Regulatory Reform and Economic Performance

The Memorandum of Understanding between the Irish government and the troika of EU, ECB and IMF was agreed in December 2010. It contained commitments to policy changes designed to improve competitiveness through acting on professional service costs, the structure of the energy sector and similar matters. Several commentators on this site have been arguing recently that the new government is delivering austerity without reform. Here’s an interesting recent article from the Economic Journal and an earlier version on open access if you cannot get into the ucd online library.

Guglielmo Barone and Federico Cingano conclude that OECD countries which have gone furthest in tackling anti-competitive practices have enjoyed enhanced performance in industry sectors which are consumers of the products and services of the formerly rent-absorbing firms and professions.

Their conclusions are supportive of the MoU reform agenda, and of the recommendations in the report of the State Assets Review Group on vertical separation (unbundling) in the energy sector.

Happy New Year to you and yours.

67 replies on “Regulatory Reform and Economic Performance”

One assumes that the reform agenda cannot be kicked down the road indefinitely in the hope that recovery will come along before it needs to really be addressed and then it can be forgotten about (because it’s going to take a long time for recovery to shine its light on Ireland)?

All I see and hear from our dear leaders in Ireland and Europe over the past two days is them telling us we need to make more sacrifices and that 2012 is going to be a tough year but it looks like only some of us (the unprotected majority) are going to be making those sacrifices 🙁

“Austerity without reform.” You said it Colm. Happy New Year.

No dispute.

However, it strikes me that the government has given up on reform and is about austerity only. It also seems that the IMF, who would drive a reform agenda, is losing influence among the troika while CEC and ECB have little interest in reform.

Thank you very much Colm McCarthy, looks like a very interesting article but has already been intimated it doesn’t seem as if Ireland will be getting much reform. What’s happening with ESB is particularly depressing given the outsized impact that energy provision has according to the study.

‘Austerity without reform’ – absolutely bang-on – and nothing but ‘windbaggery’ from Kenny,Gilmore and their political and administrative accomplices!

Tis a sad reflection that we could reform such things under our own will power, rather than the force of others…
Self-government, isnt that what it is called?

real Reform should have started back in 2008 when we entered this crisis
what gets to me is that it takes so long for Officialdom to get to grips in what needs to be done they seem to be constantly underestimating the depths of our problems and their actions to date is nothing less than incompetant lets get this straight there is no crisis for these people they can muddle along indefiantly and we looking to these same people to pursue a reform agenda when they have failed so completly i for one have confidence in these same decision makers to do the right thing for the people of this country

that should read

i for one have no confidence in these same decision makers to do the right thing for the people of this country

@ All

There may be interest in the interview Schauble gave to Handelsblatt last Friday. In one sense, it is his unchanged refrain. However, such an impression would be misleading. His comments about the willingnes to see the ESM up and functioning by July this year with its fully paid up capital of 80 billion euros, in respect of which Germany will not be the “brakeman” would have been unthinkable a few short months ago. (Google Translate does a reasonable job).

http://www.handelsblatt.com/politik/deutschland/ansteckungsgefahr-gebannt/6006794.html

On the issue under discussion on this thread, one wonders why it is necessary for the OECD to blind everyone with largely meaningless formulae to arrive at a very obvious conclusion.

On the other issue, a budget which rules out, ostensibly, income tax increases and cuts in social welfare and the public sector pay bill simply cannot be taken seriously. (Ciarán O’Hagan had coined a word for the approach on the lines of ‘pretend austerity’ which I cannot recall.)

@ Colm McCarthy
Let me say at the outset that I respect you and your work. The bord snip report is great. Your outlook is valuable.

When it comes to reform why stop at Ireland. What about German banks? What about French banks? What about US banks?

Irish public service – very easy prey – even the word public servant makes them ripe for kicking. It should be reformed but for God sakes we cannot let bankers off the hook. The public sector educates my kids (excellently), provides care for sick relatives (well but could be improved) and will try to keep my community safe.

Bankers do nothing for nobody. They (not the public sector) are in the greatest need of reform.

@Richard Tol
Best of luck with everything.
Agreed with a lot of he points you made on Twitter.
I think Ireland can do well at the heart of a reformed Europe. But Europe needs mega reform too. No reason why we cannot influence that. We’re all Europeans now.
Anyhow Veel Geluk. And when Muster start beating Leinster again you know it’ll be safe to return.

the published text of the legal services reform bill is pretty disappointing. Though it contains useful reforms, it’s central competitive innovations (competition in the provision of training, dedicated conveyancers, allowing for partnerships between legal professionals and other professionals) are all long fingered -either they are to merely be the subject of a report, or else they are to be kept under “review” (section 9) -which is a novel legal term that appears to have little practical effect in the real world.

@DOCM
Herr Schauble, translated by Bing:

‘The measures which the ECB has taken to provide the banks with liquidity, it is difficult to imagine that the banks now not in the position should be to provide the economy with loans. In addition, we have still the problem that we have far too much liquidity and has much of financial transactions with financing the real economy only still quite away to do something in the financial markets. This is indeed one of the major annoyances.’

No half as annoying as it is going to be in 2012. Credit crunch look out below.

@DOCM

On the other issue, a budget which rules out, ostensibly, income tax increases and cuts in social welfare and the public sector pay bill simply cannot be taken seriously. (Ciarán O’Hagan had coined a word for the approach on the lines of ‘pretend austerity’ which I cannot recall.)

“Hysterity”. Great word

@ Ger

We need more of that ill-informed analysis. Happy New Year and more power to yer blogging arm 🙂

Here’s a simple reform, for a decade we had legalistic, narrow regulation of the banks by career civil servants: look where it got us.

ComReg is the same, and more annoyingly the Irish State is selling monopolies(spectrum) to effectively unregulated agents.

For 5 years now I’ve strived to find a 2g, then 3g operator that offers reliable data services. They all fail, contention, poor network design, let alone coverage. ComReg is stashed full of lawyers and lazy unprincipled civil servant types.

Here’s a simple suggestion:
That ComReg requires publication of quantitative data in some RECAP style format, on effective network speeds and reliability over time. That would be a hiuge step towards regulation. Doubtless any lackey dullards in ComReg will howl: they’ve no legal powers, and they don’t make policy. I suggest those lackey dullards be reassigned to counting sheep in Donegal.

