Capitalism in Crisis

The FT has launched a series of articles on this topic.  The first essay is by Larry Summers, who focuses on the challenge of Baumol’s cost disease

The nature of the transformation is highlighted by the 50 fold change in the relative price of a television set of a constant quality and a day in a hospital over the last generation.

149 replies on “Capitalism in Crisis”

Years ago (1950’s – 1970’s in particular), there was a vision of the future put about that showed capitalism and advances in technology freeing people – they would have more leisure time, a higher standard of living, great health, good food, live in a peaceful society, better education, etc. (and in some models of the vision, wore shiny silver suits, had robot servants and food was in the form of pills taken at mealtimes!).

Everyone bought that vision and agreed it was a good future to look forward to – we even had TV programmes about it (e.g. Tomorrows World).

The unspoken assumption of these utopian visions was that the wealth created by these advances would be shared out. Unfortunately, back in the real world, that’s not what happened.

That’s why you’ve got a bunch of people running around shouting about the 1% having it all and the 99% getting shafted with the rough end of a pineapple. I guess the 99% are the ‘Soylent Green.’

@Ernie Ball

Sort of…. Irish pensioners who didn’t get around to admitting they had income other than the state pension. You’d be surprised at what powers the Revenue has.

I don’t know why anyone listens to or even gives a platform to this odious money-grubbing sexist guy. He still does not get it. He was amongst the people who enabled the structural crisis of capitalism through his efforts at deregulation – which BTW he was handsomely rewarded for by the hedge fund industry. Yes he WAS a smart economist and is still a pretty smart guy but over the years he has been so full of himself that he has lost the ability to listen and to understand. His cognitive biases make his opinions less than worthless. They make them positively harmful.

The same Larry Summers who worked with Greenspan and Rubin to prevent Brooksley Born from regulating the OTC derivatives market?

The same Larry Summers who endorsed the Gramm-Leach-Bliley Act that enabled the banks to get TBTF via their derivatives activities in the shadow banking system?

Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha!

Larry Summers pontificating on a crisis in capitalism ranks up there with Kissinger winning the peace prize.

Larry walks right up to the big question, and then walks away from it again.

“The difficulty is that in many of these areas the traditional case for market capitalism is weaker. It is surely not an accident that in almost every society the production of healthcare and education is much more involved with the public sector than is the case with the production of manufactured goods.”

Ok, but if it’s weaker, or if it’s not an accident, then “WHY is it so and should we be doing anything about it?”

I guess the 99% are the ‘Soylent Green

Oh it’s much worse than that.

Mr Summers is “sponching” here in that he is raising points and making arguments which so not address the core problem with capitalism today. In the context of the global economy, it is as irrelevant to talk about income inequalities, demand for goods, and Baumol’s cost disease as it is irrelevant for our Spronch/SG debaters above to discuss nutrition and food sector jobs. None of these debates address the main issue.

Spronch/SG is made out of people. Our banks are all insolvent.

Our latest crisis of capitalism is a banking crisis. Virtually all the major banks in the western world are insolvent following the bursting of a massive lending binge, unprecedented in human history. The uncertainty, the deleveraging, lack of confidence, lack of investment, unemployment, sovereign debts, currency upheavals, income inequalities, and the endless series of increasingly irrelevant Op-Eds; all stem from one root cause: The insolvency of the banks.

Until the mass insolvency in the banking system is resolved, capitalism as we understood it simply will not exist. We will have no functioning credit system, no profit motive, no moral hazard. We will have no investment. We will have no firm foundations for industry, no stable monetary or fiscal policies, no public confidence the markets or the state. We will have privatisation of imaginary profits, and socialisation of real losses.

We will live in, in the words of Nassim Taleb, in “some wierd combination” of capitalism and socialism, with a “cartel” of banks controlling the economy, with the public serving them, rather than the banks serving us.

Forget everything else. Forget what is happening, forget how we got here. Dealing with the insolvency of our banking system is the principal task of our generation. When the banks are wound up and their debts resolved, then we can conduct some kind of Marshall Plan for capitalism and society. But until that task is complete, our efforts on such things are wasted, consumed by the voracious debts of a bankrupt banking system.

Could not be bothered reading fat boy slims diet coke advertisement – but went for a few pints in Cork city centre tonight and it was Dead – DED dead.
This ship is going down boy.
A man who is thee most effective publican in Cork – who has the best bars in town is suffering.
The Irish bar system works like the French waiter system although perhaps a touch cruder -redistributing income.
If the centre of Cork is dying – Munster is Dying.

The 1980s was never like this – we always had a few bob for pints on a Sunday night.
The Euro is going to be ejected from the Irish body politic – wether the Irish Brain wants it or not.

@ The D of C
Drinking habits have changed instead of going out to the pub and getting caught drunk driving, people are buying cheaply in bulk from Aldi and getting pissed quietly at home. Alcohol consumption per capita is probably trending up.

I notice you are less optimistic than usual lately. Always remember that we can say to hell with poverty we will kill a duck and if we have to tighten our belts the best and cheapest poteen comes from Sligo. I liked your link to the Kerry Railway, I was in the Lartigue in Listowel last June. There were a couple of ex CIE people there reminiscing about the good old days and the thousands of livestock that went out on railway carriages on Big Fair days. The Englishman who said “Hope springs eternal in the human breast.” got it right and then there was Paddy Moriarty from Knockanure who said “It is always darkest before the dawn.”.

I think prof. Lane picks out the most interesting point in this, that the price of stuff relative to essentials has become quite distorted. Though I’ve been based in China much of the last decade, and seeing the quite opposite relative costs where much of this stuff is made makes me think this must be related to the artificially low Yuan and that’s not going to last for ever given the inflation here.

In terms Summers’ proposed reinvention, seems to me most of the countries that are doing best at the moment; Germany, “Greater” China, have retained wage competitiveness through serious and efficient government involvement with health / housing / education whether through regulation or supply.

@ Darren Snow
I agree with you.
Manufacturing today is heavily automated and geared to high volume output. The incremental cost per unit above the breakeven output is a small fraction of what it used to be. Samsung and Philips with their joint venture LCD/LED TV manufacturing in Korea are a good example. The quality has steadily improved as the prices plummeted. The labour content in manufacturing is declining all around the world. The labour involved in banking has been declining for the last 25 years. Both manufacturing and service industries will continue to expand without adding workers. The low Yuan keeps Chinese labour productive but competition from automated processes will limit the upward movement of wages as it has in the G8. The Henry Ford model of well paid workers buying expensive products is breaking down as labour loses bargaining power. Automation is a major factor even though Chinese cheap labour gets most of the blame. We are living in interesting times, I wish I knew how governments will meet the challenges they are now facing.

Capitalism with much diminished markets at home and abroad. How will that evolve. Even worse, a surfeit of production capacity world wide.

The Director of the ESRI disagrees with Prof. Summers:

Whatever qualms one might have about Prof. Summers’s role in reducing effective democratic governance of financial markets – and which contributed to the current crisis, his observation, which Prof. Lane has highlighted, on the relative costs of goods and services provided by the non-sheltered and sheltered sectors is valid and poses a major policy challenge – even if he pulls back from confronting the implications.

Prof. Ruane, on the other hand, sees Ireland’s salvation in ‘innovation’ – whatever that is precisely – in the export-oriented sector. I wonder what Prof. Summers would make of it. He might view it as evidence of this quintessential Irish charm and ability to suspend disbelief indefinitely. Not a hint, of course, about the widespread dysfunction in the sheltered sectors and the burden it imposes on consumers and the economy in general and on the remarkably resilient non-sheltered sectors in particular.

But, if she were to do that, it might give some credence to Richard Tol’s complaints – and we couldn’t be having any of that now could we? So let’s focus on an area where there probably isn’t a major problem so as to avoid confronting, at all costs, areas where there are real problems.

It’s this turning a blind eye to problems that got Ireland in to this mess; it’s baffling that so many intelligent, influential, well-rewarded people believe that a continuation of this approach will get Ireland out of it. But maybe the adjectives I’ve used provide the answer to this puzzle?

American capitalism is certainly in crisis but those who are easily sold on simple answers to complex issues, should pause before latching onto one mantra.

Larry Summers refers to Michael Spence and the latter as chairman of a commission on development some years ago highlighted that sustained high growth in developing economies is a recent, post-World War II phenomenon.

Each and every one of the economic miracles that were examined had an export sector as a driver of growth and an increasing share of trade in GDP. There were no exceptions. Every growth miracle involves leveraging the demand and resources of the global economy.

Communist ruled China today more resembles the capitalism of Karl Marx’s times than that in the contemporary European social democracies.

US worker pay has fallen to a 50-year low as a ratio of company sales and US GDP according to JP Morgan Chase, one of America’s biggest financial firms.

Profit margins were at their highest level in 2010 since the mid-1960s.

Last October, Bill Gross the founder of PIMCO, the trillion-dollar bond fund manager said: “Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labor. Washington, London, Berlin and yes, even Beijing must accept this commonsensical reality alongside several other structural initiatives that seek to rebalance the global economy. The United States in particular requires an enhanced safety net of benefits for the unemployed unless and until it can produce enough jobs to return to our prior economic model which suggested opportunity for all who were willing to grab for the brass ring – a ring that is now tarnished if not unavailable for the grasping. Policies promoting “Buy American” goods and services – – which in turn would employ more Americans – – should also be reintroduced. China and Brazil do it. Why not us?”

Yet a multmillionaire former private equity firm head may become the next president.

Newt Gingrich attacked Mitt Romney’s business background of buying and selling companies at the investment firm Bain Capital, saying Sunday afternoon that the work was comparable to “rich people figuring out clever legal ways to loot a company.”

In the context of globalisation and support for free trade, the current imbalances in the US are a serious risk to the economy.

@ Paul Hunt

What is innovation?

It’s an interesting question as like the proverbial motherhood and apple pie, everyone sees it as a positive.

Gaggia S.p.A. is the best known Italian manufacturer of coffee machines for professional and household use. The company was founded in 1948 by Achille Gaggia, the man to whom we are indebted for the success of espresso coffee all over the world: it was he who on September 5th 1938 filed patent no. 365726 with which the modern steam-free coffee with cream machine may be said to have been born. The brand was purchased in 1999 by the Saeco International Group, which is itself a subsidiary of Philips, the Dutch group.

It was Howard Schultz, a native of Brooklyn, who created a global coffee shop brand.

Both Gaggia and Schultz are innovators.

In Walter Isaacson’s book on Steve Jobs, there’s a story about a furious Jobs confronting Bill Gates about the interface for the newly launched Microsoft Windows.

Gates looked back at Jobs calmly. Everyone knew where the windows and the icons came from. “Well, Steve,” Gates responded. “I think there’s more than one way of looking at it. I think it’s more like we both had this rich neighbor named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it.”

@MH: “I wish I knew how governments will meet the challenges they are now facing.”

They won’t, is the short answer. I hear a rumour that our ministers are paying furtive visits to St Jude’s oratory.

@PH: “Prof. Ruane, on the other hand, sees Ireland’s salvation in ‘innovation’ – whatever that is precisely -”

Innovation is what you do to ensure you get an increasing share of a shrinking pie – for yourself!

“…it’s baffling that so many intelligent, influential, well-rewarded people believe that a continuation of this approach will get Ireland out of it.”

I used to think so too. Its quite simple really. If you KNOW, with religious conviction and fervour, that you are RIGHT in what you think and do, then thinking and doing something different would be an admission that you were in error and incompetent. And should you continue in thinking and doing what your mindset KNOWS to be wrong: that’s clearly pathological. So you persist with your espoused beliefs. Its known as Skilled Incompetence.

It takes an intellectual and psychological epiphany to rattle your mindset sufficiently for you to start to question it. An eclectic and wide-ranging reading list is useful.


@Paul Hunt… I dont have your expertise or indeed patience…. but that article from the ERSI is just more of the same old crap.

The Government could also foster domestic demand for innovation through well-designed public procurement policies, regulations and standards.

Second, given fiscal constraints, it should make sure that money spent on innovation, both in business and higher education, is well-spent. This means collecting more robust measures of outputs and outcomes, and undertaking more rigorous independent evaluations of the policy effectiveness.

i.e. spend more money with outfits like the ERSI and pretend to do something

Im sure if there was a famine here, the same class of people would be calling for lots of money to research into the effects of hunger as a priority.

“citizens of the industrial world who believe that they live in progressive societies are right to wonder why increasingly affluent societies need to roll back levels of social protection. Paradoxically, the answer lies in the very success of capitalism which has made the opportunity-cost of an individual teaching or nursing or administering that much more expensive”

Pull the other one. You no discussion of capitalism in crisis is relevant without bringing in rampant inequality and how it has grown over the last 30 years.

