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Why neo-classical economists are shills of Ireland's capitalist class
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By your definition , 2 civil servents stamping paper and handing it back and forth would be a valid economic activity that should not be cut back on as it would make everyone poorer, nonsense!
Its not nonsense, its an unmitigated economic fact that deflationary policy exasperates the rate of economic decline. Keynes famously expressed that the gov should employ people to dig holes and fill them again. His point (lost on your sort apparently) was that policy conductive to increasing aggregate demand is sound. Your snide little analogy above entails the allusion that state enacted economic policy is inherently devoid of productive capacity, this a liberal delusion, one you should probably seek professional treatment for. Many social projects could be undertaken - broadband could be expanded, new rail networks constructed, schools upgraded ect.as these two happy fools have to be supported by the rest of the economy the only logical conclusion is to cut back spending, release the 2 so that they have the opportunity of contributing to the economy and lower taxes so that the rest of the economy can pay down debt or invest , spend as they choose.
Typical liberal nonsense, no small country has ever recovered successfully from debt deflation by cutting spending and sticking with a hard currency. Your prescription for economic recovery essentially entails reducing wages to eastern European rates - newsflash, this isn't a solution its a disaster scenario for the vast majority of the population. Of course it will be of some benefit to the socio economic elite who your particular brand of economic theory is designed to insulate. After all your philosophy is that starvation among the working class is fine so long as the process of unhindered global accumulation can continue.
Ireland if it seriously wants to recover will prob need to increase its debt in order to stimulate demand - the subsequent revenue can be used to cover the increased debt service. Its either that or the neo-liberal ''solution'' ie. reduce living standards to polish levels in order to attract/retain investment.
Additionally your prescription would entail social ramifications that you should perhaps consider a little more carefully.
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Its not nonsense, its an unmitigated economic fact that deflationary policy exasperates the rate of economic decline. Keynes famously expressed that the gov should employ people to dig holes and fill them again. His point (lost on your sort apparently) was that policy conductive to increasing aggregate demand is sound. Your snide little analogy above entails the allusion that state enacted economic policy is inherently devoid of productive capacity, this a liberal delusion, one you should probably seek professional treatment for. Many social projects could be undertaken - broadband could be expanded, new rail networks constructed, schools upgraded ect.
Typical liberal nonsense, no small country has ever recovered successfully from debt deflation by cutting spending and sticking with a hard currency. Your prescription for economic recovery essentially entails reducing wages to eastern European rates - newsflash, this isn't a solution its a disaster scenario for the vast majority of the population. Of course it will be of some benefit to the socio economic elite who your particular brand of economic theory is designed to insulate. After all your philosophy is that starvation among the working class is fine so long as the process of unhindered global accumulation can continue.
Ireland if it seriously wants to recover will prob need to increase its debt in order to stimulate demand - the subsequent revenue can be used to cover the increased debt service. Its either that or the neo-liberal ''solution'' ie. reduce living standards to polish levels in order to attract/retain investment.
Additionally your prescription would entail social ramifications that you should perhaps consider a little more carefully.
Maybe you missed the memo, but we are already borrowing 80%+ of our tax receipts. We are borrowing at the same rate as the US who have borrowed $800bn for a stimulus package, are fighting 2 wars and currently have a much higher debt repayment burden.0 -
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Its not nonsense, its an unmitigated economic fact that deflationary policy exasperates the rate of economic decline. Keynes famously expressed that the gov should employ people to dig holes and fill them again. His point (lost on your sort apparently) was that policy conductive to increasing aggregate demand is sound. Your snide little analogy above entails the allusion that state enacted economic policy is inherently devoid of productive capacity, this a liberal delusion, one you should probably seek professional treatment for. Many social projects could be undertaken - broadband could be expanded, new rail networks constructed, schools upgraded ect.
