Never ending Irish success?

Paul Krugman has a thoughtful post (ht Niamh Hardiman) on Ireland’s role as poster child for austerity. He points out that those in power continually cite Ireland’s imminent recovery as proof things are getting better and sticking to their plan works. Paul doesn’t mention our lack of fiscal headroom or the need for fiscal consolidation of *some* kind–whatever that might be-but I think it’s implicit.

At any rate, his point is more about how Ireland is used as an example of what great things austerity policies can achieve, when clearly, they can’t. At least, not on their own.

Comments

comments

Author: Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

120 thoughts on “Never ending Irish success?”

  1. “And yes, it seems obvious to me that Ireland keeps being proclaimed a success because it’s supposed to be a success: they did the austerity thing forcefully, with a minimum of complaints, so there must be a pot of gold at the end of that rainbow, right?”

    In the meantime HSBC say their indicators suggest that the world economies are heading into a cyclical downturn?..
    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10087843/No-saviour-in-sight-as-world-credit-cycle-rolls-over.html

  2. When I want some Mark I eyeball evidence about our economic activity, I drive about the local town centres, commercial parks and industrial estates – in south Dublin. They are grim. I shudder to think what the less affluent peripheries are like.

    We hardly need PK to explain our situation. OK, so he’s trying to be helpful. Fine, but its our Deadweight leaders and cheerers that need to be converted, and to start telling folk the plain, unvarnished and unpleasant truth about our economic prospects. Which they have no intention of doing! Bad for votes, it would be! Still, Confidence is good. Buys the groceries Confidence, does!

    The Irish agricultural/rural sector could sustain an extra 30,000, manual labour jobs. But you are unlikely to hear/see any Government press release about this. Everyone wants to ‘work’ in the service sector – naturally! 😎

  3. What austerity? We’re still partying like it’s 2007 on the savings of foreigners. Not for us the indignity of efficiency. As well as begging for money from other countries we have the temerity to fiddle them out of the taxes they are due. The world is slowly figuring us out thank God. Excellent investigation by the Guardian today into Apple’s shenanigans in Cork.

    http://www.guardian.co.uk/technology/video/2013/may/29/apples-dirty-little-tax-secret-video

  4. Well the national household survey just gave a nice boost to sentiment after pretty weak data a couple of days ago on earnings and consumer spending.

    The unemployment rate is now 13.7% apparently. So going in the right direction, albeit slower than we’d like to see.

  5. Possibly more revealing is the tone of the piece, it’s possibly as close as the genius will ever admit to being wrong. Krugman has been banging on for years Ireland’s failure. Now he’s allowing that maybe Ireland could recover.

    For instance in May 2012, the much decorated nobel laureate declared
    “In fact, the will to believe is so strong that members of Europe’s policy elite keep proclaiming that Irish austerity has indeed worked, that the Irish economy has begun to recover.

    “But it hasn’t. And although you’d never know it from much of the press coverage, Irish borrowing costs remain much higher than those of Spain or Italy, let alone Germany. “

    Wonder if he’s checked those borrowing costs again? Maybe even checked them against one of Krugman’s success stories Iceland?

  6. Also worth noting (just for the reality based community, mind you) is that total net emigration has been somewhere north of 200K over the years since the great unpatriotic war against bondholder losses.

    Had these people not left to seek work in countries not being run by the Troika the unemployment rate would be about 20% (with a corresponding hit to the budget deficit).

    So we are a country which is in the midst of an unemployment disaster hidden by an emigration disaster and which only has funding because we are in an employment destroying “structural reform” programme.

    Of course by the standards of Greece’s “rescue” Ireland’s is by far the less awful failure so we get to be the good publicity for a failed and dangerous policy touted by Deutsche-bloc paleoeconomists and European idiotacrats.

  7. @jackh

    Krugman is right, and not because he is a genius. He is just nobody’s fool.

    It is helpful to compare these two graphs over time of employment in Iceland and Ireland (though obviously our economies are different, Iceland is less dependent on foreign multinationals and tax arbitrage!).

    http://www.tradingeconomics.com/ireland/employed-persons
    http://www.tradingeconomics.com/iceland/employed-persons

    Also: http://www.cso.ie/en/statistics/labourmarket/principalstatistics/

    Numbers employed in Iceland are slightly higher now than in January 2006, before the financial bubble really started to peak, while numbers employed in Ireland are at 90% of the level they were in 2006.

    The current policy has been a disaster for everything except the class and political status quo in Euroland.

  8. The mood on the streets and in the shops is fairly resigned. If there is success it won’t be visible for some time. The crisis grinds on and on.

    Maybe when all of the Donegal starting 15 are in work we can say that the economy is back on its feet.

  9. Actually hold the front page
    “Full-time employment fell by 3,700 or 0.3 per cent in the year to the end of March. This was offset by an increase in part-time employment of 24,200 or 5.6 per cent over the year.”

    “The numbers of under 35s at work continued to fall in the first quarter of 2013, a trend that has been on-going since 2007. There were just under 650,000 under 35s in employment in the January-March period, down from 1 million in 2007.”

    So there has been an increase of 24,000 part time employees but they have been over 35??

    It seems like the whole country is soon to facing the same issues of a country village. Plenty of very young and very old people But all the younger workers have headed of to the Big Shmoke (London,Canada and Oz).

  10. @ eamonn moran

    The largest rates of increase were recorded in the Agriculture, forestry and fishing (+19.5% or 15,700) – – the CSO suggests this maybe an anomaly.

    Self-employed (without staff) up 15,800; assisting relative up 3,700

    That’s 35,200 jobs that maybe not real jobs.

  11. Unemployment figures down today – hurrah!

    Due of the numbers forced to work part time because there’s nothing else – boo…. or being forced into ‘self-employment’ because there’s nothing else – boo…. or being forced to leave the country because there’s nothing else – boo…. or ……

    Keep up the austerity until morale improves.

