What can the Government do, aside from spending money to boost the economy?

blue shimmering

This question has plagued me for some time now, would it be better to try other options and what could they be? What about Exports, Imports, Investments, and so on....Should they look at boosting consumer income and hope they will spend this money wisely, what do you all think?:cool:

silverharp

cut taxes and cut public spending, otherwise the irish economy is like a flea on an elephant, enjoy the ride and don't bother looking to politicians for any answers

Akrasia

silverharp wrote: »

cut taxes and cut public spending, otherwise the irish economy is like a flea on an elephant, enjoy the ride and don't bother looking to politicians for any answers

The Irish government are totally hog tied. They have no control over monetary policy and because of our 'free market' ideology, even the money we're spending on capital projects is leaking out of the economy.

Cutting taxes is a terrible idea. It won't stimulate the economy because a lot of that money won't be spent in Ireland. Cutting public spending will just further depress the economy as more people are laid off.

The FF government have made an awful awful mess of the economy and now there is very little they can do to fix it. We're going back to the 80s, and this time we can't even emigrate to england or america because they'll be in just as bad a position as we are.

Tricity Bendix

Akrasia wrote: »

The FF government have made an awful awful mess of the economy

Only if you call fantastic growth rates over the past 15 years a mess. I'm no Fianna Fáiler, but Ireland has done amazingly well under them and the PDs (and dues to FG and Labour for their brief stint). If 15 years ago someone offered you a bag of beans that would make the economy grow 6% or 7% a year for 15 years and then grow at more modest rates of 2% or 3%, you wouldn't bloody turn it down.

You are right in saying that spending shouldn't be cut, though. At least not spending on the major infrastructure projects.

As to what the government can do, for a starters it could reduce the ridiculous amount of red tape that is choking entrepreneurs. Rolling out Broadband across the country would also help. Moving at least part of the service offered by Dublin Port to Bremore would increase our trade potential, which is currently being constricted. Improvements in our antiquated education system would take longer to come to economic fruition, but thats all the more reason to start now.

gurramok

b.ie polar wrote: »

Only if you call fantastic growth rates over the past 15 years a mess. I'm no Fianna Fáiler, but Ireland has done amazingly well under them and the PDs (and dues to FG and Labour for their brief stint). If 15 years ago someone offered you a bag of beans that would make the economy grow 6% or 7% a year for 15 years and then grow at more modest rates of 2% or 3%, you wouldn't bloody turn it down.

7% rates(2002+) mostly based on building houses which we sell to each other. Strip out the excessive housebuilding and your left with the likes of 1.6% GNP growth forecasted this year by ESRI.

10,000 houses built is suppose to be 1% GNP according to commentators, 2006 saw 93,000 built and this year might hit 40,000. We can't keep go on building houses with excessive supply.

Do the maths on GNP difference.

mike65

Free the markets from the avalanche of third rate regulatory bodies that keep prices high and service quality low.

Mike.

silverharp

Akrasia wrote: »

The Irish government are totally hog tied. They have no control over monetary policy and because of our 'free market' ideology, even the money we're spending on capital projects is leaking out of the economy.

Cutting taxes is a terrible idea. It won't stimulate the economy because a lot of that money won't be spent in Ireland. Cutting public spending will just further depress the economy as more people are laid off.

The FF government have made an awful awful mess of the economy and now there is very little they can do to fix it. We're going back to the 80s, and this time we can't even emigrate to england or america because they'll be in just as bad a position as we are.

Japan couldnt spend its way out of a funk, Ireland will be no different. Remember Ireland tried the Keynesian tax and spend nonsense in the 70's that bankrupted the economy. The best thing ireland can do is focus on getting more competitive and that can only happen with a smaller gov. (it wont happen of course)

daveirl

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blue shimmering

daveirl wrote: »

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Gosh everyone is very pessimestic aren't they, I do agree that to spend more money probably not be a good idea but so also is giving themselves a big salary rise which they will take when the whole fuss dies down - then we will have to pay for it! What about doing something about the big earners who don't pay any tax into the Irish economy - if you work, make big bucks here you should pay your fair share of tax! At the moment what is happening is they can afford to live out of the country for so many months and then don't pay a cent, the ordinary taxpayer who is close to the minimum wage has to pay for them - I feel this is not on and should be corrected! If we are proud to be Irish we should pay our fair share and the Government should make sure we all do, that is the big fat cats should be paying more than the little small cats?

