Paul Sweeney: There has been much discussion on what is called the Squeezed Middle. This refers to those middle class families who are seeing declines in their incomes and in additional benefits, like free college fees in the UK or reduced health care. It is a real issue. There is a strong case for what are called middle class people to join with the working class for a rebalancing in society through a downward adjustment in the incomes and wealth of those who are taking too much – those at the top.
This would not just be a redistribution on grounds of equity: a more equitable society also generates more demand and investment in the economy.
As will be seen in other posts in this series, the decline in incomes was hidden or masked by the credit boom when the chattering classes could only talk about the rise in the value of their homes. They believed that they were substantially better off and took longer or more expensive holidays, bought cars they really could not afford, and ate out more.
With the credit boom well and truly over, the middle classes everywhere are now feeling the squeeze. Politicians are raising taxes to pay for big holes in public finances and cutting public services, many of which the middle class also enjoy. It is hurting nowhere more than here in Ireland, as our collapse is the biggest and worst, exacerbated by the gravely erroneous decision to repay all private bank debts, in full and with all interest.
It has been seen that there are harsh lessons from the USA where median incomes have not risen since the early 1970s in real terms. This means that most Americans have not seen any improvement in their living standards for about 40 odd years. Many had the illusion of improvement when they took equity out of their homes during the housing bubble. In contrast, here in Ireland we have seen a great rise in real incomes in the 20 years up to the Crash of 2008.
As there has been substantial growth in the US and also in productivity in the period, where is the rise in national income per head going? As the Occupy Movement correctly reminds us, it is going to the very top. It is the top 1 per cent in the US who are pocketing all the money earned by the majority. Back 40 years ago, this elite pocketed 8 per cent of national income, but now they take almost one fifth of all income in the US.
While there are varying statistics on the infamous top 1 %, I have not seen any reasonable analysis which does not broadly concur that they have been reaping most of the rewards of growth in the US.
In the US the cost of healthcare and of college education has soared. In the States one can go to university in one’s own state for modest fees, but as the public universities are strapped for cash, with the cutbacks in public funding – because of the tax cuts over the decades, they are raising fees. And private colleges charge fees of $30-40,000 and more a year. 75% of Americans now think college is too expensive, according to Pew Research. And when you graduate, all is not rosy. Many graduates have huge debts to repay. Also while college graduates typically earned €20,000 a year more than non graduates in the US, this is changing. Average starting salaries for college graduates in the US have been falling in the past four years.
Owning your own home, and latterly getting a college education, was part of the American Dream. Now both are not repaying in the way that hard working American families expected. They feel very let down by the system.
There are similar trends in many other countries of the Western world, where education is not the social escalator it once was. European states are cutting public services and that includes education and health. Both are labour intensive and expensive. Health inflation has been far higher than average inflation for years. People want better public services but do not want to pay for them. Our government, certainly the FG wing, promises no rise in income tax. The government programme laid out to 2015 for the Troika shows a reduction in public spending from 45 per cent in 2011 to just 38 per cent in 2014 (assuming growth at 4 per cent!).
And we are to repay the bondholders in full, which may knock perhaps up to two per cent off GDP for decades? Meaning less for schools, roads, hospitals and other public services, which are not just used by the working class.
A further insecurity for the middle class, which we have seen very clearly in Ireland, is the reneging on the promises made for employees on retirement. In many middle class jobs, you could expect to retire at 60 or 65 with a good pension of half your final salary - or in some cases even two thirds. And it was linked to rises in salaries (which generally rise faster than inflation) back in the office. The wholesale move by employers, including some of the very best employers and richest firms, to get rid of defined benefit pensions has hit the middle class very hard. Many younger people have not realised how much this action will cost them. And pension adjustments include working longer, though we are all living much longer. But that is cutting off job opportunities for graduates and other young people at the entry scales.
