Response to Shay Begorrah

With advance apologies for a too self-referential post, I think it might be useful to put my response to commenter Shay Begorrah from Tuesday’s thread on the front page.   Shay clearly sees me as an unabashed fiscal hawk, where more deficit reduction (and more expenditure-focused deficit reduction) is always better.   As this is not at all my view, and given my official role through the fiscal council, it might be worthwhile to explain my actual view a bit. 

During 2009 and the first half of 2010, the main thrust of my fiscal policy posts on IrishEconomy was that the fiscal adjustment was too frontloaded (see, e.g., here).    At the time I assumed that Ireland’s credtiworthiness was reasonably robust.   I underestimated how fragile Ireland’s creditworthiness  was in the context of monetary union with an underdeveloped lender of last resort to governments.   My basic approach to fiscal policy is Keynesian.   But since the middle of 2010 it has been clear to me that fiscal policy must steer a difficult course between supporting demand and sustaining the borrowing capacity of the State.   Not least, the latter is essential to ensure that the fiscal adjustment can be phased in any sort of reasonable way, and thus to sustain the essential protections and services of the welfare state. 

The idea that there is a trade off between demand and creditworthiness is challenged from both right and left.   From the right, the idea of an expansionary fiscal contraction is invoked: discretionary deficit reduction would then increase demand, further enhancing the deficit reduction.   I do not read the available evidence as supporting this contention (see, e.g., the important work from the IMF).   From the left, the idea of self- defeating austerity is invoked.   This comes in different forms: discretionary deficit reduction does not actually reduce the deficit; discretionary deficit reduction does not reduce debt to GDP ratio; and discretionary deficit reduction does not improve creditworthiness.    I do not believe that such self-defeating effects are borne out by the Irish experience (see Box C, p. 46 here).  

Another thrust (obsession?) of my more recent posts has been the critical importance to more robust creditworthiness of strengthening the crisis resolution mechanisms – and more narrowly the fiscal lender of last resort function – for the euro zone.   The political economy of such developments must been seen in the context of weak solidarity between what is an association of nation states, where there is a reluctance to risk transfers and a fear of moral hazard.  While I believe the aggregate fiscal stance of the euro zone has been significantly too tight from an optimal fiscal policy perspective, the strengthening of fiscal rules must also be viewed in terms of the political economy of strengthening the LOLR function.   The fiscal compact, for example, must be seen in this light. 

Finally, on the relative measures of expenditure- and tax-based adjustments, my prior belief around 2009 based on the literature was that expenditure-based adjustments were less contractionary than the tax-based alternative.  (Of course, in deciding on the mix of adjustments, other factors besides the macro effects – such as fairness – are important.)  From the more recent evidence, I have become much less convinced of the macroeconomic superiority of expenditure-based adjustments.   This issue was discussed in the first fiscal council report in October 2011 (see Box 4.1, p. 36, here; a more general review of the multiplier literature is given in Appendix E, p. 93, here).   The inconclusiveness of the evidence is the reason that the council has focused on an overall deficit multiplier in our analysis.

Comments

comments

76 thoughts on “Response to Shay Begorrah”

  1. I think the sentence ” I do not believe that such self-defeating effects are not borne out by the Irish experience (see Box C, p. 46 here). ” needs the removal of the second ‘not’. Also, the first sentence in the final paragraph needs an object for “my prior” – possibly ‘position’?

  2. @John McHale

    I appreciate the answer, and the small moment of Internet infamy. I will try to digest your response this evening and send either a grovelling apology or a blistering denunciation as appropriate.

  3. @ JMcH: Thanks for putting up that explanation. I have some difficulty with a few bits.

    “My basic approach to fiscal policy is Keynesian. But since the middle of 2010 it has been clear to me that fiscal policy must steer a difficult course between supporting demand and sustaining the borrowing capacity of the State.”

    The Keynesian paradigm insists that the state must ‘save’ if it is to be able to ‘spend. The Ying with the Yang! No modern state bothers with the savings bit. Its spend. spend, spend – until the exponential growing debt overhead becomes un-payable. There should then be a period of ‘deflation’ and eventually (except in the case of Japan) the debt load would be reduced to a manageable situation (not a sustainable one!). Very difficult all round. No modern politician will venture next or near a real deflation process. Just line up the cans and start kicking.

    Unless and until our government is prohibited by our Constitution from running deficit budgets for day-to-day spending our situation will simply get worse and worse – until! OK, so some mendacious folk insist that ‘growth’ is just ahead. But in the meantime, just lets keep pulling out the State Credit Card and intoning, “Charge it!” Madness!

    “Not least, the latter is essential to ensure that the fiscal adjustment can be phased in any sort of reasonable way, and thus to sustain the essential protections and services of the welfare state.”

    Again we are back to that nice economic paradigm, Permagrowth. Do folk in charge actually understand what an exponential function looks like? Do they actually understand the mathematical impossibility of an arithmetic function (aggregate economic output) keeping pace with a geometric one (growth in credit-money supply and its debt output)? I have no expectation that our political leaders are so mathematically endowed. But economists and civil servants?

    In point of fact we are in this economic and financial mess because our legislators have totally failed in their duty of care to both individual citizens and our community at large. They have allowed great financial and social harm to be imposed on the citizens. Harm that was preventable! So far their efforts have been to let the citizens suffer, and the financial interests protected. “Sustain essential services and protections be damned!”

    Both ‘Left’ and ‘Right’ are full of sanctimonious crap about the real outcomes. They are either fools or knaves. I opine to the former. Unless the national and international financial interests are crushed and the Rule-of-Law re-instated, the social outcomes will be dreadful for all – bar the already wealthy. No matter whether the ‘Left’ or ‘Right’, ill-informed, ideological polices are implemented. In computer-speak we need to hit the RESET button. Won’t happen.

    Creditworthiness is useless at this juncture. Its whether or not we can ramp up productive enterprise. Make stuff that other folk want. Export it. Then save the surplus (capital formation) and re-invest in further productive enterprise. Won’t happen, ’cause it can’t! Financial enterprise in non-productive. It simply produces an economically suffocating toxic output – debt!

    Its the math John. You might consider giving the Cabinet a few lessons.

    Thanks again, for the explanation. Very useful. Its somewhat as I feared.

  4. Not sure I understand one thing.

    You write: “From the more recent evidence, I have become much less convinced of the macroeconomic superiority of tax-based adjustments.” Surely you mean that you’ve become less convinced of the superiority (i.e., desirability) of adjustments on the spending side, no? Otherwise, I don’t see what the contrast is with your prior beliefs.

  5. Hi John. Do you have a view as to the best course of action for the government in the next budget if it decides that we are ahead of target on deficit reduction and hence can afford for a stimulus package of some kind? The noises coming from Leinster House seem to indicate that there is a mood for some sort of softening of austerity measures.

    Even though reducing the overall size of the budgetary adjustments in 2014 and 2015 may well be contrary to the most recent recommendations of the Fiscal Council, I think it would be useful to have a view in the council’s next report on the relative merits of:
    a) increasing capital spend
    b) tax cuts (perhaps the USC)
    c) reduced cuts to current expenditure
    d) none of the above – use any excess cash to pay down the national debt

    If the government is going to go ahead and ignore your recommendations, at least this way you can have some input into how best they might be ignored!

  6. +1 to most of that.

    If you haven’t saved it up, then you must be balanced. Ireland, to be fair, had a lot saved up, but much of it was effectively tax on private sector borrowing. So when the private sector went TU, so did the income of the state, not only in terms of current income, but in terms of the savings which quickly evaporated in the face of the twin crises.