58% of all income growth in the US between the 1976 and 2007 went to the top 1% of the population. The top 0.01% or 15000 households had 1.7% of all income in 1976 and 6.04% by 2007. By 2004 the top 1% of wealth holders in the US held 42% of all financial and real assets, the most unequal distribution since the 1920s. The top 20% held 93% of such assets

Charles Simic on the fallout

“I remember overhearing an inebriated elderly businessman in a restaurant back in the 1970s telling a lady companion, “The American worker is too expensive and has no future. I can make more money in Asia than in Pittsburgh.” However, I never realized that our ruling classes would be in such a hurry to give up on the rest of us, and not just the workers and the old, but the young people as well, and without a twinge of conscience.”

Fresh out of uni spreadsheet wallas in investment banks with 2 years experience get paid 8* teacher salaries for what ? For this sort of innovation :

Investors can now buy an exchange traded note that returns double the inverse daily performance of palladium.

Jeff Madrick on Ireland

“And then there is Ireland. The recent experience of this once booming country should be deeply embarrassing to those who advocate austerity economics. For six months early last year, its national income started growing again after a couple of years of dramatic collapse following its own financial crisis. Ireland guaranteed all the debt of its over-aggressive failing banks to appease investors and then paid for it by cutting social spending sharply. Ireland’s leaders said with almost religious authority that this painful self-discipline was necessary to right the economy, and officials in Ireland and across Europe hailed the country’s brief rebound in 2011 as proof that it works. But then the Irish economy plunged in the third quarter of 2011 at its fastest rate ever. The upturn in the economy proved only temporary under the restraints of austerity economics. It may yet need another bailout. “

@Michael H,

I think you missed my tongue firmly planted in my cheek when I raised a quizzical eyebrow about academics – or indeed the ‘man (or woman) from the government’ – waxing lyrical about innovation. We all know innovation when we see it. All government should do is to create the conditions for it to happen. And I don’t view those in the exposed or tradeable sectors as being paragons of virtue; they’ll milk the system as well as the next sectional interest. It just gets dangerous, silly and costly when milking the system distract them from ‘sticking to the knitting’.

My focus is on the related, and contrasting, lack of focus on the sheltered sectors, the burdens they impose and the fact that these can and should be reduced. We have all of the narrow sectional interests in these sectors fighting individually for their share of the spoils with all other competing and conflcting interests. Collectively, they end up imposing additional costs on themselves and on all others, but, individually, they don’t care once they perceive they are staying ahead of the game – and the other players.

It’s a negative sum game for the economy, but no individual sectional interest has any incentive to break the vicious circle – and every incentive not to. This is why we have a parliament to adjudicate on these sectional interests, to stroke balances and trade-offs, to advance some at the expense of others – but always in the public interest – and directs government to give substance to these judgements. But, in Ireland, we seem to have it arse-wise. Parliament plays no role in making these judgements; government does all the balancing tricks behind closed doors and the Oireachtas simply ratifies what has been decided.

As for these ‘export miracles’, I agree that the evidence is there for all to see, but these are/were in the context of a single nation state seeking to make its way on its own terms in a big bad world. In contrast, the EU, via some pooling of sovereignty, provides for the rule of a law on a reasonably standardised basis and the creation of a huge, effectively barrier-free, trade zone. By definition, this should reduce the requirement for direct state support of the tradable sectors. But governments can’t seem to help themselves – and there is no shortage of cheerleaders.

During discussion with a friend it was pointed out to me that in many ways what Summers says is that the evidence for markets is weaker in sectors of the economy where productivity growth has been comparatively low.

Then he notices that these areas are also often – or even generally – areas where government involvement is higher.

I wonder, I wonder. Might the two things be connected?

Could introduction of market mechanisms and not government provision revolutionize these sectors of the economy in the same way as – say – the manufacture of TVs, provision of telecom services, provision of air travel services, etc., etc., etc., have been revolutionized?

I remember Alan Greenspan came out in 2008 declaring that his belief in the benifits of free market capitalism had been misplaced. His new found self questioning was soon rescinded and he regained his nerve.

I would be surprised if these musings from Summers are any different. As soon as he gets a chance he will be back implementing policy to benefit the 1%.
As Michael Hennigan has already pointed out Profit margins were at their highest level in 2010 since the mid-1960s.
Summer policy implementations are generally a mix of strong free market Ideology followed by Large scale bail outs for the financial (and other protected industries) sectors.

I recon this article is a mere appeasement piece and PR exersize.

The two main points he makes in the article are directly lifted from well established moderate social democrat thinking. I doubt he cares/believe one word of it.

The part about the shock in the American economy being a result of moving from agriculture to manufacture during the 30’s being similar to the move from manufacture to services now is taken straight from a Joe Stiglitz article in Vanity fair.

The part about certain things going up in price while others go down and the overall effect on American households was very like the work done by Elizabeth Warren. She gave an excellent lecture in this area in 2008.
Its worth a watch.

Summers seems confident and happy that the US will be able to borrow cheaply for the next few years. Warren sees the overall level of debt n the US economy as a part of the problem.

@Paul Hunt

From the Ruane article:

“Second, given fiscal constraints, it should make sure that money spent on innovation, both in business and higher education, is well-spent. This means collecting more robust measures of outputs and outcomes, and undertaking more rigorous independent evaluations of the policy effectiveness.”

I seriously doubt that any of the numerous vested interests in academia and beyond want to look beneath the hood on this matter. All the cheerleaders have already ganged up to deny reality. The regrettable fact is that after twenty years of spending well on R&D, research commercialisation has not delivered the returns in jobs. Will another generation of huge funding improve outcomes?

Wow, Hugh Sheehy, you’re a genius! Why hasn’t anyone thought of this or tried it? Imagine! We could actually [b]privatize[/b] areas that are traditionally the province of government! Genius!

To see how well it would work, we need only look at health care provision in the US, which is largely given over to market forces and where they spend twice per capita what anyone else spends and leave 20% of the population uninsured. Market efficiency!

Yeah , I always go all negative when I pour over Irish Maps………….

Entropy entropy – they all have it entropy.

Looking around last night – I cannot see us in the Euro by next Christmas if present policies persist.

We have a non optimal currency – money in the centre of any town should be spent freely so that it recycles.
Hoarding of artifally valued Fiat – will smash a economy.

Zombie land economics does not work too well – funny that.


Insults and sarcasm behind a pseudonym. Such high integrity.

Yes, it is rather obvious, isn’t it? Areas of business run by the state show very little if any productivity increase. Areas run in free markets have shown dramatic productivity increases, on both manufacture and services. Not all services, but most.

As for the US health industry, it’s certainly a mess – no argument there – but it does also create some rather large externalities that much of the world piggy-backs on top of.

Meantime, we could always view the halcyon days when Aer Lingus dominated the Dublin-London route, or when it took years to get a phone line (unless you were a priest, union official or similar), or when improvements in patient care in our hospitals were subject to union approval and demarcation arguments. Oh, wait, that third case is still real.


Mostly, I do. So does most of the world. 20 years ago the USSR finally collapsed. It’s probably a matter of some regret to you, but not to most people.

Meantime, 20 years ago it cost hundreds of pounds to fly to London. Many people rented televisions. Phones were never mobile and had only recently become easy to get.

Competitive market provision of goods and services has transformed most things. That doesn’t mean that unregulated wild-west markets are the best type of market. It also doesn’t mean that government provision of goods and services is ever the best way to do it.

It is a very relevant discussion when you look at the issues that Summers mentioned in his piece.

Do try to engage with the discussion instead of trawling out irrelevant Beggsianisms.

I read something recently (can’t remember where) about capitalism used to be about making money out of making things but now it’s about making money out of money and it’s been screwing up since then. Kinda makes some sense to me.

@ Hugh Sheehy

With over 10% unemployment across the eurozone we don’t need productivity improvements, we need jobs. And by the way while productivity has increased steadily over the past three decades real wages have virtually stagnated (in the US they have actually declined) and unemployment is roughly three times higher than it was in 50’s and 60’s. There is a lot more to a healthy economy and society than endless productivity improvements.

@ Hugh Sheehy

Phones were never mobile and had only recently become easy to get.

Oh, the easy confidence of belief in the free market fairy. Mobile phones have little to do with capitalism in comparison to the state interventions which made them possible (space program, military R&D, properly licenced and regulated radio frequencies).


I’m sure you’ll give some detailed examples of the applications of military R&D to mobile phone development. From the last 20 years. And their comparative weight in the technology development over the last decades. And how apple used military technology in the iphone. And how Samsung and LG are in receipt of huge military investment. And how HTC in Taiwan has benefited. And the huge investment that the Finnish military made in Nokia. And how military developments – using public money – were always immediately funneled through to make consumer products rather than being kept secret for as long as possible, and how Russian consumers benefited from all the USSR’s military investment…….oh, wait, they didn’t.

As for properly licensed and regulated radio frequencies, I think I’ve said a number of times that unregulated wild west markets are not necessarily the best kind. Radio based services is one such area.

Firstly for the record, Larry Summers is a dangerous sexist scum bag and patsy of the financial sector who has done only damage to the world. Like military propaganda you must ignore the content of anything he says and instead ask yourself what purpose and who does saying it serve.

The man has an agenda toxic to the common good, in this case is he perahps slyly promoting privatization and more deregulation? As Ernie Bell notes it is bizarre he would choose the US as a place to blame the relative increase in health care on insufficient market reforms.

@Paul Hunt on innovation

We all know innovation when we see it. All government should do is to create the conditions for it to happen

Well, that is how we got the Internet and world wide web, the space program and associated technology, penicillin, the European aerospace industry, the MRI scanner, and…oh wait.

Lets be a bit sweeping: “The vast majority of significant innovations in engineering, information technology and health care in the last century have come either directly from large government investment programs or academia. ”

The integrated circuit, mobile telephony and the flat panel display are possible exceptions.

Modern entrepreneurs have found ways to profit off innovation which has necessarily involved pursuing important efficiencies but evidence that the free market is a major part of the progress of human civilization is largely absent.

Seriously Mr Hunt, you have markets on the brain.

@Hugh Sheehy,

DFTT. As someone who has been conferred with troll status here I remain persuadable by argument based on facts, evidence and analysis. These folks, apparently, are not.

The boundaries between the state and markets and the definition and provision of public goods are at the core of Prof. Summers’s piece and need continuous attention in any democratic polity. There is no fixed eternal answer – contrary to what the dogmatists and ideologues (both left and right) may assert. It is a never-ending battle. In addition, having been kicked off in the leader’s speech at the Labour conference last autumn, the governance of capitalism is now becoming a hot topic in Britain. Unfortunately, the role of effective representation and advocacy of consumers’ collective interests in restraining the malign behaviour of capitalists and in improving the functioning of markets has yet to be considered.

It may be that it would upset the various producer interests being advanced and protected either separately or jointly by the left and the right. Ireland is so far behind the curve in terms of tackling these issues, it would be hilarious if it were not so frightening.

@ PR Guy: Racking my few neurons to try and recall where I read a definitive explanation of the Production-Consumption [PC] economy v the Fire, Insurance, Real estate and Education [FIRE] economy. Sounds like Prof Michael Hudson – though I’m probably wrong.

The PC economy is about maximizing profit (you get a surplus to re-invest or save), whereas the FIRE is about maximizine income flow so you can skim your % commission. No surplus. Debt compounds. Margins collapse. Consumption falls. Demand for credit collapses. Financials scream RAPE! Sovereigns to the rescue.

What’s with this productivity lark? “Its the context dear chap, the context!”.

Some processes are well suited to productivity enhancements – at a cost, at a cost! There is always a cost, and a technological limit. But other processes cannot be enhanced. They have inflexible, human-based, rate-limiting steps.

Next time you go to your GP do you want to face a real, properly trained, experienced human (with partial knowledge and recall), or a laptop with the latest self-diagnostic software installed? 😎


Innovation per se can be good or bad. It was innovative to build apartment blocks in Co Roscommon without any buyers lined up.

Productivity doesn’t have to be effective or even desirable. The senior management at AIB worked late into the night many times during 2006 to win business from Anglo Irish.

A very strange article, not one mention of the FIRE economy, or why capitalism should not be applied there. Take the losses, wipe out the incumbents and let a new batch go again…. Isnt that supposed to be capitalism?

Comparing the price of TV vs healthcare is nonsense… Sure, there are vast inefficencies in health, education and all large organizations.
Productivity could be viewed as cost per patient.. But fundamentally, technology is working against productivity as patients are being kept alive longer, thus increasing care needed, increasing cost and decreasing productivity.
The application of technology to electronics and manufacturing has proven to be much simpler in terms of increasing quality and decreasing cost.

That said there may be opportunities to apply disruptive technology/innovation/ to these areas e.g. this looks like an interesting approach

There are sheltered sectors, sectors that have to constantly compete in order to survive… The division is not public and private, within each of the sectors there are people/organizations that are wining and losing

Murphy’s no longer make TV’s, their employees were made redundant once they couldnt compete. Irish Bank employees are still very well paid despite their employeers being bankrupt… just 2 examples from the private sector, yet their treatment is very different.

But for the author to be leaving one of ‘his’ areas out of the discussion… ie. finance…, is very strange indeed.

