Guest post by Martin O'Dea: A simple suggestion

Martin O'Dea: Forgetting banking debt and its link to sovereign debt and resolutions required around this issue and just dealing with excessive sovereign debt, if I might. Can blocks of sovereign debt, instead of just being subsumed into Euro Bonds, not be reconstituted so that they create some of what the fiscal treaty was attempting in terms of structural balance? In other words, could sovereign debt above perhaps 80% not be repaid (interest on same etc) until the country is running a current surplus? As the country's surplus increases the amount of repayment correspondingly goes up. The design would need to be long-term and equitable in its nature but should also leverage a short-term mechanism to bring sovereigns back from the brink of default and allow current deficits be addressed without the markets focusing on sovereign default potentials.

Guest post by Martin O'Dea: Rebalancing the power

Martin O'Dea lectures in Management and Human Resource Management at the Dublin Business School: There are many levels at which to assess the current financial crisis in Europe. One of those at the higher level involves the discord between political bodies and financial markets and how this power battle is playing out. There has been talk of financial transaction taxes from Angela Merkel and finance ministers from Austria and Belgium as well as France. The concept is seen to originate with John Keynes in 1936 and was applied particularly in 1972 by Nobel winning economist Jim Tobin. There have been alterations in the interim as analysts try to find ways to minimise the impact on market activities and to dissuade companies from fleeing to destinations where any such tax does not exist. There seems a reasonable chance developing over the last decade or so that a global financial transaction tax could be employed to attempt to bridge growing income inequality, somewhat, and also to provide a fund to deal with many major social issues; though, of course, this remains to be seen.

European countries have pushed hard for the introduction of a F.T.T. tax since 2008 and, in fact, Sarkozy of France has recently introduced a 0.1% on certain transactions (though not on bonds) in the hope that others will follow. The G20 did not reach agreement on a universal Tobin Tax, and so Europe proposed to move ahead within its own ‘borders’. The proposed E.U. F.T.T. will apply to the country where the financial operator is based, and so for example a German bank could not avoid the tax by having transactions take place from a different base. The U.K., despite two-thirds support for this type of tax among its citizens has opted out, and so the outcome of this issue remains unresolved. In as much as the ‘market’ can be seen as a singular entity, there must be disquiet at this concept and some of the negotiations around indebted sovereigns must hinge on some brinkmanship in this battle. The investors and fund managers, in the most, whose jobs entail achieving maximum return for their clients will naturally look at this tax as an unwelcome proposal for their balance sheets. They also look at burden sharing on debts in a similar way

It is easy enough to feel that the markets have all the cards here – it is certainly what the Irish government state quite openly; i.e. that they have no choice but to follow instructions from the ECB and commission and that they are behaving in the only way that they can as markets would not allow any deviation; and so ‘Armageddon’, ‘bombs going off’ etc is the language that is suggested if we force the issue of debt clearance with Europe or if Europe generally pushes the issue with the markets.

There is a very strong argument of logic put forward by David McWilliams and others for a long time now that, in fact, this position is inherently wrong, that markets can only invest in what is coming and so would quickly reinvest in countries that shed unbearable debt burdens, because this gives them a chance to grow and makes them more worthy of investment. Iceland seems to provide some support to this argument, as they took a massive hit when declaring bankruptcy and saw fairly immediate growth thereafter as the issues were ‘dealt with’ and the country and economy reeled but then began to move on.

There are obviously many others who say that this is too big a risk and what happens if the speculators bring down the house. It is easy to sit and think, how did we come to this, how did we find ourselves in a system where the markets dictate to the politicians.

