Economic woes

Revealing how a single news story was treated last week. In the Guardian on Friday you would read at lunchtime that ‘Eurozone crisis live: Ireland falls back into recession, as Portugal strikes’. Meanwhile over in the Irish Times there was a more sedate ‘Economy grew by 0.7% in 2011’, and it was only in the first line that any mention of the ‘r’ word was made.

The Irish economy returned to growth since 2007, but a slowdown in the final two quarters of the year meant the country was technically back in recession.

And if you read a bit further in the IT coverage you would find this:

“Uncertainty over the world economy and euroland in particular is likely to weigh negatively on the country’s growth prospects,” said Alan McQuaid, an economist at Dublin-based Bloxham, which is forecasting 0.5 per cent growth this year.

”There is little to be optimistic about as regards the Irish consumer and personal expenditure in the immediate future.”

Alan McQuaid is the go to guy when it comes to saying it like it is. No doubt about it. But Michael Taft has harsh and correct words about this ‘technical recession’ to be found here.

On a related topic, Robert Skidelsky, a peripatetic traveller on the British political spectrum, from Labour originally to Social Democratic Party and on to the Tories before arriving as a cross-bencher in the House of Lords makes some sensible points about austerity in the Guardian this last weekend.

He notes that:

Osborne’s claim rests on the view that a shrinking deficit will automatically, if mysteriously, revive the “animal spirits” of businessmen, while confidence in the government’s finances will reduce the cost of its borrowing. However, the opposite logic is more compelling. If the government is cutting its own spending at the same time as households and businesses are cutting theirs, the result is a fall in total spending which means a fall in total buying. This depresses output and employment. And the low cost of government borrowing may not be a sign of confidence at all. It may mean the money has nowhere better to go, or simply that the Bank of England is busily buying up government debt.

This point about a ‘mysterious’ dynamic is well worth expanding upon because the Osborne (and others closer to home) approach isn’t underpinned by any evidence whatsoever (there’s some handwaving about the Irish economy in the late 1980s and early 1990s which seems to ignore the transfers from the EC during that period and that wages weren’t cut in the public sector). We see this in this society where far from austerity unleashing the pent up energy of the private sector we have instead seen the economic indicators dip even further. As noted directly above, only this last week the Irish economy reenters a recession ‘technically’.

And the same process of targets set, targets missed is in evidence in the UK.

Osborne claims his deficit reduction plan is on course and borrowing has come in below targets – but these are the same targets that were revised upwards by Ј112bn only in November. Keynes’s remark, “look after unemployment and the budget will look after itself” is more to the point than Osborne’s “look after the budget and unemployment will look after itself”.

And he continues:

Osborne has said the government cannot afford to spend at the present rate because it hasn’t got the money. But if the country were more fully employed, the government would receive extra revenue – which would make its spending “affordable”.

Of course the question is where does the money come from to tide economies across this period. Michael Taft and Tom McDonnell have some ideas in relation to what happens if we vote No to the fiscal ‘compact’. Yet it’s hard not to believe that from the start the wrong approach was adopted, and that a broader European wide approach was and remains necessary – though I have no hope at all that it would happen. An approach wherein actual transfers – as distinct from the melange of policy responses evidenced in the ‘bail-out’ would be made from centre to periphery in order to significantly cushion the blows that have occurred in the past four years. Given that this state assumed debt that was private sector generated that would seem to be the least that could be done. That it hasn’t is an indictment of the EU as presently constituted. But also an indication that there is no functional vision of what the EU is meant to be for all its citizens, as distinct from the markets, when one strips away the rhetoric.

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