‘Productive Investment’

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Use of the phrase ‘productive investment’, without chapter and verse, and within the hearing of job-desperate politicians, is dangerous.

No matter how bad the economic outlook, foolish policy measures can always make it worse. The spectre of politicians seeking to create 100,000 jobs through extra public spending is every economist’s nightmare. The government has announced a New Era programme, funded through privatisation proceeds or otherwise, intended to create 50,000 jobs in the state sector and another 50,000 elsewhere. The state’s 50,000 are apparently to come mainly in the water, telecoms and energy industries, the remaining 50,000 through some mystical process yet to be disclosed.

 

With the unemployment rate in the mid-teens there is inevitable pressure on government to do something, or at least to appear to be doing something, and it is difficult for governments to preach patience when it comes to job creation. However it is inconceivable that sustainable employment on the scale envisaged can be magicked into existence through initiatives from above. The previous government in 2009 produced a ‘Smart Economy’ plan to produce, coincidentally, 100,000 jobs, and which has to date produced no more than sustenance to public expenditure dependants in the universities and barrow-loads of public relations.

 

Job creation schemes will win plaudits in the popular press and gratitude from subsidy junkies in the business community. But they cost money we do not have and cannot borrow. Diverting more funds to public capital ‘investment’ presumes that worthwhile projects are available. Indeed the scale of the New Era scheme presumes that such projects are abundant. Little detail is available on the projects to be pursued, an unacceptable feature in itself. Major commitments should never be made until the details have been scrutinised.

 

The three sectors indicated as having job potential, energy, communications and water, have one thing in common. These are capital, rather than labour, intensive businesses. Once the construction of new facilities is complete, it is not clear that these industries need large additional workforces on a continuing basis. In any event the total workforce in these three sectors is currently about 30,000. It is inconceivable that tens of thousands of extra permanent jobs are required in these areas. The electricity industry has been shedding jobs over the years and I have yet to meet anyone who believes that the ESB is understaffed. The gas distribution network now reaches all of the urban areas in the country that can be served commercially, so there is no job potential there either.

 

As for water, the government intends to meter all users, but this only has to be done once. There will be no permanent jobs in the once-off installation of meters, which will presumably be read remotely, so no jobs there either. The government’s intention is to create a single national water authority to replace the current inefficient and fragmented system of delivery through city and county councils. This is presumably intended to create opportunities for economies in staff numbers, not for a hiring fair. The merger of the regional health boards into the HSE seems to have been a disaster, not least in the creation of new layers of expensive administration. Surely the government is not planning a HSE for water?

There was a depressing discussion of these matters on RTE’s The Week in Politics programme last Sunday evening which paraded three Dail deputies, a junior minister and an RTE anchor none of whom seemed to grasp any of the issues involved. A recurring notion, apparently shared by all five, was that the dividends receivable from state companies (a surprisingly modest sum given the amounts of capital they consume) constitute a recently-discovered treasure trove freshly available to finance job creation schemes. These dividends are part of the government’s current revenue and are already spoken for. A further illusion shared by the participants seems to be that devoting privatisation proceeds to debt reduction, rather than to the New Era schemes, would be tantamount to wasting the money.

 

Patience in pursuit of a feasible macroeconomic plan will halt the rise in unemployment and eventually deliver a recovery in the demand for labour. This is the declared view of the government itself. The strategy of reducing the deficit over the currency of the EU/IMF rescue deal and seeking to stabilise the rocketing national debt is the best plan available and will be de-railed by half-baked and panicky job-creation schemes. 

 

The government seems to lack the courage of its declared convictions. If the macroeconomic strategy is to be subverted with ill-considered job creation schemes, the return to a better jobs market will be delayed. Fortunately the deployment of privatisation proceeds for any purpose other than debt reduction requires sign-off by the troika of EU, ECB and IMF. They should ask the government to explain, in detail, how this plan to conjure up100,000 jobs contributes to national economic recovery

81 Responses to “‘Productive Investment’”

  1. JohnTheOptimist Says:

    It would be much better if the increase in domestic consumption, that is so urgently required, came from private individuals reducing their savings from their current astronomical levels (particularily the savings that they have shifted abroad) and increasing their purchases of goods and services in the Irish economy, rather than coming from government spending. I wouldn’t argue with that. However, as you were equally hostile to them doing that in your Irish Farmer’s Journal article a couple of months ago, and indeed encouraged them not to, it ill-behoves you to attack the government for taking up the slack.

    The bottom line is as follows:

    Ireland is now in balance-of-payments surplus. Exports are doing very well. This is being recognised the world over. But, domestic consumption is totally flat. This needs to be rectified one way or another, whether from private consumption or government consumption. I prefer private, but I’m not ideologically hung-up on it. The fact that exports are doing well, and that the balance-of-payments is in surplus, means that Ireland can now afford an increase in domestic consumption. There is no longer any external constraint on this. As I said, tt would be much better if this increase in domestic consumption came from the private sector rather than the government sector. This requires an increase in consumer confidence. Fortunately, there is a possibility (no more than a possibility) that the collapse in interest rates on Irish government bonds (down from 14.5% in July to 7.5% now) will result in just that, especially as said collapse discredits all those economists who write in the Sunday Independent every week that default and economic armageddon are inevitable and thereby encourage people, not only to save rather than spend, but to shift those savings abroad.

  2. The Dork of Cork Says:

    The function of Goverment spending in the utility sector is not to create jobs !!!!! – it is to create a surplus of energy.
    This energy / money is then available to the service sector to do what they want with it.
    Even in the labour intensive 30s the Hoover dam construction never made much of a dent in employment.
    But do you honestly think Las Vegas and its jobs would exist now without massive capital spending ?
    We spent 50 billion on physical capital formation in 2006 – now its in single figures and set to decline even more.
    That 50 billion was a gross malinvestment as much of it was based on continued cheap oil.
    Unless China implodes we will never see cheap oil again in our lifetimes ?
    The lack of spending now is just as wasteful as the overspend was just 5 years ago.
    Everything & I mean everything will disappear into depreciated dust unless we have a radical Gaullist like energy programme now.
    This Penny wise , Pound foolish Paddy thinking is deeply disturbing – we cannot be that grossly retarded can we ?
    Not even a couple of hundred million for a 1991 DART to Dublin airport plan !!! come on ?
    I am still waiting for accurate figures of the total yearly depreciation of the Irish car fleet.
    I guess it will be a cold day in hell.
    We must destroy the physical economy so banks can recapitalise so that they can again lend cars to customers I suppose…………. thats back to front thinking – there will be no economy by that stage.
    The $ credit expansion era is over Colm – get your head around it.
    But that should not mean the end of technological civilisation – money and not credit must be spent into the economy wisely.

  3. Brian Woods Snr Says:

    @ DoC: “This Penny wise Pound foolish – (Political) – Paddy thinking is deeply disturbing – we cannot be that grossly retarded can we ?”

    I inserted political to attribute the principle (but not sole) cause. “Yesiree! We be that, an’ all!”

    There be NO votes in ‘austerity’ – only in pandering to the Special Interest gombeens, pissmyers and the slightly criminal. The marginilized no-longer vote. The wealthy are bought off with subsidies and tax breaks. That leaves the rest of us. So who is doing all this Paddy thinking then? Are we not ‘thinking’? At all! We mouth off enough.

    @JtO: You do really earn you name John. Keep up the ….. work! Just rem the late John Healy. If you get a swift and unexpected kick in the goolies .. .. you were not paying attention!

    This dreadful mess will only be (or begin to be) resolved when the equally dreadful realisation finally dawns that unpayable debt (insufficient current and iffy future income) is unpayable and the debts are written off. We all go bust together, and then attempt to re-structure our economies on the basis of very minimal borrowing: you simply pay-as-you go. That will be a most difficult political lesson and is totally beyond the current administrations (home and away) for the foreseeable future.

    Brian Snr.

  4. hoganmahew Says:

    @JohntheO
    “Ireland is now in balance-of-payments surplus. ”
    http://www.cso.ie/releasespublications/documents/economy/current/bop.pdf

    Not for Q1. It remains to be seen if there is a bounce in later quarters as there was in 2010 or if the bounce in 2010 was exceptional.

  5. Georg Baumann Says:

    Colm’s article refers to the ECB-EU-IMF compliance managers as government de jure certainly correct, but de facto a very different story.

    Ever since the election, and apart from media stunts such as Obama, Lizzy – Too bad they could not get the Pope to come as well – Presidential Election, self appraisal exercises such as summer school etc., this ‘government’ kept the head down and as far away from the public as possible.

    Oh well, surly the nations stopped breathing for a moment when Gilmore spoke on Palestine, I am sure for that. Whatever happened to Joan Burton, I don’t know, are you certain she still lives in Ireland?

    Cynicism aside, the fact that the Irish public was forced to bailout Anglo etc. will be at the core of papers that political economists and historians might wright in the future.

    The global economic system itself has turned, gradually at first, and then with full speed into a fraud. Markets rigged, parliamentary democracy and citizen liberties destroyed in a slow burning fire.

    What was observed on the small stage in Ireland with reference to the financial regulator, equally was the case on the main stage, and now a bunch of EU technocrats try to force their wet European Peoples Party dream of a federal Europe under EU governance by means of another fraud where Ireland was at the core, the Lisbon treaty.

    As long as Banks continue to call the shots, as long as puppet governments are following through, the fraud will continue and reshape the social fabrics with full force.

    The simple truth of the matter is that global CDS exposure is a unknown factor. And why is that? It brings me back to Anglo and another simple truth, nothing happened, absolutely nothing. I remember the event where senior bank employees were refusing to cooperate and many more such stunning news accompanied during the Anglo story.

    The IFSC in Dublin is like an epitome of fraud and rip off, at the hub of the game played, and the bill presented to the people, while Banksters continue to invent new vehicles and cash in.

    Every time when the EU ministers meet and announced a new ‘rescue fund strategy’ the markets reacted and billions of Euros in CDS were traded the following days, It always lasted for a week or so, until the curve sloped down again, this was a forecast to be made with the same certainty that someone in Dublin will drink a Guiness on a saturday night.

    If you look at Greece, the longer the protracted default is forced upon them, the longer this game can continue, and make no mistake, we do not talk peanuts trades here, the DB alone has earned fees > 400 Million Euro on the latest CDS cycle trade.

    Politicos in general are not educating the public on these matters, they are motivated by induced fears, induced by banksters that play their blackmail since 2008 with full force.

    In Ireland, nothing changed…. nothing!

  6. Desmond Brennan Says:

    About time someone called out the nonsense that is NewEra.