it makes no logical sense to "dig holes" as there is no additional production at the end of it , it fact it consumes valuable resources like energy and materials. You like the Fed is obsessed with consumption instead of production. Had for instance the Fed not pumped up the housing bubble after 2001 the global economy would not be at the edge of a cliff right now nor would be have had the commodity bubbles that created artificial shortages over the last few years. Your logic only works if you ignore the future consequences of present actions.Typical liberal nonsense, no small country has ever recovered successfully from debt deflation by cutting spending and sticking with a hard currency. Your prescription for economic recovery essentially entails reducing wages to eastern European rates - newsflash, this isn't a solution its a disaster scenario for the vast majority of the population. Of course it will be of some benefit to the socio economic elite who your particular brand of economic theory is designed to insulate. After all your philosophy is that starvation among the working class is fine so long as the process of unhindered global accumulation can continue.
Ireland if it seriously wants to recover will prob need to increase its debt in order to stimulate demand - the subsequent revenue can be used to cover the increased debt service. Its either that or the neo-liberal ''solution'' ie. reduce living standards to polish levels in order to attract/retain investment.
Additionally your prescription would entail social ramifications that you should perhaps consider a little more carefully.
who mentioned Eastern Europe? Irish wages will settle bost bubble at whatever Euopeans etc are willing to pay us for our output. And let me get this correct, you are saying we need to borrow more so we can buy stuff, so we can pay off the debt? he he!A belief in gender identity involves a level of faith as there is nothing tangible to prove its existence which, as something divorced from the physical body, is similar to the idea of a soul. - Colette Colfer
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it makes no logical sense to "dig holes" as there is no additional production at the end of it , it fact it consumes valuable resources like energy and materials.
You seem to have either missed/deliberately misrepresented the point. While a seemingly useless endeavour such as digging holes (for no reason) produces no material value in immediate terms, it does nevertheless keep money in circulation and therefore sustains demand, which in turn ensures that the productive process continues.
Your obviously right to point out that digging holes for no reason is a waste (provided the energy/resources used in the process exceed the cost of whatever value is created from the demand generated by the given activity). Its important to note however your liberal dogma entails the false premise that public works are necessarily devoid of value when in (reality) they to large extent facilitate value creation. The projection of public sector as a parasitic leach on the ''value producing'' private sector is liberal propaganda at its worst.
The labor of public sector to an enormous extent ''facilitates'' the activity of the private market. Its a symbiotic relation and always has been. For instance, the technicians who work in high tech industry are by and large trained in the public sector - scientists, tradesmen, engineers, architects, all receive their education in the public sector. The wealth generated in the private sector is inseparable from the public arena.be atYou like the Fed is obsessed with consumption instead of production. Had for instance the Fed not pumped up the housing bubble after 2001 the global economy would not the edge of a cliff right now nor would be have had the commodity bubbles that created artificial shortages over the last few years.
Again - your misrepresenting the reality of what occurred. Sub-prime lending and the subsequent trade in derivatives are components of the current bust, but what facilitated this occurrence was the de-regulation of the financial sector both in the US and here. The liberalization of finance was enacted on the theoretical basis that free and consensual exchanges between rational market actors would yield positive economic results. Naturally, things like externalities and asymmetric information are missing from your antiquated brand of dogma.
Moreover - you don't address what (caused) the compulsion to expand investment into areas such as debt. Needless to say this is the central factor when examining the nature of the global crash. The tendency of the rate of profit to decline in areas such as manufacturing in the US/Euro caused a push towards opening up new sources of accumulation, the financial market was one such area, public services was another. Of course in order to de-regulate finance/attack organized labor and appropriate public facilities, a pseudo scientific justification was required - this was to be found in neo-classical/Austrian theory.Your logic only works if you ignore the future consequences of present actions.
And yours only works if you ignore the immediate consequences of long term plans.who mentioned Eastern Europe? Irish wages will settle bost bubble at whatever Euopeans etc are willing to pay us for our output.
No actually, while in your textbook on bourgeoisie economics wages will naturally fall and people re-configure their expectations in line with the demands of the market gods - this is not how real economies/societies work. Wages will stick - thanks to the brave efforts of organized labor.