    Ministers will be clamouring to get on the TV today to spread the good news and take credit for it, er, unlike the other night when questions were being asked about various creches and no minister was available to come onto the show.

  12. It’s all PR. All of it. We’re living in the second coming of the Soviet Union. A dysfunctional second world run by believers and incompetents. This could go on for 80 years.

  13. Another PR onslaught with NAMA today. They sold a lot of foreign property and are paying down some debt. But what happens when they try to sell the crap?
    Pity Jagdip won’t be available to dissect the numbers.

  14. Hey DOCM, how’s about you flock back off to whatever DoF/German outfit it is that pays you to derail threads on here. No I don’t want another link to some Federated EU BS or Bundesbank orthodoxy. And No I _really_ don’t want cynical dismissal from a man who’s probably getting paid handsomely to keep justifying a regime that bankrupting the rest of us.

    You’re trolling. The mods on here don’t have the experience to see it, but it’s pretty obvious. And I honestly wouldn’t care about some random troll on the web, but since this site happens to be well read, and since the opinion on here do have some small bearing on the future of the country, I’d prefer if you just quit your job and left.

    If you are Irish, just go away. If you’re not, please just stop caring. Either way Ireland and this site do not need you in here wrecking what should be a public discussion forum.

  15. @ OMF

    As I have been impressed by the restrained nature of your own contributions, I will refrain from further comment on your most recent one.

    @ All

    Leaving aside the attempt by Krugman to have it both ways, I would suggest that the really interesting issue is not that Ireland is doing particularly well but that the other countries in difficulty are doing so badly, even allowing for the impact of emigration (which seems not to have been factored in by him at all).

  16. @OMF

    The moderators can count and have banned people before for posting they judge to be unhelpful to the general debate.

  17. @ OMF

    any update on the Bundesbank’s impending striking down on the prom note deal? Or that syndicated derivative thingy the NTMA was up to in January?

    Best regards
    Eoin

  18. OMF

    Yes. This site is well read and it does have some bearing on the future of the country, IMHO. And yes, a bit of humour does not go amiss, this is Ireland FFS. No one can derail a thread if other posters do not go along with it and some of the derailments have been better than the original thread.

    I am not sure what you are pi55ed off about, and I am sure there are plenty of reasons to be frustrated with the Irish and Euro reality, but DOCM isn’t the problem. S/he is part of the solution, and as DOCM freely acknowledges, so are you 🙂

  19. @ Kevin Lyda

    I wonder how many older workers had retired and have now gone back to work because of tax increases and reduced pensions.

    Many, including my own parents. De brudder (much younger than me) has emigrated to the UK, thus also contributing his bit to this emplyment ‘success’.

    It’s also amusing to see the continuing deperate efforts here to find some spin to prove PK wrong, in the face of reality.

  20. Slightly off topic but the FT have tightened up their subscription terms :

    “I would like to remind you that we do not provide refunds to customers who wish to cancel their subscription mid-term”.

    Pearson must be feeling the downturn but obviously Europe is in safe hands as DOCM says.

  21. I found Richard Koo’s presentation to the Soros founded New Economic Thinking Institute April 2010 of interest. It compares Europe’s Balance Sheet recession 2008 onward with Japan 1990- 2005.

    Progress is hard to find which is why any improvement no matter how small is lloked upon with awe. We ar probably five years into a 15 to 20 year recovery. Koos’s Balance Sheet Recession emphasis looks right to me, particularly in private sector borrowing/lending not responding to low/no cost money.

    27 slides

    http://www.businessinsider.com/richard-koo-recession-2010-4#-1

  22. @paul quigley

    Yes. This site is well read and it does have some bearing on the future of the country, IMHO. And yes, a bit of humour does not go amiss, this is Ireland FFS.

    I don’t know where this is anymore. And this is no longer funny.

    The country has now reached Great Famine emigration levels. It’s dying. Our never ending success as austerity’s poster child is killing this country; killing its future. Whatever potential Ireland had to improve itself is haemorrhaging out of our airports, our banks, and our economy. The carcass of a country I believed in is being feasted on by a criminal ascendancy of connected crooks, even as they skive out of paying their own debts to the rest of us.

    So when the likes of DOCM drops to make a quip about it all, It make me angry. Enraged in fact. They’re probably paid to post here, by companies with written off debt, or department offices which refuse to take cuts, or some other rent collecting enterprise that makes a living out of taking one from the rest of us. I don’t find it funny, and I don’t find it part of the solution either. It’s a very big part of the problem.

  23. All we have had from our paparazzi is a regurgitation of state sponsored statistics which are nothing more than state propaganda. I used to get updates from Namawinelake and Constantin’s site and I say well it’s bad but probably not as bad as he says. But, as regards the Nirvana CSO ERSI and DoF they are a disgrace.

  24. ‘Austerity in the Eurozone and the UK: Kill or Cure?’

    Martin Wolf

    “Austerity has failed.

    “It has failed in the UK and it has failed in the eurozone. Its failure was predictable and, by some at least, predicted. It turned a nascent recovery into stagnation. That imposes huge and unnecessary costs, not just in the short run, but in the long term, as well: the costs of investments unmade, of businesses not started, of skills atrophied and of hopes destroyed.

    “This is not, as many seem to believe, a debate about the short term versus the long term. It is a debate about both the short and the long term, because what we do in the short term shapes the long term. What is being done here in the UK and also in much of the eurozone is worse than a crime, it is a blunder. If policymakers listened to the arguments put forward by our opponents, the picture, already dark would become still darker.”

    http://blogs.ft.com/martin-wolf-exchange/2013/05/23/austerity-in-the-eurozone-and-the-uk-kill-or-cure/?

  25. Ah here now, the post is hardly thoughtful. More like boilerplate PK, as much as I love the man

  26. @ GK: “It is a debate about both the short and the long term, because what we do in the short term shapes the long term.”