    Furthermore…if it promises 100,000 jobs…say at paycost €50,000 per job…that is €5bn p/a (and given current unemployment levels, that can be assumed as +€5bn p/a to our national income). So given a €5bn yield….we can declare the value to (modestly) be €100bn

    Now for something promising €100bn ….I’d expect to see a detailed business plan:
    - discounted alternatives
    - risks
    - econometric modelling
    - project plan

    Etc

    Yet there is no such document (rather instead a glosssy brochure)…and the director is a ‘yes woman’ appointed on the qt.

  7. Ceterisparibus Says:

    A dose of reality…courtesy Der Spiegal ..

    What will happen to Europe in the coming weeks and months has much to do with Greece, but it has also long been detached from the drama in Athens. In fact, it is the continuation of the financial tragedy that began in New York in 2007. According to American economist Kenneth Rogoff, what began in New York was not a normal recession, albeit somewhat more severe than usual, but a “great contraction” of the sort that happens only once every 75 years in global economic history. This circumstance, says Rogoff, has not been recognized to this day. In his view, this is why Europe’s crisis, which began as a crisis of confidence, turned into a debt and liquidity crisis and finally led to multiple solvency crises, is not ending.

    “The current policy is to act as if a liquidity crisis could be overcome,” says Rogoff, “and as if all it took were to hand out enough loans to jump-start growth once. But it’s the wrong diagnosis. We have a solvency crisis, and we have European countries and regions that are fundamentally bankrupt. No loan in the world, no matter how big, will save Greece, nor will it save Portugal and probably not Ireland, either, and Italy is also very worrisome.”

  8. Ceterisparibus Says:

    Link to article quoted above.

    http://www.spiegel.de/international/europe/0,1518,790568,00.html

  9. Ernie Ball Says:

    “The spectre of politicians seeking to create 100,000 jobs through extra public spending is every economist’s nightmare.”

    Wow, I guess Paul Krugman and Joseph Stiglitz aren’t economists then.

  10. Lord Wellington Says:

    When is someone, well some economist or politician, going to admit that technological advance means that it is no longer necessary for everybody of working age to work?

  11. The Dork of Cork Says:

    Just looking at the Slievecallan area – and as locations for windfarms go it is in a perfect location.
    Clare is one of , if not our windiest sea level locations – with consistent winds shaping even the hedgerows down there.
    Slievecallan is already a destroyed area due to forestry plantations so from a environmental & touristic standpoint there is nothing to loose.
    Not so sure about its suitability for pumped wind power storage as the lakes seem far apart but I would be interested if someone had a comprehensive report on the subject.
    I assume they propose excavating a crater at its peak and then piping water to the nearby Lough Boolynagreana which looks far too small while the other suitable lakes are very far away.
    Its looks a big job but still more productive then building bog houses.

  12. The Dork of Cork Says:

    Could it be the Irish version of the Rance power station ?
    Not a real solution to our energy needs but a start toward a new era and also a station that can produce power for decade after decades despite its age.
    (Although I accept that wind turbines don’t last very long)
    Anyhow I assume Turlough station has produced more revenue then its capital input cost by this stage of its long life ?

  13. Brian Woods Snr Says:

    @ DB: “About time someone called out the nonsense that is NewEra.”

    Don’t know whether or not you like bad (like really bad) pantomine. Check out the Dear Leader’s response to Dep Ross on http://www.merrionstreet.ie. It is cringing embarassment (you went around with your virile member, inadvertently, exposed). Smug, smarmy, cynical, truly awful. Message is clear. “I’v got my arse on the blue seat, and the rest of ye can go f*** off”. In the nicest possible way – of course.

    Brian Snr.

  14. Bklyn_rntr Says:

    The article in Der Spiegal says that the crisis started in 07, again playing neatly into the banksters narrative, the problem is the correction of imbalances, not the creation of them! The crisis started in 2002 when banks were allowed to pretend that they were offloading risk.

    It may seem like an unimportant point to make, but it isn’t. While we work on this fiction that the crisis is the correction, our politicians are desperately trying to find ways to hold the financial system together until such time as we can return to the 02 to 07 period. The banksters are very willing to oblige, of course, as they take their free CB reserves and lend them to hedge funds etc to write/buy CDS protection on sovereign debt instead of mortgage debt, and when that goes tango uniform we’ll find, yet again, that those that assumed risk (the writers of the CDS) don’t have, and never had, the capacity to pay out their counter parties.

    Now we hear, no no, it’s not like that, just privatize the assets and leave the banking system to repair itself. It’s nuts. Please study privatization of electric utilities, in EVERY case, energy tariffs increased, headcount fell and capital investment was reduced! instead, government could raise tariffs (by the SAME as the privatized entity would) and reinvest the proceeds in new capacity. The problem with this, of course, is that it doesn’t feed the giant financial vampire squids and they squidlets.

    It’s time for a new conversation… Capitalism means protecting the value of money and taking the consequences of your decisions. Today’s system with CB’s thrashing the value of money to prevent an irresponsible financial system from suffering the consequences of it’s massively irresponsible actions is a toxic one that can’t be called capitalism

  15. JohnTheOptimist Says:

    @hoganmahew

    Ireland is allready in balance-of-payments surplus on a rolling 12-month basis (Q3 2010 to Q2 2011 inclusive). That’s how it is usually measured. As far as the balance-of-payments is concerned, the second half of each calendar year is usually much better than the first half.

    http://www.cso.ie/releasespublications/documents/economy/2011/bop_q22011.pdf

    The significance of all this is that the balance-of-payments surplus means that Ireland can now afford an increase in consumption. That is a simple fact. There is no longer any external deficit constraint on Ireland Inc increasing its spending. You can have a legitimate debate as to whether the private sector or the government sector should drive it, or whether it should be in the form of pure consumption or on infrastructure and investment. Those on the right will argue that reducing the deficit will increase consumer and investor confidence, which in turn will increase the propensity of consumers and businesses to spend, rather than maintaining savings at their current very high level. I think they refer to this as ‘expansionary fiscal contraction’. Those on the left pooh-pooh this idea and say that increased government spending should be the driver. But, it needs to be one of them at least. I favour private myself, but can see the argument of those who favour the alternative. However, those who oppose both, who write articles telling consumers not to spend, who incite people to send their savings abroad by whipping up panic about default in regular Sunday newspaper articles, but who then also oppose any increased spending by government to take up the slack left by private consumers and investors, have nothing to contribute to the debate and are just a waste of taxpayers’ money themselves.

  16. The Dork of Cork Says:

    Ah yes found this now very detailed but visually impressive piece.
    We have so many ex – builders hanging about getting the dole here.

    The project entails the creation of two craters , possibly more !!!!!

    Anyhow you cannot save debt by locking it up !! it rots from the inside out anyhow – you have got to spend it baby……….
    http://www.mnag.ie/workshop_2011_2_3666986089.pdf

  17. The Dork of Cork Says:

    “Not very detailed”

  18. Bklyn_rntr Says:

    Although in fairness to Colm McCarthy, both propositions are correct. It does make sense for individuals to save and it does make sense for govt to use excess income (the BoP surplus) to lower debt. The problem is the country is carrying massive amounts of debt in a currency that is issued by a foreign entity (the ECB). without the power to debase the currency, The ONLY way to service or repay that debt is to scrape off ever more of the country’s productivity to pay creditors.

  19. Philip II Says:

    john
    What percentage of the BOP 12 month rolling surplus is from the pharmaceutical sector?
    What % of that is attributable to transfer payments?
    What % of the remainder is retained/retainable in Ireland?
    Answers on a v small postcard please.

  20. hoganmahew Says:

    @JohntheO
    “That’s how it is usually measured. ”
    Really? I’d say on an annual (historical) and comparative (Q this year vs. Q last year) basis myself. My concern is that the improvements of Q3 and Q4 last year versus 2009 are not being sustained into Q1 and Q2 this year versus either 2010 or 2009. We will see in Q3 and Q4, but until then, it is too soon to say we can afford higher consumption levels.

  21. Desmond Brennan Says:

    With €100bn return, it is clear that Simon Coveney and Andrew McDowell (plan authors) fancy themselves as wealth creators on par with Apple, Microsoft or Google.

    Why do we encourage and tolerate people of such meagre ability, and lesser track record, when they spout shyte like this ?

    There certainly are ways the govt could spend to create jobs….but the New Era document is scant and glossy….and such a process would need involvment of Simon and Andrew’s betters to come up with investment targets

  22. Stephan Says:

    >The spectre of politicians seeking to create 100,000 jobs through extra public spending is every economist’s nightmare.

    Every economist’s nightmare? Really? I don’t think so. I would suggest instead of making bombastic announcements you just speak for yourself.

    http://e1.newcastle.edu.au/coffee/

  23. Eoin Reeves Says:

    @Colm
    An interesting and timely post. There are a host of questions about NewERA that remain unanswered. Your scepticism about government job creation schemes is well founded and Edgar Morgenroth published and insightful 2009 working paper which demonstrated how increasing capital expenditure for the purpose of job-creation is an expensive option to take.

    That said I believe there is a lot to welcome in the NewERA plan as it was originally articulated (in 2009). Assuming capital investment decisions pass rigorous cost-benefit analysis, investment in infrastructure such as broadband, water distribution and electricity networks is to be welcomed. The NewERA plan also offered a route to addressing governance issues that have traditionally hamstrung SOEs as well as engaging with the issue of how to finance SOEs responsible for such investments.

    That said, there is still a lack of clarity around these issues. For example, as it stands, it appears that SOEs such as the ESB will report to the NewERA holding company instead of the relevant Minsiter. This is not a bad idea given that political interference is problem that undermines the performance of commercial SOEs. But the original NewERA document states that the holding company will have a 7 year life (a sunset clause). What happens then? Does the ESB revert back to reporting to the Minister thereby re-introducing the original governance problem?

    There are other unresolved issues that require a separate post. But for now its good to see questions (such as Colm’s) asked about the NewERA plan.

  24. Peter Stapleton Says:

    The Balance of Payments:

    Here’s how the Central Bank of Ireland sees things developing in its latest Quarterly Bulletin:

    “Despite the downward revision to the outlook for exports of goods and services, the trade surplus is set to improve further during 2011 and 2012 as the growth in exports is expected to outpace that of imports. Net factor income outflows are estimated to have risen in the year to the second quarter of 2011, with an increase of 6.3 per cent. Further growth in net factor income outflows is expected to occur during the second half of 2011, resulting in a rise of around 8.5 per cent for the year as
    a whole. An increase in net factor outflows of 7.1 per cent is projected in 2012. The international transfers component of the current account remained negative on a net basis during the second quarter of 2011 and the negative contribution arising from this component is projected to continue into the second half of 2011 and further into 2012. Reflecting the projected trends of the various components of the current account, an improvement is likely over the next two years. A current account surplus in the region of 0.4 per cent of GNP is projected for this year, rising to a surplus of about 2.5 per cent of GNP in 2012.”