Additionally - you are of the view that we need to become more competitive through wage reductions and tax cuts. Following this to its logical conclusion its hard to see how you don't advocate wage reductions in the region of 80% in order to match Polish rates. - Perhaps you can enlighten me ?you are saying we need to borrow more so we can buy stuff, so we can pay off the debt? he he!
In the short term yes - how you fail to understand the logic of this is beyond me. Cuts will deepen the reccession by initiating a deflationary spiral, this will result in a higher long term debt due to the amount required to maintain an unemployed population. Borrowing in the short term will soften the contraction. You are quite right however that continuing to borrow at current rates presents problems. Suspension of our euro membership - the reinstatement of the punt and monetary devaluation is what is required. This runs on the same principal ie. introducing more money into the economy/forced inflation.
Of course this solution wont crush the unions, heighten unemployment and drive the Irish population towards accepting soup as a viable form of payment - which is precisely why liberals are against it. 0 -
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Except that they aren't sticking. Wages here have already fallen (but need to fall more).
This will be determined by both the strength of the unions and the extent to which neo-classical/neo-liberal dogma can withstand the impending attack from the broad academic left. On an International level people are increasingly realizing that the neo-liberal prescription has a long history of making disaster scenarios worse - much can be seen in the case of Latin America. Chomsky, Stigliz, Ha-Joon Chang and many others have studied the effects of neo-classical prescriptions on the international stage.
The problems are intrinsic in neo-classical theory, although (perhaps) its wrong to consider a neo-liberal prescription entirely detrimental given its general tendency to produce beneficial effects for a small minority whilst generally impoverishing the majority.The current deflation we're experiencing is a regression to the mean price level of the EU. There isn't going to be a deflationary spiral.
Whatever - ''Debt deflation'' then. The point is that cuts make the situation worse in the long run - this an unmitigated fact, get over yourself.Cuts will help us regain our competitiveness and so help us out of the recession. How you think that cuts which will contribute to competitiveness will somehow make things worse is beyond me. Well, it's not that what your saying it beyond me, it's just that what you're saying is wrong.Clearly you don't understand the differences between the Irish and Polish economies. Wages here don't have to fall to Polish levels for us to become competitive again because we produce different things.
Argument adapted from (Irelands economic crash) - Kieran Allen
The notion that cuts in wage will restore competitiveness is predicated upon the idea that a reduction will lead to an increase in exports. As if rising wages/expenditure led to a reduction in exports. However according to the NCC, manufacturing unit labor costs have not changes significantly since 2000. Therefore wages are not the primary factor in fluctuations. The slow growth was caused by the fall off in US investment. When we examine specific areas this becomes even clearer. The two main industries which contribute to Irish exports are chemicals (49%) and pharmaceuticals (25%). Together account for (75%) Irish exports. Yet on 2007 figures - each was paying the highest wages. 19.85ph for industrial workers and 15.11ph for all manufacturing industries. This presents a paradox for advocates of wage cuts, especially in the textile sector which does least well in exports and has an average wage of 11.94 ph. Moreover, increase in exports does not necessarily lead to increased employment - manufacturing grew modestly from 2000-2007 yet employment in the sector fell.
Additionally - if you think reductions will retain/increase FDI then your mistaken, as I have already illustrated Ireland is in terms of tax/labor costs/employer contributions PSRI remains the most attractive nation in the EU15. Of course we could reduce tax to eastern EU levels - but what good would that do ?. Unless you think we should reduce our labor costs in suit which was the initial point.We could go and change back to the punt and all the crap that entails (and when I say crap i mean negative economic consequences), or...we could just lower wages and prices to make ourselves more competitive.
By negative economic consequences what you really mean is that savings will decline in value, its a circular argument in that these are the people who gained from the initial transfer, borrowers lost out.Also, your last comment about needing devaluation and forced inflation (quantitative easing) belies a complete ignorance of (at the very least Irish) economics. You don't know what you're talking about.