    In other news, inflation makes people poorer in real terms (see the UK producing up to date wage figures, not so sticky after all). Now that’s a real dandy way to solve a recession. Except it hasn’t worked either. Take a bow inflationistas…

    So what are we left with? I go back to my argument of five years ago of the inevitability of protectionism so that wages in already high (in global terms) wage economies can grow.

  7. There were 2 fairly pessimistic article in Saturday’s FT

    John Authers : bonds and equities are both overvalued
    http://www.ft.com/intl/cms/s/0/ece16cf0-cf6b-11e2-a050-00144feab7de.html

    John Burbank of Passport Capital was quoted : “We’re going to have a crisis and central banks won’t be able to fix it…People’s confidence is way too high”

    http://www.ft.com/cms/s/0/98cd1ee4-cf92-11e2-a050-00144feab7de.html

    The Irish “rescue” took a lot of money out on the assumption of future growth that did not materialise. If we really are looking at a Japan style decade on top of the 7 years of construction contraction to date, is Ireland anywhere near being ready for it ?

  8. @ seafoid

    True for you.

    As a friend of mine from Dundalk used to say, ‘ when things are bad, I say to myself, sure better times are coming. Then after a while, I look back and say, sure they were the good times’…..

    ‘Well, this is year five of the “global government finance Bubble.” This Bubble encompasses the world’s securities markets. Having played such a profound role in fuelling this Bubble, it’s not easy for me to conceptualize how central bank balance sheets will now be looked upon to backstop global markets in the next major de-risking/de-leveraging episode. A serious global de-leveraging would require multi-trillions of liquidity support, which I fear at this point might unleash currency and market chaos. Global central bankers have been doing everything possible to avoid a de-risking scenario’

    That’s the Big Picture.

    http://www.prudentbear.com/2013/06/twenty-year-anniversary-of-market.html

  9. @ John McHale (& Shay)

    Thanks for (provoking) the very illuminating post above. I’m busy at the moment so I don’t have time for a short post.

    My position for the record is roughly.

    When it comes to being able to expand under austerity Ireland was/is always exceptional as pointed out a good why back by Jonathan Portes in his ‘Self-defeating austerity’ paper. However, even in Ireland the impact of austerity was always underestimated by the IMF, Commission, DoF, pretty much everybody. I think I have a good record over the last few years of being closer to the actual outcome than any of those. That is to say, an idly interested playwright with 1/2 hour to spare has consistently out-forecast all those bodies. That says something about bias.

    The net result of this is that Ireland’s debt ratio is sliding over 120%.

    I think there was a turn to austerity in 2010, particularly in the EZ and also under Osborne, and that was a mistake and the mistake can be read through the jobless figures, failure to cut deficits and the coming and going of the fiscal compact. At the kindest, the timing was all wrong. Within a centrist sort of position, as John McHale outlines, the right has been far more wrong than the left. Aside: I always find it remarkable that the Republicans over the last 30 years have been far more fiscally imprudent than the Democrats, yet the popular imagination shows the reverse.

    The academic economic supports for that turn have been knocked back both by further academic work and facts on the ground.

    Further: I agree with Shay if I have him right, that ‘mistake’ doesn’t really cover it. There may be good-willed conservative agents, but as the remedy is always and everywhere: make jobs less secure, try and reduce pay, roll back the welfare state, make people work longer use unemployment to advance this, it’s hard not to see this turn as a coherently driven attempt to further for want of a better phrase a neo-liberal agenda. I think the only thing that really bothers neo-liberals is the possibility of the the whole thing spiralling out of control.

    I do have a particular animus for Rehn and the Commission – their actions at least if not their persons – when you go back and read, say, Rehn telling the Greeks in 2010 that growth will come next year when it was patently not going to happen, it is hard to have sympathy. The Cyrus debacle and the despicable attempt to load blame on the Cypriot government – in which they weren’t alone – also rankles.

    Seafoid has made the analogy of Premiere League managers. If it was just a case of doing the job, they should have been shown the door. Now we have the problem of the Commission having to argue that they were right, then and now, only they were misunderstood then, or something, the Compact was always flexible and so on. A new team would be in a much better position to take stock and drive in the right direction.

    I appreciate that the IFAC has dug deeper into the problems of forecasting in its recent report and is not ignoring them, but if “My basic approach to fiscal policy is Keynesian.” I would encourage it to go further in spelling out the consequences of the budgetary adjustments ahead.

    Also, I tend towards the deGrauwe reasoning on the lowering of sovereign bonds (OMT), over confidence induced by tax-raising and expenditure cutting. I note, and agree with John McHale, that Ireland, unusually perhaps, has room for tax raising over cutting. In the medium term, a better EZ architecture plus growth are the key drivers – the markets (I wonder how one phones them up and ask), seem to want both austerity and growth. In my take, growth wins.

    Finally, on the markets, I see again that Jens Weidmann is looking for sovereigns to be subject to the ‘discipline of the markets’. If the markets are creatures of fear, panic, euphoria and suddent reversals, I don’t see why that would be a good thing.

  10. @ Seafóid: “There were 2 fairly pessimistic article in Saturday’s FT.”

    Depends whether you ‘view’ stuff from top down or bottom up!

    This current financial predicament is just the latest (list goes back at least 2 millenia), was well flagged and predicted – as early as the 1970s (Sweezy and Magdoff) – and many other contrarian writers up to the present. But who was reading? Who was listening? Who was concerned? Certainly not main-stream econ nor politicians. And how were those contrarian folk characterized? Doomers! Gloomers. Bloody Cassandras all. Even that idiot ex-Taoiseach of ours had a quite immodest proposal for them.

    Well now? It turns out that those Cassandras were correct after all. But they had to be. They anaylzed the fundamentals and predicted what would happen when a Productive economy (surplus capital is re-invested in productive enterprises) morphed into a Financialized economy (surplus capital is invested into financial products). As I have said on a few occasions. Its the math! You can’t cheat the math!

    And the way out of this predicament. Our ‘leaders’ (economic and political) are advocating and implementing a similar strategy that got us into this fix in the first place! Some intellectual effort! “Cheat the math – again” Madness – as the man said!

    Hi Gavin! “If the markets are creatures of fear, panic, euphoria and sudden reversals …”

    In Vet-speak – “Its time to put them down” If they were bullocks (steers) not bulls, we’d all be safer. Bulls have to have secure rings and tethers through their nostrils. They may look docile. They may behave in a docile manner. But they are unpredictable creatures – and are also very dangerous!

    The only valid exit strategy? The politically risky and very unpleasant one is to hit the financial RESET button. That is, default on all un-payable (out of actual disposable incomes) debts. It will work. However, our politicians would have to shift from protecting the strong, to protecting the weak. The former should be able to weather it out on their own. The latter would be crushed without state intervention and assistance.

  11. John Authers article is about expected returns on financial assets over the next 10 years, it is not about prospects for the economy. I am no optimist on economic prospects but I feel compelled to point that out. Returns on assets are expected to be poor partly (mainly?) because they are currently highly priced. They are highly priced because of QE. And this was the intended effect of QE: to bring forward future returns so that the over-leveraged and the underwater can be kept alive. Since the returns have been brought forward, returns in the future will be poor, even if the economy turns out to be relatively OK.

    On markets being creatures of fear and panic… Benjamin Graham said that in the short-term the markets are a voting machine, in the long-term they are a weighing machine. They may be wrong for a very long time (longer than Keynes was able to remain solvent). But in the end they are self-correcting. It’s hard to think of any mechanism for long-term resource allocation that would not suffer from similar defects. The trick is to prevent mistakes that are so large that when the correction comes, it destroys the entire system. The available tools are the rule-of-law and monetary/fiscal discipline, but they are not popular.