The boy Summers’ idea is something we should all keep in mind. Avatar says that we need jobs, but where are those jobs to come from when Capitalism has considered the words “Innovation” and “Efficiency” to be interchangeable. “Build a better mousetrap” has become “Build a better mousetrap with 20% of the labour force”.
If it takes 20% of the labour force now compared to 30 years ago to fulfill all of my purchasing needs, then where is the other 80%’s part of the pie. How do they have jobs, what do they make? The growth of financial services as a labour creator has reached a peak, information technology will reduce that labour force, so where is the next labour creator … our children will enter the market place with very limited opportunities unless we have a real paradigm shift.

Yours Doomingly,



The crisis afflicting most, but not all, of the advanced economies, is fundamentally the result of a failure of democratic governance. The rolling series of bank blow-outs, credit crunches, fiscal overload, economic recession are the proximate causes. Until enough people get their heads around this, no sustainable resolution will be possible.

Governments in most of these countries entered into a Faustian pact with the financial sector that allowed them to make out like bandits while they generated mountains of cheap, apparently risk-free credit to compensate the vast majority of citizens for the wage repression required to maintain some measure of international competitiveness in the face of huge increases in the production, and huge falls in the costs, of the good people in the advanced economies wanted.

The financial sector and these national governments are now locked in a deadly embrace and it will take a long time before either side will be able to operate with some degree of independence.

Slowly, painfully slowly, governments and representative democracy will prevail. There is no alternative and the global financial sector knows this; but it will be a long drawn-out battle.

The process of representative democracy, with government directed by parliaments, is slowly beginning to re-assert its primacy, particularly in the northern EU states. There was less requirement to do so in some than there was in others. There is a long way to go in the PIIGS, but, at least, in a few there is some flicker of an awareness. In Ireland, there is none whatsoever. There is little point in looking to the economists, however, clever they might be, to come up with ‘innovative’ solutions or clever, technical fixes.

The process of representative parlaimentary democracy has been all but obliterated in Ireland. Until this is restored as the basis for formulating, scrutinising and deciding on public policy there will be no possibility of a sustainable recovery from this economic crisis.

But there are far, far too many who are comfortable with the status quo and those who lack power and influence can simply go hang. Recently I’ve detected a growing and barely concealed, but cunningly articulated, resentment among the well-ensconced that those who are able to emigrate are not doing so as rapidly or in the required numbers as their predecessors in the ’50s and ’80s. And the last thing, the very last thing, those who are ensconced want is any reform of democratic governance that might in any way discombobulate them. So it won’t happen.

Why did CIE not keep & develop the Foynes line ?

Got this from wiki –

“Foynes railway station was opened on 29 April 1858, but closed to passenger traffic on 4 February 1963.[4] Freight traffic continued until the line was mothballed in 2001 and there has been no trains since 7 May 2002 when the annual Irish Rail weed spray train visited the line.[citation needed] The last known movement on the line was on 9 January 2003 when a permanent way inspection car visited Foynes.[citation needed] The line is not currently operational but the Shannon Foynes Port Company and others maintain contact with Irish Rail to review opportunities for reopening it for future bulk cargo projects.[citation needed]

In an interview on Limerick’s Live 95 fm on April 18th 2011, Kay McGuinness Chairperson of Shannon Foynes Port Company said that they are confident that the rail link could be reopened for €7 million, which was considerably less than initially quoted price of €30 million by Irish Rail following the involvement of consultants and it was now a do-able project”

Also it could be a fine DMU 2 set passenger train service not unlike the Midleton line.
As you leave Limerick you pass Rossbrien , Kilteragh ,Huntsfield & Glencaim estates with adjacent Raheen Industrial estate which I imagine has a substantial population and the area does not appear that destitute by any means – ie it could afford a train fare at least until the collapse of 2007 / 08
It then moves out to Patrickswell ,Adare ,Ballingrane , Askeaton & Foynes.

CIE is a mystery wrapped up in a enigma.

The only state run train company left in Britain (DRS) is now running regular passenger trains for Sellafield nuclear workers and other passengers.…/direct-rail-services-launch-trial-for-sellafield-special

Why could they not have had the imagination to run a smaller DMU service for both Anguish Alumina workers & the local population west of Limerick and its western suburbs.
Its all very strange – and points to the extreme dysfunction withen CIE during the boom years and indeed today.

The Summers article is his usual guff. The John Plender article which formally kicks off the FT series is much better. Read that instead


>With over 10% unemployment across the eurozone we don’t need productivity improvements, we need jobs.

Yes. But if you’re implying a causality relationship between the two, I’m not sure it follows. The US has historically had both very high productivity and employment levels. Anyway the reason I’m calling this out is to challenge another possible implication of what you’ve written, that somehow un-productiveness equals job growth. I think it is a fallacy to think that waste of resources, in this case both labour and capital, can ever be good for anything. That is the “why do it right the first time when you can get paid again to do it right the second time” mentality. PS – if productivity improvements can in fact be shown to cause job losses, the argument is still incomplete on that basis alone. Cf. Baseline fallacy.

@The Dork,

Not my territory, unfortunately, but you might attract a response from someone with relevant expertise. The key general point to note, though, is that in all of these infrastructure or utility areas you have long-lived, specific assets and to ensure efficient financing of efficient investment there is a requirement for a pretty rock-solid assurance of investment recovery. In the case of investment in a specific mode of transport, this isn’t easy when you have competing modes of transport. (It is easier in the case of, say, electricity, where it is a universally required “essential” service and there is limited competition from other fuels. But policy-makers, in their wisdom, have introduced retail competition which means that the long-term, almost indefinite, commitment of final consumers to pay and consume is no longer accessible to back-stop the long-term contracts that investors in infrastructure require. Deep, liquid wholesale markets were expected to spring up miraculously to shoulder the burden but these are as scarce as hobby-horses’ droppings.)

The difficulty of establishing these long term contracts to secure recovery of investment is one of the main reasons the state is involved. It can make up any shortfall via its power to tax the general populace and it can always be dressed up in some sort of ‘public service’/’market failure’ language. The problem then is that the operator has no incentive to run the business efficiently or to seek out new, potentially profitable, business as it requires a lot of effort with no real prospect of any reward – and the state will always plug the gap irrespective of the costs incurred, revenue recovered or quality or level of service provided.

So we’re back to local governance and the collective willingness of local citizens and businesses to make some commitment to attract and secure the required investment. But an excessively centralised, excessively dominant executive will never allow the necessary devolution of power to the local level and a centralised state owned operator will also fight it tooth and nail.

Sorry for the long answer, but you did ask!

@Mick Costigan,

Thank you. Plender’s piece is good value. It’s nice to see Mancur Olson getting a name-check. An up-date of his analysis of collective action would go a long way to explain how narrow sectional economic interests have by-passed parliaments and captured governments – and how collective action on the part of citizens, as consumers – both individually and collectively – who pay for everything bar exports, could restrict the malign power and influence they exercise both in the market and over government.

It would probably be a bridge too far for most economists here, though. Olson is usually confined to the political science silo – or, even worse, the sociology silo. It’s amazing how vauable insights and concepts are discarded if they can’t be hammered and battered until they fit comfortably into the narrow canon of neoclassical economics.

“In the case of investment in a specific mode of transport, this isn’t easy when you have competing modes of transport. (It is easier in the case of, say, electricity, where it is a universally required “essential” service and there is limited competition from other fuels”

Well we are seeing road transport begin to decline in the UK when you have parallel rail lines – its largely about the price of fuel , it changes the dynamics of things in quite radical ways – despite the fact that Rail in the UK is thee most expensive in Europe by many measures.
Perhaps the Sea France liquidation is another victim of high fuel prices relative to rail.

I see intensive road use as a product of its time – the $ petro century which really got going in 1922.
FOFOA -2010
“The US exorbitant privilege began at the International Monetary Conference of 1922 when for the first time international banks were allowed to accept not only physical gold, but also US dollars (paper gold) as reserves. But all US dollars held by foreign banks were put on deposit back in New York City banks. And there they were counted as local US deposits, the same as if you and I put our gold into the bank, in addition to being counted abroad.

These deposits were used as the basis for credit expansion in both the US and in the foreign countries claiming them as reserves. This process doubled the money supply paid out through the US balance-of-payments deficit for the last 88 years (except that money which France demanded in gold). US deficits never contracted the aggregate purchasing power of the US after 1922, the way deficit settlement is supposed to. It also exported US inflation outward. And it continues today. ”

If this era is ending then the M20 which runs parallel to the Foynes line on its initial stretches can only be seen as a malinvestment that may be efficiently run down over the next decades much like how the Irish narrow gauge railway line was run down during the FRNs prime.
Its all about the input costs – if they continue to rise year after year then it will probally be not a good investment.
But these input costs are not seen on the road network as such but in the trade balance.
The 90,000 or so new private cars capital cost , the cost of oil imports rising despite a collapse of road freight traffic etc etc
Our accounting & subsequent development is just not working out is it Paul ? , because it is flawed – it is not holistic.
But we have these Nazca lines drawn into the Bog now – what do we do with them when we cannot populate them with Petrol eating livestock ?

People of the future may even ask what were they for – surely not transport – the energy input costs must have been too gigantic to sustain transport to villages such as Adare.

Irish “planning” is even more absurd when you look at it from high altitude.
Its just not scaled right.

@ Have a Heart: re Productivity.

As I mentioned above its conditional on the context, and any increase in productivity comes at a cost – the exact cost may not just be money, it could, and usually is human. So what do you do with displaced labour, if’n you cannot create ‘new’ jobs? That is the predicament. And what about the continual entry of new labour units? And what happens when your productivity hits the wall of falling demand? Boom! Boom! Bust!

The US productivity/jobs is a poor exemplar. They had a 25 year free run after WWII. Then they started to decline: continues to this day. I would re-title the series; “Permagrowth Paradigm in Crisis”. Its not Capitalism that’s in trouble. Its the economic vehicle which carries Capitalism along that has lost a wheel, and a second is about the fall off at any moment.


@ Paul Hunt

Your last paragraph hits the nail right on the head. The emigration safety valve has never allowed dissent to build up a sufficient head of steam to blow. One solution is to allow Irish emigrants to vote either by mail in, Internet sign in or in a Consulate or Embassy. Italians all over the world vote in national elections and where they have sufficient numbers 500,000 or so they appoint their own member of parliament from the diaspora. FF and FG have been extremely hostile to Irish born people abroad having the vote. The reasons are obvious in that FF and FG do not enjoy the admiration and support of the diaspora.

The other side of the growth in productivity in certain industries is the fact that most stuff gets thrown away in the name of economic growth. It must be very hard to take pride in producing stuff that ends up in landfill so quickly.

The entire tone & framework of this budget policey document is seriously flawed in my opinion.
•Infrastructure and Capital Investment 2012-16 (published November 10th, 2011) (PDF)

It states that 70 billion was spent on infrastructure & the productive sector over the last decade – fair enough , that great by itself………but what if they were the wrong investments ?
Are we tied to these just because we sunk money into them – much like NAMA land.
Its states its top medium term priority is to maintain the National road network in ORDER TO PROTECT THE VALUE OF PREVIOUS INVESTMENTS – this is very NAMAish in outlook – not to develop the country but to maintain the value of the capital stock -when has maintaining the value of obsolete capital stock been a goal in itself.
What if this capital stock is a drain on our resourses ? – what then ?

According to the document 1.676 billion will be directed towards the National road network & 1.255 billion to regional & national roads between the years 2012 & 2016 – thats fine & dandy.
A pitiful 715 million will be spent on public transport infrastructure during that time – I presume this covers vehicles ?

Fantastically – Nowhere in this document did they cover oil import costs & their dramatic rise.
(Major Caveat, 1300KTOE was burned in home heating during 2010 – the majority probally in rural houses , also another 500ishKTOE in public & commercial heating etc.)

In 2003 we imported 7994KTOE of oil (565 KTOE fuel oil for electricity)
In 2003 we spent 1.593 billion on petroleum and related product imports.(non taxed)

In 2010 we imported 7373KTOE of oil (103ktoe fuel oil for electricity)
In 2010 we spent 4.258 Billion on petroleum
So we imported 621KTOE less oil but paid nearly 2.7 times as much for the stuff.

Now -for those roads to pay off they need to at the very least run at 2007 levels of activity.
But we burned 9047KTOE of oil that year ( 364KTOE was fuel oil for electricity)

It would take perhaps 200 million to put tacks & signals on both the Foynes & Youghal line – these can be equipped with cheap to purchase and run DMUs.
This can be “paid” for by subtracting from the road budget.

These investments increase the potential traffic and therefore the effiecey of scale on our mainlines through the primary rail stations in Cork & Limerick and also Foynes has a big potential to take freight off our roads.

PS a major advertising campaign telling the public – especially the rural public the potential private investment rewards from wood & wood gas stoves would serve a major national goal.
Opps can we say national goal these days ?