Ekancone

b.ie polar wrote: »

Only if you call fantastic growth rates over the past 15 years a mess. I'm no Fianna Fáiler, but Ireland has done amazingly well under them and the PDs (and dues to FG and Labour for their brief stint). If 15 years ago someone offered you a bag of beans that would make the economy grow 6% or 7% a year for 15 years and then grow at more modest rates of 2% or 3%, you wouldn't bloody turn it down.

You are right in saying that spending shouldn't be cut, though. At least not spending on the major infrastructure projects.

As to what the government can do, for a starters it could reduce the ridiculous amount of red tape that is choking entrepreneurs. Rolling out Broadband across the country would also help. Moving at least part of the service offered by Dublin Port to Bremore would increase our trade potential, which is currently being constricted. Improvements in our antiquated education system would take longer to come to economic fruition, but thats all the more reason to start now.

This is the only sane post in this thread.

Akrasia

b.ie polar wrote: »

Only if you call fantastic growth rates over the past 15 years a mess. I'm no Fianna Fáiler, but Ireland has done amazingly well under them and the PDs (and dues to FG and Labour for their brief stint). If 15 years ago someone offered you a bag of beans that would make the economy grow 6% or 7% a year for 15 years and then grow at more modest rates of 2% or 3%, you wouldn't bloody turn it down.

There is more to running a country than gnp growth statistics.
The celtic tiger died in 2001 at the end of its natural life cycle. Since then, we have been in an over heating economy and the billions and billions of extra euros floating around was mostly created by debt and spent on over inflating a housing bubble.

Big numbers are very impressive but there is often a cost attached.
Even I could probably design a rocket powered car that could travel 600 miles an hour and that would look really impressive until someone took it for a drive and it exploded 30 seconds into the journey.

How much use will the last 10 years of economic 'growth' have been if a bank collapses this year and the tax payer needs to pay out billions of euros to rescue it.
What use was a boom if we have to cut back public services in our health and education departments even further?
What is the use of a boom if it doesn't raise the standard of living for the citizens in the country?

Akrasia

daveirl wrote: »

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cut tax and cut wages.. that's a genius solution alright.

Thomas_S_Hunterson

The public sector could do with a major shakeup IMO. There's far too many people twidling their thumbs in cushy jobs in there.

leninbenjamin

we need to sever our dependency on FDI, and give incentives to people to NOT invest in property.... we need to start trading more with Asia as well, but with the current set up in the economy we have no control over who we trade with.

Ekancone

Akrasia wrote: »

How much use will the last 10 years of economic 'growth' have been if a bank collapses this year and the tax payer needs to pay out billions of euros to rescue it.

A bank won't collapse this year, or next year, or the year after. Irish banks are highly capitalised and have strong liquidity ratios*, unlike our American counterparts. Luckily, Irish banks didn't follow the tactics of banks in the US and Northern Rock.

Akrasia wrote: »

What use was a boom if we have to cut back public services in our health and education departments even further?

Because people now earn more money and have the potential to earn more money better than we did 15 years ago. Also, our health service andeducation systems have improved since then. You seem to forget how bad this country actually was back then.

Akrasia wrote: »

What is the use of a boom if it doesn't raise the standard of living for the citizens in the country?

It did, are you honestly trying to say that living standards were better in Ireland in the 80's? If so, why did everybody leave? Why the net migration of the past 10 years?