  12. @BW Snr

    I’m a bit like Gavin above a mere casual observer with little or no baggage however I indicated here many many times that the single biggest problem with the current daft contractionary expansionary belief is that its ultimate aim is to fix the Govts balance sheet ahead of the publics. This approach was proven successful in the 1980s but this current crisis is an animal with a very different eating habit. We know only too well that its actually the debt the public holds that is the real problem, not the Govts. But this is not new news.

    Indeed its been pointed out here time and time again that austerity is fine and dandy when the public can bear the pain and believe, as the advert goes, its ultimately being ‘worth it’. The last 5 years have clearly shown that its patently not being worth it. The soul has been lost in rural Ireland through emigration the MNCs are effectively here for the tax arbitrage (a very close friend of mine who also happens to sit very close to the Google top brass would be very open in confirming that this is in fact the case) and the debt ravaged 30 to 45 aged cohort is playing mind games with their mortgage banks – both parties ultimatley know the end result – the money can’t be paid back. Meanwhile the Govt is insisting that it gets sorted before everyone else and to hell with the consequences.

    Well I believe the mortgage debacle will get a whole pile worse before we ultimately see the white of the banks eyes and a fess up moment arrives. ‘We’ve made a complete horlix of it’ they will finally say and at that stage let the debt write off games begin, because we can’t get out of this mess until that day arrives. Believe me I work in these institutions and that day is coming. As Bill Clinton said to Enda (paraphrasing..) ‘its the mortgages – stupid, you need to fix the mortgages’. How right he was and still is.

    Our economic future is dependant on that basic decision – write down the mortgage debts to a model property valuation and allow the banks hold significantly less capital than the current rules suggest, because the economy can’t do both. The current model is the banking version of contractionary expansionary dillusion and it too doesn’t work.

  13. Fair play to Jmac for opening up the debate. As the crisis grinds on it becomes obvious this is no common or garden slump. This is a system collapse. I read in monthly review a while ago that it is unlikely there will be an economic phenomenon again to match the power , the transformational energy and the relative democratisation of the rollout of the petrol engine and all of its accoutrements. Debt rollout turned out to be lethal. The internet was not petrol 2.0 and tends to aid plutocracy. We do not actually have a dynamic growth driver to hand.

  14. I agree with everything Gavin K said above. There can be no denying that the political, media and economic elite in Ireland circled the wagon and bought into the austerity agenda. John McHale, a respected and very able economist, is one among many who are part of this. Whether they admit it or not, most bought into the idea of expansionary fiscal contraction. Or at least they thought that the strategy would be less damaging than expected. The IMF should be commended for saying they got it wrong. It would be refreshing to hear the same self reflection among policymakers in Ireland.

    But the more important question for me as a social scientist is why so many clever people accepted and continue to accept such flawed economic-fiscal analysis. I don’t think it was material interest. I don’t think it was institutional constraints. I think it was and contnues to be ideology. Ideas rather than scientific evidence or interests are shaping economic decisions. Mark Blyth has documented this brilliantly in a recently published book. These ideas clearly benefit some interests over other. Corporate creditors are the winners whilst citizens are the losers.

    The question is whether an alternative ideational paradigm can emerge that moves beyond the futile keynesian versus monetarist debate.

  15. this article/paper offers one explanation stateside….. good links embedded,had quick glance at the paper,but not in detail in fairness….great post John McHale.
    “According to a new article in the Journal of Economic Perspectives by the Harvard Business School professors Robin Greenwood and David Scharfstein, financial services rose as a share of G.D.P. to 8.3 percent in 2006 from 2.8 percent in 1950 and 4.9 percent in 1980.”
    http://economix.blogs.nytimes.com/2013/06/11/financialization-as-a-cause-of-economic-malaise/
    http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.2.3

  16. I find this debate somewhat surreal. We lost our creditworthiness in 2010. We got a subsidized lifeline from the Troika. Any return to the markets will be bogus – it will rely entirely on our facility to run back to Mama.

    So the handouts from the Troika define our fiscal deficits – maybe a bit of debate over timing and split between expenditure/revenue. As I understand the Left argument – and to be sure the intellectual, media and blog centre of gravity seems to be on the Left – if only our official benefactors would lend us more they would have a better chance of being paid back. I’m a simple guy with socially Left leanings and I really do love a paradox but that one just doesn’t float my boat.

  17. BW2,
    you missed the bit about raising taxes on someone else ranging from the MNC, the rich, other people’s property & the FTT.

  18. The above assumes that creditworthiness is always a good thing. Being simultaneously creditworthy and insolvent is quite possible under the current euro dispensation. That seems to me to be a good deal worse than being merely insolvent because it renders one of the key tools in resolving insolvency – involuntary internationally sanctioned restructuring of sovereign debt – unavailable.

  19. @ Brian Woods II

    Surreal is the word! The only consolation is that the debate in the creditor countries is just as skewed.

    We simply do not have the luxury of debating which path out of our national bankruptcy is best. The one we have to follow is the one dictated by our creditors.

  20. @Brian Woods snr

    ‘This current financial predicament is just the latest (list goes back at least 2 millenia), was well flagged and predicted – as early as the 1970s (Sweezy and Magdoff) – and many other contrarian writers up to the present. ‘

    Agree. The financial system ran riot ….

    @seafoid

    ‘This is a system collapse.’

    Yes. Financial system so overextended itself by feeding on itself to create more of itself that it had/has to collapse. Unfortunately, EZ leaders appear to know little about simple systems theory let alone complex adaptive systems theory. They are attempting to prop up the un_propupable … as are our locals. Methinks a few savvy in the IMF are terrified … they should be.

  21. @ BCT

    You are focussing only on the Balance Sheet. In fact Ireland’s problems are more on the Revenue side. Even if Bill Gates paid off all our debts we would still face the problem that we need to borrow €1bn next month just to get by.

    Creditworthiness is irrelevant to the Sultan of Brunei – if his credit cards were torn up he would face the minor inconvenience of carrying a money belt with €1m about his person. If Ireland lost its creditworthiness, whether of the Troika gifted variety or of the market earned variety, we would be plunged into economic and social darkness.

  22. @BWII, we could resolve that tomorrow by taxing more and spending less. We supposedly already plan to do enough of both of those next year to bring us to a positive primary balance, at which point the only purpose in borrowing is the circular one of servicing debt.

  23. @Brian Woods II

    Our best human capital is being exported to other economies … and are now creating revenue for other economies. One lady I know took a year out to be with her family – one sibling in Oz, another in Canada, one in Germany and another in Norway. The other lady I know was envious – she still has one in college but her three others are in Oz and Brazil. Where is the next ‘boom’ to bring them back? …. methinks, as u do, that there will no be one. Shot and foot come to mind ….

  24. @ David O’Donnell

    Sadly, an economy based on building houses for each other doesn’t work. Tax laundering can work for a time. But unless we discover a whole lot of gas and/or oil (gold would be welcome too) it’s really hard to see where our Output and growth comes from. My own son is off to NZ.

  25. @ YoB: “This approach was proven successful in the 1980s but this current crisis is an animal with a very different eating habit.”

    Godzilla comes to mind!

    @ DOCM: “We simply do not have the luxury of debating which path out of our national bankruptcy is best. The one we have to follow is the one dictated by our creditors.”

    We do have the ‘luxury’ – its just not AAA. More like CCC. We (I assume you mean our Great Gelded Leaders!) must make a decision which protects us all from further harm. Unlikely.