Also…another fake regulatory body: The Taxi regulator. Dozens of customer service staff – who ‘handle’ irate customers but:

1) No standards for taxi drivers, no minimum knowledge
2) Nonsensical tarifs with no econometrical analysis, that never fall…even though drivers queue for hours for short pieces of work

And here’s another one: the Pharmacist’s Guild…highly trained people, acting as counter assistants…and of course, no prices displayed in any pharmacy for prescriptions (the monopoly)

Civil servants involved in regulation in Ireland are miserable failures, lazy, lacking moral courage – mostly incompetent. After the fiasco of the banking failures one lost his job, with a massive golden parachute – the others all stayed – indeed one was promoted shortly after.

As soon as I saw the mutual admiration and fawning over each other in Merrion Street and then the mutual hand shakes and smiles all round at the end of each Trokia signing off and release of funds, I knew reforms are never going to happen. Austerity? Yes, definately. Reform? Definately not. Our lot, will crucify private sector Joe Blogs and pretend reforms are happening but already there is even less and less talk of reforms, only talk of meeting the financial percentages. AJ Chopra is a soft touch and has been taken captive by the usual false Irish ‘charm’. If anyone knows how we talk the talk, endlesslly, it is Colm McCarthy. I was impressed at how easily AJ and his colleagues were captured. This package of austerity without reform and an economy without growth is futile. Then again, I have to keep reminding myself that,the main purpose of the deal, was to defend the Euro and, “stop the crisis from spreading to Spain and Italy!” remember that one? Of course, giving us enough money to stick to our blanket guarantee and pay back senior bondholders was the second objective. The privatisation and sell off’s of state assets will happen. The sad thing about this, is that it will only benefit the people working in ESB and Coillte, the people we are paying ridiculous amounts of money to manage resourses on our behalf,who have come to believe they actually own them. Hence they will cut their own private deals and from what I have seen so far I would not doubt their ownership claims. This asset stripping will be like giving away the fishing rights all over again. For instance, trees will be growing in our forests, our children will be watching them grow knowing that they are growing not for their benefit but for the benefit of foreigners.

@ Richard

Best of luck! You were very much on your own at the ESRI and one of the few people worth reading or paying a blind bit of heed to. This will really dent the cofidence of ordinary people, those of us paying attention knew the whole thing had become a mouth piece for government, as you intimated, colleagues believed that if they did not serve their useful “function” they might find themselves out of a job. I can tell you they will not be out of a job because they will do what is expected of them but nobody will pay any heed to them.

Already, ESRI have become associated with out and out government propaganda, the opposite to what they are supposed to do.

@Colm McCarthy,

Many thanks for this attempt to fan the weak and flickering flame of structural reform. But I fear its ‘saother in aisce’. The narrow political parameters on any possible structural reform were set by the previous government and the higher reaches of the government machine behind it even before you and your colleagues set to work in the State Asset Review Group – and well before the Troika arrived in November 2010. Our new political masters have had 10 months to tighten these parameters even further, to perform the ‘horse-trading’ designed to achieve some manageable arrangements between the conflicting sectional economic interests cherished by each of the governing factions and to put their own spin on the process and outcomes.

For example: (1) This NewERA beast which is touted as constituting a major revamp of the commercial semi-state (CSS) sector is being established as a non-statutory body behind the walls of the NTMA without any scrutiny whatsoever.

(2) The 9-month detailed assessment of the electricity and gas sectors – required in the initial draft of the EU/IMF MoU – has simply disappeared. It has been reduced to a crude political deal where Labour will swallow a part-privatisation of an integrated ESB in return for, at least some of, the proceeds being applied to fund some of its pet projects and whizzo schemes.

(3) The targetting of doctors, lawyers and pharmacists on the private sector sheltered side was presumably intended to provide some political balance to the considerable effort that the State Asset Group would devote to the CSSs, but, for the life of me, I can’t understand why these professions were picked on when there was such a huge rogues’ gallery from which to select. And, in any event, what is being proposed is the equivalent of a spanking with a feather duster.

Apologies…had to split the comment..

It would be entirely hilarious and would make for a wonderful comedic production if this whole panoply of subsidy-grabbers, regulator-capturers, market-riggers, rent-seekers and consumers-gougers were not causing so much widespread personal, social and economic damage.

Those who exercise and abuse economic and political power demonstrated that they could suspend disbelief almost indefinitely in the ’50s and the ’80s. The shift in economic policy from the late ’50s boosted economic performance but it altered the composition of the native economic and political power elites. The primarily fiscal adjustments from the late ’80s also boosted economic performance (and this was enhanced by some other reforms), but the composition of the native economic and political power elites merely mutated – and this mutation has continued.

This latest mutation has the capability to suspend disbelief for the best part of a decade. What a bleak prospect.

Put a cross on the mantelpiece! We begin the year on the subject of reform.

For decades, political inertia/the slow boat to China/slow motion, have been the default modes at governance level and there was little evidence of acceleration post the early Aug 2007 onset of the credit crunch and after the issue of the bank guarantee in Sept 2008.

Politicians can be slammed but is there a real public appetite for change/reform?

Eureka above left the cat out of the bag, lamenting why other issues such as German banks are not on the agenda. The truth is that it’s much more exciting feeling outraged about the shortcomings of the likes of Germans than addressing shortcomings at home.

The auld victims’ cross provides a lot of comfort and even in the small number of the population that contributes to this blog, a subject like this can never match the interest evoked by ones on banks and Europe. This should trigger the question about the chicken and the egg.

There are consequences when we do not accept the principal
responsibility for this feast and famine crisis. Forgive us our deaths and pray for us!

Conservatism reigns from left to right on the political spectrum and traditional trade unions are as mute about change as their richer counterparts representing the sheltered professions.

It’s always easy to oppose change and we had a bizarre intervention in recent months from 8 former attorney generals who warned about referenda proposals but they are mute about the colonial era legal system that made them all rich and is a burden both directly on the State and citizens.

The excess earnings of the legal and medical professions do also have consequences other than direct costs – – the State spends about €500m annually on legal fees.