Many of the pension changes represent a unilateral change to a key element of the social contract which people in Western societies had come to expect. Of course, such pensions were based on financial markets. They had been moved from solid investments to more speculative investments by fund managers, and so the schemes got severely burnt. People are also living longer than the actuaries had calculated. For some years, these pension funds performed so well that few considered the possible alternative of paying more for an enhanced and safer state pension. That must be an alternative now.
Of course, if the middle class are being squeezed, spare a thought for the working class. In the US and Europe the mass departure of well-paid manufacturing jobs to Asia has hit this class hard. In Ireland the huge collapse of construction has hit manual and skilled workers (and professionals and others) brutally too. Ireland still has a fair proportion of manufacturing jobs, but many are taken by the middle class. But the manufacturing sector is not as safe as it used to be. Weekly we see the threats from mobile capital to shift abroad unless our government does this or that. The alternative service sector jobs are not as well paid, though here in Ireland, where service exports now almost equal good exports, service jobs can be very good.
But it could be worse. The West has built up a good safety net in social security, healthcare and education for its citizens which has helped. Middle classes also benefit hugely from public spending in these areas. This safety net has also acted as an “automatic stabiliser” in this major recession, boosting demand to a level it would not have reached in it its absence. It is important that the welfare state is preserved and maintained even with the stark challenges which face us here in Ireland and elsewhere.
While the growth in the incomes and wealth of the top 1 per cent has soared to levels which have brought the divide back to around the level of the 1920s in the US, and perhaps also in the UK and some other states, it is unlikely to go back to the level of Victorian times. This is because of the safety net which protects both those at the bottom and many in the middle. What is most interesting is that, with several decades of growing pressure on the Squeezed Middle in the US, as it is they who represent most voters, they have not found a way to rebuild the American Dream. Indeed, astute observes would argue that the Squeezed Middle in the US seems hell-bent on increased, python-like squeezing of itself.
Is this what awaits us in Europe? The current leadership in Europe, while incapable of real leadership and decisiveness on dealing with the Euro and the broader European economic crisis, is very cunningly dismantling Social Europe. Three currently proposed Commission “reforms” will make things a lot worse for the vast majority of EU citizens. First, Monti 2 will curb trade unions greatly in collective bargaining; the Euro Plus Pact will institutionalise the shift in national income from labour to capital under a lot of verbiage about “competiveness” and thirdly, the pre-Keynesian straight jacket which it is designing for “balanced Budgets” will greatly hamper any actions that progressive governments can take in times of crisis.
In conclusion, trends generated by globalisation, technology and de-regulation have rapidly transformed western economies, brought much progress, but also much change which is uncomfortable for many, including the middle classes. Cuts in public spending by governments, which have had to bail out private banks, and the loss of revenue through the general collapse, have engendered greater insecurity. The shifts in jobs to lower cost areas and enabling technology which allows former higher quality jobs to be outsourced abroad is hitting middle class security. Whether the “coping classes”, who are the voting classes, will seek an effective re-alignment in politics to give greater protection from rapid change and recognise the value of taxation, remains to be seen.
In the next post I will look at the great improvements in living standards enjoyed by the new aristocracy, the great “entrepreneurs” - i.e., top executives of top firms.
Showing posts with label public services. Show all posts
Showing posts with label public services. Show all posts
Wednesday, 25 January 2012
Friday, 23 September 2011
The four factors shifting power away from workers and citizens
Paul Sweeney: In developed countries, there has been a decline in labour’s share of national income going to wages for many years. This has major implications not just equity, but for demand, for growth itself. In Ireland, labour’s share fell from a high 70% in 1987, to only 52% in 2002, but unusually, has risen since. However, at 63% in 2011, it is still below that of Germany (68.3 %), UK (71.3%) or even the US (64.3%).
The labour market is also becoming polarized between “cool jobs and crap jobs”. At the top, owners and top executives are paying themselves obscene and utterly undeserved sums, as shareholders are unable to govern them. They have rewritten the rules of corporate governance in their favour – and that what makes government policy on taxation and on corporate governance so important.
There has also been a steady rise in the number of top jobs and in jobs at the bottom, with the proportion of jobs in the middle declining.