    Er? Arrow of time and all that?

    “What is being done here in the UK and also in much of the eurozone is worse than a crime, it is a blunder”

    IT IS A CRIME! If a head of household neglected or abused their family, they’d be up in court. But if a clutch of academics encourage politicians to conduct a hazardous (and risky) social experiment on tens of millions of folk – that’s just a blunder!

    Since when have free men become the private property of financial interests? And he was me thinking that slavery was something in the past.

  27. @anti-austerity purveyors

    Beyond busting Germany, how do we adjust the budget deficit, reduce gov debt without reducing overspend?

  28. @Gavin

    Martin Wolf knew it would fail. He has been screaming this in the FT since the austerity bandwagon got going

    http://www.traderslog.com/why-will-the-euro-eventually-goes-to-par-or-beyond-basic-macroeconomics/

    “Let me put the point starkly: Germany’s structural private sector and current account surpluses make it virtually impossible for its neighbours to eliminate their fiscal deficits, unless the latter are willing to live with lengthy slumps. “

  29. Will ye for God sake stop calling it austerity. There is nothing austere about banking bonuses or the behaviour of billionaires. This is financialism – are yis all s bit thick? Blankfein gets paid 1000 times the average industrial wage for example. How can 1 man be worth 1000? And it’s not just him.
    Now I believe in capitalism and that but this is ridiculous. The scale is obscene. Justify it. What is austere about this?? Hey?

    Honestly sometimes I despair.

  30. Sorry despair is too strong a word. Was going for a bit of melodrama.
    Ill save that word for something serious – if my daughters became Beliebers that’d probably come close

  31. @eureka

    Beyond the moral high ground would taxing/reducing high salaries make any difference?
    You are right, austerity is the wrong discription, a budget deficit of €12 bln is an unaffordable stimulus package, most of which is spent on salaries or social transfers, meanwhile debt ticks upwards

  32. @ Pale Rider
    Nice try but don’t deflect from the issue.
    How can one man be paid 1000 times the average western industrial wage? And probably 10000 times the wage of a worker in Bangladesh for example.
    There is something rotten in the state of the world! And it’s not social welfare – it’s bankers and their exaggerated sense of entitlement.

  33. Eureka,
    his salary and bonus has dropped from $53m in 2007 to $13m in 2012. He probably earns less than McIlroy/Federer/Rooney etc now. We don’t know what he pays in taxes either

    Pale Rider,
    +1. We are still running the biggest primary deficit in the periphery. Maybe that is why we are the best boy in the class.

  34. @Pale Rider

    Beyond the moral high ground striking immorality of it would taxing/reducing high salaries make any difference?

    Income diverted to high earners from the less well off adds comparatively less demand to the economy, especially in a recession, because of the reduced tendency of the super rich to spend (there is some disagreement about how much effect this has).

    Perhaps more seriously because purchased influence in a society is a zero sum game even nominally democratic societies are gradually bent to the needs of the super rich as they acquire more disposable income relative to the average citizen (concentrated wealth corrupts).

    High taxes also do not negatively affect economic growth, America’s period of highest growth corresponded to very high rates of taxation on high incomes (70% was the top tax rate in 1965). Today capitalist oligarchs like Lloyd Blankfein and Jamie Dimon labour under a tax rate of a maximum of 36% on the majority of their income.

  35. Eureka,
    as long as he is doing nothing illegal and he is paying the correct amount of tax, I do not really care. It is up to his employers and shareholders to decide what is the right pay.

    If you want to change the rules run for election. I willgive you a preference.

  36. @Tull

    I would have concerns around misallocation of resources. The Squid may have operated within the law pre lehman but the global financial system was brought very low and the masters of the universe didn’t understand what they were doing, as it happened. GS had to be bailed out by the taxpayer.

  37. All true. The Vampire Squid was better than most given it was short and stuffed its clients.
    At least US policymakers deployed enough cash and nous to shore up the system. The Treasury made a profit from the big banks & AIG. Contrast that with the half measures in the EZ. As DOCM, the EU has a different political culture. Moralistic, procrastination, incompetance & failure until the US & the Brits save the day.

  38. Agreed. The US policy response was far better. But it isn’t out of the woods yet either .

  39. @ John Gallaher

    Blankfein’s a relative bargain! His $13.3m of 2012 pay is only 33x the average compensation of a Goldman employee*. He’ll be laughed out of the next Bilderberg Group dinner when they find out that he’s only worth 33 of the serfs working for him!

    [*Not sure if the average in the article excludes bonuses or/or deferred compensation, because the total comp is actually $400k http://online.wsj.com/article/SB10001424127887323968304578245482333171010.html%5D

  40. @Edward v2.0 oh the shame the shame…not 100% of beni’s and deferred comp.This was a little surprising,the top two guys have not exactly been value for money either!
    “Estimates by academics and trade-union groups put the number at 20-to-1 in the 1950s, rising to 42-to-1 in 1980 and 120-to-1 by 2000.”

  41. What is the cost of service? The price that someone will pay for it!

    I think the most incredible side of such well paid senior positions is the one way bet it is for the incumbent. If the company hits targets they get an obese bonus, if it doesn’t they get leviathan bye bye money. This is the tat meant that is so different from most of us might expect. How did this practice develop? On top of that there is more reputational damage to the stock than the CEO!

  42. “What austerity? We’re still partying like it’s 2007 on the savings of foreigners.”

    Johnny Foreigner: I hope you’re enjoying the party in your neck of the woods. Here in my world, my husband is trudging to work in two slightly mismatched shoes that leak. Month after month, we don’t have enough left after bills to buy him new shoes. He’s a professional man, but his ever-shrinking salary supports five people, and the kids’ feet come first. Just wondering, if he were going to work barefoot, would that be austere enough for you?