We do have a template of an economy that introduced reforms in response to an economic collapse; its net debt as a ratio of GDP is now a negative of more than 50%; it has no private schools and no league tables where playing rugby can give a lift for a job, as there is little variation in the standards of schools; it has no private universities and no tuition fees; teachers are required to have a minimum of a master’s degree and competition for university places are highest for teaching-related degrees not medicine and law; the equivalent of the Leaving Certificate is the only standardised exam; teachers have a lot of autonomy and the level of homework required is low; in the past decade it has been among the countries with the highest achievements in maths, science and literacy.

Finland radically reformed its educational system following the collapse of its economy in the aftermath of the disintegration of the Soviet Union in 1991.

It pays its teachers well as they are comparable with earnings of medics and doctors – – but still lower than levels in Ireland.

In 2009, the rate for a primary teacher after 15 years was €50k in Finland and €68k in Ireland according to the OECD. It was €61k at upper secondary level and €68k in Ireland.

In Finland in 2009, a Finnish GP’s pay was 1.8 times the average wage and 3.5 times in Ireland; a salaried specialist earned 2.6 times the average wage in Finland and 4.5 times in Ireland.

According to the OECD’s Education at a Glance 2011, Finland spent 5.8% of GDP on education in 2008; Ireland spent 5.6% (Ireland’s GDP is inflated by the profits of foreign multinationals and GNP is about 20% lower. So effectively Ireland spends more on education than Finland). The United States spent 7.2%; South Korea 7.6% and Norway 7.3%.

Oil-rich Norway compares poorly compared with Finland and it has teamed up with Statoil, the state oil company, to recruit maths and science teachers.

Teachers pay in Norway is low compared with that of other graduates.

So Ireland’s university chiefs want more money from the public but fear not that there will be any hint of radicalism at this time of crisis.

The late American historian Daniel Boorstin, wrote in an essay, ‘The Amateur Spirit and its Enemies,’ published in his book ‘Hidden History’: “In the United States today there is hardly an institution or a daily activity where we are not ruled by the bureaucratic frame of mind — caution, concern for regularity of procedures, avoidance of the need for decision” — all of which, Boorstin suggested, was best summed up “on a sign over the desk of a French civil servant: ‘Never do anything for the first time’.”

I did think once that the Irish only responded to a serous problem when it had transmuted into a dire crisis. Now, I’m even having doubts about that.

Finland excels with no private schools and less study time; South Korea’s factory-style system brings results and deaths

@Micheal Hennigan I fully agree that Ireland should look to benchmark models and places like Finland of Denmark can provide these in different sectors.

However the GDP spending needs to be looked water per student, any country can have low spending if they have few students.

If the regulators actually do their job and actually regulate just wait for the whinging and whining from IBEC and ISME. These are the hard bitten capitalists who are out there dealing “in the real world” but heaven forbid that they actually face the consequences of their actions or even worse are held account!!(imagine that).
The public sector wage and pension system needs serious reform but there is plenty of reform to go around.

Off-topic, but it appears to be being mentioned in various places.

“Economist criticises aspects of ESRI”

“ENERGY ECONOMIST Richard Tol, who has left the Economic and Social Research Institute (ESRI) to take up the position of professor of economics with Sussex University, has criticised aspects of the public think-tank.”

With final quote from Richard Tol:

‘“Ireland is facing 10 years of austerity. Leaving Ireland is the best thing you can do at the moment if you are responsible for a young family.”’

I was wondering if Prof Tol could confirm that this is an accurate quotation?

http://www.irishtimes.com/newspaper/finance/2012/0102/1224309715732.html

@ Michael Hennigan
In all that post not one comment about the Irish banking sector.
It’s not that I don’t want public service reform but there’s a lot of scapegoating going on.
Irish wages are inflated but so too are Irish mortgages and, thanks to the budget, Irish cost of living.
Pay cuts might be necessary but believe me, in the absence of a reduction in the banking subsidy being paid by this state they will turn a recession into depression.
How many times, in all your posts on this blog, have you mentioned reforming the banking sector?

@ Michael

And re Finland:

“Figures on ratio of students to teaching staff potententially demonstrates the high availability of resources in Finland: the ratio of students to teaching staff is 15.9 for primary schools (OECD average 16.7), 13.2 for secondary education (OECD average 13.4), and 15.5 for tertiary education (OECD average 15.8).
Finland has the lowest instructions time of all OECD”

From an OECD report.
Hardly comparing like with like are you!

Apologies this post is a bit all over the place due to the complex nature of the topic, so be kind 🙂

“…Both papers find that higher regulation hinders productivity growth by slowing the speed of convergence to the technological frontier. In the sub-sample of ICT intensive (mainly service) industries they also find evidence of direct effects of regulation on growth.”

I detect a subtext that frowns on regulation in this paper but neither have the time nor interest to explore its hidden depths.

I’m reminded of Greenspan’s comment before the senate investigating committee into 2008 financial meltdown that he had discovered a flaw in his logic that had lain undiscovered for more than 40 years…..

I also recall a speech recently by Michael O Leary,
http://www.youtube.com/watch?feature=player_embedded&v=p4HYSsrlcq8#!

I appreciate O Leary’s point of view also.

Finally, I’m reminded how Berni Madoff scam liked to protect the scam with abstruse mathematical formulae designed to build opaque mathematical antechambers to hide the inner ponzi scam within.

I see another Sindo article Jan 1 Colm McCarty’s belief the euro can be reeingineered is infantile in the extreme while I believe we need to get the hell out of the euro asap; happy new year, Colm 🙂 So I’m taking the line he naively believes the EU Commission and the reengineering of the euro can be a focus for reform.

No, Colm, after the Hindenberg catches fire, is not the time to reengineer the Hindenberg!

I believe in strong regulation of the banks in a newly designed Glass Steagal; the EU has been taken over by the evil empire of the banks….

Regulation/de regulation is a complex issue that should be used by democracies to protect people, not to exploit them through useless undemocratic parliaments owned by private banking interests.

Happy New Year to bloggers.

@Richard Tol

“Ireland is facing 10 years of austerity. Leaving Ireland is the best thing you can do at the moment if you are responsible for a young family.”

+1

If only I could persuade Mrs PR Guy that my in-laws are not a good enough reason to stay here.