At the bottom, the shift in manufacturing from the west has eliminated some of the best jobs for unskilled or semi-skilled workers. It has also hit trade unions. In the middle, even with university education, jobs are becoming increasingly precarious – more short-term contracts, poor or no pensions, poorer public services – ironically as the squeezed middle is unwilling to pay for them and corporations do not.
I believe that the future will bring greater insecurity with stagnating incomes, increasingly precarious employment and uncertainty - unless there is a radical re-think of key issues like taxation and the governance of companies worldwide.
There are four factors which have assisted the change in the balance of power away from workers and citizens. It is not just the immense burden of debt which governments and bankers have hung around our necks, which is driving this shift.
Firstly, globalisation has exacerbated major trends in labour markets and in income distribution.
Secondly, there has been a decline in trade union density. This is a key to the decline in the relative share of labour income. Whether one like unions or not, this decline in density and unions as a countervailing power to corporations means demand is ebbing in all developed economies as people become less well-off and more insecure over time. The shift of national income has been to the very wealthiest, who do not spend their money (they have too much). Nor do they invest so readily – aggregate demand is down and so investment is becoming less profitable.
The third factor is that capitalists have become more aggressive in undermining the Social Contract with labour and with society in general.
Indeed, most do not realise the Crash of 2008 may have been only the first step in their own decline.
So far these trends have by-passed many emerging economies – but not for long, since most tend to ape the worst excesses of the West.
The fourth factor is the decline in progressive taxation. For example, corporation tax rates are declining in most countries, led by Ireland, as they compete for foreign direct investment. Fifteen OECD countries had wealth taxes in 1995, only three have today. Taxes on inheritances have been scaled back too. Lower tax rates are not a problem if they are accompanied by cuts to tax avoidance schemes, but governments have failed to eliminate most of these – leaving both lower rates and avoidance mechanisms in place for the rich and corporates.
Radical reform of taxation is one key driver in reform and changing the balance of power, and that will be the subject of my next post.
The labour market is also becoming polarized between “cool jobs and crap jobs”. At the top, owners and top executives are paying themselves obscene and utterly undeserved sums, as shareholders are unable to govern them. They have rewritten the rules of corporate governance in their favour – and that what makes government policy on taxation and on corporate governance so important.
There has also been a steady rise in the number of top jobs and in jobs at the bottom, with the proportion of jobs in the middle declining.
At the bottom, the shift in manufacturing from the west has eliminated some of the best jobs for unskilled or semi-skilled workers. It has also hit trade unions. In the middle, even with university education, jobs are becoming increasingly precarious – more short-term contracts, poor or no pensions, poorer public services – ironically as the squeezed middle is unwilling to pay for them and corporations do not.
I believe that the future will bring greater insecurity with stagnating incomes, increasingly precarious employment and uncertainty - unless there is a radical re-think of key issues like taxation and the governance of companies worldwide.
There are four factors which have assisted the change in the balance of power away from workers and citizens. It is not just the immense burden of debt which governments and bankers have hung around our necks, which is driving this shift.
Firstly, globalisation has exacerbated major trends in labour markets and in income distribution.
Secondly, there has been a decline in trade union density. This is a key to the decline in the relative share of labour income. Whether one like unions or not, this decline in density and unions as a countervailing power to corporations means demand is ebbing in all developed economies as people become less well-off and more insecure over time. The shift of national income has been to the very wealthiest, who do not spend their money (they have too much). Nor do they invest so readily – aggregate demand is down and so investment is becoming less profitable.
The third factor is that capitalists have become more aggressive in undermining the Social Contract with labour and with society in general.
Indeed, most do not realise the Crash of 2008 may have been only the first step in their own decline.
So far these trends have by-passed many emerging economies – but not for long, since most tend to ape the worst excesses of the West.