@Shay Begorrah
Lets be a bit sweeping: “The vast majority of significant innovations in engineering, information technology and health care in the last century have come either directly from large government investment programs or academia. ”

I hope you don’t actually believe this. Very few innovations (as distinct from patented inventions) have ever come from academia, although it is conceivable that the growth of university tech transfer activity from the US may someday change that. Government-funded development programs of various sorts have made a contribution to both innovation and invention, but not as much as you might think.
The fact is that the majority of patent-grade inventions originated with independent inventors between the birth of the patent system in the EU and US and the 1920’s. Inventions were both commissioned and bought by companies from such individuals, the companies lacking significant RDI resources of their own.
From the 20’s on, the rising technology barriers to invention and ‘scientific management’ and vertical integration of enterprises led to the rise of corporate research labs and design offices. These dominated patent output until comparatively recently, where we once again see SME tech startups led by independent inventors doing a growing share of inventing and innovating. This is reflected in trends such as ‘open innovation’, ‘open-source’ development, the shift of drug discovery and medical device development to biotech startups and private design consultancies and so on.
It is important to not to conflate research, invention and innovation in this, as economics often does. Business delivers the vast majority of innovation, always has and always will. A powerful innovation depends on a valuable invention, but inventions are ten a penny unless they get commercialised and become innovations. Only businesses do this part.

@ Hugh Sheehy

I’m sure you’ll give some detailed examples of the applications of military R&D to mobile phone development. From the last 20 years. And their comparative weight in the technology development over the last decades. And how apple used military technology in the iphone. And how Samsung and LG are in receipt of huge military investment. And how HTC in Taiwan has benefited. And the huge investment that the Finnish military made in Nokia. And how military developments – using public money – were always immediately funneled through to make consumer products rather than being kept secret for as long as possible, and how Russian consumers benefited from all the USSR’s military investment…….oh, wait, they didn’t.

Y’know, I got halfway through a fairly long explanation of the commercialisation of technology specced and funded by the state (and especially military), with particular reference to the evolution of Silicon Valley… and then realised that, even if forced to admit the points made in it, you’ll just be back next week saying the same thing again as if I hadn’t bothered.

So no, wallow in your ignorance if you must. I’m sure the Free Market Fairy is a comforting deity.

20th century aviation applied technology was almost entirely driven by Military R&D – even the “private” Schneider trophy was not really private

Its impossible to mark a exact spot in development but it can be safely said that Micheal o Learys free enterprise “wealth creation” would have been almost impossible without vast sums going into perfecting planes to drop Atomic Bombs on Moscow from 50,000.

And Bell labs made a few discoveries over and above applied stuff.
The cosmic background radiation or the very first light comes to mind.

Most applied technology of the 20th century was either either developed or perfected by the Military.
Freemon Dyson made the bold statement that his groundbreaking applied research was the first in many years centuries that was cut for political reasons – given the sheer power of the technology.
Just saying like.

@ Dork: “Fantastically – Nowhere in this document did they cover oil import costs & their dramatic rise.”

I read this with a sense of disbelief. I had assumed, perhaps most incorrectly, that the department wallahs were aware of the energy security predicament we are facing and had some cunning proposals available (apart from rationing, that is). Seems not. Dear God.

Just to make a public nuisance of myself, again. The Export-land Model of Liquid Fossil Fuel Production and Nett Available Global Exports (Brown and Fulcher)

Note: ‘Peak Oil’ is NOT about, “We have used up half”, its about the availability of the nett oil for importation by all consumers who have insufficient liquid resources themselves. And, do you know what?, it looks like we have arrived. The ‘peak’ is actually a plateau, a Mesa.

1. Total Global Supply [TGS] of liquid (crude + condensates + other bits) was projected, for 2010, to be 99 mb/d (million barrells per day). In 2005 was (actual) 85 mb/d. In 2010 was (actual) 87 mb/d. That’s a miss.

2. Global Nett Exports [GNE] is what is actually exported from top 33 major producers (they have taken some of thier own production for their domestic use). The projected value for 2010 was 59 mb/d. In 2010 was 43 mb/d. In 2005 was 46 mb/d. That’s a decline.

3. Available Nett Exports [ANE] is what is actually available to all importers (that’s us) after Chindia have taken their cut. Projected value for 2010 50 mb/d. In 2010 was 35 mb/d. In 2005 was 40 mb/d. That’s a decline.

(Source: Jeffrey Brown at

So, for all you ‘growth’ wallahs. Pay very, very close attention to these values. If oil importation costs increase (and they will) its ungrowth time.

Mr China is visting the mid-East. Now, I wonder why? India imports a lot of Iranian. If they start hurling grenades about in mid-East and Iran. Guess who will lose out?


Ah, come on folks. It’s not either or. People collectively, at either the local or national level (or even mutli-national level) can act via the democratic process to do things in cooperation with the capitalist system that will benefit all. The immediate pressing challenge is to bring the forces of financial capitalism under some sort of democratic governance to save then from themselves, to stop them doing more damage and to ensure they contribute to productive and useful investment.

@the Dork,

Fundamental problem: elected polticians and the elites they appoint do not trust the people. That’s the same everywhere. But Irish people, unlike those in many other long-established democracies, are loth to subject native power elites to effective democratic governance. They have tolerated the emasculation of local governance and prefer, between general elections, to use every visit to the polling booths as the potent, but blunt, means of keeping an excessively centralised and excessively dominant executive in line.

It’s highly ineffective and inefficient and every mess about which you lament may be traced back to this source. Reclaiming and restoring the system of central and local governance that was gifted to this state at its foundation, and then making it work for the modern era, is the only answer.

@Mickey Hickey,

When it comes to votes for emigrants, I tend to find myself governed by the “No taxation without representation” principle of the American Patriots – and its converse “No right to representation without taxation”. But that fitted a time when emigration was for life; it most certainly is not so nowadays. So as the facts change I recognise the pressure building to change my mind.

But, before I would do so, I believe the focus should be on reform of democratic governance (along the lines I’ve indicated above to the Dork). And if that doesn’t work, I’d be open to extending the franchise to the (likely temporary) emigrants to act as a catalyst.

@EWI & others

Am I reading from the above that military spending is a good thing? Really? Wow. New insights from reading this board. Never thought I’d see (apparently) socialists advocating military spending as a route to human happiness, but hey – you learn something new every day.

If I’m being accused of believing in the Free Market Fairy then I don’t feel too bad wondering how much faith people want to put in the military industrial complex.

@ Hugh Sheehy

This discussion started out with you saying that competitive market provision has transformed most things, like telephones, computers, etc. Other posters were pointing out that the State invests in R&D for the benefit of private industry. The state takes the risk and pays the cost for fundamental basic research from which new platform technologies emerge, such as electronics, internet, nanotechnology, biotechnology etc. The timeline for such basic research is so long and the returns are so difficult to capture or even predict that private companies tend to underinvest. So the State steps in. These technologies are then handed over to private companies to be sold on the free market for profit as you describe. Military R&D spending is one way in which governments subsidise private industry. Biomedical research is another as a growing share of the modern economy is bio-based. I think EWI and other posters are just pointing this out rather than saying they are in favour of military spending per se.

The key point is that the idea that private companies and the free market does innovation all on its own is a nonsense. Innovative companies are heavily dependent on State investment in R&D, not only for the new knowledge generated but more importantly for the skills output without which private companies could do next to nothing.

Is €482bn parked with the ECB overnight an indication that capitalism may well be in crisis? Or is a credit crunch no longer regarded as a crisis in the grand scheme of things these days… more the ‘new normal’?

Hugh’s ideology is made of pure titanium. Nothing you say will put a dent in it. All virtue inheres in the market. Government is the root of all evil. It’s no more complicated than that.

@ Shay Begorrah

It has taken three decades of public support for the development of fracking techniques to have had commercial impact.

As regards university research, please surprise me with evidence from the US or Europe on significant returns from commercialisation.

You miss my point – military spending went parallel to the objectives of that time.
I never said military spending was a good or bad thing by itself.
However the objectives changed and R& D was cut over time.

Its never talked about in politie circles but much of silicon valley work in the 60s was related to the conflict in Vietnam.
However very few successful direct swords into ploughshares programmes went the full distance during that time.
It was more of a follow through exercise – a critical mass of military scientists & engineers in one area at one time created a cascade of new & old ideas in 1970s private companies.

Very few direct swords to ploughshares programmes were dramatically successful – the only one that I can think of offhand is the French rejecting their / British design reactor and going for a offshoot of Admiral Rickover submarine PWR – and then mass producing it.

You miss my point – military spending went parallel to the objectives of that time.
I never said military spending was a good or bad thing by itself.
However the objectives changed and R& D was cut over time.

Its never talked about in politie circles but much of silicon valley work in the 60s was related to the conflict in Vietnam.
However very few successful direct swords into ploughshares programmes went the full distance during that time.
It was more of a follow through exercise – a critical mass of military scientists & engineers in one area at one time created a cascade of new & old ideas in 1970s private companies.

Very few direct swords to ploughshares programmes were dramatically successful – the only one that I can think of offhand is the French rejecting their / British design reactor and going for a offshoot of Admiral Rickover submarine PWR – and then mass producing it.

On fracking.. Septic tanks are now so dangerous they need inspection yet directly injecting massive quantities of chemicals into the gound and ground water, to hopefully get a positive EROEI is considered an advancement?

@ PR Guy

“Is €482bn parked with the ECB overnight an indication that capitalism may well be in crisis?”

That figure is completely, and near totally, misunderstood. To be honest its more or less meaningless, other than to say that the ECB is lending a shedload of money to the EZ banks.

PS – correction
Imports of oil by KTOE – should be net inputs I guess.
The gross imports of all Petroleum products is.
2003 : 8431 KTOE

Peaking in 2005 : 9198 KTOE

2007 : 8960 KTOE

2010 : 7464 KTOE

this is back to 1998 like levels : 7505KTOE

Yet we are paying far more for the stuff.


Also, if you look, titanium isn’t particularly stiff (specific stiffness) and it’s quite tough, so it’ll dent pretty nicely.

Now, if you could get back to the point of why some industries have low productivity growth and whether or not there’s anything we can do about it, that’d be nice.

Does anyone think that state provision of services in anything like the current form will be the best way of driving productivity growth in health, education, etc? Do we want higher productivity in health,education, etc?

@ Hugh Sheehy

I don’t see why you have identified productivity growth in health and education as a particular problem for Ireland. The problem for Ireland and most of the western world is a lack of aggregate demand. Productivity growth won’t do a whole lot in a situation where people have no money to spend so demand is on the floor and we have very high unemployment.


I disagree. I see a whole lot of unfulfilled demand for health and education services (just to take two examples) that is currently served pretty badly because productivity is low and effectively (whether on an individual or societal level) prices are prohibitively high.

People are waiting on hospital trollies because there are too few doctors or because processes are bad. People are not visiting GPs because it’s too expensive and it takes half a day, pretty much. People are not taking up higher education because it’s long and slow and expensive. Meantime there is little or no incentive to improve service provision because the funding and provision are state run and/or public sector union dominated. Either the “customer” or the provider are your priority. For me, the customer is the key….not the provider.

Someone on this thread asked (pretty derisively) whether people wanted to get to a real doctor or to use the latest diagnostic software. You know, I would not be surprised if there was a lot of opportunity for remote medical diagnostics to take the place of GP visits. An increase in productivity that could make everyone better off.

Do improved services always have to be provided in the free market? No. Can productivity be improved in state-provided services? Yes. Does this generally happen? Not often enough. Does the comparison make state provided services look pretty bad? Yes. Do people, whenever they can afford to, chose private schools and hospitals and universities? With notable but few exceptions, almost always. Will a vested interest department of health and vested interest public sector union drive to transform health care for the benefit of patients? Unlikely. Vanishingly unlikely.

Many comments on this thread remind of the story of a rare western consultant observing the construction of a dam in China during Mao’s time. The side of a valley was black with workers using shovels, picks and wheelbarrows. The consultant asked the supervisor “Do you not have any earth-moving plant or machinery?”. The Chinese supervisor responded “This is an effective way to provide much employment.” The consultant responded “Well, if that’s the case, why not have the workers use spoons?”

There seems to be this naive view that more and more of other people’s money should be borrowed to maintain current levels of pay and to establish ‘make-work’ schemes and that export growth will lift the boat. The primary driver of future economic growth (and growth in employment) is increased efficiency and productivity in the production and delivery of goods and services that people value both individually and collectively.

Of course, this would require a lot of concerted effort and some comfortable vested interests would be discombobulated, so there’s no chance of it happening.

@Hugh Sheehy

Does anyone think that state provision of services in anything like the current form will be the best way of driving productivity growth in health, education, etc? Do we want higher productivity in health,education, etc?

Not just anybody but almost everyone. What would higher productivity in health or education even mean?

The US, the great lab for privatization, is not a good advertisement for the provision of accessible health care or education through market mechanisms, the Dutch are trying an experiment in universal privately funded healthcare but they had a functioning public system beforehand and the framework in which the private firms operate is very far from a free market.

An interesting question is that if socialists can manage not to continue asking for the mass collectivization of farms why can free market capitalists not join the evidence based world and stop trying to turn human civilization into a profit centre? (hint: The word “psychopathology” is involved in the answer.)

