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An orthodoxy going mad… June 29, 2012

Posted by WorldbyStorm in Economy, European Politics, Irish Politics.
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The Irish Times editorial yesterday waxes not so lyrical about the current economic situation:

SOMETHING HAS to give in relation to promises made by Fine Gael and the Labour Party in their joint programme for government. Commitments made to public servants under the Croke Park agreement, to voters on taxation and social welfare and to the troika on fiscal retrenchment were based on economic growth rates that have not materialised. Because of the resulting revenue shortfall, unpalatable Cabinet decisions lie ahead.

The problem with that analysis is that the growth rates were meant to flow endogenously, as the term has it, from the measures taken – expenditure cuts reified over tax increases, cuts in wages in the public sector (and pension contribution increases) and so on and so forth. That’s how ‘austerity’ is meant to work. Otherwise what’s the point? And sure I get the line ‘there’s no money’, but it’s sort of unconvincing given the weighting of cuts to tax increases.

And if there are no growth rates now then it seems perverse to think that they will appear from the mists as it were.

It continues:

Closing the gap between revenue and spending was predicated on strong economic activity and higher revenues. That hope has faded as the EU lurches towards recession and the currency crisis remains. The outlook may change, depending on decisions by EU leaders to boost economic growth or to share losses by the banking system between creditors and debtors.

But as any fule kno, closing the gap between revenue and expenditure in a recessionary economy is a mugs game. Austerity writ large across the European economies has delivered negative growth. This is a clue. Whether the divergent reports emanating from Europe this morning mean any change remains to be seen. I suspect that unless there’s a sense at ground level that changes actually impact upon the bite of austerity it will simply be seen – if it has any effect at all, as meaningless.

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Comments»

1. CL - June 30, 2012

‘Expansionary fiscal contraction’ is as oxymoronic as it sounds, and only the severely deluded, or perhaps brain-damaged, among orthodox economists believe in it.
Of more sinister significance is the claim made by economist ideologues that ‘internal devaluation’ is necessary; this is a euphemism for reducing wages through mass unemployment.
By reducing wages, suppressing demand and reducing living standards, austerity increases the amount of the economic surplus extracted from workers to be transferred to finance capital.
Kenny and Noonan have already indicated that this process will continue regardless of the new scheme to bail out banks directly.

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EamonnCork - June 30, 2012

I recall Mary Harney pushing this line back in the day with the memorable phrase, “The Chinese might be poor but they’re happy.”

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WorldbyStorm - June 30, 2012

Yep. we’re all happy now that the bailout terms might (and isn’t it telling how vague it all is) be reworked. Even if it doesn’t impact on us directly. Yeah. Great…

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yourcousin - July 2, 2012

makes me think of the term, “happiest barracks in the camp”

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2. crocodile - July 1, 2012

I spent 3 wet days listening to the radio in Galway, in the wake of the ‘seismic’ deal. Interviewers asked dozens of proponents of the economic orthodoxy for reactions to it. Was I just being paranoid, or did I hear real worry in their voices: ‘We can’t sound too happy about the decoupling of the banking and sovereign debt, because our real agenda hasn’t been achieved yet: the lowering of social welfare rates and the minimum wage, the screwing of public servants, privatisation’? Sure enough, today’s Sindo and Sunday Times are chock full of pundits telling us that the real problem is the Croke Park Agreement.
If a trillion euros fell out of the skies tomorrow, enabling us to pay every cent we ‘owe’, the Marc Colemans and Varadkars would still want the CPA torn up, because nurses and teachers are the real enemy.

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WorldbyStorm - July 1, 2012

And they are simply unable to utter the term ‘tax increase’ either. Cormac Lucey had a master class in today’s SBP in respect of that when talking about balanced budgets.

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crocodile - July 1, 2012

See also Dan O’Brien’s analysis of the report into child deaths – all the fault of social workers and their managers. Not a mention of money, staffing levels or resources in the whole article (Friday)

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CMK - July 1, 2012

Today’s Sindo had an absolutely disgusting piece pitting the intellectually disabled against public servants. Cuts to the care for the former could be unnecessary if the latter were prepared to forgo their increments. Of course the Sindo framed it in zero-sum terms where the public servants who care for the intellec
tually disabled 24/7/365 giving their all (which is the only way with this type of care) are still, notwithstanding this, stoneheartedly insistent on their increments and ley those in their care go to hell. The Sindo is sick and twisted at the best of times but today’s edition saw them outdoing themselves in twistedness. I loathe Denis O’Brien, but I hope the Phoenix’s reports of a mass cull ar

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CMK - July 1, 2012

are accurate, nasty and all as that sentiment is. There is a huge amount of ‘payback’ coming for the Sindo journos who have made a living from outrageous lying over the past few years. O’Brien will, hopefully, give a few of them the boot, and soon.

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smiffy - July 1, 2012

Actually, an interesting slip was given away in that article:

In many organisations providing services to the disabled, staff salaries are linked to public-sector pay scales and therefore are obliged to match the incremental pay increases. This means that while budgets are shrinking, pay bills are often rising.

Incremental pay scales in the private sector? Surely not!

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CMK - July 2, 2012

Reminds me of my time in the private sector during the ‘boom’. Company I worked for was literally deluged with cash, a tsunnami of euros every month. So much money that they literally found a couple of million in the accounting equivalent of ‘down the back of the sofa’. And yet, and yet, staff pay rises were rigidly linked to partnership rates (there was no union) plus 2%, and no more. Indeed, I was reminded on more than one occassion that I was linked to pay grades in the public service and not to expect anything more.

Given that we’re discussing the Sindo there was unintentional comedy in the editorial pages when that berk Daniel McConnell trotted out the old chestnut, backed up by ‘expert’ opinion, no less, that public servants were paid 40% more on average than comparable grades/roles in the private sector. Almost immediately below that Maeve Sheehan writes that, according to research by a German economic consultancy, the differential is only 21%. A drop of 19% in two separate pieces on the same page. Anyone interested in accuracy or, god forbid, truth, would be looking to question such inconsistencies. Not for the Sindo crew, obviously. I read most of the editorial pages and to echo ‘crocodile’ above someone has obviously been briefing hacks to get some momentum going for an assault on Croke Park.

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Bartley - July 2, 2012

The quality of services for the disabled versus increments for the public servants serving the disabled, is of course a false dichotomy if ever I saw one.

Not because the payments received by those public servants are beyond question, more due to the fact the the numbers involved are at most a rounding error in the grand scheme of public sector employment.

Both sides of the arguments focus in on at almost irrelevant niche sending because it is so emotive. Whereas in fact most government spending and most public sector employment doesnt fit into such neat categories (and could be cut without impacting one iota on the disabled).

So the question of increments can only be understood in the large. How can it make sense that an employer in such dire financial straits justifies paying automatic pay rises to their employees?

The standards responses are:

(a) the state isnt really bankrupt at all, in fact we\’re fully funded until 2014 – so for the moment, lets party like its 2004!

(b) most of the cost of increments is actually accounted for low-paid clerical officers, so it would be patently unjust not to lift those folks out of poverty with a modest pay-rise every year.

Hard to know where to even start with either, but both are patently false and self-serving.

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WorldbyStorm - July 2, 2012

How’s your back feeling?

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3. crocodile - July 1, 2012

The Sunday Times had an article about the heads of various charities like Enable and ISPCC having salaries linked to public service pay scales. Coincidence? No- someone’s been briefing

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