The fourth factor is the decline in progressive taxation. For example, corporation tax rates are declining in most countries, led by Ireland, as they compete for foreign direct investment. Fifteen OECD countries had wealth taxes in 1995, only three have today. Taxes on inheritances have been scaled back too. Lower tax rates are not a problem if they are accompanied by cuts to tax avoidance schemes, but governments have failed to eliminate most of these – leaving both lower rates and avoidance mechanisms in place for the rich and corporates.
Radical reform of taxation is one key driver in reform and changing the balance of power, and that will be the subject of my next post.
Thursday, 26 November 2009
4th Principle: Defend public services in health, education, welfare and housing
Slí Eile: In recent previous blogs I have suggested a number of high-level Principles to inform a progressive alternative to the current TINA.
Here is a fourth principle for debate, disagreement and action.
Next to a right to a basic income, every citizen of this Republic has a right to continuing education, health services and housing – regardless of their individual incomes. Such a scandalous notion is founded on human rights and the capabilities of societies endowed as we are with rich resources of human skill, community, institutions and physical capital. The notion of a right to a basic income or consumption of public service goods flies in the face of conventional wisdom which dictates (to borrow a McCarthy phrase) that ‘when the harvest fails the elders must take a cut in their allowance’. In other words, the conventional wisdom says that fairness or human rights is not the issue – it is down to ‘what we can afford’ and presently we cannot afford 2008 spending levels at 2003 levels of revenue flow. In this way of looking at things ‘what we can afford’ is a relatively fixed quantum determined – ultimately - by conditions in world export markets, the EXISTING DISTRIBUTION OF INCOME AND WEALTH (which is always a datum and not something to question) along with ‘market sentiment’ (be afraid you plebs !) and the gentlemen from the Ministry otherwise known as OECD, IMF and EU who have the poor to advise and punish – especially the latter two.
The pre-modern notion before the modern welfare state was founded stressed family, charitable societies and community should pick up most of all of the cost when harvests, health and employment fail. Well in theory, perhaps, but not in practice because not since in the real world families and communities don’t have the same access to the harvest.
In many ways, Ireland is bankrupt politically, morally and institutionally but it is not bankrupt in terms of its skills and communities. Even if national income (which is only one limited measure of human progress and well-being) were to decline by much more than is expected this year and next (plus 12% from peak Output in 2007), we can still continue to provide at least the current level of public service to citizens – if we chose to raise taxes through closing off specific reliefs, widening the tax base and increasing effective rates on capital gains, high salaries income and windfall profits in specific sectors. Cuts in the quality and quantity of public services in key areas would represent a devastating and unwarranted attack on social infrastructure – which as matters stood before the recession – was and is hugely inadequate. We risk undermining the very conditions for future growth in prosperity by failing to invest in a healthy and well-educated society for your children.
Public sector workers should be protesting not just over pay, jobs and pensions but together with private sector workers should all join together to protest over education, health and social welfare because at the end of the day we will know sickness eventually, vulnerability and the learning needs of a new generation. Consumers and producers need each others in public and private sectors to re-start the economy. And we are more than just consumers and producers. We are citizens of Republic meant to be founded on principles of solidarity and defence of the weakest.
Yes, we can create a more dignified society and one that is more just, caring and equitable founded on principles of democracy and genuine respect for human rights. The unrealistic ones are those who constrain choices to the Iron Law of the Market and imagine no alternatives. Lets shake off the pessimism, divisiveness and apathy engendered by the illusions of such an Iron Law.
Here is a fourth principle for debate, disagreement and action.
Next to a right to a basic income, every citizen of this Republic has a right to continuing education, health services and housing – regardless of their individual incomes. Such a scandalous notion is founded on human rights and the capabilities of societies endowed as we are with rich resources of human skill, community, institutions and physical capital. The notion of a right to a basic income or consumption of public service goods flies in the face of conventional wisdom which dictates (to borrow a McCarthy phrase) that ‘when the harvest fails the elders must take a cut in their allowance’. In other words, the conventional wisdom says that fairness or human rights is not the issue – it is down to ‘what we can afford’ and presently we cannot afford 2008 spending levels at 2003 levels of revenue flow. In this way of looking at things ‘what we can afford’ is a relatively fixed quantum determined – ultimately - by conditions in world export markets, the EXISTING DISTRIBUTION OF INCOME AND WEALTH (which is always a datum and not something to question) along with ‘market sentiment’ (be afraid you plebs !) and the gentlemen from the Ministry otherwise known as OECD, IMF and EU who have the poor to advise and punish – especially the latter two.