    There remains the possibility- more the probability, that the current financial mess will be supported so that it can continue. But, as I am tired of intoning – eventually, eventually, the math will win. I doubt Orwell would be capable of imagining what might happen. But something bad will. I would put money on increased un-employments, reduced incomes, falls in asset values and increases in taxes and such like.

    Autumn 2015 looks good, but maybe 2017. Depends on energy prices. Once these go up in a secular, its tornado time.

  26. @ DOCM

    ‘We simply do not have the luxury of debating which path out of our national bankruptcy is best. The one we have to follow is the one dictated by our creditors’

    With respect, the issue of economic development in Ireland cannot be reduced to ‘pacta sunt servanda’. The world economic order is, in very large part dictated by force, but it won’t be too easy, in today’s world, for the creditors to collect their debts by force. They have to be able to persuade the citizens of the periphery that the debts are not odious, and that they have a legitimate moral claim for repayment.

    I don’t defend the shenanigans that go on in our political system, but the lenders have behaved in an extraordinarily cynical and calculating way. Their modus operandi includes the subversion of democratic governments and IMHO, merits little respect.

    We do have the luxury of debating whether to co-operate with individuals and institutions of this stripe. In fact, such debate is the duty of any conscientious citizen. As Gavin indicates, the quality of our leadership is a bit wanting, so it’s a case of all hands on deck.

  27. @ gavin

    ‘Finally, on the markets, I see again that Jens Weidmann is looking for sovereigns to be subject to the ‘discipline of the markets’. If the markets are creatures of fear, panic, euphoria and sudden reversals, I don’t see why that would be a good thing’

    The Dork consistently advocated for a strong state, and deplored the Market State which is eroding democracy in so many nations. Plutocracy is antithetical to democracy. I reiterate Bourdieu’s view of the state as flawed, sometimes oppressive guardian of painfully acquired freedoms in the face of the predatory ethic of military and business worlds. ‘Individual achievement’, without reference to a group, and to obligations to that group, is IMHO a toxic ideology on a par with the most suffocating collectivism.

    There is a central role for markets and risk taking, but the playing field needs to be reasonably level, and the rules of the game need to be respected. We have two problems at least. Firstly, there are huge, arbitrary power differentials between the participants, so it’s not a fair contest. Secondly, the big players can buy the necessary government support to bail them out on their losing bets. If they weren’t so wealthy and powerful, they would be recopgnoised for the pathetic creatures that they a

    Central banks are wrecking business and rewarding spivs. Competition is not the problem, it’s the rigging of the market returns which ruins the game for everyone.

  28. @ Yields or Bust

    + 1How right you are, but when peoples salaries depend on misunderstanding and misdiagnosing the problem then the problem will continue to be deliberately misunderstood and misdiagnosed. Two days ago we had 6 judges appointed to the Circuit Court to deal with repossessions and the various flawed inadequacies of the Shatter/Noonan insolvency legislation. When the ordinary people realise how far down the Swannee they have been sold hopefully they will call time on the governments profligacy. It is, and was an absolute disgrace, that banks were offered blank tax payer cheques by government. (another 20bn required) The money should have been channelled through the debtors accounts leaving the banks with small numbers of hostages that could not repay regardless because of their unemployment status.

    What we heard was, that there might be “strategic defaulters” but not a word about the strategic defaulters called banks who pulled the wool over the eyes of the amateurs who worked at secretary general level, governor of the central bank level(new one) as well as Cowen and Lenihan.

    The whole affair has been so tawdry that it makes me thoroughly ashamed to be Irish.

  29. @Paul Quigley
    On the quality of our leadership….I see today in the IT that our esteemed leader is to undergo a DNA test. Apparently it’s something to do with the gene pool in Mayo.

    Just as well that the US Supreme Court decided today that you cannot patent genes.

  30. @paul quigley

    “I reiterate Bourdieu’s view of the state as flawed, sometimes oppressive guardian of painfully acquired freedoms in the face of the predatory ethic of military and business worlds”

    I know a lot of business people who would take serious objection to that statement. In business, you cannot make a profit unless you provide a service or a good that people are willing to purchase of their own free will. Conversely, the fact that you are able to make a profit is taken as indicative of society’s approval of your activities. Business when conducted according to ethical standards accepted by many business people is not predatory.

    Of course there are abuses. The state has very strong legitimate interests in regulating business. I fear that in Ireland we neglect such regulation, because many of us believe that business is fundamentally predatory – but necessary, and therefore we should facilitate abusive practices on a nod and a wink. That attitude is wrong. Abuses should be stamped out, but businesses that contribute value to society should be respected and encouraged.

  31. The boom to bust in Ireland would have inevitably involved pain but the distribution was unbalanced.

    A collapse in taxes, that were at very low rates, business activity geared to a bubble, high public spending and dependency on foreign lenders to finance big deficits, gave little room for manoeuvre.

    In Europe, adjustment periods could have been longer and the core countries could have spent more but after stimulus spending in 2009 and support for failing banks, debt levels had jumped.

    Could governments have offset the collapse in cross-border flows?

    McKinsey data shows that loans and investment flows between countries were worth $4.6tn last year – down from $11.8tn in 2007. Western Europe accounts for some 70% of this drop, as the continent’s financial integration has gone into reverse. Eurozone banks have reduced cross-border lending and other claims by $3.7tn since 2007, and central banks now account for more than 50% of capital flows within the region.

    In the three years to Q2 2012, private investors withdrew some $900bn from Greece, Ireland, Italy, Portugal and Spain.

    In the UK, public spending rose to 49% GDP last year, from 48.6% of GDP in 2011.

    The UK has added about 1.6m jobs since the 2010 general election and 432,000 in the year to April 2013 but welcome to the new world economic order: In the five years before the start of the recession in 2008, average weekly earnings rose 10%, after inflation. In the past five years they have fallen by nearly 8%.

    The number of unemployed 16 to 24-year-olds in the year to April 2013 was down 43,000 at 950,000, or 20.5% of the workforce in that age group.

    Many of the jobs are low-paying and in the service sector while close to the top of the pyramid, it’s business as usual.

    In Ireland, the working assumption of policy makers has been that the downturn would be well over within an election cycle. Some prominent economists have been in the same boat.

    The Irish Independent reported in Jan 2010 that John FitzGerald, ESRI economist, said: “We will see a vigorous recovery in 2012.” He added that the economy could expand by as much as 5% a year between 2012 and 2015.

    Alan Ahearne, then adviser to the minister for finance, said a number of factors gave rise to optimism. He said there had been a 5% improvement in unit labour costs since the autumn of 2009. “This is already kick-starting growth. We are starting to gain market share but we need to do more as we lost our competitiveness during the boom years,” he said.

    It was really a mirage.

    The problem with not preparing for a decade of stagnation is that it removes the urgency to address issues relevant to putting the economy on a sustainable basis with a credible jobs engine.

    On Thursday, Ruairi Quinn, education minister, opened Maynooth university’s new “state of the art” Library Building.

    Quinn also launched Maynooth’s Strategic Plan (isn’t that what a plan should be?) and Prof Philip Nolan, president, said:

    “The last thing we need in Irish higher education is a misdirected and ill-conceived shift in education and research policy to meet the immediate needs of the economy. The students entering our universities now will work until 2060 and live until 2080.”

    Developing “centres of excellence for research and entrepreneurship” is part of the plan – terms loved by politicians.

    This focus on the long-run however appears to have been a pitch for more public funding while ignoring the changed economic realities.

    The focus on both the short-run and lung-run are important.