  43. wonder what her vig is for this…..hopefully she has some skin in the game cause thats some contribution to the bottom line,w/o her as a director this scheme would not work!
    “Kearney is the Silicon Valley computer giant’s top lieutenant in Ireland, and has overseen the explosive success of the company’s operations in Cork, responsible for selling iPads, iPhones and MacBooks to scores of markets across Europe, the Middle East and Africa. No less than $22bn of Apple’s profits – two-thirds of the total for the group – came from Kearney’s Cork companies in 2011 alone. Back in the United States, Tim Cook, Apple’s chief executive, has described this international success as unprecedented.”
    http://www.guardian.co.uk/technology/2013/may/29/apple-ireland-cork-cathy-kearney

  44. How dreadful … to be the illusory exemplar for the neugoebbellsianizm. Little wonder that Patricia_the_Irish_Sovereign_in_Exile passed away recently .. sad, very sad. And do the serfs lament? Nay … the citizenry as well as the elite have been captured …. and loaded with the debts of the dodgy financial system. Sad, very sad.

  45. @Mary Feely

    There is a painting in one of the major Dublin galleries of children barefoot playing soldiers titled Army Manoeuvres. It touches one right in the heart. Ould Ireland and its poverty stricken past.

    The worst of it is the need to keep up appearances. I hope he keeps his feet on the ground so as people cannot see he is on his uppers. You cannot go to any charity because if word got out the family reputation would be ruined. I assume you are being ironic or sardonic Mary. If not you have my sympathy. As me blessed sainted mother used to say “You can’t put sympathy in the tank and take it to the Creamery.”.

    Fear of shame is what is keeping Ireland together these days.

    On the subject of emigration, preceding the Famine the birth rate was very high, 7 or 8 children was the norm. Today it is 2.1 so emigration is a much more serious matter in terms of depopulation risk. This is a serious economic matter particularly if your banking industry is awaiting the long anticipated appreciation in the residential property market.

    Localisms like FFS and SFA are confusing to foreigners maybe we should be using FUBAR and similar equivalents

  46. apols a bit off topic-actually miles off but…kinda related i think.
    “Iceland and Ireland – and their banks…”
    “There’s more here, of course, than a little history. While Iceland
    and Ireland both dug themselves deep, deep holes in the 2008 global
    crash, Iceland has emerged battered but on its feet, while Ireland is
    still mired in austerity-induced recession and flattened by public
    debt. Not surprisingly, a lot of people would like to know what Iceland did right to escape the trap – and what Ireland did wrong.”
    http://www.milkeninstitute.org/publications/review/2013_4/14-22MR58.pdf

  47. meanwhile ; US Senate rasberries our protestations…
    http://www.irishtimes.com/business/2.790/us-senators-rebuff-irish-ambassador-s-letter-on-tax-haven-claims-1.1413418

    “Responding to the letter this afternoon senators Levin and McCain said that testimony by Apple executives corroborates that the company had a special arrangement with the Irish government to cut its tax bill.
    “Most reasonable people would agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven.” Levin and McCain said in a reponse to Michael Collins’ letter.”

  48. @john gallaher

    The political gravy train is at the bottom of everything in Ireland. ‘Tis the overarching unifying theory of Irish creation.

    Our politicians and their servants could have cut Anglo adrift before it brought down the country. But the ECB, IMF, EC and others dangled billions in low cost loans in front of our Politicians and their servants on condition we rescue the deserving and undeserving creditors of Anglo. That was the bait, the threat was if Anglo goes under and defaults all Irish banks will go under and the Irish Gov’t will not be able to borrow except from seedy men wearing stained gaberdine overcoats and carrying concealed weapons. (You have all seen the movie.) Irish politicians threatened with going cold turkey off the flow of low cost funds that allows them to go deeper into debt monthly while currying favour with the electorate made the fateful decision that distinguishes us from Iceland.

    Not alone that, they continued to fund the gravy train up to the present day the last day of May 2013. We did get something, it reminds me of that old Kerry saying “Shooting would be too good, slow hanging would be more appropriate.”. The decline was slowed , so people felt less pain but over a longer period. We are close to Peak Pain as the flow of low cost funds reverses and we begin pay down our national debt. Delay, delay, delay that has been the strategy from the first day. Now we are entering the slow hanging phase after 5 years with a mountain of external debt to pay down.

    I would not say the decision was easy but I would say it was highly predictable. We do like our government to cater to us with the model being the Taoiseach as head waiter and the TDs’ as waiters. We are living in one of the most expensive restaurants on earth as well as being thoroughly dissatisfied with the service.

    We also breached the first commandment which is “The sovereign state must be solvent at all times.” We are beyond redemption and headed for hell without a pension.

    Iceland has a cold weather, marginally productive agriculture, cabbage, turnips, potatoes, rye. Getting blood out of Iceland would be impossible. Ireland had a supply of blood in FDI, food exports, goods and services exports which could be squeezed over a long period of time by not drawing more than would cause the country to expire.

    To hell with poverty we will kill a duck, this ologoning is getting us nowhere. We have to stop or Mna na h’ Eireann will enter the depths of depression.

  49. @Mickey Hickey,the author makes some interesting comparisons..
    “Austerity hasn’t worked in Europe. But for reasons that are unclear, the European Union is still dominated by policymakers who are convinced that the only proper medicine for financial indiscretion is fiscal pain – that the right way to manage the economic disloca- tion created by the crisis is to squeeze every bit of fat out of public and private spending. Iceland’s economy was spared the conse- quences of this Dickensian view of macroeco- nomics because it wasn’t a member of the Eurozone and was small enough to fly under the radar of the deficit hawks in Europe who might nonetheless have insisted that the IMF play hardball. Ireland wasn’t as lucky.”

  50. @john gallaher

    I agree with you that the author makes interesting compariaons and that the comparisons have merit.