It never ceases to amaze me – even though, by now, I know it shouldn’t – that for any post that addresses structural economic reforms (in this case government “commitments to policy changes designed to improve competitiveness through acting on professional service costs, the structure of the energy sector and similar matters”) the thread that follows shoots off in every possible direction and thereby any meaningful consideration of the issues is impossible. And it is clear that some commenters are more than keen to distract attention from these issues.

But the pseudonymous purveyers of distraction have little need to worry. Apart from notable exceptions, those with the knowledge and competence to weigh in and make the case for these types of structural reforms are either conflicted or compromised – or prefer the easy life. In any event, irrespective of how strong, well-evidenced or well-presented the case that might be made to advance them, those who exercise political and economic power will espouse these structural economic reforms, in principle, while doing everything they possibly can to stymie and scupper them, in practice.

Richard Tol’s reported estimate of a 10 years of austerity is probably an underestimate.

@ Michael Hennigan,

In relation to teachers and Master Degree’s, Mr Howlins budget cut last December has removed any salary uplift for teachers who will qualify with a Masters Degree from December 2011.

Undertaking a Masters degree part time would involve about 3 years of study, with assignments / projects and incur a cost of about 2K per year.

Very few 2nd level teachers will be encouraged to increase their current qualifications to Masters level if they lose 3 or more years of their life and costs them something north of 6K for zero return in salary uplift.

Salary uplift payments for those teachers will only occur for those who obtained a Masters degree prior to December 2011.

Education evolves with time, greater understandings, insights into the psychology of learning occurs. Big advances in these areas have occurred in the traditional western world i.e. UK and USA in particular regard to mental health / psychology and learning issues.

However the education figures coming out of China truly frighten me. They are aiming to have several universities in the world top ten. They are determined to churn out the finest brains on the planet. China is no longer a place of cheap low quality workers, some of best quality professionals are there.

I am not sure if Ireland even has a chance against such a leviathan.

By the way your quote…

“I did think once that the Irish only responded to a serous problem when it had transmuted into a dire crisis. Now, I’m even having doubts about that. ”

Really cracked me up with laughter….

@ Dearg Doom, Eureka

The OECD’s latest education data published last year shows that in respect of 2008, Irish per capita education spending per student exceeded Finland’s in primary, secondary and tertiary (Ex R&D spending).

http://dx.doi.org/10.1787/888932463593 (Excel)

@ Sporthog

There is little evidence of long-term thinking at policy level. While it’s said that it suited Seán Lemass and Jim Ryan, the finance minister, to have Ken Whitaker publicly associated with the proposals in ‘Economic Development’ in 1958, it’s unlikely that he would have remained as an anonymous adviser. However since he retired, there has been no senior civil servant who has publicly lifted the Victorian veil.

Enterprise agency chiefs in public waffle in bullshit and and spin, rarely if ever saying anything of consequence that is not in line with the ministerial position and one can only wonder if that is the only interface that the minister for enterprise and jobs has with the market.

No wonder Bruton and his sidekick Seán Sherlock so resemble the O’Keeffe/Lenihan double act.

China’s recent rise has been remarkable and will continue to be so. However, it is building on a deep base.

According to the late eminent economic historian, Angus Maddison, until 1800, about three fifths of the world’s commerce and production took place in and around China and India. So did much of the world’s scientific and technological progress, including the Chinese invention of paper, explosives, and printing, and medieval India’s launch of modern mathematics. In the early 1830s, when President Andrew Jackson sent the first US envoy across the Pacific to Siam (Thailand), Asia still accounted for over half of global GDP.

China, a vast unified country over a span of two thousand years, overwhelmingly dominated by one ethnic group, the Han, was a pioneer in bureaucratic modes of governance. Maddison says that in the tenth century, it was already recruiting professionally trained public servants on a meritocratic basis. The economic impact of the bureaucracy was very positive for agriculture.

They nurtured it with hydraulic works; printing enabled the distribution of illustrated agricultural handbooks; farmers settled in promising new regions; a public granary system to mitigate famines was established. They fostered innovation by introducing early ripening seeds which  permitted double or triple cropping. New crops were introduced  – – tea in the T’ang dynasty, cotton in the Sung, sorghum in the Yuan, and new world crops such as maize, potatoes, sweet potatoes, peanuts and tobacco in the Ming.

@Gavin Kostick

This Tol guy is priceless, I quote :

“Prof Tol said the institute did issue warnings about policy during the Ahern years, but did not do so loudly enough.

He said the institute did not have a banking expert even though during the bubble years banking was one of the economy’s largest sectors. “So the whole thing of the bank crisis caught the ESRI from left field.”

Was Tol not co-atuhor of the ‘everything is wonderful’ medium term report of 2007?

No banking expert? Is the Director , Francis Ruane, not an ex-director of Depfa? You couldn’t make this stuff up.

Did the crash really reuire the knowledge of a banking expert anyway? Is Morgan Kelly a banking expert?

Can we please lay off the ESRI staff. The problem is not with the staff; the problem is the way the ESRI is structured, directed and funded. The following is from a paper John FitGerald presented at Kenmare in Oct 2009:
http://www.esri.ie/UserFiles/publications/20091019143620/WP326.pdf

“While the possibility of a financial crisis was adverted to, this concern was not given much attention. In October 2006, a paper given at this conference by a colleague (later published in the ESRI QEC as Traistaru-Siedschlag, 2007) raised concerns about financial stability. These concerns were reiterated later in an Irish Times article by Kelly at the end of 2006 and subsequently in a paper by him in the ESRI QEC in mid 2007. However, even then the focus of attention of the economic community remained on the housing market rather than on the risks to the financial system. It was really only from the end of 2007 that very real concerns were being discussed in private, and even then it was felt to be difficult to air them in public without having undertaken the necessary background research.”

The footnote to this paragraph is particularly poignant:
“There was also the danger of legal action if too trenchant views were expressed on the stability of an individual bank.”

He goes on to assert that “the primary failure in policy rests with the responsible authority which had all the resources needed to undertake its task – the IFSRA”.

We had ‘world-class’ bank supervision and financial regulation; what could possibly go wrong? And imagine the uproar if the ESRI or anyone else had started to poke their noses in to how they were doing their job.