@ garry: re: Fracking. This is about the most destructive industrial process loose on the planet. Clean groundwater is mandatory to sustain all life forms on this planet. To permit Fracking in this state is tantramount to High Treason. If your groundwater goes saline or toxic, that’s it – QED. Area becomes non-habitable. Population must migrate.

The IFA may have something to say about this. They have the necessary and sufficient political muscle.


Wow -getting a sick kick out of this depletion of the commons
Net energy imports of NG , the above oil is net imports also…sorry
(Destruction can be exciting as long as armies & militia don’t come knocking on your door )
1994 : 3 KTOE
2003 : 3140 KTOE
2010 : 4393 KTOE

Natural gas is the simplest of Irish imports to examine as unlike oil, refined products are not reexported much now that NET is no more.
Imports in Euros
2003 : 225 miilion
2010 : 1134 million.

so we spend 909 million more on Gas imports then in 2003
If this price and rate of consumption remains flat over 5 years then this sum is : 4.545 billion over and above 2003 expenditure !
Energy import costs work much like debt repayment in this regard – the money is not used on buying more real products , more money is spent on using existing stock.
The 2.931 billion directed towards investment & maintenance of our road network during the next 5 years is dwarfed by this one energy input cost into our economy although it is not directly related to car use , it serves as a good template.

As for oil imports ……….
Well we import 2.665 billion euros more oil for less KTOE which contrasts dramatically with our increased NG usage.
So we will spend 13.325 billion euros extra on oil imports relative to 2003 if the price and our consumption remains static over the next 5 years………..
Good luck with that.

@Shay: “What would higher productivity in health or education even mean?”

Automated autopsies and computerised multiple-choice exams.


I must say, I love the idea that “socialists” are restraining themselves – that they’d love to call for the collectivization of farms but that they are holding back out of politeness. That’s brilliant.

As for US health care, one reason (among others) that US health care isn’t accessible is because many people can’t afford to access health care and there’s no universal funding or insurance. It’s an entirely different issue to whether or not health care is best provided by state provision and whether there are productivity improvements available in general. On education, MITs recent initiative to open up their course material free for online study illustrates what improved productivity might look like. Of course, if you believe that there should be professors of everything in every university you probably won’t like the idea of vastly increased educational productivity.

One quick aside to Brian Woods Snr. Fracking is nothing like “the most destructive industrial process loose on the planet”. Your description is fairly representative of much of the commentary, but it’s just not true.

Meantime, @Paul Hunt, sorry, I’m probably FTT-ing

@Bond Eoin Bond

“the ECB is lending a shedload of money to the EZ banks”

That’s some shed 🙂

Speaking of raising productivity in education, a very efficient way to get into the literature on many aspects of economics is to check what Krugman has to say about it:

Readers familiar with health care economics may have noticed that today’s column was largely a translation into English of part of Kenneth Arrow’s seminal article on the economics of medical care (pdf), especially part IIB — the article that explained, half a century ago, why health care can’t be treated as an ordinary market. It’s amazing that we’re still fighting to get people to understand the same lesson.

Links are provided to Krugman’s NYT column and to Arrow’s 1963 AER paper (much of which actually is in English):

@ avator

What is the point of using most of the enterprise budget to fund research that may produce the odd spinout with potential that is bought by an American firm — good news for the promoters but not the taxpayers?

There are externalities of course and every Irish university president wants more public funds no matter where they come from to be dubbed the chief of ‘a world class university.’ We are not the US or China.

As regards the demands for more public spending from universities, Germany has a stronger economy than France but half the percentage of young adults with a college degree. 

“Reckless entrance into college,” President Lee of South Korea recently said, is “bringing huge losses to households and the country alike.”

The Organisation for Economic Cooperation and Development (OECD) says there is “little evidence of success” in the commercialisation of university research and according to Enterprise Ireland, it has assisted 100 spinout companies from universities and public research institutes over a decade and about 1,000 jobs were created ignoring failures — and there is no data on that.

In an Irish context with 30 claimed spinouts in 2010 — a max of about 150 jobs — the key issue is that research will never spawn a jobs engine in a high unemployment bankrupt country.

Even the University of California system gets little direct return from technology research.

Research commissioned by the Higher Education Authority shows that in the FDI sector the direct results are also unimpressive.

@ Garry

Why does it always seem that extremists on different ends of the spectrum dominate environmental debates?

There are serious environmental issues in respect of fracking but that doesn’t mean we should continue smugly driving our cars, ride the buses and be oblivious to the risks, the low concern for worker safety and environmental degradation in places like Nigeria and Angola.

In West Mayo, people who have oil terminal workers in Hamburg contributing to their modern lifestyle via CAP payments, expect oil/petrol to be supplied from far afield involving many risks for many people, but object to gas production in their own area.

@Hugh Sheehy,

My comment was not directed at you. Perhaps, you are enjoying it, but you appear to be engaged in seeking to persuade the unpersuadable. There are quite a few who comment here of the left-wing persuasion who are frustrated, angry and puzzled that this latest bout of havoc wreaked by capitalism has not had the vast majority of voters rejecting capitalism totally and flocking to the banner of the left. If they were, perhaps, to look in the mirror and view the ideological baggage they carry and the vested interests they represent they might see what repels so many voters.

I fear government failure much more than I fear market failure. And the ultimate cause of the current crisis is government failure – or, more precisely, a failure of democratic governance. That is why so much of the ‘economic debate’ is so surreal and why the participants often seem as if they are on another planet. Not much point fine-tuning the engine and borrowing from all and sundry to fill up the tank if the chassis is kaput.

@ Michael Hennigan

I don’t disagree with you about the low rate of spinouts and the low return from commercialisation in Ireland. Though obviously the same is not true for many other countries. The main return from publicly funded R&D in Ireland is the skills output. Would you agree with that? Ireland’s public R&D budget is relatively small by international comparison. Given Ireland’s industrial profile we need some public R&D to produce the skills that are needed by industry.

@Paul H

I am indeed “seeking to persuade”. It sometimes works and I tend to optimism. I would not say I enjoy it. One thing that’s interesting is that people with entrenched views usually assume that anyone who doesn’t agree with them has similarly entrenched views (like Ernie, for instance).

I share your fear of government failure more than market failure for a couple of reasons. One is that government failure can be terribly well organized and determined, whereas market failures tend to be chaotic and easily stopped. Unless, of course, as in this case, we have a dreadful symbiosis of market and government failure.

“One thing that’s interesting is that people with entrenched views usually assume that anyone who doesn’t agree with them has similarly entrenched views.”

How true that is.

@K_vin Donoghu_ shows m_ th_ futur_ of privatiz_d h_alth car_ and _ducation

Automat_d autopsi_s and comput_ris_d multipl_ choic_ _xams

(5.1) Th_ pati_nt, a for_ign mal_ in his _arly forti_s, pr_s_nt_d with shortn_ss of br_ath and _xhibit_d signs of confusion and r_duc_d blood pr_ssur_ b_for_ appar_ntly r_cov_ring fully. Pl_as_ s_l_ct from th_ following list th_ b_st way you can ch_ck wh_th_r h_ is abl_ to afford furth_r inv_stigation.

Th_ mor_ you think about Larry Summ_rs comparison of th_ costs of highly automatabl_ hom_ _nt_rtainm_nt _quipm_nt manufactur_ to hospital car_ th_ mor_ you r_aliz_ what a dang_rous hack h_ is. Th_r_ is no r_turn to manufactur_r availabl_ for a misdiagnos_d coronary thrombosis.

It is also int_r_sting that though h_ m_ntions wag_ incr_as_s h_ do_s not _xt_nd his longitudinal cost analysis to th_ r_mun_ration of _x_cutiv_s in th_ financial or l_gal s_ctor. What a lous_.

Apologies for my last posting, it was repeatedly rejected until I replaced all the “e”s with “_”s. I must use some figure of speech that WordPress thinks is an attempt to sell something but I am damned if I can isolate it.

@ Hugh Sheehy: re: Fracking.

“One quick aside to Brian Woods Snr. Fracking is nothing like “the most destructive industrial process loose on the planet”. Your description is fairly representative of much of the commentary, but it’s just not true. ”

Really? An highly destructive industrial process which will release long residence-time toxic chemicals into a fresh-water acquifer, whence these toxicants percolate away, completely unchecked, in all directions, is not manically destructive? Really? I hope you do not try that explanation on the owners of land which has experienced fracking and now find it is unfit for purpose. They are likely to run you out of town on a pole.

Hugh, you can breath polluted air for a while. You can plant your crops in polluted soils – for a while. But, polluting your groundwater? Its utterly insane.

And may “be representative of much of the commentary”. Really? Whom might you have in mind?

Its of no especial consequence which particular industrial process is the worstest (sic) environmental polluter. If we can avoid this one, and we can, then we do not do it.

@MH-ff: Michael, our environment is our life-support capsule. Folk get kinda attached to something which keeps them alive and reproductive, and get a tad narky when some dopey critters mess around with that life-support capsule by conducting un-controlled experiments with it. I’m firmly a median type (or at least I like to think so): except, when it comes to messing with my life-support capsule.

Cheers, Brian.

@Hugh S,

It isn’t so much “a dreadful symbiosis of market and government failure” as a concerted rigging, distortion and subversion of markets and an abuse of market power to benefit wealthy and influential elites in which elected governments and their appointed elites have been complicit.

It will take a long time for the governments that have been suborned, either knowingly or unwittingly, to get back ‘on-side’ with their voters. Few will survive. In the last year the governments in all of the PIIGS have been replaced. Since the crisis erupted the composition of government in Germany, the Netherlands, Belgium, Swwden and Finland has changed to a more clearly defined right-of-centre position that seems to be more in line with what a majority of voters desire. Only the Danes bucked the trend and the wafer-thin majority of its centre-left government is being undermined by expenses scandals. Sarkozy will struggle to be re-elected, but he is a formidable campaigner. In any event, Hollande is already sniffing which way the wind is blowing.

Chancellor Merkel is playing a long game and edging, ever so slowly, and in her own inimitable fashion, to get fully ‘on-side’ with a majority of her voters. She is also assured of considerable, but not unquestioning, support from the Netherlands, Belgium, Luxembourg, Austria and Finland – and, from outside the fence, Sweden. The smaller central EZ members, Slovenia, Slovakia and Estonia, are broadly in the camp. Poland and most of the other new EU members are broadly in line. (The Magyars, isolated in a sea of Slavs, are, characteristically, doing their own thing.)

A key external dimension of this long game is that the unavoidable imposition of fiscal austerity, backed by the full application of the rules and governance that the EU can muster, will persuade the PIIGS eventually to pursue the vitally necessary internal structural refroms that are required to counteract this austerity and to provide the basis for increased economic activity and enhanced future economic performance. This is linked to another key element of this long game which is to persuade bond market participants, with ‘good money’ to invest, that the PIIGS will eventually behave and that it is not in their (the bond market paraticipants) interests to remain in the funk which they’re in at the moment.

Slowly, painfully slowly, but she and the rest of the willing in the EU will get there eventually. In Ireland’s case it is unfortunate that the penny has not yet dropped with the Government that the Troika did not insist on some meaningful internal structural reforms just because that is what they are wont to do. These reforms were required and intended to counteract the inevitable economy-shrinking impact of fiscal austerity. The Government seems to think, naively, that these are optional extras, that it can whittle them down to nothingness, that it can satisfy the Troika’s demands on fiscal austerity and that, basking in the Troika’s appropbation, it will secure further concessions in the support package.

It’s hard to imagine they could be this stupid, but it’s Ireland after all and this lot have only a marginally less economy-damaging pedigree. The Troika may award some further concessions, but they will be made through gritted teeth because they will be required the austerity ‘one club’ approach of the Government. Perhaps than the Government will realise – and the narrow sectional interests obstructing them – that these structural refroms are not an optional extra – like God in the CofE.

@Hugh Sheehy meets minds with Paul Hunt

I share your fear of government failure more than market failure for a couple of reasons. One is that government failure can be terribly well organized and determined, whereas market failures tend to be chaotic and easily stopped.

Is it possible that you are posting from an alternate universe or have you been roused, Austin Powers like, from a slumber than began in 1972 to fight the rampant evils of inflation, state ownership and union activism?

We are still trying and failing to stop the four year economic fall out from the global financial crisis, a crisis entirely caused by unrestrained markets, so called financial innovation and the pursuit of profit with no regard to risks.

I will be paying taxes to bailout unrepentant, deluded and incompetent capitalist wasters for twenty years and my patience is worn down.

Formatting error.

@Hugh Sheehy meets minds with Paul Hunt

I share your fear of government failure more than market failure for a couple of reasons. One is that government failure can be terribly well organized and determined, whereas market failures tend to be chaotic and easily stopped.

Is it possible that you are posting from an alternate universe or have you been roused, Austin Powers like, from a slumber than began in 1972 to fight the rampant evils of inflation, state ownership and union activism?

We are still trying and failing to stop the four year economic fall out from the global financial crisis, a crisis entirely caused by unrestrained markets, so called financial innovation and the pursuit of profit with no regard to risks.