*For proof of this see:

Top-Down Stress Testing: The Key Results by Allan Kearns (2006), Financial Stability Report 2006.

patslatt

blue shimmering wrote: »

This question has plagued me for some time now, would it be better to try other options and what could they be? What about Exports, Imports, Investments, and so on....Should they look at boosting consumer income and hope they will spend this money wisely, what do you all think?:cool:

In the last five years, a lot of our growth like that in the UK and the USA was fuelled by a credit binge. When an individual or a country borrows about 3% of income a year for consumer spending,the credit boost to living standards coming on top of normal pay-related spending increases of 2 to 3% is wonderful at say 6% total. But eventually after 7 to 10 years,debt repayments become a burden and inevitably in a period of economic uncertainty like the present consumer spending has to slow to a growth rate below what it would have been without incurring debt in the first place. Ireland,the UK and the USA are now undergoing this transition thanks to weakness in property prices and credit excesses.

In Ireland,this transition would be manageable except for excessive government spending.This spending has been boosted artificially by the government's untypically large tax takes from the property boom in VAT,capital gains and stamp duties. All these property related taxes are now falling,requiring restraint in government spending,especially in wage demands.

But what chance is there of wage restraint given high consumer price inflation and the example of the cabinet's excessive pay? The Taoiseach and the Cabinet have been acting like pigs at the pay trough and are now the most overpaid politicians in world democracy,which puts them completely out of touch with the economic realities of the average family.

So what can we do to improve the economic outlook,apart from reserving a seat on the proverbial emigrant boat to England in the event of a recession?

THe March 16th Sunday Independent offered some interesting analysis of the economy that imply possible quick solutions. It pointed to the bottlenecks in projects for sewerage and water services and in commercial development planning decisions that are holding up maybe €20 billion of developments all over Dublin. So why doesn't the government fast track these projects and keep council planners' feet to the fire? Why doesn't it pressure Bord Pleanala to make faster decisions on commercial projects,decisions that now take many years? Maybe it should revisit its decision not to create special divisions of the courts to fast track planning appeals,many of which are entirely vexatious?

THe Sunday Independent was also critical of the government's cosy relationship with the public sector unions which is likely to result in inflationary pay increases and continuing poor productivity. An example of this in my opinion is the PR exercise to create some redundancies at the HSE in its bloated admin staff,redundancies that will be vetoed by the unions unless the terms are gold plated. And why stop at admin staff? THe HSE funds the employment of twice as many nurses per 100,000 population as in France and the UK, thanks to poor IT systems and sheer ineptitude in hospitals. Obviously, the government needs to take a demanding, businesslike attitude to the public sector,but there is little chance of that barring an economic recession,if then.

Maerc Coleman,an economics correspondent to the Sunday Independent,called for an assault on Rip off Ireland with further deregulation to expose vested interests to competition. But vested interests are durable in Ireland, even if we have come a long way from the 1980s, when, in the words of a friend, "this whole country is a racket".

Finally,I would like to see some actions along the following lines:

1.Abolish the useless bureaucracy that is the HSE and replace it with a model of health care proven successful on the Continent,such as the Dutch system of non-profit insurers and private hospitals.

2.Restore university and third level fees in order to improve the quality of third level education and prevent further degrading of universities for lack of funding. At the same time,introduce an Australian style system of student loans and grants to assist low income families with tuition.

3.THe government should slow public sector pay increases until private sector pay can catch up with the public sectors'. Public sector pay levels should be set according to the actual performance of the private sector economy,not Finance's optimistic estimates of growth. The Cabinet should take a pay pause for the rest of this term of government to lead by example.

4. In line with stated government policy, ESB's power distribution system should be transferred to Eirgrid this year to encourage new power producers to enter the market. But the government is likely to cave in to the ESB unions this year and postpone the decision indefinitely.

5.Infrastructure spending should prioritise projects that improve the economy's productivity. Metro,a prestige project,isn't one of those.

daveirl

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SimpleSam06

daveirl wrote: »

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Why is everyone so focused on FDI? I mean whats so hard about domestic export based industries? Instead of dropping our trousers for whatever multinational sashays along this year, we go to their countries and sell our products. I really am tired of this hat in hand Irish attitude.

nesf

SimpleSam06 wrote: »

I mean whats so hard about domestic export based industries?

What kind of industries are you thinking about here?

What does Ireland export?

nesf

Deleted User wrote: »

What does Ireland export?

J1 Students?

Diairist

Deleted User wrote: »

What does Ireland export?

soon Poles & Lithuanians ?