Yes, indeed. We had ‘world-class’ regulation and we were getting ‘more competition and better regulation’. In the same way that we continue to have ‘world class’ economic regulation in every other sector. Excuse me while I roll on the floor laughing…

I believe in regulation: we need to know the meat we eat hasn’t come from a cow living in a shed that has never seen daylight; fed on pills and human waste for all its life so its got mad cow disease.

Similarly, we need planes that fly and don’t endanger humans.

But we don’t need over regulation or wrong regulation. Most of all we don’t need regulation that becomes an end in itself. Arguably, the last 30 years have seen deregulation lead to Finance Insurance Real Estate FIRE economy that has now brought the euro world to financial Armageddon.

Here’s a piece from Friedman Vs Socialist. Anti Friedman in the main, anti Austrian school, anti Greenspan FIRE economy, but here I give him a point:

http://www.youtube.com/watch?v=FOMI0ORGH44&feature=related

What even Friedman is being forced to allow here is:

1. We need regulation that is efficient, effective, professional that at the end of the day provides effective medicare for the elderly avoiding demagoguery, waste, too much wasteful PS and government.

2. We need government to be small, avoid bureacucracy, avoid corruption that comes with inefficiency and Big Brother….(aside, we need to get out of the euro asap).. and get government out of business: be it banking or where business and innovation may be stifled eg O Leary link earlier post.

Instead, we have creeping evil empire of banking, of EU Commission and national PS with too much totalitarian bureaucracy. This leads to suffocation of free capitalism. Enterprise, innovation replaced with puppet socialism/political cronyism for the banks.

The fingers of totalitarian bureaucracy now extend into the media, into economics, into Public Service in Ireland eg in the field of education and health. Dissent, innovation is stifled.

Where in the world would you have a media as subservient as our own such that its now largely unquestioned whether we pay back ¢63 bn capital given to revive our broken banking system.

This is planned to follow five years at least of austerity required to bring our balance of payments back to equilibrium; where the evidence before our eyes is that our economy is being broken and destroyed by the false obligations imposed upon us by external forces Troika and otherwise; of debt that was private debt and not public debt?

We must turn our eyes away from emigration, unemployment, destruction of business and enterprise in Ireland to feed the foreign debt of private capital in Ireland?

Its actually impossible to do that!

But how do you persuade the electorate to not only live with this lie but to live comfortably with this lie?

The way you do that is to say you are working on the problem. You use blackwhite logic, eg our creditors will not allow the country to sink, but will keep it on life support to extract as much bodily organs as they can from it to pay off as much debt above is possible.

Once they keep doing that and we and enough can sleep on our soft pillows, we can live with that 🙂

We need tight regulation that is effective and focused and beneficial to all. Tight regulation can even benefit business when it protects the market and the market place.

None of this is possible in a market cornered by the banks, the private banking interests of bureaucracy and government fed by even larger bureaucracies even more inefficient at ECB, EU Commission and TROIKA/IMF level.

More opportunities lie ahead in improving the situation when the Irish Hindenberg eventually crashes. Perhaps then the real mess will be cleaned up.

@MH-ff: “China’s recent rise has been remarkable and will continue to be so. However, it is building on a deep base.”

China’s rise can succeed only if US and EU go down. Mind you, neither of the latter two will go quietly. To whom will China then sell its surplus manufacturing output? To those states who are so indebetted that they have to further impoverish their own citizen consumers, so that these same consumers will consume more? Contiguous states? Africa? South America? Maybe, but I have significant doubts.

Their ‘deep base’ is the state-sponsored theft of the intellectual property of their erstwhile partners and customers. That works for while. Then its ‘Tariff Time’ – again! After the US elections in November? Maybe even before?

You are right about their historical dominance. But things are a tad different now. They are like a dirty dog (shitting on his own doorstep) polluting their freshwater and arable land with lots of delightful heavy metal toxins. And only impolite adjectives could be used to describe a lot of their air quality. China has a bad future in prospect. They can neither feed their population, nor can they increase their use of liquid fossil fuels –
without someone else paying for that lunch. Guess who won’t pay? OK, they can ‘lease’ arable land in east Africa. That’s hardly next door is it? And who will ‘work’ this land? That is, not flog it to aridness by emptying the geological aquifers and enhancing the saline content by overuse of inorganic fertilizer.

Nigeria is a tad frisky at the moment. If this ‘excitement’ spreads to the Delta region, things will get very interesting, very fast.

@Paul Hunt

Can we please lay off the ESRI staff.

Afraid not, they’ve proved to be absolutely useless in our meltdown. But I’d rather that this view not be based on my opinion alone.

What I would like is for the ESRI growth forecasts over the past 3 years to be empirically analysed in a paper charting on a quarterly basis a) their actual growth forecast for the economy going forward 12 months b) the actual results achieved.

Apart from the above it would be interesting to look at the indices used for these growth forecasts. Interesting to see how the ESRI has been culling its own growth forecasts over recent times for the Irish economy.

When many were issuing dire warnings over NAMA and the impossibility of 3% growth forecasts over the next decade for the Irish economy; when Lehmans told the rest of the world of a coming global recession, how were the ESRI growth forecast figures used to buttress NAMA. ITS my impression ESRI have consistently buttressed the over inflated views of successive Ministers of Finance in Ireland as to our ability to grow our way out of recession.

Even more interesting would be to look at the criticism of public policy by the ESRI going back over the past 10 years.

Apart from Sean’s link, I suspect you would find it very sparse indeed.

I wonder why…….hmmmmmmmm?

Perhaps because the ESRI is a privately funded organisation whose main financial support would come from government projects ?

Perhaps the ESRI is influenced by that symptom whereby the subject won’t bite the hand that feeds it? ESRI Pravda more like it.

Reform? Reform my eye.

Take the retail sector. It employs more than all the multinationals together but does it get much of hearing at government level? Rates.Upward only rent reviews. Sick pay responsibility mooted. Fixed minimum wage. These are just a few of the issues.

There is no talk whatsoever in government about a comprehensive workfare program. And apart from the usual patriotic opposition to anything radical, the opposition most likely comes from all those in the public purse who realize that a workfare program would ultimately mean low, much lower wages all round.