I will be paying taxes to bailout unrepentant, deluded and incompetent capitalist wasters for twenty years and my patience is worn down.

@ BW

Dynamiting entire Appalachian mountains to get at “cheap” coal must be up there with fracking.


The government’s decision to indemnify the Anglo creditors with your (and my) money was not a market failure, it was a government failure. Similarly, the years of borrowing and fraud in Greece and Italy was primarily a failure of government. The way that governments and regulators allowed themselves to be taken over by bankers was a failure of government….and yes, many parts of the financial industry need to be regulated. Were there market failures? Yes. Many people mispriced risk for a long time or loaned money to chancers in places like Anglo. However, it was primarily government failure that imposed their error on me and you.

Also, remember that we’ll both be paying taxes to pay for Kevin Cardiff’s pension (and many others, Neary, for instance) for years too.

“The government’s decision to indemnify the Anglo creditors with your (and my) money was not a market failure, it was a government failure.”

Trichet wasn’t in government. Blaming the whole catastrophe mess on government alone is a joke.

The efficient market and its hypothesis died in September 2008 and the people have to pick up the pieces.

The financial industry took oil from the future and spent it today or now more accuretly yesterday on immediate consumption and /or consumer durables pretending to be capital and capital which carried these consumer durables (roads)
This was / is a massive leverage crisis.
Goverment can only tax the money supply – which was / is primarily credit , which is now declining.
Goverment is tertiary to governance.
The Banks dictate all activities due to their credit monopoly.

@Hugh Sheehy

The government’s decision to indemnify the Anglo creditors with your (and my) money was not a market failure, it was a government failure.


This is the kind of thing many books have been written about and I would be obliged if someone with a background in psychology, philosophy or sociology could help me out here if I make a total haims of it.

You are both keen to allow market players to take whatever actions they need to (to be free) and yet unable to grant them “agency” when they fail, in an almost complete reversal you are keen to restrict the role of government but willing to blame them for being unable to deal with the consequences of others’ actions (the markets, financial capitalism and so on).

So the global financial crisis was an act of God but the initially botched Irish government response to it (one that was made when the banks held back much information) is an act of man.

Many of the arguments deployed by people who see the European component of the global financial crisis as a failure in social democracy rather than a crisis in capitalism have the same logical (or perhaps psychological) flaw.


I don’t understand how – as an appointee of govt and as head of the ECB – you can claim that Trichet is not a part of government.

Many people would claim that a central bank is practically the most powerful arm of government after the army….maybe even more powerful.

It’s amazing how it’s always someone else’s fault. In parliamentary democracies, people elect members of parliament who elect a government which appoints others who are deemed suitably qualified to perform actions on behalf of government, governments generally introduce legislation which parliaments, following scrutiny and amendment, enacts and both government and those they appoint are accountable to parliament.

Even when some national sovereignty is pooled, as it is through membership of the EU, in Ireland this almost always requires the direct consent of the people and any primary EU legislation or regulation has to be transposed into national law.

Though some people may subscribe to this notion of a white-bearded, omnipotent, omniscient old man somewhere up in the sky, there is, in actual fact, no higher authority than the people. Between general elections they delegate their ultimate authority to their elected representatives. Everyone is subject to the laws enacted by the representatives of the people and to the governance sanctioned by these laws.

However, if successive governments, building on the practice of previous governments, totally disempower parliament and use it solely as a rubber stamp to enact the decrees they have agreed behind closed doors in cahoots with representatives of various narrow sectional economic interests, if a plurality of voters re-elects these governments more than once, if those with competence and expertise to alert the public to problems fail to do so (because they are conflicted or compromised – or just too well fed from the trough and are lazy), if the media fail to exercise any vigilance on behalf of voters (who do not, in any event, demand it) and bad things happen, whose fault is that?

Democracy grants all citizens an inalienable right to decide by whom and how they are governed; but it also imposes a responsibility on all to exercise vigilance and to delegate some of this responsibility to the media and to those with competence in the public sphere. Ignorance of this responsibility is no defence.

It’s that man (or woman) in the mirror again.


Sighing does sometimes seem appropriate.

However, since much of the debate on the role of markets is pointlessly complicated, perhaps we should back up and understand that for almost any free and fair market to exist, competent government is required.

Markets need at least the following things
– Permission to exist at all
– (e.g. no market in edible children in Ireland)
– Protection from interference
– (e.g. protection from criminal theft, manipulation, etc)
– Enforcement
– (e.g. if you promise to pay, you pay. If you promise to give, you give.)
– Regulation
– e.g. that any externality or difficult-to-assess aspect is allowed for

There are more issues, obviously, but provision of a free and fair marketplace is historically one of the first and most important roles of a state, alongside defense and irrigation, probably, and one of the best ways it can enrich its people.

So, if there’s a market where a long recognized externality risk is a liquidity and/or solvency issue that can impact others and it’s historically a role of government to ensure that this doesn’t happen (central banks and financial regulators) then surely if that regulator becomes a Stockholm Syndrome victim of the financial industry it’s a failure of government. The market participants should, under market rules, lose their shirts. They haven’t, but this is because of government action bailing out the banks, not the markets. The shareholders of Anglo lost all their money. Most of the staff lost their jobs. The market – in many ways – finally did its job right. People figured out that Anglo was bust. It was. The government didn’t seem to believe this and bailed the taxpayer in and the creditors out. That’s not a market activity.

You could, of course, prohibit the risky market entirely, but for a lot of the time it has benefits for everyone.

@ seafóid: Affirmative. Its not the ‘degree’ of these things, its that they are so destructive of our living space. The surface can, to some extent remediate itself, but sub-terranean structures cannot. I have the same distaste for overuse of inorganic fertilizers, mine tailings and settling ponds. But, who cares? The fish in the Avoca river?

@ Hugh Sheehy. Hugh, potable water is a fraction of a percentage of the total global resource. Non-saline aquifers are so important in some regions that their failure will lead to mass population migration. So, any chemical, physical, technological or commercial activity which stresses the resource should be severely curtailed. There is sufficient archeological evidence of the demise of civilizations because their fresh water sources became inadequate to support the population. Messing with your fresh-water acquifers is asking for real trouble, on the treble!



@ avatar

Ireland’s R&D spend of about 1.7% of GDP is half that of Finland but the official internatioanl target of 3% shouldn’t be relevant for Ireland as the tardeable sector is domanted by foreign firms who do not do their main research in Ireland.

As regards the State science budget, it doubled to €2.5bn in the ten years from 1999.

€1.5bn should do.

You are ignoring the opium dealers again……. major flaw in your slant on things me thinks.
Sure the drug addicts were not that bright but they were a mere pawn in a global slave arbitrage business that required credit consumers on one end of the global Pendulum.
At the core of the collapse is the subtraction of capital to express false profits that then become guarrenteed by the oringinal victims of the crime spree.
Its a fantastic mechanism really.
When momentum is lost from the device another mysterious finger picks up the balls again to start over.
Capatilism does have its orgins in the slave trade.
The Cork / West Indies suger trade is a classic example.
We like sweets down here in the Irish semi – tropics.

@Hugh Sheehy

So, if there’s a market where a long recognized externality risk is a liquidity and/or solvency issue that can impact others and it’s historically a role of government to ensure that this doesn’t happen (central banks and financial regulators) then surely if that regulator becomes a Stockholm Syndrome victim of the financial industry it’s a failure of government.

You do not think that perhaps your belief in free markets as an engine of human progress is making you blame the victim (the state, you and I, children both in ten years time) rather than the villain (financial capitalism and its handmaiden market liberalism)? Probably unconsciously it is what you wrote. It is the victims fault that it was attacked.

Once again there is the issue of agency – it would be a brave man who said that the deregulation of the financial industry was not chiefly caused the the financial sector using its power and influence to lobby for less regulation, aided in part by a political right increasing in thrall to market fundamentalism.

I say again that the global financial crisis was and is a crisis of capitalism, the crisis of social democracy is a result of it and indeed partially represents the forces of capitalism trying to make the state pick up the tab for their losses at the casino.


I don’t doubt that financial types, many of whom should be locked up as criminals, lobbied governments to let them do what they did. No doubt. There are probably 5 times as many financial lobbyists in Washington as there are members of the houses of congress. The same story held in Dublin, with Seanie being feted as a hero and party coffers being stuffed full of bank and developer money.

Unfortunately, it doesn’t change the fact that it is the responsibility of government to govern and when it is seduced or corrupted by lobbies it has failed.

Much like it fails when it enters benchmarking deals with the public sector unions.

Even in the Irish context and even with Anglo, the second type of failure may actually turn out to be more expensive than the first type.

“that the Rockites exhibited an acute sense of suffering from economic injustice is not at all surprising , for Ireland in the early 1820s did indeed seem to be a most distressful nation , a country crushed by insupportable financial burdens.
Part of the difficulty was a set of huge adjustments made necessary beginning in 1813 by the bursting of the huge wartime inflationary bubble.
From the peak of the boom in 1812 (Second American war ?) to the bottom of the first post war through in the harvest year 1815 / 16 , the price of oats & Barley plummeted by almost 60 % , & wheat prices plummeted by as much as 43%.
Butter producers remarkably escaped any serious damage , but those who raised livestock were less fortunate , as beef prices fell by 22% between 1812 & 1815 and those of bacon & ham declined by no less then 55%.

Worse was yet to come…………………………

editor of the Dublin evening post August 1817 ” Dublin with some exceptions……….. we look upon a city more then half ruined ,Cork we are informed , is almost entirely so.”
Introduction to Captain Rock the Irish agrarian rebellion of 1821 – 24 by J.S.Donnellly.
The assigned task of Alexander Hoskins -agent for the Foppish Lord Courtenay estate was to raise the current income of the property and reduce the arrears in a Depression.
he raised the annual rents by as much as 40%

“the Fall of Napoleon -who was surely a messianic figure in Ireland – made British rule seem impervious to overthrow by human effort alone”

@Kevin D

Your desire to score points is inhibiting your reading, and possibly your thinking.

I did not write blame. I wrote failed. In this case it is government that has failed. The “tycoon” may well have succeeded, and they certainly seem to have succeeded beyond their wildest expectations in this case. The shareholders didn’t succeed since they’re often wiped out, but the “tycoon” has succeeded.

Notice also that in many countries it doesn’t even qualify as a “bribe”. It’s a lobby. A political donation. It’s all above board and legal. It shouldn’t be. One thing there shouldn’t be a market for is political favours. Don’t get me started on party funding.


Evidently I misread you. I missed the bit about accountants, auditors, compliance officers and directors having ethical obligations. Clearly they also ‘failed’ — it wasn’t just government — but in my haste I overlooked the part where you scrupulously pointed that out. My bad.

@Michael Hennigan
The weight of foreign firms is an argument for more domestic research,not less .Your attitude is to accept that Ireland is and will remain an economic colony.

@Kevin D

Those people do have ethical obligations. Niall Fitz tore a strip off the Irish bank directors a couple of years ago in a most heartwarming speech. I’ve had a go at (if I recall the name correctly) Jim O’Leary of AIB, who wrote a column in the Irish times that basically said “Yeah, you know, we didn’t do our jobs”.

Sadly, whatever ethical obligations you or I both believe they should have, in Ireland at least, they do not seem to suffer under terribly burdensome legal obligations. Ethics – as we have seen from the Catholic Church – is a most elastic and rather unenforceable concept.

Most of the people in the groups you mention have done what’s called “getting away with it”. They took money for providing services that they did not actually provide. Most of them are keeping the money or even getting paid extra to sort out the mess. Is this failure? Meantime, ethics has gone on holiday or lost his job.

These directors and auditors have not failed in any consequential way. The state, tragically, has failed. It has allowed itself to be damaged, or has even damaged itself, in a terrible way.

Again, this is not a question of blame. It is a question of failure.

“Unfortunately, it doesn’t change the fact that it is the responsibility of government to govern and when it is seduced or corrupted by lobbies it has failed. ”

Whose fault is it ? Whose fault was the collapse of Anglo? Do shareholders have any responsibility for anything ?


I suspect I’m going to have to leave it to the philosophers to handle your case. If the servants of the state don’t live up to their responsibilities you call it failure. But if it’s bank directors you call it getting away with it. It seems that in your system of ideas only the state can fail. Oddly enough, that would seem to imply that there’s no such thing as failure in a thoroughly failed state like Somalia, since there’s no entity left which is capable of failure. There are only warlords, getting away with it.

@Hugh Sheehy,

Your focus on failure rather than blame is laudatory. The blame game is the tactic of choice for those who do not wish to confront the extent of the failure and the strenuous efforts that will have to made to repair the damage done and assure a better future.

I remain convinced that the fundamental failure is the fact not that democratic governance failed during the ‘double bubble’ era, but that it was never effectively applied in this state since its foundation – despite being gifted with a functioning system of local and central governance. Prior to that, while many English people were struggling to secure universal suffrage and effective democratic governance, many Irish people were struggling for ‘independence’. But what they eventually achieved, whether they realised it or not, was the replacement of a foreign power elite by native power elites – and, since then, there has been no widespread recognition that these elites should be subjected to the full force of democratic governance.