The context of all of this is truly of astounding proportions now. Even a cursory glance at twentieth century politico-economic history shows the dangers in economically disenfranchising a people and how when all moderate options point to economic oblivion there is provided a breeding ground for extremism. These arguments seemed extreme themselves just a few years ago, but an objective look at Europe and Greece particularly as well as the local Irish example of incredibly damaging social impositions under the somehow surreal stipulation to pay banking debts with taxpayers money to a value such as currently taking place, one can see the potential hazards. Anger will continue to mount as the drip feeding of the shocks of 3.1 billion to Anglo promissory notes comes again in March and again and again for a decade. And, of course, in the context of a comment from a slightly heady Taosieach at Davos implying that ‘we all went “mad with borrowing”’ and people reel from the frustration that whatever they have borrowed they have to pay back while also covering these banks borrowings, really makes it beyond a serious issue for Europe, and an imperative one for the maintenance of order at this point.

Regarding this seeming stranglehold of the markets then - this is one of the major difficulties, but it can also be the source of the solution, for we seem to have collectively forgotten that politicians (representing us the majority) actually hold the strongest hand. They make the laws. They have national judiciaries, police and militaries ensuring their ability to do so as well as many international fora with domestic popular support to resist the market influence (and if McWilliams etc are right – even the markets themselves would support governments eventually standing up for themselves).

So bearing in mind all of this, what could politicians do? Well, they might put the following financial logic forward to the key financial institutes as matters of fact. It is already planned by the European commission that there will be a financial transaction tax in 2014. It will be 0.1% against the exchange of shares and bonds and 0.01% across derivative contracts. It is forecasted to raise €55 billion per anum. A European treaty must allow governments to tell markets that if massive write downs of government debts are not now taken as we dictate the financial transaction tax will be 0.3% against the exchange of shares and bonds and 0.03% across derivative contracts.

Markets are not really thinking entities; people go to work and do what their bosses wish in an attempt to continue to pay their own mortgages and care for their dependents as well as progress in their own careers. Their bosses pressurise them for return as a means of passing on the systemic pressure that comes on their jobs and performances from shareholders. Shareholders can be a whole myriad of personas often financial institutes themselves and pension, insurance funds etc. So it is clear that markets cannot, as currently constructed, grow social consciences. By definition there is only one motive that markets can comprehend. The future of technological development and better informed and educated populations and the peace and prosperity that can arise from that await resolution of this crisis. The resolution of the crisis awaits massive write down of debts, and in the Irish case the allowing of bankrupt banks to go bankrupt. European leaders must speak the language of the markets but explain in that language that they are in charge and that they will not allow continuing social collapse on their watch.

Guest post by Martin O'Dea: Economics for technological acceleration

Martin O'Dea lectures in Management and Human Resource Management at the Dublin Business School: The internet was a revolution that saw massive investment followed by the seemingly inevitable crash and the eventual rebalancing in monetary value of a central technology that can greatly benefit our lives, keeping us informed, connected and allowing us to see the world as our market.

The fact that technologies don’t forget what they learn or, indeed, don’t need anything other than the smallest amount of time to download what another piece of hardware has acquired, added to the fact that scientists in their lab coats keep finding ways to push the speed and efficiency of how they can compute to levels of unimaginable speed and accuracy mean that technology does not just grow its impact and potential; it accelerates.

What economic impact of 3D printing, cloud computing, nanotechnology and simulated realities? What impact of the fact that these developments may be surpassed within months of actualisation, what impact of the fact that that very process may speed up? Perhaps more relevant again, what impact of appropriately functioning robots in the workplaces? Robotics was like many arenas of technology, unrealistically thought to change the world in the 1980s – the vast complexity in the simple things that humans do and would need to be replicated (like sidestepping an opening door) were not accounted for; and many people assumed that robots were a thing that was not quite a thing of the past.

There are many companies in Japan and elsewhere that are over 30 years into development and would beg to differ, again it is important to bear in mind – if you teach one robot to do something, you, effectively and instantaneously, teach them all. Do you believe that when a point is reached (and all evidence now sees this as within reach inside a decade) that robots can carry out the work involved in a fast food restaurant that McDonalds will continue to pay people instead of buying robots? It is said that you can only approach the future with the psychology of the past; but should we add the economics of the past to that as well. Certainly this means unemployment to those currently employed in McDonalds, but, it is really missing the picture if we do not see the continuous societal benefit of developing technologies, and we cannot find economics that will stop us hurting from our progress.