    However, we must be wary of the Irish BoP estimates. In principle the three sub-accounts of the BoP (the current, capital, and financial accounts) should sum to zero. In practice a very significant ‘net errors and omissions’ item is needed to reconcile them. In 2010, for example, this amounted to euro -12.6 billion. This compares with an estimated current a/c surplus of euro 0.761.

    In its notes to the BoP release the CSO’s states:
    “Ideally, the magnitude of this [E&O] item should be relatively
    small in relation to the combined value of all credit and debit transactions expressed in absolute terms (i.e. ignoring their signs) over all three accounts.”

  25. Rich Says:

    @JTO

    As this chronic crisis ambles on the feelings of ‘savers’ is evolving and absorbing the new status quo. For those of us with some savings the issue is not simply one of lacking confidence in the Irish Economy but logically and through the school of hard knocks there is a lack of confidence in the functioning of the state. It is clear that the interests of the individual are misaligned with those of the state. You cannot trust this country to do the right thing, it repeatedly defaults to sporadic irrational populist decisions that damage and pervert the potential of this country

    I think most of those wise enough or lucky enough to have a stash of savings where shocked and appalled at how easily many of their family and friends have been ruined financially. The state milked them and threw them on the scrapheap, a financial Verdun. The symbiotic nature of the relationship between a state and its people has been broken once more. The state does not protect us it takes advantage of us. In essence I consider the state the enemy and considering the dawn raid on my depleted pension fund I am not about to trust them again. In fact I would act completely contrary to any advice that the state or its parasitic entourage would give. Brokers, bankers, estate agents, builders etc are all licensed by the state and all have betrayed their customers. Not that individual sheepishness was not to blame we all played our part, but snakeoil salesmen both of the government and licensed by them greatley exacerbated the damage

    So the idea that a few badly written apocolyptic articles changing to happy clappy spin will reimbue me or anyone I know with money to spend again at any level above pure necessities is to insult their intelligence. Fool me once shame on you fool me twice….

    Ireland is a busted flush and we have all been taught a lession in ‘parental abuse’ we should ignore at our peril

  26. PR Guy Says:

    @Colm McCarthy

    “and which has to date produced no more than sustenance to public expenditure dependants in the universities and barrow-loads of public relations”

    Now hang on there a minute!! Play the ball :-)

    I was reading some of the blather coming out of the current ‘think in’ with the good and great of Irish from around the world. If people really want to bung some money at creating jobs in Ireland, they could do worse than build some world class museums/tourist attractions etc. e.g. the biggest and best car museum in the world, the most fabulous natural history museum in the world, the greatest aquarium in the world, etc. and scatter them around the country, not just around the M50.

    I’m talking about attractions that are so head and shoulders above anything else out there that people will come from far and wide to see them. It doesn’t take billions and just needs someone who’s capable of thinking ‘world class’. Irish ‘homecoming’ (or is it ‘gathering’)? A bit of folk dancing and fiddle playing to attract 300,000 extra tourists in 2013? Do me a favour.

    When are we going to raise the bar in this country and start thinking ‘world class’ instead of telling ourselves that getting to a quarter-final was what we set out to do? Show me someone who came second and I will show you a loser. Until we programme our minds that we will compete and succeed on a global level we will always be a semi third world country with external bodies telling us what to do.

  27. The Dork of Cork Says:

    I had a word with Eddie Lenihan recently and he told me he bought a shitload of bullion when he found out they were building a road through Tara – maybe building a Hydro / wind scheme in Co Clare is not a good idea – its best to consult with the man first me thinks.
    http://www.youtube.com/watch?v=xF9rqj0-BD8

  28. Tonicforthetroops Says:

    Pr guy
    Good points, but our political class is so inbred it thinks elusivly in local terms. Witness the different cv and work histories of our new member of the eu court of auditors vs the Austrian nominee. Pathetic.

  29. DOCM Says:

    @ All

    Meanwhile, outside the island of Ireland (which is entirely surrounded by water).

    http://www.youtube.com/watch?v=6UGDTtqklSo

  30. Joseph Ryan Says:

    @Colm McCarthy

    The spectre of politicians seeking to create 100,000 jobs through extra public spending is every economist’s nightmare.

    It may be somewhat churlish to say it on this site but many people are already living through nightmares that were designer made with the help of some economists.
    But as you make the argument in good faith lets have a look at some other nightmares that do not seem to be causing anybody to lose any sleep.

    1. The nightmare that in excess of 100,000 (about one third) of the wider PS are paid amounts well in excess of their colleagues in other EZ countries.
    2. The nightmare that all 380,000 wider PS employees have been guaranteed no pay cuts into eternity, while the world is crumbling around millions of others.
    3. The nightmare that over 300,000 additional unemployed will remain unemployed despite the largesse shown by the State to its upper eschelons above.
    4. The nightmare that many PS retirees earn more now on their pensions from their jobs that they ever did while doing those jobs.
    5. The nightmare that no increase in tax rates is promised ostensibly because it would cause people to leave the country when all the evidence is that only people without jobs or in rubbish jobs leave the country.

    6. The nightmare that NAMA, having been charged with taking loans from the banks and is now the largest property company in the world is allowed to leave semi finished residential properties in devastated and obscene conditions next to family homes and businesses.
    7. The nightmare that the same NAMA choose pay pay back 1.5 billion of cash on bonds not yet due, rather than be forced to take proper and full care of its properties.
    8. The nightmare that the same NAMA employees are probably the best paid debt collectors and property managers in the World.

    While you may be right that it will be virtually impossible for the government to create 100,000 jobs, it is incumbent on the government to do what it can within the means available to it.

    The government clearly has not done that so far.
    Is it possible that economists are underestimating the devastating effects of the current FF and FG/Lab policies. Economists should concern themselves with this question.
    We know from Greece that the Troika doesn’t give a damn about the effects of their policies on people. The Troika are simply there to get money back on behalf of the big European banks and bondholders.
    In Ireland’s case money that was thieved from the Irish people in the first place.

    PS
    The points you made in your article are well made but if the cohesion of the country as distinct from the State is to be maintained a newer and more inclusive economic and social policy needs to embarked on regardless of current financial constraints or of whichever pro-consul may be in Dublin.

  31. DOCM Says:

    @ Joseph Ryan

    Well said, and from the heart!

    The strategy is simply to wait for the incoming tide to lift all boats, including the bloated ones in academia and elsewhere. However, there is a major danger now that the tide will not arrive.

    To be fair to Colm McCarthy, he is concentraing on a narrower issue here and I would be in full agreement with what he has to say. But politics is the art of the possible. And Ireland is far from being the worst sinner in this respect. There is story on the wires, for example, that Greece has just concluded a deal with the US for 800 tanks at €3 million a pop!

  32. ObsessiveMathsFreak Says:

    Oh the government will be creating jobs alright. Jobs in Nama, in the banks, the semi-states, state agencies, and quangos; all jobs for for the boys. Jobs with big salaries and even bigger pensions. Jobs that a monkey could run, and run better than most of the “magnates” and good for nothing executive mouths with nothing better to do than give television interviews extolling austerity measures for the rest of us, while they gouge captive customers and citizens for profits, and charge any and all losses to the public exchequer.

    As for the rest of the jobs, I’m sure most will be low paid slog offers to work under these blessed gombeen worthies, doing all the heavy lifting required to justify their much needed bonus payments and expenses; dealing with the front line of customer complaints and protests when charges need to be increased, people need to be evicted, and 65 year old ladies need to be imprisoned, all so that the ATMs keep working for who still want to keep their money in bankrupt institutions.

    And in years to come, when they are grey and infirm, the boom-time magnates can rest in the knowledge that their obese pensions will continue to provide jobs for those hired to provide for their declining personal sanitation, and to daub their brows with ashes and unctions on appropriate feast days. Only the best for the best the country has to offer, after all.

    Personally, I would advocate a “modest proposal” to tackle the emigration and jobs crisis: hiring young men on modest salaries and in productive outdoor work which would build their skillsets and benefit the country. Namely, employing them to go around kneecapping the directors, developers, magnates, and managers who stabbed this country in the heart and who are still suckling on the wound, perhaps putting the occasional bullet between the eyes of the worst offenders.

    Of course, most would probably point out that such a scheme would not provide very much in the way of mass or long term employment. Nevertheless, I feel that on a cost-benefit basis, it would at least be modestly successful at restoring a much needed sense of civic duty and public responsibility to what is left of Ireland. At any rate, it is both more realistic and more likely to usher in a “New Era” than any proposed government initiatives.

  33. JeromeK Says:

    Colm, Colm, Colm

    There are many things the government can do to create jobs.

    For example since June, the NCT test is now an annual requirement for cars over 10 years old. For myself and my wifes car that is 1-2 days per annum – but hey what does the government (thru its proxy RSA quango) care about lost productivity/time off work on those of us struggling to make ends meet. (New cars are for pensioners – as Bill Cullen has noted)

    But as vehicle condition contibutes to a whopping 0.5% of road fatalities (according to NRA), why not make the NCT monthly or even a weekly requirement? This would involve lots of extra jobs – perhaps we could have 10,000 NCT testers.

  34. Dom K. Says:

    “5. The nightmare that no increase in tax rates is promised ostensibly because it would cause people to leave the country when all the evidence is that only people without jobs or in rubbish jobs leave the country.”

    Where is the evidence for this? I left a well paid job in Ireland and so did a number of my colleagues. So I would disagree with this categorical assessment.

  35. Examiner Says:

    Brad DeLong made the case for more stimulus based on more public capital spending in the US recently: http://www.project-syndicate.org/commentary/delong118/English

    His argument of course rests on Uncle Sam being able to borrow at an unprecedentedly low real long term interest rate of 1% at the moment.

  36. Shay Begorrah Says:

    Colm McCarthy

    The spectre of politicians seeking to create 100,000 jobs through extra public spending is every economist’s nightmare.

    That is an appeal to authority the right of the economics profession no longer has Colm.

    The trite dogma of market liberalism caused the global financial crisis, only the most fanatic or shameless still claim that this latest crisis of capitalism has its roots in an excess of government ambition, or insufficiently free markets.