And so we are where we are. I often wonder what those who struggled and sometimes died for universal suffrage and effective democratic governance in the 19th century would have made of this dereliction of responsibility – or what those who struggled and bled in Libya or those who are struggling and bleeding in Syria to overthrow tyranny – would make of it.

But what leaves one with a really sinking feeling in one’s gut is that there is no recognition of the nature and extent of the failure – and, even worse, absolutely no understanding of what is required to remedy it. Does a majority of the Irish people actually believe that the objective of those who struggled and fought for effective parliamentary democracy and democratic governance was to establish a system where people elected TDs who then elected a government and, once this was done, were expected to replicate that vote in every subsequent division and to spend the rest of their time acting as constituency advocates and mini-ombudspersons securing personal advantage or redress from the government machine. Maybe that is the case, because that’s the system they’ve got. And they seem happy with it – and appear reluctant to contemplate any significant change.

And if that’s the case, any recovery will be long drawn-out and painful – and longer than that from the troughs in the ’50s and the ’80s – because the external environment is not likely to be as benign as it was then and the problems that need to be resolved have become even more embedded and difficult to tackle.

The fault and the blame for wiping out the shareholders lies at the door of the directors, many of whom were either negligent or fraudulent. The fault for letting most of them get away with both that and the damage done to the state is the state’s.

The fault and the blame for wiping out the innocent citizen and the resident and the taxpayer lies at the door of the state.

Unlike shareholders, the citizen and resident and taxpayer never had the option to exit before and many do not have the practical option to exit now. In any case, selling some shares and leaving the country are hardly comparable exits.

Kevin D can slice it however he likes, but if we are to apply the same “agency” problem that Shay mentions to state institutions as to corporate governance then we really do need a whole new model of citizenship and democracy. I can avoid a corporate governance problem by not owning shares of the company. Tell me how to avoid state malfeasance and incompetence.

Meantime, Grey’s anatomy.

@ Paul Hunt
You are like the dog with the bone. And you are right. Without root and branch reform of our state, all the rest will come to nought. We need a functioning parliament.

Your stance complements the lively centre-right v centre-left debate on this thread. Some wish to strengthen and protect the state, which is seen as the guarantor of employment and social security. Others wish to make the state functionaries more accountable, and to free the state from parasitical rent-seeking elements. Both approaches are absolutely valid and necessary. The important thing, as @veronica said, on another thread, is that we finally take ownership of our state, with all its historical flaws, distortions and lacunae.

The energy issues and the ecology issues won’t go away. Extracting capital, as the Dork says, simply stores up problems for the next generation. DOCM reminds us that we our future is inextricably bound up with European institutional and political realities. Although the democratic process has been captured by vested interests, the fact that the FT should have a series on the crisis of capitalism shows that old allegiances and belief systems are breaking up.
As the saying goes, the bankers have torn the ass out of it. How not to do governance, and then some. This is a true systemic crisis, in which many ‘reasonable’ people have come to doubt beliefs that were once self-evident.

Has capitalism really triumphed ? If not capitalism then what ? It’s all to play for.

Capitalism can only triumph if it endures. I wouldn’t bet on it.

That Byzantine defeat of the Persians in 631 was a magnificent victory until a few years later and the Arab conquest.

There was a great comment over at the FT re Hildebrand

“In UK & US this is the dealing of the day since forever. Might do right and every law has to be just followed to the letter and the intent safely circumvented.”

Until the Brideshead treatment.

But obviously the corruption of money is all the fault of the government.

Hi folks – interesting reading! I actually live in the US, and one thing you should all realise is that much of what you think you know about the health care system here is distorted or wrong – both because it’s an incredibly complicated system and because leftist politicians in Europe like to talk about its worst aspects. Amusingly, I watch right-wing polititicians in the US do the same thing with the Canadian and British systems (which many Americans “know” with great confidence are a dysfunctional mess, more likely to kill than cure you$.
It’s simply, categorically untrue that health care in the US is a market-driven system; only education and maybe defence are more non-market-driven.. It is true that it’s terribly broken. The system is structured (by tax and other regulations) so that you effectively have to get healthcare through “insurance” from your job (it’s not insurance in any “catastrophic coverage” sense, since it covers ordinary and expected expenses). The benefits covered by the insurance are specified by law (gold-plated beyond reason) so the insurer cannot offer lower-cost plans. I have checked: if you get health insurance in Ireland to cover what is required by law in most of the US, it will cost every bit as much as it does in the US! So, it’s as if the government said you can’t buy a car unless it costs as much as a Rolls-Royce, and then leftists described the fact that most people couldn’t afford a car as a “market failure.” It’s not.
I’m not saying the market has a solution. For the most part it doesn’t, and even if it did it would be illegal to offer it! There are limited market solutions where the law permits. Wal-Mart and others offer walk-in clinics at very affordable prices, that cover routine checkups, vaccinations and nonsurgical medical treatment at about EUR 50 per visit. Despite what you may have heard, virtually no-one in the US cannot afford this. So what people really need is catastrophic cover, for major medical problems – but it’s illegal to sell that in most states.
At this point there are two schools of thought in the US. One says that we should de-criminalize market solutions. The other – more widely accepted – is that healthcare should be nationalized, as it is in the UK. To my mind, this is a classic example of the government intervening in a segment of the economy, breaking it, and then arguing that the market has failed and the government needs to take over. But that’s my opinion, and others would differ. The basic situation I’ve described would not be debated by either side.

One other thing for people to think about. The financial crisis that started in 2008 has been widely viewed as a) an example of what happens when you allow unfettered capitalism in the financial markets and b) an example of what happens when you don’t adequately/properly/sufficiently regulate financial intermediaries and speculators.
It’s worth noting that although all countries regulate their banks quite tightly, there is a financial/speculation sector that is pure, raw, unregulated 19th Century laissez-faire capitalism: the hedge funds. And where did the catastrophe happen? It happened in the regulated banks, not the (largely) unregulated hedge funds. Despite all the pre-crisis fears about the dangers of these “unregulated speculators”, it turned out to be the regulated sector that caused almost all the problems. Laissez-faire worked (this time); regulation didn’t.
There are two proposed reasons for this. The obvious one is “moral hazard”, the belief by bank investors that the banks would be bailed out by stealing from taxpayers, which was not an assumption hedge fund investors shared. The less obvious one is that regulation created uniform strategies, a loss of diversity in business models at the banks. Some hedge funds failed, and many did poorly, but they had diverse strategies and so it was less likely that any single scenario would bring the whole hedge fund universe down. The banks, optimizing around detailed regulations, were all steered into very much the same strategy, making them all vulnerable to a single (unlikely) scenario – a scenario that actually happened.
I subscribe to both explanations. Even now, hedge funds have diverse strategies toward European sovereign debt, but the banks are largely buying it, increasing their exposure to sovereign default at a time when they might be more prudent to reduce it. Why? Because of the regulations, which treat sovereign debt as if it were risk free, and because bank investors still believe in “too big to fail”.
Of course, in retrospect one can argue that the hedge funds weren’t regulated because everyone realised they wouldn’t create systemic risk. The problem is, that’s not what was argued before, and even during the crisis, when there were widespread, urgent calls for more regulation of hedge funds. We were lucky that didn’t happen. Unfortunately, it may yet. The better lesson would be that too much homogenizing regulation led to catastrophe; but I don’t expect to hear any regulator admit it.

@Thomas Boyle,

Welcome. A new voice here is always welcome – and one conveying such rich and varied insights is even more welcome. My heart lifted when I read your comments. They show that every country has to have its own debate about the boundaries between the state and the market; and that things are never so clear cut as the ideologues would like to believe.

The causes and the effects of the financial crisis in the US are different to those in the UK (though both are more closely linked) and both are different to those of the crisis in most of the rest of Europe. In turn all are different to those of the crisi in Ireland. Cue Tolstoy’s observation about all unhappy families being unhappy in their own ways.

The common thread is that governments in many of these countries and, either knowingly or unwittingly, their legislatures entered into an unholy, but convenient and politic, alliance with the banking fraternity. It allowed the bankers to make out like bandits playing with CDOs and CDSs, but it was convenient because the banks provided mountains of apparently almost risk-free credit to compensate for the wage repression that was being driven by technologically induced shifts in the patterns of production and the huge increase in low cost production in East Asia. And it was politic because it seemed to be what people wanted. “Let them eat credit”, as Raghuram Rajan put it – and voters re-elected governments which kept the taps (faucets?) open.

At a global level, the recycling of East Asia’s export – plus Gulf petrodollars – fuelled liquidity and drove down the cost of funds – aided and abetted by the ‘Greenspan put’. Europe had it own version based on German (and neighbouring) export surpluses within the Eurozone (EZ) and affected by contagion from the US and the UK. But Ireland simply had a plain vanilla property bubble that was fuelled by totally stupid government policy, an optical illusion of bank supervision and bank regulation and recycled EZ export surpluses. And Ireland did not experience wage repression; wages, costs and prices took off with each one driving the others in turn to reach unsustainable levels for all.

The dysfunctional governance that permitted and facilitated this blow-out in Ireland is shared, in their own idiosyncratic ways, by the rest of the PIGS – Portugal, Italy, Spain and Greece. Germany, as the indispensible power in the EU, is struggling to achieve two potentially conflicting strategic objectives. On one hand, it wishes to secure effective democratic governance of economic policy and the financial system to stabilise the Euro Area and return to growth. On the other hand, it wishes to strengthen the competitive advantages it and its neighbours possess so that Europe can prosper on the world stage increasigly dominated by the BRICs and CIVETs.

apologies..had to split comment…

The conflict arises because the governance dysfunction in the PIIGS prevents them aligning with Germany’s strategic external objective for the EU and wage repression continues to generate destabilising current account imbalances in the EU. This is forcing Germany to look inwards rather than outwards and its tactic is to drive uniform fiscal austerity so that the penny might eventually drop with the PIIGS that thorough-going internal structural reforms are required. Both – fiscal austerity and structural reforms (not only in the PIIGS, but also in some of the better-governed economies) – are required to persuade international bond market participants with ‘good money’ to invest to get out of the funk they are in about Europe. And, running alongside this, is a pressing requirement to restore many EZ banks to financial health. This is the big gamble. The hope is that fiscal discipline and structural reform will provide the economic conditions to allow banks to trade their way out of difficulty – and strengthen sovereigns to provide any back-stopping required. Unfortunately solvent liquid banks are a sine qua non for increased economic activity. Like Waterloo, it will be a damned close run thing.

In Ireland, much popular sentiment is focused on blaming every external party that may be identified (capitalism, markets, the European Central Bank and Germans are prime suspects) and selected internal parties. The penny hasn’t dropped that major internal structural reforms are required – and, to the extent it has, narrow sectional economic interests exercise so much power and influence that they can prevent any meaningful reform. A decade, or more, of stagnation is unfolding before us. But Ireland is good at that; it has no end of historical experience.

Reply got ‘mashed’ somewhere!

@Thomas Boyle: Very useful commentary. Thanks.

@Paul Hunt

Reading different parts of your split-response to TB, I got to wondered about your economic Model-in-Use. Not certain what it is: Permagrowth? Solvent banks, liquidity, lending, borrowing, increased economic activity (aka: growth).

I am reasonably confident that (due to the slow, non-reversible decline in global available liquid energy) that we are entering an era of economic ungrowth and economic Regression. You reckon on a decade of stagnation. I agree. But what happens then? By then, there will be even less liquid energy available for all those countries who are nett importers. Ignore the shills that confidently extol the virtues of New Technology, resuable energy and other such snake-oil guff.

There is a serious intellectual deficit about the nexus of energy, GDP and political stability, and our courageous political leaders are up to their arm pits in this slurry.

Waterloo: depends on which side you were fighting! Our historical experience will not save us this time.


Thomas Boyle, would you mind me asking if you are involved in the selling or promoting of private health care or are you a representative of a private health care corporation?

A simple google for ‘”Thomas Boyle” healthcare’ makes me wonder whether you might not be a completely disinterested participant in the discussion about the provision of private health care.

@Brian W,

I recognise the importance of the problems you highlight, but why should I have a ‘model-in-use’? I hold on to very few things – the over-riding evolutionary force that has brought humankind this far and will take it further, the scientific method – ‘nullius verba’ – in all disciplines, and effective democratic governance with public policy formulated and decided on the basis of open, adversarial disputation of facts, evidence and analysis.

That’s more than enough to be going on with. And I spend more of time than I should seeking to persuade those who reject or ignore some or all of these three that they shouldn’t.


I hope I’ll be able to hold myself together before I hit the floor and start rolling around laughing. We have a pseudonymous commenter challenging a commenter using his own name to declare his interests…

+1 on Paul H’s comment. Are you serious?

Since we don’t know who you are, calling on your Granny as a source of authority may not have quite the effect you anticipate.