There is a debate as to whether there will ever be a post-scarcity society. The idea of standing before a Star Trek ‘Replicator’ type device has often been the root of young jokes as teenagers imagined conjuring up cigarettes and alcohol from these manipulators of matter; however can I suggest that people look at 3D printing via the recent announcement to begin to grapple with the concept of a future of post-scarcity. I am inclined to align myself with the argument that the value will be acquired by the desirability in the future, and so like oxygen (abundant and free) there will be many things that are now monetised that will not be so soon – and this, of course will greatly help humanity; however, I feel that whether it is leisure/physical space/certain resources/information there will be future monetised objects and perhaps while we could all print some clothing only leading designers of 3D printed items will charge money for theirs etc.

I would like to pose a simple concept for economists' comment in light of the above. If there will be, and in many ways already are, essential and desirable and abundant free products could we not realign our monetisation system to represent that with more social benefit. Could we not use two separate currencies? One currency would be used for a wide range of product/services that are seen as necessities.

Every household would have access to a large purchasing power within these categories, including much of welfares payments etc. and have a large universal wage that would allow each person sufficient funds to be adequately supplied with these items. Those that earn more may take some of their payment in the second –non-essential – currency. Most likely the ‘luxury’ items will take a mixture of currencies as one could buy non-essential currency with the essential currency. However, certain products/services being made widely available while maintaining the competitive motivations of the market economy and competitive labour markets could be achieved in this model – while we ease towards a society where perhaps the house with the beach will remain sought after but very many things become universally available.

Guest post by Martin O'Dea: What can I do you for?

Martin O'Dea lectures in Management and Human Resource Management at the Dublin Business School
In our day-to-day lives we consume, enjoy, utilise etc a broad, but not inexhaustible, range of products and services. One month or year spent analysing all of your outgoings and categorising them makes for very interesting reading.
Generally speaking the greater the percentage of money we spend on productive, innovative products/services the better, as in the round the innovation and betterment of society is best–served. Fighting this, to some extent, is the urge for wealthy interests to try to retain control over certain flows of money. This gives us punitive costs (akin to crossing a palm with silver just to get permission to cross a bridge – or taking your chances on a train in the wild West against the percentages of train robberies). We should, in essence, analyse the productivity of our individual spending. How? Well, does 'the spend' provide for employment, does it promote innovation or improvements in the quality, accessibility etc of products/services?

One quick and obvious result of this type of spending review is the amount of money that is taken up by your car, and transport in general; say car parking and petrol, as particularly unproductive spends. We would also look at monies that are prohibitive in the manner by which they tax as a means to raise income from inactive economies.

In a given week, I might spend money on coffees and restaurants; on food, on petrol, on some sports activity, on use of a train, on health insurance, car insurance, pensions provision, city car parking facility, perhaps an outing to a cinema or theatre, telephone bills, utilities, more infrequent gadget purchases, perhaps a pub or a match or saving towards a holiday. Perhaps a dentist/doctor/accountant/barrister will be met, or a hairdresser/mechanic/piano instructor. I will, like many of my generation, consign a huge portion of the money I earn - by contributing to the output of my company and the spending generated by that company - to repaying a mortgage and an incredibly large amount of money on childcare.

Okay, in these instances, I can see how the cinema, theatre, sports activity, match, coffee, food, restaurant, hairdresser/mechanic/piano instructor may provide me with what I feel is value for money, provide jobs; and generate income to the government through the taxes that the people employed in providing these services/products pay, and by the V.A.T. that my spending generates.

One of a government’s key concentrations should be that my money provides jobs and opportunities for as many as possible, as well as providing the opportunity for future products that will make my life more comfortable and enjoyable, as well as freer and longer-lived in better health.