    When asked at a congressional committee hearing in the 1930s on whether, in the long run, money spent on capital projects wasn’t better for the economy than on small project relief works, Harry Hopkins, a key architect of the New Deal, replied: “People don’t eat in the long run, they eat every day.”

  32. @ Paul Quigley et al

    The point that I am making is that for the discussion to be realistic it must be set within the parameters established by the MOU to which the country is now subject.

    It can also be set in the wider context of our euro membership and the agreed changes in policy direction impacting on the MOU e.g. the decision to transfer the remaining funds in the Pension Reserve Fund to an Ireland Strategic Investment Fund (ISIF) aka “betting what is left of the farm”.

    In an EU context, the principle of “pacta sunt servanda” is of primordial importance. Institutions – or countries – guided by individuals or parties who fail to observe it lose credibility in the long run (or the short run as seems increasingly the case with the Bundesbank and the German Constitutional Court).

    http://blogs.ft.com/the-a-list/2013/06/14/the-ecb-is-doing-the-right-thing/#axzz2WAjEb57b

    I agree with the points expressed by Brian Woods Sn and skeptic01.

  33. Every 3 or 4 economic crashes is a big one . And this one is massive

    Grumpy put it well once

    http://www.irisheconomy.ie/index.php/2011/10/17/oleary-and-walshe-on-debt-deleveraging-and-the-irish-economy/#comment-179699

    “This is an extraordinary point in macroeconomic history with events, in terms of apparent policy or market realities shifts every few hours at times. Ireland is likely to be affected by them for decades – long after topical interest in sites like this has waned due to policy stasis”

    Neoliberalism is a self confirming ideology. If you build it they will come. If you bail it out it will grow again.

    This site was unmissable in November 2010. The final deal was a real disappointment. It killed the debate for a while.

    There was a new paradigm. And the butchery was supposed to stop the rot, like the Duke of Cumberland at the Battle of Culloden.

    But it didn’t. No. It was the same crap but on a Euro scale.

    Pacta sunt servanda whatever but this was way bigger than the capacity of a Finnish pastor or bank manager to manage.

    I imagine Olli , God love him , expected something like this in 2013
    http://www.youtube.com/watch?v=ruAi4VBoBSM

    It’s more like the first line of this
    http://www.youtube.com/watch?v=6AkKWi-XO6k

    And there is no credible LOLR. There is no bank recap system. If you knew there was no bank recap system and no LOLR and that this was the mother of all economic crashes, would you put your name behind Olli Rehn’s pronouncements?

    Private Eye magazine recently ran an article about the London Fire Brigade. Osborne’s cuts mean that stations are going to close. The government expects IT, management changes and work practice reforms to compensate. There was a massive fire somewhere in Norf Lahndon recently that was put out by crews from Islington and Kingsland. They arrived on the scene in 4 minutes. Both will be shut shortly. The closest station under the new paradigm is 8 minutes away. Fires only need 6 minutes.

    Neoliberalism does like to cut away at inefficiencies like insurance and replace it with IT.

    So where are we now?

    http://www.guardian.co.uk/commentisfree/2008/may/12/usa.iraq

    “We have an economy run by high-rolling financial gamblers, shielded by politicians and rarely confronted by our media – a closed world to most people, whose popular propaganda has all been about glossy mortgage deals, rocketing property prices and cheap food, and whose leading figures have been hobnobbing with cabinet ministers and being whisked off to the Lords since the early 1980s That system is now falling apart, just as the naive optimism of America’s Iraq hawks fell apart when that country descended into chaos. Eventually, reality intrudes. Then the backlash comes. The “experts” are upended. We see the cost of not having an honest, open argument, whether about Pentagon strategy or about how the banking system really works, and the media feel embarrassed: “How did we miss that?” In Washington, and elsewhere, the answers are often the same. It comes down to unspoken deals between powerful people, and smiling faces telling fairytales”

    “One way of looking at the history of the human group is that it has been a continuing struggle against the veneration of “crap.”―Neil Postman

    And what Martin Wolf wrote back in 2010

    “If the private sector runs a financial surplus (an excess of income over spending), there has to be either a fiscal deficit or a current account surplus (or both). The bigger the private surplus, the bigger the fiscal deficit or current account surplus must be. If, in reverse, fiscal deficits are to fall, the private sector must spend more relative to income or the current account must improve. Evidently, this needs to happen with higher spending, not lower incomes, particularly after a deep recession.”

  34. @ All

    The European parameters are seemingly in a state of flux.

    http://in.reuters.com/article/2013/06/13/us-eurozone-regling-idINBRE95C14Z20130613

    The unstated message is (i) that Merkel was unwise to insist on IMF involvement in the first place, the only argument that could be advanced being that it considerable technical experience and (ii) the EA now has to get its act together, having learned on the job, so to speak, a development that depends largely on Germany.

    As the comment by Ashok Mody on another thread in relation to Latvia confirms, the IMF has never really grasped that the euro is first and foremost a political project. It could hardly be anything else. The considerations that are driving the desire of Latvia to join are the same as those which prompted the country to join NATO i.e. getting out of the shadow of a very large neighbour and former occupying power. (Any parallels with Ireland would be a bit overdrawn).

  35. @DOCM this ties into discussion on OMT and SLOLR from other tread,he’s always interesting,apols a bit off tread here….any similarities..forgiveness is still not a viable strategy is paying it back realistic for Ireland,leaving only def..
    http://mainlymacro.blogspot.com/
    ” The first was forgiveness, in the form a large fiscal transfer from other Eurozone governments. These governments might have noted that the Greek people did not intend its previous governments to act in such a profligate and deceptive way, and that the Eurozone had failed to put in place effective institutions to stop it happening, and as a result they could have (one way or another) paid off a large part of Greek debt as a gift. That was never likely to happen, and it did not happen. [2]”

  36. Let 2007 => 1929. Then to-day is 1935. ??? The US remained in the economic doldrums for another 4 – 5 years. And, then they had a nice juicy war to get them out of their fix. And an even juicer after-war – until 1960s. Then it all came apart – again!

    So, tell me the story then!

    “Japan did WHAT!” “But, but, are we not doing something similar – and on a multi-national, semi-global scale!”

    “Yep!”

    “Oh, dear!”

    “Quite!”

  37. The sovereign is flirting with insolvency with debt at 120% and rising with large swathes of the EZ in a similar position. Germany the flywheel that provides stability is now on the edge (perhaps over) of losing momentum. The view from here is not as bright as it was in 2008 when our Gov’t and the Troika expected a “normal” 2 year recession from which we would recover with flags flying and the bands playing.

    We are in a replay of 1929 or our own even worse 1932 which lasted fifty years. It is cast in stone at this point that we will lose a decade and a half starting from 2008. The far greater danger is that there is a high risk the political and economic culture has not evolved to the point where we are capable of making the hard decisions required to reinvigorate the economy. We cannot rely on the second coming of the EU (EEC) with its terms and conditions that put us on the path to prosperity. The EZ brought us cheap money which we used to grasp defeat from the jaws of prosperity.

    There is a lot of soul searching to be done and painful changes to be made if Ireland is ever to rise again to join the ranks of responsible nations.

    Will the core be willing to fund the massive public works projects that are necessary to restart the periphery. With Germany in decline will the new German government open the purse strings. France is now in decline, will they insist on some form of economic stimulation for the EU as a whole.

    There are some things within our control and other things within the collective control of the EU and EZ. We have to focus on what we can do for ourselves and lobby for improved conditions elsewhere. What we cannot do is to throw in the towel.

  38. ‘What we cannot do is to throw in the towel.

    + 2 gold and 2 silver European

    Paddy Barnes for Taoiseach ….