SimpleSam06

nesf wrote: »

What kind of industries are you thinking about here?

Take your pick. With all the money and effort going into attracting "foreign investment" to come to Ireland, build industries, and export it for sale in their own country, Ireland is still locked in a 1980s mindset. You could easily put all that money and effort into whatever growth industry and do it domestically - Ireland has never been short of brains. I'd be favouring robotics at this time, the Japanese are too busy navel gazing to do a decent job of it. There are a wide range of options though.

Deleted User wrote: »

What does Ireland export?

Not much at this stage, which would be my point.

Ekancone

Wouldn't exporting products imply developing products?

SimpleSam06

daithifleming wrote: »

Wouldn't exporting products imply developing products?

Indeed it would. Which would be preferable to exporting graduates, and indeed the only long term growth plan that I can see for this country.

daveirl

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parsi

patslatt wrote: »

Maerc Coleman,an economics correspondent to the Sunday Independent,called for an assault on Rip off Ireland with further deregulation to expose vested interests to competition.

Hmm. Nice to see he waited until his boss was no longer in charge of eircom.

Do Independent still have a stake in those bastions of ripoffs formerly known as Chorus and NTL ?

Ekancone

SimpleSam06 wrote: »

Indeed it would. Which would be preferable to exporting graduates, and indeed the only long term growth plan that I can see for this country.

But isn't this what the government is spending our money on promoting?

SimpleSam06

daveirl wrote: »

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We can't compete on wages with lower paid countries, such as those in Eastern Europe, inflation makes sure of that. Lowering the taxes means finding somewhere else to pay for the powerful public sector (who will bring the country to a grinding halt at any mention of wage reductions), after years of rampant wage and job growth, far in excess of the private sector, which puts us in a fairly nasty pickle.

If we can't compete on the playing field as presented to us, we need to change the playing field entirely - that means export based domestic industries. Of course the time to get started on that was around ten years ago, when the record tax receipts of the housing boom should have gone into support for entrepreneurs and massive amounts of infrastructure.

Whats going to happen now is anyones guess, but its not going to be pretty, or fast.

daithifleming wrote:

But isn't this what the government is spending our money on promoting?

If you're referring to the recent Enterprise Ireland grant scheme, that's a fairly ludicrous effort that highlights the ignorance of beaurocrats when it comes to the SME sector, typically enough in my experience. Among the criteria for available assistance were "training key managers" and "technology aquisition". Worthless to most companies.

What is needed is

• a streamlined business accounting and registration process
• remove the red tape
• a direct channel for investors to find and fund startups, and ideally some measure of insurance for investors so that they won't take a bath entirely if their enterprise goes under (even a nominal amount would provide assurance). Either that or joint funding. This involves an element of risk mind you, something alien to the public sector.
• easy access to enterprise grants (and I mean grants, not just the find your own funding and we'll refund you a small percentage of that when you hand us the receipts)
• a grace period of a few years for taxation on startups
• foreign marketing assistance - if you want export based industries you need to form partnerships with foreign sales groups, and data on existing markets
• possibly a relaxation of IP laws to encourage innovation

Thats off the top of my head, I'm sure I could come up with a few more ideas if I spent a couple of hours on it.

I think you are missing the point (or else I am not getting it)

WHAT can Ireland export? We have little resources apart from

a)People
b)Agriculture

Of the first, the government is supporting this and the second is constrained by European politics.

Correct me if I am wrong, but don't you trade the goods in which you have a comparative advantage in producing?

What can Ireland (competitively) produce?

SimpleSam06

Deleted User wrote: »

WHAT can Ireland export? We have little resources apart from

a)People
b)Agriculture

So, much the same as Japan then. Or even China. How many resources does Taiwan have? Then you have places like the Philippines and many African countries, bulging with resources but no industry to speak of. We can draw lessons from all of these.

Deleted User wrote: »

Correct me if I am wrong, but don't you trade the goods in which you have a comparative advantage in producing?

What can Ireland (competitively) produce?

Same way as any business gets started. Take your pick, examine the market in that industry, and work out how you can produce competitive products or services. There is still a lot of legroom in most industries.