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Sunday Independent Stupid Statement of the Week November 25, 2012

Posted by Garibaldy in Sunday Independent Stupid Statement of the Week.
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Today is praise Fianna Fáil day in the Sindo. What a great guy Martin is, how FF is needed etc. Heard it all before, but never quite so confidently and aggressively. On top of that, it’s also the poor middle classes day. Again.

Mixing the two themes is John Drennan, who believes the “welfare classes” are a vested interest à la the banks, unlike the real oppressed.

Ironically, Fianna Fail is also beginning to benefit from the great cull of election 2011. The Irish political system has evolved into a perfect replica of Ireland’s social divide between the comfortable classes and the ‘squeezed middle’ dispossessed classes. But the axing of the FF ancien regime means that our ‘new’ government of Grumpy Old Men belongs to the former grouping.

Casting his eyes further afield, Marc Coleman has been reading a report written by some people who work for the ECB. Clearly objective and lacking ideological bias then.

The first myth about this crisis – that “right-wing policies” caused it and “austerity” worsened it – is blown apart by the paper. Rather various shades of left-wing government – from Greek socialism, to Spanish and Portuguese Social Democracy and Irish and Italian social partnership – have led to bloated spending, chronic debt and penal taxation, joblessness and low growth. By contrast, countries that cut early and cut hard are now growing: Latvia, which cut spending by 30 per cent in a year, grew by a staggering 5.5 per cent last year and its unemployment rate is falling.

All together now, the bank crisis had nothing to do with the current crisis. And black is white.

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1. paul - November 25, 2012

This latvia angle is getting tiresome. Its used over and over again and has been well debunked by Krugman and others. But a key angle that seems to get missed is that Latvia is – quite appropriately – in receipt of structural funding. (I don’t have the figure to hand, but perhaps somebody better informed than me will have?).

Now remember that when Ireland’s economy began to grow in the late 80s, we were also in receipt of over IRL7bn of structural funds.

in both cases the subsequent growth is often attributed to cuts in government spending rather than to the huge (state) investment in the economy.

Its almost like they don’t want to see the evidence before their eyes.

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2. Jonathan - November 25, 2012

Latvia, the austerity advocate’s dream! Coelman’s never one to let facts get in the way of reality:
http://www.neweconomics.org/blog/2012/07/18/the-myth-of-successful-baltic-austerity (and in more detail here: http://michael-hudson.com/2012/06/lativa-no-austerity-success-extended/)

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3. RosencrantzisDead - November 25, 2012

Not in the Sindo, but too good to pass up. Some moron on Marian Finucane was pushing the Laffer Curve and claiming that we cannot increase income taxes any more. (We bloody well can, and should, increse the top rates and introduce an extra bracket, but a certain party made a promise that they would not do it). Naturally, he assumes that Ireland lies on the declining end of the curve. The rest of panel ‘umms’ and ‘ahhs’ in agreement.

Same individual later goes to say how Ireland will recover, but only if we continue to reduce our labour costs. ‘People of a socialist persuasion won’t like me saying this, ‘he opines ‘ but we cannot be self-sustaining…We need foreign investment and other countries to invest in…We need to compete with countries like Vietnam and Pakistan.” [I have changed to quote slightly but the thrust of it is the same.] Of course, this is linked to the above because it relates to price and a lower price is more attractive.

And I suppose socialists might not want to hear about how the Socialist Republic of Vietnam, run by a Marxist-Leninist party, is doing better than Ireland. Of course, they devalued their currency three times this year alone. This is a trick we sold away.

In any event, if our competitors are Vietnam and Pakistan and we have to beat them on price and price alone, then it is not just socialists who should dislike what he is saying; it is the entire country.

If we are competing with developing economies for foreign investment from developed nations, then we are fucked.

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Starkadder - November 25, 2012

Marian Finucane has been beating the right-wing drum for quite
a while:


Flexible markets exhibiting their flexibility by off loading tens of thousands in redundancies – somehow in some intangible fashion ‘solidarity’ is demanded of the public sector, implicitly or sometimes explicitly in terms of wage cuts (this proposition was directly made by Marian Finucane at the weekend). And so on.

http://cedarlounge.wordpress.com/2010/03/30/the-public-sector-union-agreement/

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RosencrantzisDead - November 25, 2012

Oh, I know; it is just that that particular piece was brilliant in its irony. These people have no idea what they are coming out with. Pakistan? We are going to have to be cheaper than Pakistan?!

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gabbagabbahey - November 25, 2012

also, if that’s the case, better tell workers in Pakistan that their incomes, standards of living, national development etc. can’t increase because Ireland is coming down to meet them.

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paul - November 25, 2012

Another aspect of this is less comical but equally serious. the apparent logic unlerlying austerity is that we all allowed ourselves to become uncompetitive during the boom, and must now restore competitiveness through internal devaluation (reducing wages acrioss the board)

Notwithstanding the fact that Ireland’s exports have continued to do well throughout the crash – even allowing for transfer pricing – is it really feasable that every country in the eurozone can be more competitive than every other country in the eurozone?

and also more competitive than China.

Like Germany is.