  37. clintideal Says:

    Colm i agree with the complete hyperbole about investment of 5B WOW I never done Billion as a B new experiance unlike our old/new Goverment
    their becoming the real PRO s in that regard any back to the matter of invest 5B and create 100B it is just not do able by an incompatant Goverment

    A goverment with its agents or politicos who are working against the national interest and people to feather their own nests and perks will raise any amoumt of tax and cripple their own economy hold on they have done that already and they just dont get that its not about growth anymore its about Debt managment and how to reduce the debt will ensure that the economy can start to grow, but we Labour and Fine Geal people were good europeans but bad Irishmen i may well add,
    roll the revolution!!

  38. Livonian Says:

    @Colm

    “Money we do not have”

    I really enjoy your articles here and in the Sindo but to be honest this assertion is IMHO not very fair as is the refernce to populism.

    I am a political scientist but my modest education in economics makes it very hard for me to believe that such an idea would provoke a fear of sleep among most economists who also must reside in the realm of reality in their daily lives.

    One hundred thousand jobs may take pressure equivalent to (if we include secondary benefits) 1.2Bn Euro off the Social welfare budget. At 33000 Euro plus aditional labour costs amounting to 40000 Euro would be thirty thousand jobs would be created in the public sector.

    A “fairly applied” progressive wage cut on Public service incomes above 40000 Euro could easily produce another 1Bn Euro with 400 million in “change” after creating another fifteen thousand public service jobs.

    A public service pension levy (subject to 20 % tax relief) of 12% would provide significant further savings in public expenditure especially if this was also applied to the entire pension for every public service retiree under 66.

    Cost of living would not necessarily increase because of increased demand but would be subject to influence by purchasing power. Therefore any public servant earning less than 60000 Euro would probably not experience any reduction in purchasing power.

    Public sevants earning above 60000Euros know how to use calculators so any “adjustment” may just mean more holidays spent in Ireland rather than abroad thus contributing to an increasingly competitive domestic hospitality/services and retail sector.

    Any public servant earning over 100000 Euro in fear of “penury” because they are not treated as the “best” can always “leave Ireland” and seek out the excellent opportunities which apparently exist abroad for such amazing talent.

    The money they (the “best” who “leave) spend on holidays back home would be gladly received by the Irish Economy. Better still since they are the “best” they could seek out jobs in the private sector which will be experiencing a “stimulus”.

    These “best “who l”eave” would obviously have to be replaced (because their function is so invaluable) by incumbents on a lower salary which would necessitate further recruitment.

    Since the “best” public servants who earn over 100000 Euro amount to around twelve thousand “poor souls” it is not inconceivable that two thousand will retire very shortly and three thousand may depart for lucrative “utopia” at home or abroad. Which neatly adds up to an extra fifty thousand public sector jobs at a cost significantly lower than 2008 and surpassing the reccommndations made in a report which I believe you know very well.

    Now for fifty thousand Private sector jobs and further deficit reduction:

    People earning an average of 33000 Euro spend most of their income domestically which would probably provide at least an additional 600 million in VAT in income and social tax.

    Cars (apart from homes, which we have plenty of) may be their biggest expenditure but many people on 33000 Euro buy second hand cars , much of which remains within the domestic economy. Since people have become used to “scrapping” (amortising) cars the “parts”industry is not that much of a drain on the economy.

    Needless to say I do not need to mention the “multiplier effect” to a distinguished economist such as you which: combined with increased demand and “strategic” investment would create GDP growth meaning that a 3% deficit target would require less “adjustment and labour intensive demand

    As we are already experiencing growth the 3% target is already moving up above 5BN even without a stimulus.

    As for “strategic investment” Irish bonds are proving very attractive these days and it would be a shame if Irish pension funds and the NRPF could also not get a “piece of the action”. At some stage we are also going to have to “activate” our housing stock in order to avoid another bubble which if (managed properly) would create twenty thousand jobs between now and 2015 when more housing will have to be started.

    Increased domestic demand by public sector could mean ten thousand jobs, housing “activation” followed by more housing requirements from 2015 could mean twenty thousand extra jobs. These extra thrty thousand jobs could create another five thousand jobs in labour intensive sectors. After that “strategic investment” needs to only create an extra ten thousand jobs as an extra forty five thousand jobs in the private sector would necessitate an additional five thousand jobs in logistics and distribution. to supply the “stuff” that people buy.

    Of course I have not considered the fact that many of these extra one hundred thousand workers may need child minders. Which if provided by some of the public sector emplyees (i.e.local authority/community creche and day care facilities) will reduce the barriers to employment many unemployed people experience.

    Fifty thousand plus Fifty thousand = one hundred thousand.

    There is also one extra “Public Servant” windfall which would in turn benefit the entire economy. A clear unambiguous public service wage adjustment would remove the uncertaintly which the majority of public servants experience concerning the “spectre” of wage cuts. Abolition of increments, repalced by more opportunities for promotion, would be a price most Public Servants would pay for certainty and a pro-public service environment.

    Remove the “spectre” of uncertainty and Public servants will gladly head “down to the shops” in an evironment which is not anti (in most cases unjustifiably so) public service.

    IMHO it would be a shame if senior public servants sabotaged these ideas just because they want to not worry about the cost of their holidays in the Sychelles. It would even be a greater shame if they could use an eminent and respected Economist like yourself to justify their opposition.

    Indeed thanks to the sacrifices many of their parents made to educate them it “was far from the Seychelles they were reared”.

    I look forward to reading many more of your excellent articles and your continued contribution to solving the diffcult (but not insurmountable) challenges Ireland faces. Ireland can not wait for Europe to clean up the housing estate (which Europe will eventually do) but in the mean time Ireland can concentrate on getting itś own house in order.

    Best….L

  39. Tim O'Halloran Says:

    “The spectre of politicians seeking to create 100,000 jobs through extra public spending is every economist’s nightmare. ”

    This really is an irony free zone, as I’ve said many times before.

    The spectre that haunts my nightmares is the borrowing of 100s of billions by private sector morons that created 100,000s of useless jobs mostly for noncitizens.

    Where was the fearless Colm McCarthy went that lunacy was being perpetrated? Whining about increases in public spending but not uttering a word about semi-literate developers borrowing billions for their crazy schemes. McCarthy was silent because all private sector borrowing and job creation is brilliant, by definition in his universe, even when proven to be useless by the objective facts.

    Go back to your stockbroker friends , you should be ashamed to draw your ridiculous professorial salary from the unfortunate tax payers you failed during the bubble.

  40. Kevin Lyda Says:

    Ah, more hairshirt economics for the poor and middle class. Lovely.

    Just out of curiosity, at what point is this austerity lark supposed to pay off? I mean if we need full explanations and timelines for job creation schemes, surely austerity plans should have the same?

    Or is economic recovery now a Friedman away?

  41. Livonian Says:

    “Kevin

    “Just out of curiosity, at what point is this austerity lark supposed to pay off? ”

    I cant tell you when it is going to pay off but I can tell you when it is going to end.

    The end will be when:

    1) Uncle Claude gets his retirement watch (November 2nd) from the ECB and the “Bung Bunga” crowd move into Frankfurt.

    2) Sarko ,or rather his advisers, realises his banking buddies are as useful to his re-election (in May 2012) as the Irish lot were to our previous clowns re-election,

    3) Angela gets a few lessons from within her own country(and Party) why the EEC/ EU really came into existence when she was growing up in East Germany. The “lessons” are already happening at this moment.

    4)The majority of Irish Public Servants realise that Croke Park was a scam designed to deceive and manipulate them by a small percentage of senior public servants and union leaders who are putting on their “golden parachutes” between now and next March.

    Oh and I almost forgot to mention the small matter of an election campaign in the US which is being accompanied by a spontaneous (but very sophisticated) grass roots movement which makes the Teaa Party look like : well a tea party.

    All within a matter of months actually! :)

  42. Bklyn_rntr Says:

    @Tim harsh

    Better to point out the holes in the “privatize everything, but protect the bankers” philosophy. That philosophy is so riddled with basic logical errors that only the most sophisticated economist can assume them away. The problem now is that we have had thirty years of evidence refuting the promised benefits of these policies.

    The straight on personal attacks can be counterproductive because they shut down debate and force each into a “with us or against us” camp

  43. Michael Hennigan - Finfacts Says:

    I doubt if many economists have nightmares about unemployment.

    TV news clips cannot convey the funereal atmosphere in a company struggling to remain afloat while creditors hurl abuse in reception, looking for promised cheques that aren’t there. I’ve seen it first hand.

    There are two segments of the jobless that need attention: young people who may give up before they even begin life as adults and middle aged people who may face the prospect of never working again — the fear of people with children, running out of money in the modern consumer society, is distant for the comfortable policymakers.

    I’m with the posters who reject Margaret Thatcher’s TINA but while I’m generally an optimist, I do not expect radicalism as despite the crash, the ancien regime is firmly in control.

    What can better illustrate that than a boomtime FF insider may become the next Irish president? Anyone who believes in the malarky of a recent epiphany should check the facts: ministerial adviser, FF campaign manager 2007, state board appointee, FF national executive and as recently as Dec 2010, seen as a possible FF Dail candidate in Louth.

    In this recession there is a new situation compared with the 1980s when the US issued special visas for Irish immigrants. Today those at home have to compete with immigrants.

    In the first year of the Cameron government, almost 90% of the 400,000 new jobs that were created went to migrants. British employers say local youth lack basic skills such writing and communication.

    Given the depth of this recession, employment will remain a problem for many years.

    In the period 2001-2007, only 5,000 jobs were added in the internationally tradeable goods and services sectors by foreign and local firms – - who were also selling domestically.

    Colm McCarthy is right to raise concerns about spending in particular areas as the record is poor in picking winners. It should also be said that Colm could have likely picked up a haul of handy earners during the boom if he had been minded to suck up to the poltroons. Others avidly drank the soup, sat in amen corners and are still doing so.

    Even though it would for example, be speculative helping young startups, some funds should be shifted from the €2.5bn annual science budget which in 10 years has produced about 1,000 jobs in spinouts (I do realise that there are other outcomes).The protests of impotence in the face of continued insider gouging, shows where the priorities lie. The fact that the aspiration of equal pay for the same work is being cast aside (bound to be declared illegal in time) illustrates the two levels of citizenship.

    A credible jobs strategy needs to begin with a reality check not the fantasy that passes as an enterprise policy.

    Bruton has already been captured by the insiders who conflate multinationals with indigenous companies.

    In the same week that Elan said 6% of its shareholders were Irish residents, Bruton was bragging that Irish companies employ 120,000 in the US.

    Richard Barrett of Treasury asked in Dublin Castle, how many could speak Mandarin? As if it could really matter – - the British head of a Japanese company said recently that he stopped trying to speak Japanese when someone told him that he resembled a baby.