  39. @ MH: ” … in 2008 when our Gov’t and the Troika expected a “normal” 2 year recession from which we would recover with flags flying and the bands playing.”

    That was for PR use only. The ordinary folk are clueless (and most non-ordinaries also). The difficulty is that most folk really and truly believe (and expect) that the people they elect will not harm them. But the truth is quite different – and the majority of folk still refuse to alter their beliefs – until the sh*t has exited from the fan, that is (= its too late).

    This is where we are now.

    “The far greater danger is that there is a high risk the political and economic culture has not evolved to the point where we are capable of making the hard decisions required to reinvigorate the economy.”

    Our legislators and civil servants are not actually powerless – more like clueless and keep convincing themselves – “It will be all right on the night” Neither groups ever had to make ‘hard decisions’ – these are disallowed in those circles. Its, “Do the soft shoe shuffle in shit” – and, “Lets go to D + N! for a pint!” This culture is genetically embedded in those two self-selecting groups and will never change.

    “Will the core be willing to fund the massive public works projects that are necessary to restart the periphery.”

    No! But we do have massive public works to be undertaken:- new and updated railways, new water schemes, innovative agri developments in urban areas; energy conservation, forestration. We will either have to finance these public works ourselves – or, wait for it … borrow and borrow and borrow until our eyes pop! Guess which? Remember those Hedgies will want a juicy return on their leveraged credit-money gambling chips.

    In approx 12 years time there will be a significant oil shock: the major producers will have transitioned from nett exporters to nett importers. Chindia (if they manage to stick with their unsustainable programmes) will attempt to suck up all the export slack that might remain: else they go into the economic trash can – permanently!. That WILL make folks eyes pop. Guess whose?

    You cannot eat confidence, coins or notes, nor oil. So how will Ireland feed itself? Oh, yeah! The Knowledge Economy will do a 7th Cavalry over that hill! It will in its glue!

  40. @John McHale

    Thank you for your response, sorry for the late reply – its been a busy week and angry invective does not pay the rent.

    I think dramatist/economic forecaster Gavin Kostick and political scientist/blogger Aidan Regan have written terrific posts above that capture the two big failings (well, three if you count Olli Rehn) that have bedeviled the response of governments and EU institutions to the European component of the global financial crisis – neoliberal idealogical blinkers and a shameless refusal to adjust policy based on results (the Commission and ECB have invested far more time in disputing evidence than acting on it). I think the class interests of the current generation of European policy makers, both elected and unelected, and the pervasive influence of the financial sector (Paging John Bruton and Alan Dukes) has also influenced how politics has been practiced in the EU but I encourage everyone to read Gavin and Aidan’s posts again.

    I am more of a little picture guy so I would like to focus on just one small part of your response above – the role of the fiscal compact in improving Ireland’s economic outlook, because I think it illustrates nicely the problem in the “realist” camp (other than the now hopefully rectified issues of the Mr Micawber school of forecasting).

    The reasoning behind the Fiscal Compact seemed to have at least four parts:

    * The peripheral countries were going to have to do it anyway due to cost of funding (this is a reason “Why not”)
    * The “common sense” Schwabian housewife school of household budget economics (which as a good Keynesian you would not subscribe to).
    * The idea that by adhering to rules acceptable to the creditor nations we would benefit from their solidarity if we required it.
    * Simple necessity, Ireland would have been bankrupted by the actions of the ECB had we not agreed to it.(economic blackmail on behalf of the financial sector and Germany)

    So is Ireland now in a more secure position because of the well defined long term guarantees that it has on funding and Germany’s notable new openness to burden sharing?

    Trick question, obviously.

    Germany has become even more intransigent on burden sharing since they enforced the Fiscal Compact on the Eurozone and the modalities under which ESM funds would be available are still not established. We can safely assume that the funding will be channeled through the state and that the fiscal policies required would be even more contractionary than the current ones – as a result Ireland’s unemployment levels and debt would increase. Ireland might well end up another 20 billion Euro down on the banks and with more of our youth emigrating.

    How about the ECB agreeing to behave like a proper central bank (with European Union characteristics) through OMT? The conditions for OMT are undefined but we can take it that the ESM logic applies. It will only be dispensed with kind of wrong headed growth asphyxiating conditionality as ESM.

    The fiscal compact had significant political costs (it strengthened Merkel and the most reactionary elements in the EU), a negative effect on European economic policy (which affects Ireland) and it allowed the ECB to function in a political manner totally out of place in a democratic union.

    It is good to be realistic about how you reach a goal, but the goal of being permanently subject to the political and economic needs of the German block was one not worth achieving. Really.

    We have incidentally, been over this ground before

  41. @ Shay

    I appear to have called myself Gav there (in a post which is hanging). Oh well. It looks like some kind of moderation has kicked in – I’ll note it on to John McHale and see if he can disentangle.

  42. @ skeptic01

    ‘ Abuses should be stamped out, but businesses that contribute value to society should be respected and encouraged ‘

    Most people, including me, will subscribe to that. The difficulty is to identify what constitutes abuse. Market dominance is just one of many forms of power in the world. Globally dominant corporations are a very different form of business from a small independent trader. Big corporations have extensive systems for internal command and control. They quasi-states’ in their own right, and it behoves us to pay attention to them.

    We interact with MNCs every hour of the day, day of the week. They don’t compete the way the local plumber does. They have monopsony and monopoly powers, are heavily cartelised, and are in a position to capture regulatory efforts. The capture may operate in old fashioned ways, such as bribery of executives and politicians, or it may be concealed behind a vast network of paid lawyers and other technicians. Just because the capture is sophisticated, technically opaque and ‘neutral’, and so less offensive to modern democratic eyes, doesn’t make it any less of a capture. Soft power is power. As Gramsci would say, it is hegemony, and people accede to it. We fail to recognise it at our peril.

    The reality is that many peripheral governments have effectively ceded control to much better equipped transnationals. Even worse, many wars continue to take place over state boundaries which were originally set down for the convenience and profit of big business. An awful lot of people have died violently in the various struggles over Middle East oil, and it is these arbitrarily-resolved resource issues which keep the Israeli/Palestine pot bubbling. Bobbit’s Shield of Achilles provides some terrific illustrations of the interaction between states, weapons systems, and trade. The military aspect, and the use of force as a solution, can never safely be disregarded.

    MNCs operate on the global stage. Their CEOs have a supreme sense of which strategies to apply in the different jurisdictions, and just how far they can push it. When in Rome, so as the Romans do. But they are not just in Rome, so they do it different in different places. Now and then they get caught doing stuff which doesn’t smell very good in Rome, but that’s where you need your army of top-dollar accountants, lawyers and suited, po-faced spinners. Not to mention the politicians and state execs who are indirectly or directly on your payroll. A few new faces at the top, ‘mistakes’ acknowledged, and all squeaky clean again. Isn’t that the sort of cosmetic stuff which we deplore in totalitarian state regimes ?

    I think this is an excellent thread and I commend John McHale on his openness. There is no way forward other than dialogue of this kind. Thanks also to Aidan R for the Blyth reference, While I have come out in defence of DOCM, I do think the members of the ‘business-oriented’ camp (if I may put it like that) need to recognise that ‘regulation’ is not just some technical exercise. The power imbalances in the real-economy MNC world are now intensified, and further complicated by financialisation.

    Double standards are a problem. It will be no armchair task to rein in the 1%

    http://therumpus.net/2013/04/austerity-by-mark-blyth/

  43. I heard a rumour that a few revolutionary marxists are convening somewhere in Leitrim … btw, is anyone still liviing and working in Leitrim?