The pre-modern notion before the modern welfare state was founded stressed family, charitable societies and community should pick up most of all of the cost when harvests, health and employment fail. Well in theory, perhaps, but not in practice because not since in the real world families and communities don’t have the same access to the harvest.
In many ways, Ireland is bankrupt politically, morally and institutionally but it is not bankrupt in terms of its skills and communities. Even if national income (which is only one limited measure of human progress and well-being) were to decline by much more than is expected this year and next (plus 12% from peak Output in 2007), we can still continue to provide at least the current level of public service to citizens – if we chose to raise taxes through closing off specific reliefs, widening the tax base and increasing effective rates on capital gains, high salaries income and windfall profits in specific sectors. Cuts in the quality and quantity of public services in key areas would represent a devastating and unwarranted attack on social infrastructure – which as matters stood before the recession – was and is hugely inadequate. We risk undermining the very conditions for future growth in prosperity by failing to invest in a healthy and well-educated society for your children.
Public sector workers should be protesting not just over pay, jobs and pensions but together with private sector workers should all join together to protest over education, health and social welfare because at the end of the day we will know sickness eventually, vulnerability and the learning needs of a new generation. Consumers and producers need each others in public and private sectors to re-start the economy. And we are more than just consumers and producers. We are citizens of Republic meant to be founded on principles of solidarity and defence of the weakest.
Yes, we can create a more dignified society and one that is more just, caring and equitable founded on principles of democracy and genuine respect for human rights. The unrealistic ones are those who constrain choices to the Iron Law of the Market and imagine no alternatives. Lets shake off the pessimism, divisiveness and apathy engendered by the illusions of such an Iron Law.
Tuesday, 17 November 2009
Buses are not widgets
James Wickham: In a recent article in the Irish Times (29/10/2009) Sean Barrett criticised the new Public Transport Regulation Bill. He claimed it was like a situation where 78% of widgets were produced by one supplier, and this was then enforced by law. James Leahy and James Nix had a good reply last week in the Irish Times (11/11/2009). But let's look more closely at these widgets...
Actually, buses are not widgets. Just like its human counterpart, the rational economic man, the widget is a convenient fiction. But just like the rational economic man, the widget can often detract from reality. Whereas widgets are bought by consumers in a market free of institutions, buses are used citizens in a market defined by institutions.
There are actually three different ways buses can be operated:
But it's not that simple. A state-owned monopoly can (not must) ensure a reasonably efficient and above all integrated system, especially because there is only one owner. German and Austrian cities would be a classic example of this, as would be the RATP - the Paris public transport company. The problem in Dublin is that we have the worst of both worlds - state owned companies which do not provide an integrated service.
The problems of option (B) are well known and well described by James Leahy and James Nix. This is a world in which the bus is treated like a widget, users like consumers, there is no integration: ridership falls, and the service declines. This is a world in which the role of public transport as ensuring the right of citizens to move around their city cannot be discussed. It is a world in which the role of public transport in creating European public spaces and European cities is quite simply incomprehensible.
Option (C) needs a strong regulator to organise the network, and even more, it needs overall political direction. The example of London is quite good here. The elected mayor makes the political decisions and raises the funds. Transport for London (TfL) delivers the service through contracts with private companies.
Originally it looked as if the planned Dublin Transport Authority was going to come close to Option (C). But before the DTA was even set up, it's now merged into the new National Transport Authority. Like Barrett, but for very different reasons, I think this will be just another mess.