    In the southern Chinese industrial heartland, you could speak in Cantonese, Mandarin or whatever, but unless you’re dealing in big money, you would understand what f-off is in any language.

    As to the balance of payments, Peter Sutherland said in 2009 that countries don’t call in the IMF because they have a budget deficit; they do it because they have a balance of payments deficit.

    So there goes the danger of believing our own propaganda.

    As for the average savings, there are still people who have retained their bubble gains; Ireland’s owner occupied house ratio without a mortgage is four times the level of the Netherlands.

  44. PR Guy Says:

    @DOCM

    “There is story on the wires, for example, that Greece has just concluded a deal with the US for 800 tanks at €3 million a pop!”

    Please tell me this isn’t true… please

  45. Michael Hennigan - Finfacts Says:

    One of the most striking aspects of Irish enterprise policy is that after 60 years of public support, so little useful data on firm birth, survival and death is available.

    Enterprise Ireland has said that investment in over 800 start-up companies over a 20 year period (1989 – 2009) yielded only about 14,000 jobs. Since the agency started funding the commercialisation of academic research over 10 years ago, 140 spin-out companies have been created employing over 1,000 workers — an average of 7 employees per firm.

    These are gross figures and they haven’t a clue what the survival rates are.

    In the US, young firms (0 to 5 years old) are responsible for ALL net job creation. The big giants both create and destroy jobs.

    BLS data shows that 66% of new establishments in all sectors were still in existence two years later, and 44% were in existence four years later.
    Research also shows that 30% of startups fail in the first year – - indicating how important firm creation is, availability of credit and reform of bankruptcy laws.

    @ PR Guy

    The Greek story is on blogs rather than mainstream news services.

    Somebody in Sweden may have misunderstoos the context of ‘tanks.’

  46. Darren Snow Says:

    The government could support and incentivise work without trying to make up jobs that will as Colm argues probably have questionable long term potential.

    Jobs will only become viable when the cost of labour makes them so. When people say there’s no jobs I don’t think they’re seriously suggesting that so many services are provided in Ireland that no more are needed. It’s that they are unaffordable. But in a civilized country we need to at least try to establish a livable minimum income. I think this poses a problem that what was pre crisis the ‘rich’ world hasn’t come to terms with yet. I don’t think there are any easy answers.

    In Hong Kong, they attempt to maintain a level of social provision despite proximity to much cheaper labour on the mainland, this is done through mass social housing and subsidized transport for work etc. I think this kind of focus on what will facilitate the creation of real jobs could be useful.

    @MH I live in South China an speak fluent mandarin, I find it’s very useful. Are you seriously suggesting otherwise working here? I’m not sure Japan is a relevant comparison.

  47. Michael Hennigan - Finfacts Says:

    @ Darren Snow

    It’s always a big plus to be able to converse in a local language.

    Unfortunately, from an Asian perspective, there is a tendency among some of the middle class to use English as their children’s first language.

    Suggestions that Mandarin should be on the Irish school curriculum say compared with German, as a potential business benefit, implies that Irish SMEs have fully exploited European markets, which they haven’t.

    In the EU, nearly 80% of children were studying a foreign language at primary school in 2008; in Ireland the level was 3%!

    Irish exports to China are about 2% of total exports and multinationals are responsible for 94%; exports to India are insignificant.

    MNC exports are part of a global supply chain and destination decisions are not generally made in Ireland; the ratio of Irish SMEs that export is low and Europe seems a more obvious area to focus on.

    Of course individual companies can have potential to export anywhere.

    Intellectual property is a problem in China as this example illustrates:

    The Chicago Tribune reported last year that Yet-Ming Chiang, an American professor at Massachusetts Institute of Technology (MIT) whose family left Taiwan for America when he was six-years old, invented a breakthrough battery that could be recharged using a conventional wall socket.

    His company A123 has five plants in China and in 2006 began supplying batteries for Black& Decker power tools.

    According to co-founder Bart Riley, in ramping up production in China, A123 paid an immeasurable price: Loss of its intellectual property, the ideas and engineering that made its products better.

    The company did what it could to slow the technology transfer by breaking down the manufacturing process into steps, Riley said, but “we ended up having to teach these guys how to make our state-of-the-art, world-class batteries. … And some of them are (now) competing with us directly.”

  48. DOCM Says:

    @ PR Guy

    My memory of the number was wrong. It is 400, not 800.

    http://articles.businessinsider.com/2011-10-05/markets/30245456_1_greece-european-debt-crisis-greek-comedy

    I mentioned the story because it helps illustrate a wider point which is that Greece is a special case because of the geo-political context within which the country operates, the most notable being its state of armed neutrality vis-a-vis a fellow NATO member, Turkey, which still happens to occupy, de facto, part of a member state of the EU, Cyprus. Russia is also reported to have put up 2.5 billion in an energency loan to the last-mentioned. Go figure!

    The arms industries of the US and the other powers have competed for lucrative and unnecessary defence spending in Greece. But there is no let-up in tension in the area, especially having regard to the developments elsewhere in the Mediterranean and notably in Syria. Turkey and German also share a long and interesting history. The fact that Turkey has been a member of the EU Custom Union for the industrial sector for many years is also often overlooked cf.

    http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/turkey/

  49. disgruntled observer Says:

    @ Bklyn_rntr

    “The straight on personal attacks can be counterproductive because they shut down debate and force each into a “with us or against us” camp.”

    I’m not entirely sure we’re not in a “with us or against us” camp anyway. You know something that seems to be a problem with the left in the anglo world, is the attempt to be always reasonable. The right has been smacking the bejaysus out of it for over thirty years.

    Take the list of DKM’s clients

    * Health Services Executive
    * Department of Communications, Marine & Natural Resources
    * Commission for Energy Regulation
    * Department of the Environment, Heritage & Local Government
    * Department of Finance
    * Department of Arts, Sport and Tourism
    * Department of Enterprise, Trade and Investment (Northern Ireland)
    * European Commission
    * Bord Gáis Éireann
    * Many of the major private developers of infrastructure in Ireland in recent years

    Well I can think of one quango that’s cost us a lot of money.

    I’ll give a direct example: According to The Times, in 2002 Colm McCarthy did a report for Jerry Healy and John Coughlan, two senior counsel for the Moriarty tribunal.

    The times reports. “Documents released from the Department of the Taoiseach after an appeal to the Information Commissioner, reveal McCarthy’s report, written while he was at DKM Economic Consultants, was key to the lawyers’ success in lobbying for a pay rise….”

    “…Last week McCarthy said he “could not remember” writing the report…”

    “According to McCarthy’s analysis, if the barristers’ wages had risen in line with High Court judges’ pay, they should have been earning €2,913 a day.”

    http://www.timesonline.co.uk/tol/news/world/ireland/article6797854.ece

    Irony free zone indeed!

  50. Tim O'Halloran Says:

    @disgruntled observer

    Mr. McCarthy is always snide and disrepectful when discussing anyone but the ‘wealth creators’, so I’m sure he take a few home truths. You can’t hold with the hare and run with the hounds as McCarthy has been doing for years without someone pointing it out from time to time. He uses the ‘working class Dub’ persona to give him a free pass for this kind of thing. If his uterances were delivered in a Blackrock accent maybe people would see through his position more easily.

    At this moment there is an economic forum, paid for by the taxpayers being addressed by such as Colm Toibin and Gabriel Byrne and Bono for God’s sake. This country looks everyhwere for economic sense except where it should expect to find it, in the economics profession. Why? Because unconsciously we all know but rarely articualte out loaud, that the economics profession has failed us abysmally in the last decade or so. Mr. McCarthy as Irealnds best know economist, its only real ‘celebrity economist’ bears the greatest responisibility.

    We desreve an apology, a resignation or some explanation why he will not be so blind in the future as he was in the bubble.

  51. Paul Hunt Says:

    It’s bit late in the day to be shouting the odds about NewERA. It’s a done deal. Only the details have yet to be revealed. It was a key plank in FG’s pre-election policy programme and it is part of the Programme for Government. So the Government believes that it has all the democratic legitimacy it requires to implement whatever the FG and Labour High Commands can hammer out behind the scenes and get past the Troika.

    So we can pursue this ‘debate’ to our hearts’ content – seasoned with a few jibes at and from the usual quarters – but it won’t make a blind bit of difference. It’s business as usual. Key issues that badly need to be addressed will be ignored. The spin machine will go into over-drive. Benefits will be greatly exaggerated; costs will be ignored. But ‘something’ will be being done.

  52. Ceterisparibus Says:

    @Paul Hunt
    The spin machine is already in overdrive with the driver consumed with his own puffery and meantime the crisis escalates to a point that will have undoubted dangerous effects on little old Ireland.
    “Greek debt may have been understimated, says Schaeuble

    Europe perhaps underestimated how much it needed to reduce Greece’s debt burden at its July summit, German Finance Minister Wolfgang Schaeuble was cited as saying by Frankfurter Allgemeine Sonntagszeitung.

    “It is possible that we assumed in July a level of debt reduction that was too low,» Schaeuble was cited as saying.

    Euro zone finance ministers are reviewing the size of the private sector’s involvement in a second international bailout package for Greece, the chairman of the Eurogroup ministers Jean-Claude Juncker said earlier this week.

    The reassessment could undermine Greece’s aid program and hasten the threat of a Greek default.

    “There is a high risk that this crisis further escalates and broadens,» Schaeuble said.

    And
    “Thomsen warns rescue plan could fail

    Troika officials are criticizing the slow rate of reform implementation in Greece and ask for harsher structural changes, warning that the plan to save the Greek economy could fail.

    “Greece is at a crossroads. It is clear the program will not work if the authorities do not take the path that requires much stricter structural reforms than those that we have seen so far,” said Poul Thomsen, the representative of the International Monetary Fund to the troika, in an interview to German Sunday paper Welt am Sonntag.

    “It is going two steps forward, and one backwards,» Thomsen added. «The Greek government understands that many of the most difficult changes lie ahead. At the same time, the political and social fatigue is growing.”

    His troika colleague from the European Commission, German Mattias Mors, criticizes the slow pace of reforms.

    “The Greeks believe it is enough to make laws,» he told the same newspaper. «But it takes time to implement. And often the right structures are lacking, for example in tax administration.”

  53. Joseph Ryan Says:

    @MH
    “Richard Barrett of Treasury asked in Dublin Castle, how many could speak Mandarin?”

    What a neck Mr Barrett has. This would be the Treasury Holdings that has parked its debts at NAMA while the executives continue to be paid handsomely to after the ‘assets’.

    I could pay for a lot of lessons in mandarin for my share of the Treasury debt that the State has foisted on me.