    @all

    The so-called ‘Fiscal Compact’ has no social scientific empirical validity whatsoever. Good job too as it will be a mite difficult to get from 180% GNP to 60% GNP by finding one over a score over the present millenium! Present EZ ‘policy’ is quite simply ‘wrong’. Europe is regressing unnesessarily.

  44. My original post was eaten by imps, but to be honest it was rubbish…

    @John McHale

    Thank you for your thorough response.

    I think Gavin Kostick and Aidan Regan have written terrific posts above that capture the twin problems that have bedeviled the response of governments and EU institutions to the European component of the global financial crisis – neoliberal ideological blinkers and a shameless (and shameful) refusal to adjust policy based on results (the Commission and ECB have invested far more time in disputing evidence than acting on it. ). I think the class interests of the current generation of European policy makers, both elected and unelected, and the pervasive influence of the financial sector (Paging John Bruton and Alan Dukes) has also influenced how politics has been practiced but I encourage everyone to read Gavin and Aidan’s posts above again.

    However I would like to focus just on one small part of your explanation above – the role of the fiscal compact in improving Ireland’s economic outlook, because I think it illustrates nicely the problem in the “realist” camp.

    The justification for the Fiscal Compact seemed to have at least four parts:

    (a) The peripheral countries were going to have to do it anyway due to cost of funding.
    (b) The “common sense” Schwabian housewife school of household budget economics was a good one. (which as a Keynesian you would not, of course, subscribe to).
    (c) The idea that by adhering to rules acceptable to the creditor nations we would benefit from their solidarity if we required it. (They would recognize us as virtuous fellow ordoliberals)
    (d) Simple necessity, we would have been bankrupted by the actions of the ECB had we not agreed to it.

    I think (d) was in fact a strong reason not to sign the fiscal compact – you do not have to be a libertarian lunatic to grasp that the ECB was playing a lobbying role both for the banks and Germany that was totally out of place in any kind of international institution which supposedly gains its legitimacy from the people. It was demonstrative of a democratic crisis in the EU (see Aidan’s most recent piece here.

    This leaves (c). The fiscal compact was a political and economic necessity because it allowed our European partners to show solidarity assured that we would not abuse their generosity by wasting money on special needs assistants in schools and otherwise spending money that was not ours (“Moral hazard”).

    So are we now in a more secure position because of the well defined guarantees that we now have on funding and Germany’s notable new openness to burden sharing?

    Trick question, obviously.

    The exact modalities under which ESM funds would be available are still not established but we can assume that the fiscal policies required would be far more contractionary and that Ireland’s unemployment levels and debt would increase.

    Not only is there no agreement on direct banking recapitalization (or bank resolution) the agreement is that will be none. Any funding will only be available if core countries financial interests are threatened and only to the extent needed to protect them.

    There were several things that the Fiscal Compact achieved of course. It reinforced the influence of the most reactionary elements in European economic policy making and strengthened the domestic political hand of Angela Merkel. It reinforced the entirely dishonest and tendentious narrative that the European component of the global financial crisis was a simultaneous failure of national fiscal discipline in lots of countries not bordering Germany (who needed to return creditor nation “savings”). It made it difficult, and perhaps impossible, to reform EMU (since it ascribed the failure of EMU to national governments).

    Agreeing to and then signing the Fiscal Compact was one of the most significant failure in Irish governance in Ireland’s history and let us hope it the most significant foreign policy mistake we ever make.

    What it was not was a display of realism. It might have been considered pragmatic but the goals of that pragmatism appear to have been rather modest – not being laid waste by a belligerent neoliberal bloc in the Eurozone. This is not something we should have had to negotiate.

    This is not your mistake at all Professor McHale, it was shared across the political spectrum, and across the wider European policy making establishment (who were desperate for progress, though not sure of where to) but it has to be acknowledged that it was a failure and we have to ask ourselves why and whether these failings can be fixed with the current variety of EMU.

  45. @ PQ: “As Gramsci would say, it is hegemony, and people accede to it. We fail to recognise it at our peril.”

    People accede by default – they are basically clueless – in an innocent and naive manner. Getting them into a clued-in state is mighty difficult – who can persuade them? Who will they actually believe? Government ministers and such like are very persuasive. And not many clueless folk read this blog! Or any well informed blog for that matter.

    Your correct about the MNs. They are almost (but not fully) in control. A sovereign is still a sovereign – they just need the testicles to act to protect their citizens from real harm. At the moment ours is a tad sheepish.

  46. My last comment is in moderation (perhaps twice, each post has its own distinctive errors of style, punctuation and spelling so please enjoy both) but I have a request for the readers of this blog.

    Please, if you have fifteen minutes to spare over the next day or two, go the following Crooked Timber post (which is about a UK Parliamentary committee debate on the ten year anniversary of the invasion of Iraq) and watch the entirety of the speech by Tory MP Rory Stewart (starts at 01h30m28s) linked to there.

    It is quite brilliant and remarkably relevant to the topic at hand.

    http://crookedtimber.org/2013/06/15/iraq-2003-looking-back

    Every person, every group and every institution makes bad decisions but if those errors are never acknowledged, if it becomes policy not to admit mistakes (a la Barosso’s plea to slow down on collective austerity, even though it is such a good idea!), then decision making will get steadily worse.

    As it has.

  47. CHECK THIS OUT

    POP IN IRELAND FOR A SEARCH TERM: [H/T NAKEDCAPITALISM]

    Offshore Tax-Haven Data Made Public As Companies Brace For Scrutiny Huffington Post. Link to the actual database in the post. Reader Chris E: “I was playing around with it using some search terms, and if, for example, you enter the word “China” you can get an idea of the scope of the entities escaping tax offshore. It’s absolutely huge.”

    http://offshoreleaks.icij.org/search?q=&ppl=on&ent=on&adr=on

  48. @ Shay Begorrah

    Forget about Barosso what about the public servants here that got it wrong? Rory Steward finished his very fine speech by saying they needed to admit failure and they needed to “identify which civil servants got it wrong and hold them to account, rather than promoting everyone”. Have we done that? When Cardiff was being rejected by the European Court of Auditors we actually fought tooth and nail for his promotion but he was just one of a plethora was it not remarkable that people like Honohan would go native and end up telling us that, “he was not interested in finding out, who was responsible” they all cover up for one another. If you don’t find out “who” then there is a very good chance that they will end up in positions of even more power.

  49. @ shay

    Thanks for all that. Very fine speech too. I suppose parliaments, and institutions more generally, are not so every different from the general public. Most politicians and civil servants stick to their last.

    The idea that people in authority should be accountable for their mistakes is a bit like the idea of sound money. It’s very interesting that ‘pacta servanda sunt’ applies exclusively to Joe Public. The dominant groups simply change the rules and rewrite history when they think they are going to take a hit. To hell with the facts, they get in the way of business, would seem to be the motto.

    There is no fiscal responsibility without the sort of individual accountability of the type which Rory Stewart outlines. Golden parachutes for elites are politically repugnant in circumstances where millions of Europeans have no work Given the grip that plutocracy has on the political party systems, some innovative politics is required.

  50. @RB: Shades of Kingston – ‘Interrogating Irish Policies’.

    I ‘worked’ in a rule-based organization and it took me quite a while to understand the slug-like personalities who were in charge. They invariably used their formal positions of authority to both command and decide (and caused great resentment) rather than being able to deploy their (unfortunately absent) functional authority first. Once one understands that this is how actual decision-making is being undertaken, you scoot fast* – and leave the incompetents at it. The bad drive off the good.

