. Why don’t you simply admit that you know nothing about the calculation of (age-standardised) mortality rates and leave it at that?

I’m just going to leave this right here.

@Niall

They still don’t tell me WHY inequality is linked to health outcomes. Without an explanation of that fact there seems to be too many imponderables to say one causes the other