@Thomas Boyle.
Good points. Thanks.

Mr Sheehy and Mr Hunt.

Given that we are in the middle (or possibly just at the start) of cleaning up after a global financial crisis significantly caused by relentless (and in hindsight dishonest) commercial lobbying for deregulation of the financial sector do you not find yourselves feeling a little bit uneasy to be leaping to defence of someone doing just that but for the health care industry?

Do you think that there is a possibility that Thomas Boyle (who I wish the best to in his career and to his customers – he is in an entirely legitimate profession) might stand to benefit financially from the kind of deregulation he is in favour of?

Whatever happened to learning from our mistakes? (except of course they are not really my sides mistakes….)


When you refer to your ‘side’, you have us all at a disadvantage. It is pretty clear you reside somewhere on the ‘left’, but that is a broad church and its internal theological disputes, self-deceptions and intellectual erors are a source of continuous amusement for anyone who cares to pay attention. Are you a member of a particularly pure sect – analagous to the Presbyterian Wee Frees in Scotland – that allows you to condemn all who do not belong with such vehemence and conviction?

I have no problem contesting the delusions you advance – because they seem to be cherished foolishly by so many, but it is bit rich for you to have a go, pseudonymously, at those of us who reveal our identities, run the gauntlet of the libel laws and, in some cases, risk (and experience) professional damage.


Are you saying that Thomas Boyle is engaging in relentless and dishonest commercial lobbying? By posting on here under a real name (or what seems to be a real name)? When you are a regular yet anonymous contributor on any number of internet fora?

As for “your side”, whatever that is, the banks are not my side either.

Maybe the pathetic bleating of the left-wing sects has subsided and we can get back to the observation in the initial post about the massive change in the relative costs of consumer white goods and essential personal services and the underlying question about where the boundaries between the state and the market/private sector should be set when addressing the implications of this observation.

Although when examining various US sectors and economic activities where the state either has – or could legitimately claim it could or should have – a role as a provider my field of vision is limited by my focus on the energy sectors, I have been advised that among all these sectors and activities the economic organisation and regulation of the natural gas industry – and to an extent the electricity industry – is probably close to optimal, while the organisation and regulation of other sectors have varying degrees of dysfunction.

My sense is that dysfunction everywhere has to be tackled on its own terms, but, once the dysfuntion is recognised – and we are a long way from this in Ireland, it may be possible to identify replicable and transferrable features of good practice from other jurisdictions.

Google informs me that there are over 600 people called Thomas Boyle in the U.S.
I can assure those who asked (and anyone who wondered) that I have no professional connection to the healthcare industry, nor to political advocacy. I am a consumer of healthcare, and often a fairly dissatisfied one. I have, in the past, encountered the problem of trying to buy health “insurance” when I was working as an independent professional, and the difficulty and expense of that (I had a pre-existing condition) drove me back into the ranks of those who are employed (rather than becoming someone who creates employment, as I had hoped).
During the debates of “Obamacare” here, we heard a lot from the right about the dysfunctionality of healthcare in Canada and the UK, both countries whose healthcare systems are internally quite popular. I wondered whether something similar might be going on when people on the left in Europe and Canada bash U.S. health care. It took me about an hour to get up to date on how health insurance in Ireland works these days, and to find a plan comparable to what’s required in the U.S. (helpfully, the FAQ actually described it as something like “US-style”). It cost about what it would cost in the U.S., although I probably wasn’t getting a precise comparison.
My own view is that there is a role for the state in providing a healthcare safety net, and ithat in many ways the US has the worst of both worlds: healthcare that is highly centrally controlled via regulation, paid for by a third party (which would also be a problem if the government paid for it, which for most people it does not), in a litigious society, and with an inadequate safety net. The incentives are completely misaligned, and the “fixes” that have been layered on each other only make matters worse. It’s also byzantine in its complexity: most people, myself included, can’t even read our doctors’ bills. It’s a mess. But it’s not a market.

Burning high quality NG fuel for electricity generation is similar to burning oil in plants during 60 & 70s – its a naturally extractive activity.
The Left / Right Punch & Judy show is just but a act.

I find it funny that both these parties dispute the laws of Physics & its natural interaction with real economic activity. – as if they were both above such nasty technicalities.
Hilarious stuff Paul.
You really crack me up.

@Thomas Boyle

My sincere apologies Mr Boyle, not that the other Thomas Boyle need feel insulted.

Hi Paul, Sorry about the delay in replying. We all have Models-in-Use – for all sorts of stuff, its just not so obvious, ‘less you go poking around in your ganglia to locate and identify (not recommended when sober!).

Re: “… further, the scientific method – ‘nullius verba’ – in all disciplines, and effective democratic governance with public policy formulated and decided on the basis of open, adversarial disputation of facts, evidence and analysis.”

I know that is what is recommended in the books, and is the subject of multiple exhortations. My experience has been most different. A goodly bunch of the critters I encountered in my previous professional career didn’t give a witches tit about other folks’ professional opinions – and these were postgraduate research scientists! Well, they alleged they were. Low (probably absent) mental horizon types. I, mostly, laughed at their intelletual contortions. I had read “The Good Soldier Svekj”! 🙂

Hey Dork, “I find it funny that both these parties dispute the laws of Physics & its natural interaction with real economic activity – as if they were nasty technicalities”

Jesus Dork, that’s a right good definition of delusional belief. But I suppose if you have this religous thingy belief system – your as happy as a cow in clover!


( Example A ) Private Utility company builds &/or operates Jet engines powered by NG , these have a low capital cost relative to Nuclear & Hydro.
Because these have a lower capital / money cost the bank credit ecosystem apparently registers it has more resourses for credit production / fois gras activities
The amount of consumption and consumption of consumer durables (houses , cars etc) increases……….relative to core capital.

The glut of gas soon ends as consumption races ahead.
Gas price rises as shortages appear – utility externalises its low capital investment by increasing charges.
It makes extreme Profits
Economy begins to contract as more & more resourses go into operating consumer durables already bought , number of new consumer durables decreases , general consumption decreases.
Entire Economy crashes.
Utility company goes bankrupt.
State bails out Utility company.

(example B)
State Utility company invests in capital intensive Nuclear or Hydro where suitable locations exist.
The banking system registers this big capital / money investment as a subtraction of demand from the credit ecosystem as more resourses go into the production of core capital wealth relative to consumption.

Consumption of consumer durables and general consumption declines.
As supply comes on line there is a energy glut – this registers as a loss on the state utilities books as it cannot sell energy at a profitable price.
Its losses are subsidised by its parent state – which takes more demand from the economy
After lets say 10 years demand rises enough so that it begins to sell energy at a profit.
Meanwhile it has entered a privatisation process.
It would be breaking its fiduciary duty to its new shareholders if it invests in further capital intensive projects as although they increase the long term wealth of the commons this will subtract from profits for a decade or more.

It decides to build cheap jet engines instead and hope the price of Gas will rise so that it has the excuse to charge more to customers…………………………….

In the very long run however all Gas is depleted , wealth is depleted.

Nothing that complex really.
With Nuclear construction the consumption part of the economy is restrained during the initial phases.
Gas is the opposite.
Consumption crashes at the end of the process.
If enough resourses is depleted not enough may be available to build capital intensive operations without starving the populace.
You may get a long decline into a dark age.

Fission is thee most effective conservation measure in this modern fossil fuel capitalist society rather then capitalist slave based economy of ancient times that many people believe we are still in -although they now use a global slave arbitrage system that depends also on fossil fuels – a nice touch really.
They however just concentrate their remedies on the wrong problem ……….. making things even worse…….. via austerity & the like.
Completly missing the central problem.

Both were the motive power for capitalism but the dynamics have changed since the days of Galleys.

The high capital cost of Nuclear is a advantage and turns these nuclear units into monetory batteries.
It defers expenditure on consumer durables via a more stunted bank / consumer credit ecosystem and / or prevents higher extraction rates of fossil fuels if mining resourses are diverted towards nuclear build.
But when it does this it gets a false signal from the new market transformed by capital intensive but abundant energy…….. lowering demand , thus creating surplus energy and paper losses as the electricity cannot be sold at a profit until demand can be created again.

Which is why most bankers hate this energy – when something is capital intensive but effective their leverage and thus profits is reduced.

“I wondered whether something similar might be going on when people on the left in Europe and Canada bash U.S. health care.”

US health care spend is something like 14% of GDP with annual inflation significantly ahead of economic growth. Project it forward a few decades and the US will be spending 30% of GDP on health costs. The rest of the country’s output will presumably be spent on lost wars .


Here are 2 more t shirts for the collection

Must get one of those.

“The revised Christo-Fascist Sermon On The Mount. And Jesus said ‘Your poverty disgusts me. Get a job, you losers.”

Headbangers church of the surplus workers me thinks.

@ Thomas Boyle

It took me about an hour to get up to date on how health insurance in Ireland works these days, and to find a plan comparable to what’s required in the U.S. (helpfully, the FAQ actually described it as something like “US-style”). It cost about what it would cost in the U.S., although I probably wasn’t getting a precise comparison.

In contrast to the excellent systems in the UK and elsewhere, there is near-unanimity here on the bad state of the Irish ‘system’. Basically, we have grossly overpaid consultants allowed to pursue their private practice using any public resources they like, up to and including putting their private patients (who until recently were allowed tax deductions at their top rate) into public beds. And on the other side, we have an insurance industry that is a model in dysfunction.

All of this has been made infinitely worse by a so-called “free market” former health minister who made every effort to encourage the parasitic private health industry leeching off the public.

@ Paul Hunt

Maybe the pathetic bleating of the left-wing sects has subsided

I’m guessing this is meant as an insult to someone, however it’s more than a little… incoherent. Maybe you’d like to try again?

Meantime, I’ve been reading that Arrow paper and – to be honest – so far it’s giving me the impression that it’s not saying anything terribly surprising.

Open to correction, but so far it seems to be saying that medical treatment has a demand function that’s unlike “normal” markets and a supply function that it odd too. Ehm, yeah. Only half way through though.

Hey ho.

Healthcare spending in the USA is now approaching 20% GDP (it was 17.6% in 2009 and is growing), by far the highest in the world. Of this only 32% is from private insurance payments. About 12% is out-of-pocket payments by consumers, and the rest is from an array of federal, state and local programs. Lots of facts can be found here .

The two biggest programs (Medicare and Medicaid) by themselves are larger that all private insurance spending, and then there are other programs such as the federal veterans administration, state programs for children and mental health; local/county hospitals; insurance coverage for government employees etc. etc. Government healthcare spending per capita is, by one league table I’ve seen, the third highest in the world.

The average cost for an employer to provide health insurance for an employee is now approaching $10,000 per year, with roughly an 80/20 split between employer and employee cost. This is a huge overhead for companies.

Of course the main problem is the insanely high costs involved, mainly due to the incentive structure that is in place, which most of the time sees everybody spending other people’s money. ‘Defensive’ medicine is also a culprit, with huge incentives for doctors and patients to use lots of extra check-ups and tests, at minimal extra direct cost to patients. While the new Walmart retail clinics and the like are a good development, they are still relatively few in number and they are not staffed by doctors. Much of their use is by insured people for simple treatments, due to the convenience. They cannot be seen by themselves as an adequate solution for those who are uninsured.

The fact that the USA trails developed countries in infant mortality and life expectancy is well known, as is the fact that it is the only developed country in the world not to provide a universal health care program. However the amount of taxpayer money that the system draws in is probably less well known, as is the impact on employer costs.

It is a prime example of an industry that has grown out of control, consuming large amounts of public money in an inefficient manner and making many insiders rich (if not quite up to Wall St. compensation standards). The regulatory capture is wide and deep, and the system is one that has so far easily seen off all challenges to the wide and deep reform that is really needed. Despite having the highest expenditures in the world, the USA only ranks 37th in the world in health care efficiency according the WHO.

Capitalism is in ‘crisis’ ’cause lots of folk who used credit to consume stuff, have been ‘shut-out’ of the market! No credit, no Capitalism! Its that simple. Lack of credit also has a nasty way with asset values, they sorta tend downwards. I wonder why?


Productivity in the health care industry can be improved with the stroke of a pen. Medical procedures in France and Germany cost half what they do in Ireland. Even better the cost in Poland and Hungary is one third. There are a host of discretionary procedures that are not time sensitive such as knee and hip replacements, neck and back procedures are some examples. There is no reason why patients should not be offered these alternatives now that it is dirt cheap to fly to Warsaw or Budapest. Hungary is famous for the quality of its physiotherapy to the point where Germany send thousands of patients to Hungary every year. Involved dental surgery is another candidate.

Prices in Ireland can be negotiated down very quickly. Of course the Gov’t God bless them has to protect the high incomes of Irish professionals and that trumps every other consideration. Manufacturing will continue to be one of the few competitive activities in Ireland.

Interestingly, I heard only recently about the size of the Hungarian “medical tourism” business. This isn’t just health tourism for Spas and such, it’s true medical tourism – as you suggest. People going to Hungary for serious medical procedures.

Free trade, eh?

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