    And I will never get to play a game Command and Conquer Red Alert with Battersea Power Station using somebody else chips.

    http://namawinelake.wordpress.com/2010/06/27/vultures-gather-over-nama-assets/
    http://namawinelake.wordpress.com/2011/06/23/for-a-company-with-e1bn-negative-shareholder-equity-treasury-holdings-vehicle-reo-is-surprisingly-upbeat-in-its-latest-financial-report/

  54. Bklyn_rntr Says:

    DOCM and Disgruntled

    On C McC I will defer to the better knowledge of others. The point I wanted to make was that the philosophy of 1. ignore financial costs in economic projections, 2. privatization is always good 3. Banks must be saved as they are the only efficient allocators of capital has been completely discredited in this crisis. Our neo classical keynsian economists insist that we need only hold the faith and with time, they can resume normal service. But they are wrong and we can be powerful in pointing out how wrong their base philosophy is. When we go to personal attacks we add emotion to an already very emotive subject. When the “right wingers” perceive that one of their men is down in this game of personal attacks, they will cut him loose and join in on the attacks to protect the ideology. The real capitalists (the left) end up fighting silly wars against the likes of Sarah Palin as a result. Concentrate on the ideology, it’s rotten to the core and they can’t defend it.

    On Turkey/Greece, I have no difficulty in beleiving that Greece is buying arms. One reliable outcome of financial crises across history has been that the financially weak quickly become the geo politically weak. Turkey’s position in the middle east is being enhanced by the Arab Spring, its democracy and it’s membership of NATO while Greece is seen as the irresponsible punk that won’t even take responsibility for its own spending. Look at a map of the region. Cyprus is not naturally a part of Greece, it is a knife point into the Dardanelles. The idea that the world has moved onto one of well defined borders and civilized negotiation is likely to find out that when the big boys are busy with their financial worries, the smaller ones get busy fixed perceived wrongs. That is as much a consequence of the financial crisis as the employment crisis.

  55. EWI Says:

    The spectre of politicians seeking to create 100,000 jobs through extra public spending is every economist’s nightmare.

    This is clearly untrue, but Colm McCarthy’s ideology is impervious to the facts (I saw another sally for King Car and against rail in the Farmer’s Journal a week ago, which determinedly ignored all of the comments here from a while back)

  56. Ceterisparibus Says:

    @Joseph

    Wtf was a bankrupt developer invited to the gabfest in Dublin C castle. Investing the taxpayers money in china seems to be the game. As for that power station…it has gone of the radar. Did NAMA quietly invest our money in this dodo?

  57. disgruntled observer Says:

    @ Bklyn_rntr

    “But they are wrong and we can be powerful in pointing out how wrong their base philosophy is.”

    Fifteen years ago Krugman wrote this:

    http://www.slate.com/articles/business/the_dismal_science/1996/08/supplyside_virus_strikes_again.html

  58. Chris Says:

    We injected 10 billion more into the blackhole of the banks this year. We could have employed 300,000 people at 33,000 euros a year to do whatever they are qualified to do or something similar for that money.
    Everything has to put put into the context of expenditure on banks.
    Job creation schemes are certainly ahead of that in the list of things we can’t borrow the moeny for.

  59. Bklyn_rntr Says:

    Disgruntled
    I can’t read the link… And Krugman drives me nuts too. His partisan nonsense is too annoying and he refuses to accept that democrats are as much to blame as republicans for the mess we are in. We didn’t create this monster in 8 years, it took the best part of 40 years to do it and both democratic and republican politicians are knee deep in conflicts of interest and responsibility for it.

    Krugman says demand management (keynsianism) is the key, but conveniently ignores all of Keynes’ work on deficits, also he never addresses the long term problem of money debasement because that gets hidden in the “in the long term we are all dead” meme which, when properly translated, means let the next generations pay.

  60. The Dork of Cork Says:

    Colms friends can only drive cars out in the sticks because of the hugely overvalued Euro.
    If the Euro collapses in value or we go back to the Punt the cost of petrol & diseal will skyrocket.
    To maintain a currencies value you must tax externalties & waste – Colm does not see this.
    He just looks at a countries fiscal books and thinks that is all the information he needs – but given how small goverment money is to credit even now in this country thats absurd.
    He wants us to be grossly dependent on foregin multinationals to generate huge profits and create a trade surplus against the counter of massive imports.
    He is but another $ bubble economist.
    He was right in the past at least in a narrow monetory sense but he will not be in the future.
    Thats the danger of the older generation implementing & advising on policey – the people who succeed in the past believe the future is more of the same so they implement predictable but disastrous policies.
    The huge transfer of urban wealth to the sticks must stop because if it does not we will experience a full scale collapse of society where perversely the only relatively safe place will be the hobbit hole down in West Cork.

  61. Bklyn_rntr Says:

    Ok found that article …. Interesting in how ideas are like an African virus. But philosophies do change, they changed in the 1930′s with Keynes and again in the 1970′s when bretton woods collapsed. On that basis, I have hope that they can change again.

    I love the bit about how any old fool thinks they understand economics … True indeed … And I suspect will remain true for as long as our intellectual betters leave giant holes in their “scientific” theories

  62. Kevin Lyda Says:

    Regarding Greece and their tank shopping, a comment by a Finnish member of parliament:

    “””Jussi Halla-aho, an MP for the populist True Finns party, wrote on social networking website Facebook on Wednesday that the Greek government should use military force against workers on strike.

    “What Greece needs at this particular point in time is a military junta that would not have to worry about its popularity and could use tanks to enforce some order among strikers and rioters,” Halla-aho wrote.”””

    http://www.helsinkitimes.fi/htimes/domestic-news/politics/16646-finnish-mp-halla-aho-calls-for-tanks-in-greece-.html

    Love the thought process there. This is what a culture of unaccountability breeds. Instead of punishing those responsible, punish those at the bottom.

  63. Darren Snow Says:

    @ MH

    Yes probably Europe is a better focus- and German is much easier. Though probably we could do both?

    I do think you are underestimating Mandarin’s usefulness by conflating China with the rest of Asia though.

    Surely long term trading with China and other growing markets will create jobs more sustainably than the government expanding its payroll? If there’s not enough work in Ireland there’s a lot of work in the world, no reason why more of it can’t be done in Ireland.

  64. Brian O' Hanlon Says:

    A couple of sentences which Michael Hennigan wrote above, which I think are worth highlighting for a moment, and un-packing a little bit. Michael wrote,

    One of the most striking aspects of Irish enterprise policy is that after 60 years of public support, so little useful data on firm birth, survival and death is available.

    Which would appear to me, to contradict a lot of the original direction and motivation injected into Ireland’s early industrial-isation policies by such figures are Lemass. I don’t fully know the history behind it. I know that Lemass borrowed some ideas which were actually initiated by Fine Gael members in the 1950s. But wasn’t part of the effort which was begun by Lemass, to try and capture information about the state of enterprise in Ireland in the mid twentieth century, and what observations could be drawn, having assembled that information.

    A credible jobs strategy needs to begin with a reality check not the fantasy that passes as an enterprise policy.

    Focussing on Michael Hennigan’s repeated use of the phrase enterprise policy, under what heading should one categorise the activity of the builders and construction in Ireland, and the various support mechanisms that the sustained building activity or ‘enterprise’ enjoyed over a decade. I would submit, that what we witnessed in that case, was an enterprise policy of sorts. The reason I feel comfortable with using the phrase ‘policy’ to describe the same, is that in my mind, policy is anything which requires a sustained combination of efforts of many in specific areas of enforcement to work on something for a long time, to produce a result.

    Given that kind of definition, we cannot escape from the fact, that the construction activity in Ireland over a period of a decade was the realisation of an enterprise policy. What is amazing, is that in 2011, there still is not any discussion in the media of that activity, as an enterprise policy, in which so many people had to be involved, for it to function at all. Not many people today in Ireland, will honestly and publicly admit to have had any hand, act or part in what I describe as an ‘enterprise policy’.

    In one sense, it doesn’t matter. You can go into any public or university institutional library in Ireland and go to the periodical shelves. I know future researchers will do just this. Maybe, it will take just that action, to enable the nation of Ireland to gain any sorts of useful insights into the decade of the 2000′s, and perhaps the decades which preceded it. Future researchers will look at publications and periodicals. It will become apparent from doing that research, just how organised and how widespread the effort was in Ireland to implement and make a certain type of enterprise policy happen. No one will honestly and publicly admit to being a part of that effort today.

    I do not believe there is any particular conspiracy at work, given the total lack of admissions from top to bottom, for involvement. I would agree with Michael’s contention that the same enterprise policy was a fantasy of sorts. But that fact, didn’t seem to matter. The enterprise policy as it was rolled out in the country over the course of a decade, did not seem any less real, for the fact it was a policy based upon a fantasy. Maybe, the future researchers aught to look carefully at the hypothesis that enterprise policy may NOT BE something, which is conceptualised or even understood by a broad range of participants. Rather, that enterprise policy is something that a lot of people participate in, to make it occur, without having any notion whatsoever, of what the overview may look like.

    That is the whole thing about enterprise policy as we now can understand. Even the former Taoiseach Bertie Ahern, can claim total deniability of the enterprise policy that existed in Ireland for over a decade. To use Mr. Ahern’s own words: I wish someone had said something to me. Isn’t that the whole beauty of enterprise policy? Isn’t that why enterprise policyis so valuable to have? Having invested so much time and public finances into creating an enterprise policy, the beauty of the system, is that no one afterwards has to claim any idea of what had been going on.

    I can understand from historical accounts today, by researchers who have studied the careers and times, the 1950s, and Sean Lemass – that Lemass wished to throw some daylight on the real state of enterprise in Ireland. That was the major focus and the direction in which public investment and resources were employed. But today in the Ireland of the 2010′s, it seems that enterprise policy is something which politicians can use to claim plausible deniability. We acted upon the best advice. We consulted the best expertise. Rather than throwing some daylight on matters, it does the entire opposite. BOH.

  65. Brian O' Hanlon Says:

    @ All,

    Actually, I will correct one of the above sentences, for the sake of emphasis.

    Having invested so much time and public finances into creating an enterprise policy, the beauty of the system, is that no one afterwards has to claim any ownership, of what had been going on.

    The hypothesis I humbly submit, is not that Ireland had a deficit of enterprise policy, over the course of the past decade and more. Ireland had an enterprise policy. It worked so well, and so many participated in its implementation, being paid to do so. But afterwards, and after its total failure, no one was asked to own that policy, or set of policies. BOH.