If we see all of this we must question the use of the car park (mere unchanging space acquiring vast sums), or indeed, the petrol, insurance and taxation associated with the car. Of course, a private car is a significant part of our lifestyle, and would account for a large portion of our finances in a more ‘value-for-money’ based system, but surely not this much; and perhaps it is over-priced and well beyond the point where it provides return for the citizen spend; and while we must acknowledge the open aspect of our country, certainly, the volume of money that leaves for oil-rich countries is pretty astounding, and abetted by the drain on economic throughput of going straight to the Exchequer via the majority stake of the government charge.

What about people spending the equivalent of a mortgage on having their two young children cared for while they go and try to contribute to other work environments? How much of the money involved here is justified, how much goes to the wages of those involved and is, so, run through the economy further by their spending? What of an argument to utilise the infrastructure of existing schools to provide the option for public provided child-care covered over a lifetime contribution to taxation as opposed to strangling the spending of a huge and heavily indebted portion of current economy? What of the amount of money that is taken from the general economic activity directly as taxation on items like drink and cigarettes: is this truly productive and providing jobs and innovation and societal and technological improvement, or is it an example of short-sightedness and the desire for quick money for the exchequer?

Of course, we had items in this country like the NTR and the stunning arrangements that allowed them to open the cash-point that was their M50 toll. We can include exorbitant fees charged by professionals such as barristers, accountants, medical professionals and others (accounting for the majority of the richest top percentage earners in the land and benefitting from very regressive tax systems), and how these concentrate on areas of society where people find themselves without choice but to avail of the services; and dealing with self-regulated and non-competitive traditional strongholds of Irish society.

It is a line of thinking that shows you that, by just extending the un-productivity and protection afforded to certain vital or state-supported endeavours, we end up quickly at corruption.

Ponder the results of a range of tribunals, look at taxpayers picking up the tabs in a whole range of dealings, and see how the most massive misappropriation of funds of them all (the bank guarantee) was a continuation of a cultural practice by the elite factions of a society moulded in the promoted deference of its civilians. We must also look, together, at fees for public services that are operated in the face of innovation, in many instances. Finally, a long and international look needs to be given to a form of Tobin Tax (or an equivalent) on the trillions of euro of financial transactions and market activities that are devoid of tax.

There are two obvious elements to this: firstly, it can only work if adopted internationally (and it has at least been discussed at G8 level - and Ireland might lead the fight for this), and secondly it has the potential to right an awful lot of what is wrong about an unfettered market model, as well as affording society at large to reap the benefits from the enormous progress it is actually making. Of course, to name and tackle elements of a society that are unproductive and examples of ‘protected’ money is not that easy a thing to do, and will meet with resistance from the very factions involved. The question remains, then: will politics in Ireland see itself as the servant of the people as a whole and society as a whole or, will it continue with the practice of representing separate elements of society in a supposedly ballot-box friendly, yet, eventually counter-productive, manner?

If this government want a new way of doing things, then the public sector reform government post should have its remit widened to a public/private sector forum for encouraging productivity and innovation.

Guest post by Martin O'Dea: Concrete progress

Martin O'Dea lectures in Management and Human Resource Management at the Dublin Business School
There is an understanding of the errors in our current political and economic strategies among most people now, and also a realisation that things must change fundamentally in the window of opportunity that currently comes from this politicisation and appreciation among the general population; as well as the outrage at the continuous revelations of politico-economic faults. What is required to couple with this outrage and enthusiasm is a whole sea of ideas. All one can do is spend as much time as possible contemplating and presenting one's own contribution, and awaiting the response of others as to the degree to which they are helpful before recharging the batteries and going again. This is the central tenet of a ‘smart society’ and it is with this in mind that the suggestions below are offered.