Devaluation works very well - changes the exchange rate.
''The new currency would fall rapidly, giving our trading sector a significant boost and making Ireland cheaper overnight for people to do business in. Clearly, the government deficit would have to be addressed through strict spending targets.
''As the Central Bank would do what the US, UK, Australia, Canada and Sweden are doing now and print money, the liquidity trap that we are in would evaporate. Clearly inflation would rise rapidly, and the State would need to introduce CPI-linked bonds to refinance itself. But lots of successful countries have done that in the past -- Sweden, Finland and Israel come to mind.
There are more than enough domestic savings to cover any government short-term shortfalls. In fact, inflation in Iceland a country which embarked on a similar policy last September, shot up but has now collapsed. Clearly, the Irish banking system that gambled in Euro would be bankrupt. But banks are only institutions and maybe that's no bad thing because it would allow a new bank (or banks) to emerge. The price of land would fall dramatically even in the new currency but would find its level. After this, we could reboot the engine.
Unemployment would fall rapidly as it has done in practically every country which has embarked on such a policy. The Asian Tigers, after their collapse in 1997, are the best example of this rapid re-employment phenomenon. One look at the Asians or the Scandinavians should put paid to arguments about what small open economies can do.
We are already running a trade surplus and we'd run a bigger one. Our deposit base is significant. Clearly lots of money would flee the country initially, but it would come back as the domestic economy recovered quickly. Sure we'd have a lot of explaining to do politically, but we've to do that anyway.'' - Mcwilliams
Additionally Micheal Taft outlines the actual savings made in terms of cuts relative to increase in taxation. Contrasts this to the cost in terms of unemployment ect.
If the trade unions really engage the fight, they will be doing so, not on behalf of a sectional interest, but on behalf of the nation’s economic interest. Let’s turn to the ESRI multiplier simulations. They modeled three public expenditure measures – cutting public sector wages, cutting 17,000 public sector jobs and cutting public investment. Each of these would reduce current expenditure by €1 billion each, or €3 billion combined. What would be the effect? GDP would fall by a further 1.2 percent, or €2 billion Unemployment would rise by nearly 29,000 – just as the recent Live Register figures showed almost no growth in seasonal terms.
And the reduction in the borrowing requirement? Less than €1.9 billion. Not €3 billion – that’s only the reduction in Government expenditure. When account is taken of the impact those cuts will have (on output, consumption, employment, etc.), the net gain is seriously eroded. At the end of the day, the annual deficit would fall by 0.9 percentage points. So, we have
Knocked off another €2 billion of our GDP, thus postponing the end of the recession and making it harder to generate the growth needed to absorb high borrowing costs in the future Thrown nearly 29,000 on to the dole queues, ensuring higher social welfare expenditure going forward Degraded public services further just at the point demand is growing, Cut people’s living standards and consumer spending. Reduced investment in an infrastructure that is one of the worst in the industrialised world (the Global Competitiveness Index ranks Irish infrastructure 65th out of 133 countries)
All this, to reduce borrowing by less than 1 percent of GDP? If that sounds irrational it’s because it is. And that’s why hardly any other government in the industrialised world is pursing this absurd course. There are alternatives. For instance, using the ESRI’s simulations we find that €3 billion in tax increases (increasing income tax along with introducing a property and carbon tax) would:
Reduce borrowing by €2.5 billion (or €600 million more than public expenditure cuts)
Reduce the GDP by €800 million (compared to €2 billion under spending cuts)
Increase unemployment by 6,600 (22,000 less than under a cuts strategy)
The annual deficit would fall further if a tax strategy were used. The end of the recession would not be postponed and everyone would be better off. That is not to endorse the particular tax proposals used by the ESRI. They merely serve as an indicator.
Further material:
http://notesonthefront.typepad.com/politicaleconomy/2009/10/imagine-youre-walking-a-high-wire-youre-nearly-at-the-end-of-line-youre-doing-everything-possible-not-to-fall.html0 -
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