  66. paul quigley Says:

    @ Brian

    ‘But today in the Ireland of the 2010’s, it seems that enterprise policy is something which politicians can use to claim plausible deniability’

    Take a look a credit allocation trends 1998-2010 . It’s one of the later slides in this presentation. I submit that it is impossible to escape the conclusion that the executive was captured by bankinbg/developer vetsted interests. There was no enterprise stratey, as the strategies were all outsourced.

    The state was handed over to the so-called entrepreneurial classes, including the professional firms who bill the state for cartel services provided. Free markets indeed.

    By the standards of governance prevailing in previous decades, the Noughties were truly abysmal. It will probably take the rest of the decade for that simple fact to be acknowledged.

    http://www.finance.gov.ie/viewdoc.asp?DocID=7002

  67. Carlo Spiceyweiner Says:

    “If the macroeconomic strategy is to be subverted with ill-considered job creation schemes…”

    Yes, the likes of schemes which see people like Colm McCarthy wheeled out time after time to give us the benefit of his ill-considered wisdom that could be as easily obtained in Dohenys & Nesbitts for the price of a pint of a plain.

    I could actually go with less of those…

  68. Aidan R Says:

    “The spectre of politicians seeking to create 100,000 jobs through extra public spending is every economist’s nightmare”

    I work at the Amsterdam Institute for Advanced Labour Studies (AIAS), at the University of Amsterdam (UVA). Most people who work here are trained economists. I did a quick voxpop around the office. None of them agree with the above statement. It simply reflects the dominance of a narrow minded ideological preference for a failed neoclassical orthodoxy.

    There was €477bn available for capital investment in Ireland from 2000-2008, three quarters of this went into unproductive real estate. All productive investment during this period was driven by the state (electricity, water sewage, waste etc). The private sector invested a measly €15bn into productive investment. There is simply no empirical evidence to suggest the private sector is capable of productive investment in Ireland.

    Business, planning and employment are simply too important to be left to the faith of markets. It requires active public policy. Markets are an institution like any other. They require embedded institutional coordination to work. This cannot occur by private decision but collective action. Small open economies of Europe learnt this years ago yet so many of the Irish economics profession still cling to the dream of a perfect liberal market economy brought about through structural reform.

  69. Tim O'Halloran Says:

    @ Carlo Spiceyweiner

    Why just Doheny & Nesbitts? Any gin-soaked sot in any golf club bar could re-gurgitate the same rot from the Telegraph etc. any day of the week.

    McCarthy’s newly arrived at populist problem with ‘politicians’ ( = democracy) was not evident when he was the FF/PDs favourite economist.

    Remember them boys who thought 4-bedroom semis in the Bog of Allen were a productive investment ? Simply because some thick chancer with a TD for a cousin and a banker for a brother-in-law could get the loan and the planning permission? Where was Colm McCarthy’s concern for sustainable jobs and productive then?

    Jesus wept!

  70. Michael Hennigan - Finfacts Says:

    @ Aidan R

    The private sector is involved in most public capital projects and whether the shambolic record in Ireland is the fault of the public sector, private sector or both can be argued about.

    Many excuses can be found but the evidence that we are pretty poor at project implementation is strong.

    Nearly 50 years to build a Dublin-Cork motorway; sahll we mention broadband implementation and hundreds of millions flushed down a sink hole on IT projects.

    Why would an experienced CIO be appointed?

    Rossa White, then at Davy, said in 2010, probably the best way to compare the wealth of countries is to look at the capital stock. He says years of high income can be turned into physical wealth if invested properly and takes three small nations as an example: Belgium, Finland and Ireland.

    The three are closely matched in the euro-area income per capita table, albeit that Ireland slipped behind in 2009. But no Irish resident who has visited Belgium or Finland would have the audacity to claim that this country is wealthier. Transport infrastructure is vastly superior in those countries, as is the telecommunications network, and public services are delivered from higher-spec schools and hospitals.

    Who is suggesting that business, planning and employment should be left to the faith of markets?

    The vested interests both in the public and private sectors applaud the politicians for spending billions on research but maybe we should spend more not less because the outcomes don’t appear to matter.

  71. Shay Begorrah Says:

    We can now all reflect sadly on how Ireland’s most influential economists (and Colm McCarthy is a radical leftist compared to John McHale, head of the national fiscal advisory council) are far to the political right when the most convincing explanations of the global financial crisis and Ireland’s particular vulnerability to it come from the left.

    I am sure Colm McCarthy has a thick skin but much the anger above is not personal, it stems from the simple fact that the apostles of free market orthodoxy (and he remains one) have never deigned to admit that we are here because we tried market liberalism out, and it failed. It is galling to hear about the foolishness of governments “wasting” money trying to create jobs in the midst of a crisis of private financial capitalism where tens of billions of the peoples money have been spent to stop the entire economy being destroyed by an out of control financial sector.

  72. EWI Says:

    @ Finfacts

    The private sector is involved in most public capital projects and whether the shambolic record in Ireland is the fault of the public sector, private sector or both can be argued about.

    The “involvement”, as you put it, of the private sector in public capital projects is in the form of PPP’s and such, yet another example of the corrupt crony capitalism that exemplifies the types in and about Dublin Castle this past weekend.

  73. Brian O' Hanlon Says:

    Paul Quigley wrote,

    Take a look a credit allocation trends 1998-2010 . It’s one of the later slides in this presentation. I submit that it is impossible to escape the conclusion that the executive was captured by bankinbg/developer vetsted interests. There was no enterprise stratey, as the strategies were all outsourced.

    I understand the argument in relation to the entrepreneurial classes, and I do like the description of the construction industry in Ireland, as an entrepreneurial class. I think it is a good description. There were hundreds, and thousands of small construction specialist companies of one sort or another, set up in Ireland during the 2000′s. Again, I will defer to the better and more qualified judgement of future researchers in Ireland, who will look back at this era of Irish economic development, and be able to see it rationally, detached and without emotion.

    I mean, the way, that we today look at the Lemass era of the 1950s and 60s. The facts stand on their own merits, and speak for themselves. It is nice though, to meet the odd person who remembers that era and participated in enterprise at that time. I recall, listening to Gordon Clarke whose job it was to install and manage the first computer system in Ireland in the 50′s, for a sugar factory down in county Tipperary. I have also had several conversations with Roy Johnston, a physicist who worked with Clarke at Aer Lingus in the early days. I was listening to Jim O’Hara speaking on Newstalk radio on Sunday morning. It is important I feel, that some young researchers, who are around today, aught to track down these men and interview them. The historical society at Engineers Ireland is particularly active on this front, of making these connections and at least capturing some snapshots of bygone stages in our economic development.

    I would have to submit a serious theory though in relation to the construction industry in Ireland. It relates also to the transformation of FF as a party for the working man, to one devoted to something very different. What the construction boom, in the 2000′s was really about – and you can see it in the number of entrepreneurial agents at work in the economy, with construction related ventures – was the working man, made good. The construction boom in Ireland was all about guys with very little actual equity, taking very large risks indeed. I have spoken to so many of these men and women who were responsible for voting FF back in, in 2007. They had invested most of what they made (and often, a lot more), during the Celtic Tiger, straight back into the construction area – they all felt, they needed to vote back in the FF party, to secure their investment.

    What I wish to propose, and it may not be a popular message – is that in Ireland, the ‘working’ man, the poor, are actually one of the largest vested interests of all. In that, they see their futures, collectively as becoming rich out of the construction industry. That belief has become embedded deep into the lower tiers of Irish society, and I do not believe the recent economic collapse as done anything to shatter that embedded belief. There is still, that deep rooted belief, there will be another boom, and another opportunity for the ‘working’ man, to race back into the lead on the back of another property bubble. This may not be a media friendly slogan or message to transmit, but I will defer to future researchers with much better methods than my own, to prove or disprove my hypothesis.

    But to summarise, what Eamon Dunphy, the Newstalk 106 broadcaster would say – you get the democracy that you deserve. This may in fact be very true. But it is an uncomfortable reality to cope with, one that hits a little bit too close to home. What I am basically saying, is that one needs to compare and contrast the breed of entrepreneur which Sean Lemass and the FF party encountered and supported in the 1950s, with the same in the 2000′s. I would argue, that future researchers will discover, that the breed of the 2000′s, were mostly on the make for the quick and easy buck. There was a lack of substance, vision and horizon. I think, that is the fact that is recognized by many outside of Ireland, looking in, also.

    For instance, imagine the experience for someone such as Craig Barrett landing on a plane from the United States in Ireland during the 2000′s. He must have thought to himself, Boy, this can only end one way. Someone aught to interview Craig in relation to this also. My hunch, is that he may be quite honest in expressing his opinion. BOH.

  74. Irish Left Review · Investment Denial and the New Road Map Says:

    [...] McCarthy’s post on Irish Economy takes a sceptical look at ‘productive investment’, or more precisely, the [...]

  75. Paul Hunt Says:

    @Shay,

    All Colm is doing is exposing the huge between the current economic reality that is confronting Ireland and the political consensus that has formed around ‘something must be done’. This gap should be filled by political economy, but that’s all a bit old fashioned and, in any event, a few economists have made an effort to carve out a new sub-discipline – the economics of public choice – to the top of which they might ascend. But, useful and all as it is, it has gained little traction in practical application.

    The simple fact is that government has too big a share of a much lower level of economic activity and this cannot be sustained. And what is even worse is that much of the so-called private sector depends for its livelihood on the broader public sector. Given the extent to which the economy had become so seriously imbalanced over the last decade, it cannot, unfortunately, be anything other that a long and painful adjustment. Managing this requires some application of the economics of public choice, but there is negligible interest in doing so.

    But ‘make work’ schemes, while maintaining key features of the existing structure and financing of the semi-states, are entirely the wrong way to go about this. Restructuring these businesses to minimise their service delivery costs would be far, far more effective. But that would be hard work. A lot of people who are living high on the hog under the current arrangements would be very, very upset. And they have the political muscle to over-turn the applecart. For Government it’s far easier and safer to go with the flow.

  76. The Dork of Cork Says:

    @Paul Hunt
    I am stumped by your thought framework and concentration on public and/or companies dependent on public expenditure.
    When these companies make a mistake or are corrupt because goverment debt is unleveraged they can only loose what money is given to them.