@ Alchemist
Again I agree with a lot of what you say but here’s my problem:
Lowering wages can mean less disposable income and more mortgage defaults. While wages decrease the cost of paying for the bankers’ mistakes increases. I’m all for making savings and cutting wages but not while the overall debt burden of the country isn’t dealt with. It removes the last tiny bit of stimulus from the domestic economy.
There shoud be no wage cuts without debt cuts.

@Eureka,

Would cuts in non-wage costs and increased efficiency and productivity (without cutting wages) in the sheltered sectors not help at all? This is what Colm’s initial post was all about, but nobody wants to address it. I wonder why?

@ Paul Hunt
Yes and yes but…
The reason this doesn’t get much traction is the way it’s presented. There just seems to be a relentless attack on public sector workers without paying any attention to the other miscreants in this debacle.
Banking sector needs reform. Upward only rent needs reform. Pensions need reform. Social welfare needs reform. Our relationship with Europe and the pan- European democratic deficit needs reform. Even David Cameron started the new year with details on banking sector reform.
We need to look at absolutely everything and remember that every penny paid to bail out bankers is wasted money

@ Paul Hunt
I think the paper is a little poor and doesn’t control for confounders and it doesn’t seem to follow effects over time.

Just to sum up.
The paper isn’t very good
And the area in need of greatest reform is the beloved “financial markets”.

@Eureka

I read last week that 7000 people in Ireland had been jailed or given a custodial sentence of some sort (whether they made it inside a cell of course is another matter) for nonpayment of fines. Phil Hogan talks of making deductions at source from those who refuse to pay a property tax. A group of TDs on 100K+ think a property tax is onerous, even though the number of exempt categories likely will include most of their electoral base. The government promotes a salary cap for advisors, and the Taoiseach promptly reverses it in one special case. The list of head-shakers is endless.

A week of two before Xmas a group from the UK felt there was sufficient interest among distressed property developers to host a ‘DIY UK Bankruptcy’ show. Several major developers have either left the country for domicile in more welcoming jurisdictions or have subjected themselves to the terrible penance of foreign bankruptcies. And as for prosecutions over the banking collapse, the Shannon will be drained first.

The debts of several of the bankrupts via their investment companies are being managed, handled, underwritten, paid off, call it what you want, by the taxpayer. That the previous government signed up Irish taxpayers to this arrangement is beyond belief, but they did and the current government has continued the policy.

If the name of some notional banana republic was substituted for ‘Ireland’ it might all seem more credible. And may be therein lies the lesson. There is no appetite within Irish political culture to resolve the shocking dissonance in public life. There is almost no transparency surrounding big ticket expenditure.

I have posted here several times on my own belief that a NAMA for the little people was necessary, that default begins at home, that intelligent reduction of the public sector be pursued, that a comprehensive workfare program be developed.

Someone who was 40 in 2008, and lost his or her livelihood is probably deeply in debt, is now approaching 44 and in the vast majority of cases is more likely to face a future of unemployment than employment. Someone was was 50 in 2008 or 55, is highly unlikely to work again. And I believe that this is where a workfare program which provides a basic unemployment package and ‘credits’ in some form to cover at least the interest on mortgage debt is required. The ideal solution would involve some kind of debt write-down in conjunction with very diminished welfare entitlements. In particular, whatever the notional average industrial wage is, no one should earn more than it on welfare.

If the government had any sense if would approach the unemployment crisis as the equivalent of a wartime emergency. There is no substitute for being in work. Not only does it have obvious psychological benefits but it also opens more possibilities for spinning out further enterprises.

@ The Alchemist,
your comment, esp re unemployment rings so true and is a very scary reality that I face. However, I’ve managed to out of debt at the cost of all my redundancy and savings.
Before Christmas I had several interviews on the internship scheme, now I’m not an intern but there you go. Didn’t get a internship on the basis that more experienced technical people applied.
This means that graduates are not getting a chance unless the employers wishes to take on an intern.
It’s an incredibly unfair system that was suppose to be for the interns but employers are using it to take on people and not pay them. Plus risk of displacing a potential employed person is very high. I told my local TD this and he didn’t care at all in fact he barely responded to my concerns. The employment crises is a major one but as an very lowly unemployed professional I don’t know where I going to end up (maybe they will re-open workhouses for us). I also find it a tad insulting to my intelligence that none of the geniuses determining my fate has the courtesy to meet and ask why I’m having problems re-entering the workplace. Still I am looking at all the possibilities for self-employment and paying for my Masters via distance learning. I also plan to make the lives of politicians and public sector worker’s lives hell due to the downright unprofessionalism, lack of transparency, and mind-boggling inefficiency, to the point if I’d worked the same way in my previous job, I’d have been sacked. So if that rule was good enough for me it’s good enough for them.
Setting up won enterprise in Ireland is quite bureaucratic and assistance is there if you know someone or are referred to someone. This could be made a heck of a lot easier to navigate.

I will post this as here as Stephan K. has a habit of erasing my comments from his bird nest.
This was in regard to Tolls 10 +years of austerity nonsense.

Can’t quite remember the exact words and would prefer not to engage with Stephan directly via e- mail.
But here goes.
10 years of austerity is a nonsense
Yee guys have clearly not read history books.
The creditors may have powerful bullshit medicine but there is a limit to everything I guess.
Irish society has already been dramatically weakened by the near hyperinflation of credit.
Now a collapse in the money supply is on the verge of creating a final social collapse.
Ireland has been thee biggest sociological experiment in the western world – it is not economists we need in this country but ecologists with a understanding of dramatic changes in habitat.
Stephan Jay Gould and his thoughts on punctuated equiliberium come to mind when I think of the changes in the Irish economic ecosystem over the years both during the intense monsoon period and now the dramatic drought with some forecasters proclaiming no rain will fall for 10 more years !!! – this after 4 years of failed harvest.

Anyhow we are all test tube babies in this country with no context to anything of substance.
Both we & Ireland as a unit is a embarrassing absurdity.

Richard is a smart guy – he is fleeing because he sees total societal collapse in my view.