    Dow here in Kerry in 2008 we saw a sound country with a 28% debt to GDP ratio. We were sleeping soundly at night and not too fearful about meeting a new day. Then in 2009 we wake up to Anglo being declared sound by Merrill-Lynch and 11 days later becoming a ward of the state. One institution losing over Euro 12 billion in one year. Then the horror show unfolded with debt to GDP projected to reach 120%.

    Down here leaning on the slane we had no reservations about putting Anglo into receivership (or the more cutesy examinership). Auctioning it off and paying the creditors in accordance with the laws of the land with the auction proceeds made perfect sense to us.

    Instead our government with forethought and knowledge accepted all responsibility for Irish Banks thus weakening the state to the point where any Tom, Dick or Harry in Brussels, Frankfurt and Berlin could impose and did impose austerity on us.

    If I was an excitable person I could get enraged at how naive, gullible or incompetent our gov’t was. Presently their head is in the noose, their hands tied with no choice but to cut expenditures and raise taxes.

    The first responsibility of the state is to remain solvent even Mariano Rajoy of Spain and Monti and his successor in Italy knew this.

    From 28% to 120% unbefekkinlievable. Only in Ireland.

    117.6% today, Sheila tell me I am hallucinating and all will be well when I sober up.

  51. Levin would prefer Apple taxes to cuts to social spending and McCain would spare the Pentagon if the funds could be repatriated. Senior hurling redux,

  52. @Mickey Hickey it’s been well reported elsewhere,but the relationship between bankers/politicians/regulators was very unhealthy.
    The biggest surprise from over here is the lack of political will to conduct a full inquiry….people have moved on,memories fading by now.
    I also never understood why the powers that be haven’t “turned” any senior bankers,give them immunity in return provide a road map full cooperation.
    New York and The Hamptons is packed with bright,energetic well educated irish this summer probably a few from Kerry too….they be the ones with the GAA jerseys and wearing socks with sandals 🙂
    For the love of gawd hold a fecking inquiry!!!!

  53. @ john gallagher

    There won’t be any enquiry. The message is ‘heads down lads (and ladies) and this will blow over’. Every significant institution in the state compromised itself in the bubble, and the new faces are committed to pouring concrete over the smoking ruins. Move along nothing to see here.

    Today’s stats confirm the dominance of the elite fee paying schools. Co-optation, not co-operation, or, God help us, competition, is mostly still the way we do things. Property is still the central measure of value, so we will do whatever it takes to make sure it stays that way. There is no risk in bricks and mortar. None.

    Fianna Fail are licking their wounds in the confident knowledge that a bout of emigration will restore the national humour, and the people will tire of austerity. The little people.

    If you think, which I doubt, that the relationship between US politicians and bankers is healthy, take a look at this tome

    http://www.amazon.com/Great-Deformation-Capitalism-Corrupted-Democracy/dp/1586489127

  54. @john gallaher

    I have a link in my comment May 31st 2013 5:45pm.

    Political Credit Cycles.

    Ireland is in Section 4 beginning on page 18.

    It is as good a learned description of events as I have seen anywhere.

    The three authors are Spaniards operating in US universities, I am impressed.

  55. @ OMF 12.00

    The anger is valid, and the analysis is partly correct, IMHO, but the real world is bit more complex. DOCM provides a public service, and has certainly educated me about EC rules and German politics, among other things. Who is going to pay you to criticise vested interests, as DOCM frequently does ?

    Emigrants withdraw from the domestic polity, and, in the vast majority of cases, cease to have any influence in their country of origin. Such is life. The domestic issues have to be faced by those, young and old, who remain. The situation is tragic, but challenging each other’s bona fides is not going to improve theirisheconomy.ie

  56. @paul quigley anyone who worked in FIRE in NY knew the Irish banks as lenders off last resort,Anglo was know as the bank that liked to say YES!
    Regarding,the revolving door btw DC/ Wall St. of course it exists…but too many peoples surprise Lehman was allowed fail.Is the system perfect over here,of course not but it was the US Senate that exposed Apples dirty little secrets…can you imagine a time in Irl where that would happen,not in my lifetime.
    @Mickey Hickey tks will look it up.

  57. @ Mary Feely

    You do highlight an issue that only intermittently gets attention in the mainstream media.

    At the other end of the spectrum, TDs are given money to pay for their lunch.

    Coming from a typical Irish market town myself, with country cousins who would often drop by with some farm produce, I do wonder if despite improved public supports today, it was easier for some people at least, to be poorer a few decades ago.

    There was of course less conspicuous consumption for children to feel inadequate about.

    In July 2008, Dublin law firm William Fry and property consultants Knight Frank, sponsored a conference called ‘Moving the Goalposts,’ on how sports clubs could profit from the then fizzling boom.

    I wrote at the time:

    From a society viewpoint, the rush to cash-in on high value land, may not be justified as out-of-town locations require the use of a motor car because public transport is not generally available. So children of families without a car or use of one before the end of the normal adult workday, can be effectively excluded from participation. In the UK, during the period of Conservative government rule between 1979 and 1997, an estimated 10,000 school playing fields were sold to raise funds. In 2004, the Labour government introduced restrictions on such sales.

  58. @ brian lucey (@brianmlucey)

    The letter from the government of Ireland to senators Levin and McCain was foolish as was the Irish Times’ call for a “major diplomatic initiative” in response to the US Senate hearings on Apple.

    It was foolish as it was likely to be rebuffed by Levin in particular, a Democrat from Michigan and a 34-year veteran of the Senate with a record of fighting tax and corporate abuses.

    The playing with words by Apple and Irish ministers: [tax haven, transparent, gimmicks] in the face of pretty stunning evidence, has been zapped by a simple term: “common sense definition.”

    @ DOCM

    Most reasonable people would agree that the two distinguished senators are not exactly up front in their reply. Who is allowing US companies to avail of the purported loophole?

    Senators Levin and McCain are both pushing for US tax reform and that is the purpose of their subcommittee’s investigations.