    However when the banks lend to the private sector at lets say 10 to 1 they can lose 10 times the amount of money.
    Please refer to the centrals bank latest quarterly bulletin at chart 2 – contributions of exports, imports & domestic demand to GDP growth from 1996 to 2010

    The net expenditure of both central & local goverment was mildly positive during the boom years & mildly negative during 2010 when compared to the rest.
    The public services from a monetory perspective was and is a tiny part of the financial ecosystem that is now wildly dysfunctional.
    The truth now is that only goverment spending has any velocity – everything else is stuck in a leveraged nightmare that dwarfs all goverment.
    Unfortunetly Goverment has no direct control over utilties that are now chiefly privatised – this means that most of its net spending gets converted into more private spending again.
    Goverment is poltical eunuch – it has no real function anymore.
    But its been a long time coming.
    http://www.youtube.com/watch?v=gRE-IDYfi8Y

  77. Brian O' Hanlon Says:

    Shay writes,

    It is galling to hear about the foolishness of governments “wasting” money trying to create jobs in the midst of a crisis of private financial capitalism where tens of billions of the peoples money have been spent to stop the entire economy being destroyed by an out of control financial sector.

    I don’t know. I am not a left wing economist, or a right wing one, or an economist at all. But I do have twenty years of experience behind me, in Ireland, working alongside the poor and alongside folk whose main opportunity to generate their own personal fortune was through industries such as construction.

    I should not target the enterprising folk who set up roofing and bathroom tile companies, as suppliers and trades people during the boom years in Ireland. I should not criticise that enterprising spirit. However, I would have an awful lot more time for my fellow ‘working’ men and women, if I could think that some might spare a thought as they walked through a departure lounge in an Irish airport, on their way to earn another personal fortune in the northern territory of Australia, for the mothers and fathers they are leaving behind here to scrap it out, and pay out of their weekly old age pension, for the last ten years of exuberance, which the same tradesmen (leaving now), enjoyed in Ireland.

    I know too many who enjoyed life in the trades and construction sector here in Ireland, who went on €3,000 annual holidays for the last decade. Men and women, who would not know how to get by on less than €2,000 per week. I listened to an economist recently describe a situation of a carpenter in Ireland, who was leaving to go to north America to work. The carpenter had a high-tech sophisticated workshop built for himself, which he needed to abandon and sell off at fire sale price.

    But what I think it really illustrates, is the extent to which trades people were able to capture wealth in vast amounts over the course of the boom years in Ireland. When many folk were struggling trying to innovate, startup with a real idea, or plain build a career – all one had to do was pick up a saw and hammer – and start to rake in the money. If we are to be very honest about the boom and bust cycle in Ireland – and I don’t think broadcasters such as Richard Curran have even attempted to grasp this nettle – what we witnessed during the Celtic Tiger boom, was a bail out for the poor man. A gigantic transfer of wealth onto the backs of people who didn’t really know what to do with it, except build themselves high-tech woodcraft workshops, and then buzz off to the southern hemisphere, when the going got rough. Leaving their folks to get old in Ireland, and try to pay for the party out of their weekly pensions.

    If I thought that the odd trades person leaving Ireland today, could be honest enough with themselves about that, I wouldn’t mind. But I think, many have left, leaving debt in their wake, without a real sense of conscience about anything. Let’s just remember, a simple fact. The fat cat banker in the financial district in Dublin, could never have made the kind of bonuses and salaries that they did, until the Celtic Tiger started in the first place, primarily as a politically influence massive bail-out subsidy for the poorest classes of this country. It wasn’t until the poorest classes started rolling round in the money piles, that the bankers in the financial district, really found themselves getting rich off that same activity. We should try to understand that sequence correctly, to know what we are talking about. BOH.

  78. Shay Begorrah Says:

    @Paul Hunt

    All Colm is doing is exposing the huge between the current economic reality that is confronting Ireland and the political consensus that has formed around ’something must be done’.

    I think you are being too kind here Mr Hunt. Colm would have us believe, and may believe himself, that the state needs to get out of the way of the market, pay down our debts and let capitalism heal itself. Somehow or other the wonders of market discipline, free trade and laisser faire will fix the damage it caused in a way that the silly old government could never manage.

    It is magical thinking that somehow places the blame for the current crisis in capitalism outside of the current flavour of capitalism (not mentioning the coming resource problems of course)

    Now, as it happens I do not think that our current semi-states are a very good way of generating employment but given the last ten years forgive me if I refuse to attribute an emergent wisdom to private enterprise that government can not mimic. This is not simply burying bottles, it is trying to use government investment to give the economy some structure, structure that, per Richard Koo, the private sector can not or will not be able to provide for some time.

    @BOH on the grasping tradesperson

    A gigantic transfer of wealth onto the backs of people who didn’t really know what to do with it, except build themselves high-tech woodcraft workshops, and then buzz off to the southern hemisphere, when the going got rough.

    I think it is a little unfair to single out builders and tradespeople for their greed and profligacy during the construction bubble, there was intense competition for the title of most avaricious and hort sighted social strata of Irish society.

    Also, while I do share your Henniganesque distaste for the undeserved wealth that has escaped the collapse of the construction bubble it was leeched off, I have more sympathy for the shoddy labourer than the developer crazed by the cult of the entrepreneur. I remember keenly how the lovely lucre from the dot com bubble failed to trickle down outside the college going classes at all – surely if you are going to have a bubble it should enrich all sections of society before it bursts and impoverishes everyone but the connected and wealthy?

  79. Paul Hunt Says:

    @Shay,

    I fully agree with the requirement for government to provide the economy with some structure. And the economy needs not only structure, but government must impose some bound on private sector behaviour. The principal reason we are in this mess is that there were no effective restraints on the behaviour of banks, property developers or the construction industry – and this was shared to varying extents throughout the EU.

    But we are talking here about the infrastructure and utility sectors. Lumping the semi-states (and adding some more) under the umbrella of a giant holding company – without any effective structural changes – in the NTMA (where many staff presumably are not over-worked at the moment) does not seem like a brilliant idea.

    It seems that a gravy-train is required to lubricate economic progress and to keep it going in most economies. Brendan Ogle usefully reminded us recently of the gravy-train that delivered for the ESB staff he represents, but these were small deliveries compared to the largesse being lavished on other sectors and to other interest groups. The gravy-train has been in the sidings recently. This NewERA vehicle may not be viewed by the ‘powers-that-be’ as the engine to haul it back on to the tracks, but it will be interpreted in many quarters as being precisely that.

    The utility and infrastructure sectors throughout the EU are struggling to vary degrees to secure the long term investment required at a low cost of capital. The EU liberalisation model has failed – and no where more seriously than in the Britain which pioneered it (but, as usual, Ireland isn’t far behind Britain). Some new thinking required, but there seems to be ne’er a chance of that.

  80. Brian O' Hanlon Says:

    Paul Hunt wrote,

    The principal reason we are in this mess is that there were no effective restraints on the behaviour of banks, property developers or the construction industry – and this was shared to varying extents throughout the EU.

    David McWilliams came out with an expression, in a recent radio panel discussion which found resonance with me. He spoke of how the Irish are wonderful patriots, but poor citizens. I would venture a guess, that the Irish were never afforded an opportunity to become the kind of citizens that they should be entitled to become. To have that small bit of dignity at least. We were always, the nation of pilgrims, who had to look for the angle. Things were usually construction based, small and opportunistic. You could view it in Darwinian terms, as like those creatures should scurry along the ground, underneath the radar.

    It was one thing, to do that in the 1950s-1980s in the United Kingdom. I am talking about the brutal Darwinian shake-down, which occured when groups of Irish left a home parish, to make good abroad. The Irish man or woman, who made good against the odds. I am in my late 30′s, but I am not too old to recall the very stagnant times of the early 1990s in Dublin in Ireland. I would attend jobs fairs and seminars about the construction industry I was working in. There was an expression that gained some traction in the middle 1990′s, to describe a phenomenon, of how some of the Irish began gradually to trickle back into Ireland to work in construction again. They were called, The Irish in London, back in Dublin.

    I apologise, I don’t have enough time to think about this to compose a full and thorough response. The principal thing we have worry about in such a small country such as Ireland, is that tipping point which can be reached very quickly. You look at the various sectors of Irish society. The point when the majority of the youngest, most energetic and most entrepreneurial become active on the island, and put their minds to doing something.

    When the Irish are in London, they can throw enormous energy into their various enterprises. They can make their own space, and contribute forcefully and postively to the energy which defines a time, a place and a level of economic activity. It is like certain sporting occasions, where you sense a certain kind of atmosphere or synergy, between the various supporting crowds. I think, in larger countries, this energy which the Irish inevitably bring to the equation works extremely well. The Irish do very well for themselves and deservedly so. But what happened in the 2000s in Ireland, I feel, is that we tried to repeat what we achieved in the 1980s in places such as London, on home turf.

    That was the major problem. There were no boundaries for force the ‘bubble’ of economic activity to stay confined into a space. The bubble just expanded, and expanded, and expanded into limitless space. I recall, very vividly, at one point in the mid 2000′s, my occupation was to drive around the midlands of Ireland in an automobile. The developer, who was a convert from the concrete industry drove to various sites of GAA football fields in towns around the midlands. My job was to point a camera out of the window of the automobile, as we sped past various ‘sites’ while driving. Such was the speed of operations and the fervour to build-and-flog, that one could not organise deals fast enough. I do say good look to the many Irish who have gone to the southern hemisphere, or remain scattered around various corners of the European continent.

    I would like to leave folk here with that observation. In the absence of a natural ‘containment’, as in the case of the Irish in London, where they could only corner so much of the action – when we ramp up our economy and investment here on the island of Ireland – we need to find some way to impose some constraints upon ourselves. I would look mainly to the labour supply, as a possible control nossle. That is, the amount of construction specific labour, that you lend to, you train, you import or your encourage though one incentive or another.

    It is really not the minority of financial development companies I worry about. It is the resources, which those companies have at their disposal, in terms of labour and skill availability. There are many who arrived home to Ireland from abroad during the 2000′s, who were shocked at the amount of enterprise that had become tied up specifically in one sector. Surely there is an index, or a reporting system of sorts, that we can use in Ireland, to monitor this. At the present, we are witnessing all of those resources leak out of the country again. We will probably find ourselves working with the opposite problem soon. Inflation, owing to lack of availability of resources to do anything. That is bad for the economy too. Perhaps, we could look at the ‘productive investment’ which Colm McCarthy refers to, from that point of view. The point of view, or maintaining some level of health within the Irish construction sector, and the capacity to execute a certain minimum level of activity, at all times.

    But even there, care is required. Lone opportunist individuals, building themselves high-tech carpentry workshops in the middle of no where. Then selling them off for half nothing, and going to Australia. Even if they pay off the loan, and many have. You see my point? It is far from being a optimal use of investment. It’s too granular, too small, too opportunisitic and far too wasteful. This job creation program by the government, if nothing else, might be a way to keep a larger, more efficient granularity in the construction sector. To avoid things becoming too small, too opportunistic and point less. BOH.

  81. provided Says:

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