In all this, what are the unions doing? The paradox is that if we had no unions on the buses, most buses would have disappeared and we probably already would have the disastrous public transport system of most American cities. Yet union pressure now seems to have created a situation where Dublin Bus keeps its existing routes, but new companies can enter the market on new routes. As Barrett also says, the Bill also seems to mean there is no transparent contract for the services Dublin Bus will provide. This means there will be no political pressure to improve services. At the same time, the NTA will have no overall planning power. The unions have protected their existing members' jobs, but have made the provision of a better transport system for Dublin even more difficult.
Actually, buses are not widgets. Just like its human counterpart, the rational economic man, the widget is a convenient fiction. But just like the rational economic man, the widget can often detract from reality. Whereas widgets are bought by consumers in a market free of institutions, buses are used citizens in a market defined by institutions.
There are actually three different ways buses can be operated:
- (A) By a publicly owned company which has a legal monopoly. This is effectively the current Dublin situation since other operators are very limited (Aircoach etc.).
- (B) By competition in the market (competition 'on the road'). Here operators do what they like, and regulation is just minimal safety requirements. This is what Barrett wants for Dublin and this is effectively the situation in the UK outside of London.
- (C) By competition for the market (competition 'off the road'). The regulator specifies routes, standards etc. and actively plans the network. Companies bid to provide routes ('bundles') or the whole network. This is the situation in London, but crucially it's also the situation in many continental European cities.
But it's not that simple. A state-owned monopoly can (not must) ensure a reasonably efficient and above all integrated system, especially because there is only one owner. German and Austrian cities would be a classic example of this, as would be the RATP - the Paris public transport company. The problem in Dublin is that we have the worst of both worlds - state owned companies which do not provide an integrated service.
The problems of option (B) are well known and well described by James Leahy and James Nix. This is a world in which the bus is treated like a widget, users like consumers, there is no integration: ridership falls, and the service declines. This is a world in which the role of public transport as ensuring the right of citizens to move around their city cannot be discussed. It is a world in which the role of public transport in creating European public spaces and European cities is quite simply incomprehensible.
Option (C) needs a strong regulator to organise the network, and even more, it needs overall political direction. The example of London is quite good here. The elected mayor makes the political decisions and raises the funds. Transport for London (TfL) delivers the service through contracts with private companies.
Originally it looked as if the planned Dublin Transport Authority was going to come close to Option (C). But before the DTA was even set up, it's now merged into the new National Transport Authority. Like Barrett, but for very different reasons, I think this will be just another mess.
In all this, what are the unions doing? The paradox is that if we had no unions on the buses, most buses would have disappeared and we probably already would have the disastrous public transport system of most American cities. Yet union pressure now seems to have created a situation where Dublin Bus keeps its existing routes, but new companies can enter the market on new routes. As Barrett also says, the Bill also seems to mean there is no transparent contract for the services Dublin Bus will provide. This means there will be no political pressure to improve services. At the same time, the NTA will have no overall planning power. The unions have protected their existing members' jobs, but have made the provision of a better transport system for Dublin even more difficult.
Thursday, 28 May 2009
Surely we can do better than this?
Sli Eile: Writing in the Irish Times, Michael Casey a former chief economist with the Central Bank argues that a ‘Change of Government will not solve our economic woes’. He goes on to list seven reasons why there is little an alternative Government can do:
We lack the power to devalue currency or change interest rates (just as well?)
Public finances are stuck between a hard rock and a hard place (cut and be damned or reflate and be damned, it is said)
Social partnership will not, cannot, deliver an ‘appropriate incomes policy’ (what would that look like if it included all incomes?)
Public Sector reform will take years (if not decades?) to deliver
Toxic Banking is a poisoned chalice and nobody wants to drink from it (before, during or after NAMA has run its course in 20 something)
‘No political party has formulated an alternative industrial policy’ (not entirely true actually)
‘Most important economic decisions are made in Brussels, Frankfurt and Washington’ (it used to be London, and that was a key argument for joining the Common Market’)
And there the article ends. Is that all that there is to say? One may argue with many of the above claims, but there is an underlying truth – business as usual is gone and in a post-recession world we are left standing on our own two feet. I contest that these two feet should be:
- A new economic policy based on internationally traded services and products with completely new indigenous public, private and community enterprises;
- A new social and democratic contract that will replace the existing model of partnership and ensure the provision of a basic income for all and a 21st century European level of public services.