    In this area of amounts involving huge sums of money, with most untaxed, the distinction between Irish tax-resident and Irish non-tax resident companies, would be seen as another example of the Byzantine schemes that are used to shelter from taxes.

    It would hardly be a shock to know that most Irish non-tax resident companies are used for tax avoidance.

  59. MH
    Agree. What’s disheartening is how all sides in the political debate are pulling on short term green jerseys. We need a debate. We seem to have hysteria and running for the hills.
    There’s a 60y addiction to MNC tax arbitrage that needs to be put on self reliant methadone

  60. @ Michael Hennigan

    On the wisdom of sending the letter, and the usual guff, this time in the IT, about “mounting a diplomatic initiative”, I agree. The PR battle is lost at this stage. What matters is keeping tabs on what (i) Congress and (ii) the EU actually do. In the first case, probably not very much given the way the US electoral system works and the unlimited capacity of companies – confirmed by the Supreme Court – to provide political funding. In the second, the initial issue will be one of exchange of information both in relation to personal and corporate information. There is already considerable progress on the first. On the second, there will also be if there is agreement to tack the necessary additional wording to legislation going through the European Parliament.

    @ BL

    Green does not really suit me. What I object to is any facilitation of efforts to scapegoat us. Congress is expert at finding them.

    @ Paul Quigley

    Thanks!

  61. If the Yanks could destroy Swiss banking secrecy they can do what they want with Ireland.

  62. MH,
    Levin is retiring in 2014. McCain is hated in his own party. Obama is a lame duck. So this is going nowhere FOR NOW. In the long run who knows. But this impacts more than Ireland. Tax competition is a vital component for most of emerging EUrope, Singapore, lots of Asia. The UK is also coming late to the party with its 20% base rate & 10% patent box.

    BL,
    Careful what you wish for. Without the taxes from the MNC sector, your relatively generous salary would be at risk.

  63. @ tull

    Brian is doing his wishing in public and in person. It’s obvious that a lot more than tax rates will be in play if the FDI flows dry up. I would think it will be an economic shock for Ireland on a par with the 1930s, and the adjustment will test the institutional and constitutional order, as well as the remaining external supports, to the full.

  64. Slightly off point but can anyone explain to me the economics behind Northern Ireland paying such low salaries to those in the accounting/legal (solicitor) professions?

    I know of qualified solicitors who cannot earn above £15,000 and newly qualified accountants who earn around £25,000. These rates are below what would be paid to counterparts in the north east of England where living costs are similar.

    Can anyone square the circle?

  65. @ Tullmcadoo

    The US battle with the Swiss coupled with the revelations of massive tax avoidance by leading global brands in Europe’s biggest markets at a time of financial crisis, has moved the prospect of reform forward at a pace that few anticipated.

    It also got to a ridiculous level when a sale of advertising to a firm in Sydney by Google Australia became an Irish export.

    Irish ministers bragged about an export miracle that wasn’t, supported by the usual cast that the Chinese might unkindly call running dogs.

    I don’t claim prescience but I didn’t expect the sham to last — it was reflected in the data: exports almost doubling in nominal terms since 2000 but direct employment in the sectors falling.

    The next penny to drop will be on the delusion of the ‘smart economy’ strategy — when will it happen I don’t know but possibly by 2016 after a general election, when some genius will ask: where are the jobs?

    OECD tax proposals for G-20 here:

    http://www.finfacts.ie/irishfinancenews/article_1026067.shtml

  66. “Nama’s report states that it is devoting “particular attention” to the Dublin Docklands, where it has significant holdings that it believes will be attractive for expansion of the IFSC and to further develop tech hubs for the likes of Google and Facebook”

    Might be a dodgy strategy now.

  67. Tull
    The business school in tcd earns about x5 total cost. So I’m not that concerned thanks. And even were that an issue tknow what. ..some public servants like to serve the public. ..its mad Ted. .
    Paul Q
    No idea what that means?

  68. PQ,
    That is an entirely underdtansble position to take, Agitating for change is fine as long as it is done in a lawful and hopefully non violent manner. It is incumbent on everybody else to point out the risks of such agitation.

  69. @Tull,Levin decided not to run for reelection so he can focus on reforming the US tax code.McCain is one the eminence grise’s of his party,yeah he’s a “maverick” the loony right dislike him.The president is committed to reforming the tax code-he’s no lame duck.
    Ireland is out of step,America is changing when you grab the Saturday papers and Barron’s lead is legalize pot,you just know it.
    Gay marriage,immigration,reforming the tax code all top issues with some cross party support.
    http://online.barrons.com/home-page
    Find it difficult to understand how badly Ireland was blindsided here,did they really not know about the senate hearings involving Apple…
    Had NO response then send this rather lame letter,which is swatted away and just made it worst….is this it,as The Strokes sing!
    http://www.levin.senate.gov/download/?id=d78f5bc2-3c09-487c-be07-6b3b04aed534

  70. @ John Gallaher

    The era of the strong Irish presence on Capitol Hill with Thomas P. “Tip” O’Neill as speaker of Congress together with leading senators, Edward Kennedy and Daniel Patrick Moynihan, who had formed the ‘Friends of Ireland’ group in Congress in 1981, is past.

    Senators Levin and McCain say that the average US corporation pays an effective tax rate of 15%, less than half the statutory rate of 35%.

    “A recent study found that 30 of the largest US multinationals, with more than $160bn in profits, paid nothing in federal income taxes over a recent three year period.”

    http://www.levin.senate.gov/newsroom/in_the_news/article/apples-tax-tactics-strengthen-case-for-closing-loopholes

  71. @Andrew Cochrane
    Oversupply is the usual explanation. I hired a solicitor during a recession to do what was essentially clerical work at clerical work wages. Women have entered the Legal profession in large numbers and whenever you double the supply there is a knock on effect on earnings. Accounting in many countries has seen competing accreditation organisations enter the field. That in addition to the computerised accounting systems provided the double whammy of increased supply and reduced demand. In Ireland of course the Legal and Accounting professions are in silos higher than the those enjoyed by the priesthood. The 18th century is alive, well and thriving in modern Ireland.