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Jim Monaghan - November 25, 2012

I suppose with an independent currency we could devalue. At a stroke our exports would be more competitive. The downside is that our imports would be more expensive. So our wages would not go that far.At an instant prices in supermarkets would go up.Devaluations work by essentially reducing our pay, pensions etc. The weaker sections have this done permanently. The stronger get an increase.So I think we should think long and hard about it.
One way of reducing labour costs would be to cap salaries in the public service at 100 grand. More than enough for anyone. But this is off the agenda. The unions should insist that a precondition of even talking about Croke Park 2 is the salaries of the senior public servants who dodged a lot of the cuts when bonuses were turned into basic pay.

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CMK - November 25, 2012

Jim, why stop at capping public sector salaries at 100K? If that’s more than enough for anyone then it’s more than enough for anyone regardless of where they work. A 95% income tax over 100K. I know the latter is completely off the agenda and probably condemns to the realms of political fantasy. But I think income tax rates for the ultra-wealthy in the UK in the 60’s were of the order of 95% (the inspiration for the The Beatles’ ‘Taxman’ if I’m not mistaken). I agree that 100k should be enough for the public sector but it should be extended to everyone else, too.

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WorldbyStorm - November 25, 2012

+1

Very good point CMK. What exactly is the rationale that PS salaries only should be capped?

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LeftAtTheCross - November 25, 2012

The rationale, as it goes, is that entrepreneurs must be rewarded for the risks they take, because “government doesn’t create jobs, business does”, so if we (the workers) want jobs, we must be glad of the jobs we’re given and not complain about the price we pay for the luxury of working. As opposed to the public sector where jobs for life are guaranteed from the taxation of hard-pressed businesses and the PAYE that they contribute to the public good on behalf of their employees. That’s the world they live in, bizarre as it seems.

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smiffy - November 25, 2012

I think it’s more than that. Capping PS salaries at 100,000 would be just tokenism. The level of savings generated would be minimal, as the numbers of public servants on salaries at that level are tiny.

But does anyone really believe that such a move would silence those obsessed with public sector workers? This 100,000 figure is just the thin end of the wedge. That’s what’s being sought now, but it’ll be pay cuts all the way down, on a sliding scale because given the pyramidical structure of the public service the only way to generate meaningful savings from pay cuts is to cut at the bottom as well as the top.

And attacks on the public sector are just a stalking horse for attacks of workers’ rights across the economy, as in right-wing attacks on the trade unions which are, in the Sindo and elsewhere, synonymous with the public sector.

That’s not to say that the public sector isn’t disproportionately represented when considering unionised workers across the board. But if those commentators bemoaning the struggle of private sector workers were sincere in their concerns, they’d be advocating an improvement in conditions within the private sector, not a race to the bottom for workers.

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CMK - November 25, 2012

For some sectors of this society 100k is a poverty wage. The absolute base level for survival! Much of South Dublin would be ungovernable if maximum taxes on salaries over 100K were imposed (puts on tinfoil hat!). The army would be on the streets; there’d be curfews; mass arrests; police raids on Roly’s Bistro looking for the instigators of the revolt; the Old Wesley grounds would be a den of intrigue… But for many who regard 100K as poverty for them, they would regard a Clerical Office in the civil service on 40K as grotesquely overpaid (which I think is the point of LATC’s comment, apologies if I’m wrong on that). I think the FG mindset what encapsulated by the doorsteping of a Meath FG TD (I can’t remember her name) who, when asked about the impact of household taxes versus raised income tax, gave the example of a professional couple each earning over a 100K who would ‘suffer’ tremendously if income taxes were raised.

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smiffy - November 25, 2012

“for many who regard 100K as poverty for them, they would regard a Clerical Office in the civil service on 40K as grotesquely overpaid”

Brilliantly put (not to forget that a CO, even at top of scale, wouldn’t make 40K).

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LeftAtTheCross - November 25, 2012

Thanks CMK, that’s it exactly, it’s the begrudging reluctance to foot any of the costs of externalities to their own comfortable private circumstances, whether that’s the direct costs of public services or the indirect costs of political intrusion into their free market pay rates.

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Jim Monaghan - November 26, 2012

I agree with this. My pojnt would be that a “reformist” government has control of the Piublic Service.It happens to be SF policy but they use it for rhetorical reasons, they would compromise. To be honest I think the way out of the crisis is at least a pan EU thing. We are buit leaves in the storm.

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CL - November 26, 2012

Merkel has succeeded in imposing eurowide neoliberal austerity. This has depressed economic activity to such an extent that even some elements in the IMF are beginning to demur.
The only way for Ireland fo increase aggregate demand is a massive expansion of labour-intensive exports, (unlikely) or a massive re-distribution of income and wealth to the less well off (very unlikely).
In fact the opposite is happening: as the debt/GDP ratio approaches 120% a massive amount of surplus value produced by the working class is being transferred to capital by way of interest.

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4. paul - November 25, 2012

to expand on that (I have loads of work to do, so I’m doing this instead), the pro-austerity logic seems to be:

in order to become rich, we must first become poor, and in order to stay rich in the future, we will have to stay poor. Or, at least, some of us will.

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5. greengoddess2 - November 25, 2012

” some of us will” and others will become richer, in such a scenario. Some of this sounds mad, but maybe its more sinister then that.

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LeftAtTheCross - November 25, 2012

Nessa, class consciousness just sounds like some whacky paranoid conspiracy until you realise that actually it’s the way things are.

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6. crocodile - November 26, 2012

The plonked quoted by RisD also pointed out that the days of seventies luxuries like union rights and decent pensions were also over. None of that kind of thing in Pakistan.

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