PS did not mention test tubes in my first erased comment but am just waiting for politically correct smart asses to eat bone marrow or whatever vultures do these days.
I am so disappointed in this farce really.
Not one maverick in the Irish establishment is willing to cut loose and tell it like it is.
We are all alter boys………. no I will not go any further on that one as even Dorks have social mores I guess.

@The Alchemist

“If the government had any sense if would approach the unemployment crisis as the equivalent of a wartime emergency. ”

I think that is what it would take to tackle this problem. Sadly, I don’t see it happening.

The media (amongst others) should be putting far more pressure on the government over this but they aren’t. It’s all just too cosy between them here.

Any body who though that this( Fine Gael and Labour) government will reform the economy and put the country on the road to recovery is seriously deluded. The sole purpose of this government is to protect the living standards of the ELITE at the expense of the rest of the people of Ireland.

Since the Crisis broke both Ministers for Finance have repeated that ‘tax increases were not the way to go’. And they have done nothing else except raise taxes. According to the Irish Times / RTE the choice is between ‘tax increases’ and ‘welfare cuts’. That’s it. Reform is not on anyone’s agenda.

‘tax increases’ are two things:

1. an underhand way to cut the pay of public servants (who don’t really pay tax – but how can you, who are paid by my tax, pay your own tax).

2. (real) tax increases on the private sector who shoulder ALL of the burden of economic adjustment up to and including emigration.

Things are tougher in the private sector than in the public sector. In fact the real and (re)emerging social divide is not between the ‘Bankers’ but between the public and private sector. That things are harder for the latter is the price to be paid for the Croke Park Agreement – i.e. making things easier for the former.

Does any sane person doubt that this is true?

Does any statement about the Bank bailout, the Troika, children on waiting lists (insert stuff from Charles Dickens here:_______________…) render it less true?

Remember this points are made not to distract attention from the Bank bailout. Economic liberals like me were as opposed to it as Joe Higgins (and for pretty much the same reasons). They are made to draw attention to the truth.

@Paul MacD I think it is important to keep the attention on the bank bailout… Why there hasnt been massive redundancies (at statutory terms) with bank employees is beyond me….

It is harsh to be calling for this but their actions should have personal consequences.

Agree 100% on reform but think that a lot of people in the sheltered sector genuinely dont see what the problem is. Some of those who are both public and protected see any reference to this as just public sector bashing…

I used to think these people were merely game playing but Ive came around to the view they genuinely have had very sheltered careers, which has shaped their world view.

Id recommend using the word sheltered rather than public, because it is more accurate…. To me it covers the vast majority of the public sector, plus the bank employees, the legal profession, the big farmers, the connected…. if you belong to an organization that paid people to sit around the social partnership table, chances are youre part of the protected sector.

@ Garry
“Sheltered” definitely a good compromise and captures the essence of it I think.

@Eureka,

I sense you speak for many here and throughout Ireland. This sentiment, which appears to be gaining popular traction runs along the following lines: we will sit here in the sh1t, that we mostly produced ourselves, but with some help from external parties, and we will do as little as possible that is in our power to clean it up until the external parties, who helped to produce some of it, come to our assistance first.

This is totally unrealistic, self-defeating and counter-productive. In the first place, most of the external parties which facilitated some of the sh1t production in Ireland have more than enough of their own to clear up. Secondly, any asistance they might be encouraged to provide is entirely contingent on Ireland making its best efforts to clear up the sh1t it produced entirely on its own.

This post – and the subsequent thread – is, and should be, about some of the sh1t we produced ourselves. It is totally in Ireland’s power to clear this up and external parties have no role to play in this other than to provide encouragement and to make arrangements to provide some assistance in clearing up some other sh1t. This is what they are doing and they are reluctant – and believe they are not empowered – to go any further as it would infringe on Ireland’s sovereignty to make its own decisions about clearing up the sh1t it has produced.

But while a significiant tranche of public opinion supports wallowing in the sh1t that has been produced – and while many find it comforting and rewarding and will fight steadfastly to defend their right to wallow in this way – it is almost impossible for government (even if it had the will – which it doesn’t) to take the steps necessary to clear up this sh1t. And the external parties will find it even more difficult to justify the allocation of resources from others required to clear up other sh1t.

And all the commentators who have some standing and the opinion formers who wail about the apparent reluctance of external parties to pile in resources to clear up the sh1t produced with external assistance are simply simply giving credence to this sentiment supporting sh1t wallowing; and it builds resistance to any efforts to clear up the domestic sh1t production.

Ireland has to clear up – and be seen to clear up – the sh1t it has produced itself before external parties will be encouraged to provide meaningful assistance. Salami-slicing public expenditure and introducing or increasing taxes incrementally will also be self-defeating while mounds of domestically-produced sh1t remain.

But nothing will happen while those who point at these mounds and make suggestions about their removal are villified, pilloried and isolated.

@Garry I agree on the point about ‘sheltered’. I believe, (believe it or not) that public servants have been badly treated in the sense that they get tarred with the same brush, they got sent to Mullingar and other places to help local politics and talented workers don’t get recognised or given a chance to use their initiative.

@Paul Hunt As ever you’ve nailed it. You and @Robert Browne write some of the most compelling stuff on this subject on the whole the Internet.

@Paul Hunt

well said

@ Garry

i also like the term the sheltered sector
it incorporates the strong resistance to change and advocates most of the muddle along attitude to getting us out of this crisis

@Paul
Yes I am beginning to accept that total societal collapse will be upon us soon.
Its a pity – we could have recognized the core problems with our economy & society before it was too late.
But the banking system has been empowered by the low capital intensity of oil for 100 years – they will extract using more & more decapitalisation schemes until they finally cannot.

Energy economists such as Richard are prepared to reduce capital spend to sustain consumption and then reduce consumption to prevent more resourses going into capital spending that would reduce the consumption of the rich.
Although I agree to a large extent on his skepticism of wind to do any decent industrial job.
We will become a milder wetter Detroit me thinks
As late as 1987 something very substantial could have been done – but that was a seminal year.
Now it seems -there is no way out.