    My gut feeling is that accountants at the top level (Chartered) are in demand and making a decent living.

  72. @Michael Hennigan,probably only Donnley left from that crew/era.The Noraid collection boxes are gone too,Woodside/Bainbridge Ave no longer Irish ghettos,the new arrivals are mostly coll educated on visas.
    Of course there are still some undocumented ones but not as prevelant,very few the juke boxes have maudlin Irish ballads either bout nations once again.
    America has moved on from its myopic vision of Eire as some repressed island,thankfully.
    Gilmore has some explaining to do,he dropped the ball here badly,is Ireland “in” or “in the way ” of tax reform ?
    http://www.nytimes.com/2013/05/31/opinion/no-replacement-for-corporate-taxes.html

  73. @ john gallaher

    From the NYT, a concise picture of the current situation.

    “Corporate taxes need to be reformed to ensure that the profits of American multinationals are taxed by the United States when those profits are earned. In an era of mobile global capital, that will require international cooperation, a painstaking process. In the meantime, however, there are many steps Congress can take to curb tax avoidance, like ending procedures that allow companies to easily shelter profits abroad.

    Congress should also follow the lead of the European Union in pressing ahead with laws to require corporations to report their profit and taxes on a country by country basis. Disclosure and exposure have a role to play in changing corporate norms. After all, multinationals want to be viewed positively and for some, like Apple, their image is part of what they sell. Under today’s corporate tax system, tax avoidance may be legal, but it’s hardly the stuff of a good reputation.”

    All one can say is that “pressing ahead” is not actually arriving any more than the “many steps” that Congress could take are those that it will take.

    Levin may not have “the distraction of campaigning for re-election” but his colleagues do; a good or a bad thing depending on one’s point of view!

  74. @DOCM it’s not like Ireland is exactly benefitting,the reputatio,damage is done.Its simply ridiculous to have that amount of untaxed profits frozen and non productive,to then appease an activist shareholder by issuing a rather large corporates bond,sucking up more capital,is not going to last.
    These are not bleeding heart liberals,loony lefty’s critiquing Ireland,the us tax code is going to get reformed.
    The share of corporate tax bite has fallen rather dramatically,while the middle classes has risen,at same time the deficit keeps growing-like Ireland in some ways.
    Back at ya-link above.
    “Eliminating the corporate tax would not fix the broken tax system. The corporate share of the overall tax burden has declined as the labor force’s share has increased. At the same time, the nation has gone deeper into debt to provide the social and economic foundation on which corporate success is built — including security, education, infrastructure, scientific research, health care, environmental protection and legal, financial and regulatory systems.”

  75. @Mickey Hickey

    165% GNP. Time for the Puck poiteen and the Knocknagoshel weed – why sober up? The major issue of the day realtes to the little spat on discretionaly points between two well propertied members of the Oireachtas … not on the odious 90billion …

    @Paul Quigley
    U have been latently assimillated …!

    @DOCM

    .

  76. @DOCM over here it’s The Daily Show…
    http://www.thedailyshow.com/watch/wed-may-22-2013/tax-men—apple
    yanks are quite vindictive,they like keep things even and fair but f** ck with them,and they will…hate to find oneself as the poster boy for what’s wrong with the us tax code.
    I would get out off the way rather quickly….it’s not like you have much EU support either,perhaps some more sunnier climes may lobby for you.Who benefits from a race to the bottom.

  77. @ john gallaher

    Video link does not work in Europe, I regret to say. Maybe the issue could be included in the proposed US-EU trade agreement. (Not much chance! The French, using their usual protection of French culture argument – “l’exception culturelle” – are likely to succeed in excluding audiovisual industries).

    Plus ca change!

  78. Try apple tax senate Jon Stewart it’s not behind a paywall,apols.
    Or mask r ip….oops sorry mods.
    But agreed,we will find out this has some backing,Levin may get in a huff over the ambassador circulating that letter-ask for a meeting or to make to a live presentation,they may actually accommodate Gilmore…..he’s in charge.
    Why does the irish govt. if they feel ambushed not ask to make a full presentation to the committee or submit a report.Apple did.
    But gosh can you image the file on him….bring it on 🙂

  79. @ Andrew Cochrane

    what about ye ? 🙂

    I have no expertise or stats on legal earnings, but my sense is that the British state has not been as thoroughly captured by the wigs as the Irish one. There have been pro-competition reforms in the UK, and I don’t think the British polity, let alone the Garman polity, would stand the kind of rent-seeking (eg tribunal earnings, PI no fee no foal) that goes on here. In other words, the UK earnings are probably more soundly based in economic terms, FWIW.

  80. fyi

    The dangerous aristocrats of finance [h/t nakedcapitalism

    In many ways, the financial world has changed remarkably little in the five years since the 2008 financial crisis. Yes, banks, brokers and other intermediaries are neither as profitable nor as popular as in the pre-crisis years. However, the industry is still arrogant, isolated and ridiculously lucrative. Leading financiers look more like pre-revolutionary aristocrats than normal businessmen.

    […] The rewards for financiers are excessive by three standards. First, professionals with comparable skills earn much less. Second, financiers are paid far more than is merited by their contributions to the common good. It is telling that the most richly rewarded financial activities – trading, advanced financial engineering and sales – are more likely to subtract than to add economic value. Finally, there is the matter of justice. Penance was in order after the industry’s foolish behaviour in the years leading up to the crisis. But instead of sackcloth and ashes, or bread and water, there are designer clothes and helicopter skiing, caviar and champagne.