    Unfortunately (but understandably) this allows the novice slugs a salt-free passage toward the top. “Change? What change?”

    The current economic and financial mess is simply a further enhancement of the priors. (No learning has occurred). Its just deeper, more invasive and more intractable that previous episodes. Since no real resolutions of the most recent episodes has occurred, then expecting any successful resolution of this episode (reduction of likelihood of a reprise) is bordering on the insane (no offense to you folk). What many concerned folk are doing is faffing about the detail and administrative minutae of the various ‘solutions’ – without having first grappled with the principle of the thing (you cannot pay your debts if your real income is inadequate). That’s the issue: income poverty!

    *’King Amoeba and the Parable of Dropland’ [Robert Mager]

  51. @Robert Brown

    Forget about Barosso what about the public servants here that got it wrong?

    This is really interesting. What are the possible reasons for Cardiff’s escape from the Department of Finance to the European Court of Auditors?

    * The DoF felt that it had carried out its brief and that Cardiff had done exactly what was asked of him by “irresponsible” (but not badly advised) politicians.
    * Cardiff knows where the bodies are buried as regards key decisions and so needed to be kept sweet, and ideally far away.
    * Cardiff made serious errors but it is culturally impossible for this to be acknowledged.

    I think the last option is important. Given that at the highest levels mistakes are never acknowledged (EMU, austerity, the fiscal compact – all good ideas that have been let down by poor implementation, dontcha know?) why should Cardiff be the one to confess and seek absolution? No one else will, everyone in the Eurozone policy making establishment is convinced they have made the best of a bad situation even while European economic outcomes have trailed our peers. It would simply be too appalling a vista if they had made such significant errors (based on a flawed ideology), and so it can not have happened.

    While it is important to retain a sense of outrage at the failure there does need to be a balance struck between accountability for bad decisions and the kind of environment in which mistakes can be quickly identified, reevaluated and rectified. If the consequences for politicians, civil servants and advisors of decisions which did not work out are too severe, personally and professionally, then huge effort will be invested (as it has been at every level) in denying that any mistakes have been made.

    So like the penal system we need to be more focused on rehabilitating government than punishing it – in allowing space for people to change their minds, acknowledge errors in direction and then reverse. (“Only forward” and “Ever closer union” compete for dumbest political catch phrases of the twentieth and twenty first centurys.)

    I hope that at some point a senior figure involved in policy formulation in Ireland will step up and say “We got it wrong, lets analyse why, try and undo the damage and try again.”

    I can think of a few people who might be up to that job.

  52. Hey up Shay!

    Good try, but as I alluded to in the penultimate post, fessing up is not in the rule book. Look, how could I make mistakes? I possess the minimal technical qualifications (read, write and some math), and speak a passable Tá sé mahogany gasspipe. I apply, am interviewed (by a solemn set of senior critters) and get appointed. I keep my knoze clean and get both wage increments and the standard promotions. Better, I not only have kept my knoze clean, but I have cleaned some Big Snots as well. Then I get the big promotion.

    Now, please explain how in God’s name it is even remotely possible that I can (with all my experience) make a ‘mistake’ – that is I suggest a course of action that ‘blows up’. Its impossible! A ‘mistake’ is only possible if I am ‘unwell’ (in the head sort of thing). The others will protect me – as I protected them. And so it goes.

    If a senior politician or civil servant makes a bad booboo – then they must be held to account. It does happen. In the case of the former, they (God help us) have a ‘serious reflection’ and step aside. Not so in the case of the latter. Its all done in a completely opaque and silent manner. You quite correctly identify the ‘Appalling Vista’ scenario. The whole edifice has been built in such a manner that it has all the attributes of the best formed military-grade concrete. If you ‘bomb’ it. it suffers a few scratches, maybe even tilts a little, but otherwise is completely undamaged. The only way to ‘change’ these structures is to de-populate them – and make them permanently uninhabitable.

    “I hope that at some point a senior figure involved in policy formulation in Ireland will step up and say “We got it wrong, lets analyse why, try and undo the damage and try again.””

    I sincerely hope so too. But I reckon that they would be ‘slimed’ for their courage and effort. And, his/her, successors would simply continue as before. I’d suggest a novena to Saint Jude, but I understand the poor lad was ‘demoted’. So? Scoot – fast! Those ‘Samsons’ will pull the edifice down on top of us before they are done.

  53. “The president has failed us. The Congress has failed us. The courts have failed us. The press has failed us. The universities have failed us. Our process of electoral democracy has failed us. There are no structures or institutions left that have not been contaminated or destroyed by corporations.”

    http://www.truthdig.com/report/item/blocking_the_gates_to_the_temples_of_finance_20110418/

    People like Geithner signed off the Irish bailout. There is no accountability. Sure it flopped but as Noel Coward almost said, strange how potent cheap economic assurances are.

    And there is this by Wordsworth

    Action is transitory—a step, a blow,
    The motion of a muscle—this way or that—
    ’Tis done; and in the after-vacancy
    We wonder at ourselves like men betrayed:
    Suffering is permanent, obscure and dark,
    And has the nature of infinity.

  54. The best way to run the world

    is to let it take its course

    -and to get yourself

    out of the way of it!

    Tao Te Ching #48

  55. The Brits are giving us a trouncing in terms of what needs to be done and will be done!

    The Government (British of course), has been urged to introduce a new criminal offence for “senior persons” who run banks in a “reckless manner”, as well as much more stringent clawback rules that could see managers being stripped of several years’ worth of pay.
    Andrew Tyrie MP, the chairman of the Commission on Banking Standards, warned that bankers had escaped “personal responsibility” for their actions, and said that drastic reforms were the only way to restore trust in banks.
    “Where the standards of individuals, especially those in senior roles, have fallen short, clear lines of accountability and enforceable sanctions are needed,”

    A 570 page report just out that shows the Irish attempts to date to be almost laughable.

  56. @Paul Quigley

    Your views broadly endorsed here I think

    My position was not novel or radical but it s now factual.

    When Europe signed up to the fiscal compact it agreed to misdiagnose the European component of the global financial crisis as a fiscal crisis. It turned out that near total political unity (or in fact submission to the creditor countries) on a poor analysis does not make the analysis any more valid (the very abridged Paul Krugman ) but it lends the analysis a political weight that makes it very hard to shift.

    Is it not a remarkable testament as to how to the economic and monetary policy framework of the EU functions works that the losers of the intellectual battle still set it after their policies have patently failed?

    The structures of the EU are not completely to blame, it was partially Europe’s misfortune that the EPP were in power in so many peripheral countries (Spain, Portugal, Ireland, Greece) coming up to the signing of the economic suicide compact, it has always been the habit of the right to rely on intestinal fortitude rather than good taste (or a sense of smell) when dining at the policy restaurant.

    We’ll have whatever she’s having.

  57. @David O’Donnell

    Have all your posts been included here?

    All eight of my posts, including two almost duplicates, were let through on this topic. This is all the insight I got (good thread though).

    Prof McHale, if it is he that did the moderation, may have allowed me to hoist myself on my own e-petard (or may now completely agree with me, fingers crossed).

    Off topic: I think it is only twice or three times that my posts have failed to make it through moderation on this site, and even though the posts were obviously all good (minor errors of terminology, detail, logic and language aside) it demonstrates some engagement. Blogs do not maintain their own usefulness – just like markets.

  58. Seafoiid,
    You & your fellow Grauniad reading keeners ignore the fact that Ireland is not unique. For Anglo read C or BAC. In some sense we might even be superior. Last time I looked MN did not have 100k from a dodgy arms dealer resting in his a/c.

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