@ Paul Hunt
I suspect we agree on much more than we disagree.
I don’t accept the kernel of your post which seems to imply some willingness to sit in faeces.
Look – my biggest gripe with you is that you turn every human failing into a uniquely Irish failing. Ireland is not alone in this. We are not here because we are Irish – we are here because we failed to understand that “the price of democracy is eternal vigilance”

I don’t buy the informed despondancy lark either. F*** despondancy. I have two kids who are going to grow up into this country. I cannot afford to be despondent. Nor I suspect can many others. We’ve got to stop this self flagellation bull and start making stuff happen.

@ Catriona
Just tell us who your local TD was and how you told him. Then somebody here (maybe PR guy) let us know the correct avenue (is it Richard Bruton). We are a small democracy – let’s start changing stuff. Now

@Eureka

Sadly, I am an unimportant financial services PR Guy, not a political one. I hear you have to get Enda to butt in on your behalf these days if you want to be one of those (and earn above the set limits).

I have a lot of time for what Catriona is saying though as I see lots of abuse of internships in PR and the media. I would advise her to make a documentary and Youtube it or use other forms of social media to get the message across rather than go through so-called official channels. Campaign.

@PR Guy
That sounds really good. Very interested to hear that you’re in the finanial services.
I have begun to wonder if the internet hinders revolution rather than promotes it.
Here’s the theory. WHile I write this I am sitting on my backside watching characters appear on a screen. I have the sense that on this thread my characters will be allowed through and that my ideas will be “published”. It gives me a vague sense of satisfaction to have them get through. So you see – the aim of my typing is to get “published” and “accepted” by this new community rather than instigate change.

Is it time to accept that blogs are really just a jostling for position in a virtual and parallel social order rather than a means to change the real one. Is the real way of instigating change going to be through posters and pamphlets and public meetings rather than this internet? Is PR about to understand that the internet does nice things well but when you want real stuff to really happen it’s more of a hinderance than anything else?

@ PR Guy,
I tried to, I know this mightn’t be ideal but if I shout loud enough or post in these blogs enough eventually someone will listen. I am furious about what has happened, and seem to continuously pay dearly for the errors of others who are getting away scot free. TBH I am trying to emigrate, would rather get out of this godforsaken s*rewed-up country.

BTW Mr. McCarthy,
do you realise that if my 188E/week – rent allowance, that I can no longer live.
I am going to see all of my TDS, with a list of my outgoings and ask them how I will manage. Then I will scan the document and email to you, and see what you think. Re my previous post, why are people in my position always taking the hits? We cannot live on fresh air and it is next to impossible to get a job.
Do you really think that in countries like Spain, Poland and Slovenia, where the wages and SW is a fraction of here that their citizens actually live on less? They don’t, Poland and Spain have thriving black economies. Spanish unemployment is 50%, officially, in reality it’s much less because of this. In Slovenia people go back and live with their parents, as far as I’m aware.
Are you aware of how much waste is generated in the public sector? Did you not already state in a previous document that you published that it ran into tens of millions? 700 million or something? I think that we are an easy target that this is the reason and the only reason.

@Eureka/Caitriona

A short reply when it deserves more but sorry to say I’m very busy at the moment.

If you – an isolated/individual member of the public – want to capture the attention of the country, you need to leverage mass media: TV, national paper, certain elements of social media (e.g. Facebook, Youtube) in particular. Specialist blogs such as this, good though it is, has limited readership and influence. Radio is not that great in Ireland either (but better than nothing and don’t turn down if offered a slot as it may lead to others taking up your story if they hear it).

A good example of this is the letter that was written to the Irish Times (IT) last year (and I am sorry I forget the exact detail) from the guy saying his children only had breakfast cereal to eat that day.

For several reasons that I won’t bore you with, I would start by getting one of the national papers interested in your story. Try to draft an op-ed style piece (look in the IT for examples of style and length) that puts forward the problem and argues what needs to be done to solve it. Try to find a unique angle if you can. You then need to find a journalist (try starting with Fintan O’Toole in the IT?) who sympathises and at least has your draft as a starting point to write something. Just approach them directly – it’s not hard to find contact numbers and email addresses on the web if you look hard enough.

Next, take your draft op-ed piece and summarise it in the form of a letter to the editor. Might be best to take the angle “do people out there really understand what’s going on and the consequences of that?” If you can’t find a journalist as above, email your letter to the editor.

Above all, be articulate and don’t rant or it will just end up in ‘file 13’ (the bin).

An alternative route (that may get press coverage) is to get hold a Sinn Fein TD and get them to make a big noise in the Dail about your case (you won’t get any other party to do it). Their spokesperson on Jobs, Enterprise and Innovation is Deputy Peadar Tóibín.

http://www.sinnfein.ie/contents/20208

I would still get hold of a video camera and make a short documentary and stick it on Youtube – with a controversial title.

Finally, if emigration is deemed essential by Richard Tol, I wouldn’t argue with him. I’ve done it myself in the past and it was a fantastic experience. Personally, I suspect things are only going to get worse over the next couple of years at least.

A final thought, there is a website in Ireland for unemployed people called halfaloaf dot ie (look it up on Google) – they may have some experience of campaigning/good press contacts.

Apologies to rest of the readership for going off topic.

@ Caitriona

Without trying to pick a fight, I think most people can comfortably live on 188E a week -rent allowance. i.e. 155 euros after accomadation.

Indeed, I’m living on less than that right now.

My basic approach is 50 quid for food, 30 quid for bills, and the rest is for extras like clothes, entertainment, transport etc.

Maybe you have avoidable outgoings?

It may be worth examining where your money is going. Sometimes, (I am definitely guilty of this) we can put pressure on ourselves to buy things we neither need nor can afford. I know a few years ago, I would feel absolutely terrible not buying a round of drinks with my friends. But once I moderated this habit a bit, I found that I could still afford a modest night out, as long as they weren’t too expensive or too frequent.
Also, changing accommodation is one of the best things you can do to save money -many of us feel that moving into a smaller/cheaper/less well located place is a regressive step and cannot be considered. But if you are willing to get over this and look at cheaper accommodation -nothing you can do will do more to cut your costs. Living in a downmarket area can give you a lot of breathing space in your finances -it’s definitely worth it if you’re struggling. If you own your own home -sell it or rent it and then move.

If you’re willing to really address your costs, then it is very possible to live on JB and rent allowance. You just have to be willing to make the adjustments -even if they were previously unthinkable.

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