    The excessive pay can be interpreted as a sign of unfair or inefficient markets. It is that, but I think the deeper cause is not so much economic as sociological. Financiers have persuaded the broader society that they are modern aristocrats. Pampered lives are part of the package. They go along with an unthinking sense of entitlement and a mix of self-righteousness and self-centredness, with just a hint of condescending tolerance for limited criticism.

    http://www.breakingviews.com/edward-hadas-the-dangerous-aristocrats-of-finance/21088270.article

  81. @payl quigley ah now in fairness…fantastic piece from Brian in today’s examiner,12.5% is considered a good enough unfair advantage,but 2% and a “deal” on billions-enough already.
    To be taken seriously,the irish govt. needs to explain
    1- why it was unaware of the hearing
    2- who knew what when
    3- if they were not aware why not
    4- were they given a rite of rebuttal
    5- is that “letter” it?
    6-will they request a right of reply in front of the committee
    7- is Gilmore simply out of his league and tainted by his stickie past
    http://www.irishexaminer.com/business/we-cannot-have-it-both-ways-with-tax-policy-232985.html

  82. I think the US tax issue is about the limits of corporate power.
    The Yanks as John Gallaher sez are running a deficit to pay teachers while corporate profits are at record levels and much of the money is inaccessible in tax havens.

    And that is not sustainable. Taxing the corporates is an easier way for the Dems to manoeuvre the Republicans out of the way for the next mid terms.

    It’s real senior hurling.

    Switzerland is in shock at the moment. The banks have 120 days to get the data back to the IRS. The gnomes have no choice and no political cover .

    “Für die USA ist der Schweizer Bankendeal ein Rechtsfall

  83. @ john g

    I wasn’t knocking @brianlucey at all, just enquiring what our next economic model might be. Thanks for that link which is + 1.

  84. @ mickeyhickey

    Many thanks for this most interesting link which I copy again below for convenience. It’s a very succinct and readable summary of how things evolved politically and economically in core and periphery. I guess the euro had some of the qualities of an addictive drug.

    ‘Before monetary union took place with the fixing of parities on January 1, 1999, the conventional wisdom was that it would cause its least productive members -particularly Greece, Portugal, Spain, and Ireland – to undertake structural reforms to modernize their economies and improve their institutions. This paper argues that, due to the impact of the global financial bubble on the
    Euro peripheral countries, the result was the opposite: reforms were abandoned and institutions deteriorated. Moreover, it argues that the abandonment of reforms and the institutional deterioration prolonged the credit bubble, delayed the response to the burst, and reduced the growth prospects of these countries’

    ‘ Third, our theory suggests that there may be differences between how damaging private and public bubbles are -private bubbles appear to be more damaging, since they not only affect the sustainability of public finances, but also damage governance in the private sector’

    The corruption of our property-related (and by a process of contagion, most other) professions, and professional institutions, is, IMHO, a particularly nasty legacy of the bubble.

    http://economics.sas.upenn.edu/~jesusfv/Political_Credit_Cycles.pdf

  85. @ mickeyhickey

    Many thanks for this most interesting link which I copy again below for convenience. It’s a very succinct and readable summary of how things evolved politically and economically in core and periphery. I guess the euro had some of the qualities of an addictive drug.

    ‘Before monetary union took place with the fixing of parities on January 1, 1999, the conventional wisdom was that it would cause its least productive members -particularly Greece, Portugal, Spain, and Ireland – to undertake structural reforms to modernize their economies and improve their institutions. This paper argues that, due to the impact of the global financial bubble on the
    Euro peripheral countries, the result was the opposite: reforms were abandoned and institutions deteriorated. Moreover, it argues that the abandonment of reforms and the institutional deterioration prolonged the credit bubble, delayed the response to the burst, and reduced the growth prospects of these countries’

    ‘ Third, our theory suggests that there may be differences between how damaging private and public bubbles are -private bubbles appear to be more damaging, since they not only affect the sustainability of public finances, but also damage governance in the private sector’

    The corruption of our property-related (and by a process of contagion, most other) professions, and professional institutions, is, IMHO, a particularly nasty legacy of the bubble.

    http://economics.sas.upenn.edu/~jesusfv/Political_Credit_Cycles.pdf

  86. @ PQ

    You could add the sad state of Irish journalism as another legacy of the bubble

    http://www.independent.ie/irish-news/bornagain-bankrupts-seek-fresh-starts-in-uk-and-states-29313815.html

    “Now the boom has turned to bust, they’re blazing a fresh trail for ordinary people laden down with insurmountable debt, and have taken flight to the UK and USA in the quest for a fresh financial start.In the now much-maligned era of the Celtic Tiger, we called them tycoons, moguls and millionaires. Today, they’re fully signed up members of a set you could usefully call the born-again bankrupts.

    John Fleming

    In terms of blazing a trail, the Cork developer bears the distinction of the being the first of Ireland’s fallen tycoons to read the writing on the wall and head for the UK to declare himself bankrupt.

    Having weighed up the €1bn in debt owed by his companies and the prospect of repaying it anytime soon, Mr Fleming very wisely slipped away in 2010 and pulled the trigger on a career during which he had built, amongst other things, the five-star Fota Island hotel and golf resort. After exactly a year, he and his wife Noreen were discharged from bankruptcy in November 2011, allowing him to get back into business.”

    Is it any wonder the allegiance to the State is so weak when these a##eholes get such coverage in the papers ?

  87. @David O’Donnell

    I see 165% GNP but to internalise it would be too painful so I am in total denial. Bertie Ahern and Brian Cowen were not the only Irish people who had a limit to the amount of disconcerting information they could process.

  88. Just add 15 to get 180. Imagine a dart board – treble 20, treble 20, treble 20 and ONE HUNDRED AND EIGHTY. Pause …. now try to hit DOUBLE 90 with one dart … and that is the rogoff an reinhardt situation we are in.

    … back to the Puck poiteen & Knocknagoshel weed ….

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