1. Tell banks that they will reduce personal mortgages for all citizens to an upper value of €1 million and one property per adult mortgage owner; by 20%
• Reduce the amount the banks owe in terms of government investment repayment preferential shares etc.). Or (reduce from ownership by Irish state and have available to bondholders’ equity credit to the value of this reduction (approx 16 billion).
• This is money already borrowed from the ECB under the guise of NAMA and would then act as an ongoing stimulus to the most indebted sector of the population of on average €240 per month, which would not have the difficulty of instantaneous withdrawal and would stimulate mostly indigenous growth as it would progress as long as mortgages run (It is hard to see that the Irish people have not given enough to the banks at this point)
• The long-term and ‘re-found’ nature of this stimulus should guarantee its spending through the economy
• There should be a significant decrease in the future levels of mortgage defaults which looks set to become a major economic and social issue as things are currently
• Offer a direct government stimulus to those in the rental market while ensuring that the benefits be kept from landlords for adult citizens without mortgages

People really cannot be evicted from their homes because they have lost a job building houses that were erroneously built as a result of complete banking mismanagement created a housing market where these people had to become heavily indebted to have a family stead; while all the while having the unemployment benefit that they contributed to, and now need, reduced to pay for these same banks.

2. Recapitalise the country (give the bondholders who invested in the private banks in Ireland a debt-equity swap. This must be done with our European partners and in the understanding that the European Union cannot continue to follow markets sentiment only but must show strength and cohesion that will lead the markets to reinvest in a Europe they see will thrive. A new Irish government can pursue this course of action with a mandate from the Irish people.

3. Immediately create an incentive to the public sector workers which offers each individual who suggests and documents a money saving measure in their workplace 10% of that saving. From major schemes to purchasing canteen milk at a cheaper rate the employees who highlight these savings will receive their 10% savings from their senior managers who will need to achieve major reductions in costs or lose their positions, ala department heads in NYPD in the 90’s. We know beyond any doubt that there are massive wastages in this system which grew unchecked again with government mismanagement. However, incentivising staff’s ingenuity in this way will triumph where a continued governmental fight with a completely incoherent management structure has failed so often.

4. Form online and physical based 'Innovation Centres' around the country. Innovation centres should form a ‘public’ option for citizens seeking employment – in much the same way as one may attend a public or private school or college. These centres will concentrate on varying levels of information management and data mining. These projects may well be part funded by private enterprises and technology companies who may have first refusal to some of the data generated. A keen understanding of the potential information management here will allow one to see this as akin to a government finding minerals underground and employing members of the public to mine (the reduction of welfare and taking of income tax forming much of the funding and added by governmental stimulus and some private investment)

5. Remove unnecessary middle management and others from the health service and other areas and move them to running elements of these innovation centres.

6. Colleges and Universities and the department of education should work quickly towards providing online education courses made available on mobile phone apps as well as simple internet connections. These courses (with interactive and video based tutorials and assessments) should initially prepare people for re-entry into education (preparatory courses for a variety of professions and skill sets) but future development of this public education should be allowed to develop with the advancement of those receiving the education as the main drive.

7. Set about straight away creating an Irish educational institute that will focus on RESEARCH and will attract genuine international leaders in their fields. Locate this institute in a region of the country that can accommodate its needs but would benefit greatly from a decentralised spatially aware investment. Set up arrangements with leading firms to locate near this ‘green field’ institute site to create a fulcrum of learning and innovation and their implementation

8. Form an open government programme, under the website opengov.ie where all information with the exception of some sensitive defence material (perhaps) will be made accessible to the public. The providers of this service who will be a group of non-affiliated capable individuals will provide a web space that will allow citizens have debates, post queries with representatives at the various levels of governance, and pursue those issues through responses, associated laws or new bills etc. This would include budgetary information at a certain time each year, ideally before the final publishing.

9. Provide localopengov.ie and utilise it as one means of a number to encourage local level participation by citizens

10. Increase foreign aid significantly. Appreciate that principals of fairness will permit a growing economy and that a 1% GDP investment to areas of the world historically disadvantaged where absolute poverty and disease are still suffered

11. Utilise innovation centres who will have network coordinated infrastructural support to invest in health providing technologies, and reap a direct benefit in major reductions in health management costs (including smart house, and mobile, technologies that can monitor individuals health while they are in their homes on an ongoing basis and can feed the relevant information to the primary and secondary level of health care) as well as by exporting same technologies.