But how will this be paid for? And how will we dig ourselves out of the present financial hole? And where will be the political momentum come from?
What has progressive economics to offer? What could contributors to this blog suggest? What have non-readers who prefer to read irisheconomy.ie to say?
What is the minimum that a progressive coalition of economists, thinkers, politicians and social commentators and activists could agree on? Let's see. How about a set of ‘contestable’ statements to start a debate:
1 Banking – get this right as a top priority. It is a complex area but you don’t need to be a financial whiz kid to arrive at an obvious conclusion – only full ownership and control of Banking by the State can save this sector and the rest of the economy. Why wait for it to happen, and then say it is our only option. I appreciate that not everyone agrees with this …..
2 Fiscal policy – public finances are in dire straits and nobody denies this (at least since the start of this year). So, let's raid the rich (and not so rich) with much higher capital, new property, local residential and high-income taxes, while closing as many of the tax loopholes and reliefs which have long outlived their economic usefulness (if they every really had any). At the same time increase (yes!) public spending in a planned and strategic way to improve public services, capital infrastructure and job-retention and training while increasing public borrowing through a brokered ‘off-balance’ approach.
3 Jobs – a fiscal stimulus carefully targeted and forensically tested could arrest at least some of the jobs haemorrhage. Although there are no magic solutions, let's accelerate a programme of investment in select areas of research and development and link these to new enterprises – temporarily nationalising those firms that still have a viable future but are about to close, aiding firms in trouble through a new credit agency, converting unused land banks into productive social use and identifying potentially new growth areas for international services such as education, health and green technology. Fine Gael have made some valuable proposals in regard to a slate of new State companies and green technology (Rebuilding Ireland - a New Era for the Irish Economy)
4 Public Services - we need more, and not less, by way of health, education and protection against poverty. We are still among the most prosperous countries in the world but we need to move from being a society of nouveau riche and haves and have nots to a society where citizens and communities share the cost of providing an acceptable level of income, nurture, care and protection.
5 Reform of Corporations and Public Services
Linked to a reformed and enhanced public service is the need to democratise institutions (as well as reform public sector institutions, work practices and responsiveness). Our education and health sectors (to take just two examples) remain profoundly undemocratic and exclusionist in spite of all the talk about customers and inclusion. Likewise, the workplace needs to become a place where skills, team-working and decision-making are not the preserve of the shareholders or the managerial elite. Openness, transparency and accountability must reach into every public, private and voluntary organisations (but especially those in receipt of State subsidies or in charge of delivering some part of public or social services).
A new deal for a new Ireland. Five principles to start a national and international/EU debate. Who is up for it? Comments, disagreements, suggestions?
Or should we resign ourselves to waiting out the storm and someone else (IMF, ECB, EIB, ECion, London, Washington) will bail us out eventually ….? Surely we can do better than this.
We lack the power to devalue currency or change interest rates (just as well?)
Public finances are stuck between a hard rock and a hard place (cut and be damned or reflate and be damned, it is said)
Social partnership will not, cannot, deliver an ‘appropriate incomes policy’ (what would that look like if it included all incomes?)
Public Sector reform will take years (if not decades?) to deliver
Toxic Banking is a poisoned chalice and nobody wants to drink from it (before, during or after NAMA has run its course in 20 something)
‘No political party has formulated an alternative industrial policy’ (not entirely true actually)
‘Most important economic decisions are made in Brussels, Frankfurt and Washington’ (it used to be London, and that was a key argument for joining the Common Market’)
And there the article ends. Is that all that there is to say? One may argue with many of the above claims, but there is an underlying truth – business as usual is gone and in a post-recession world we are left standing on our own two feet. I contest that these two feet should be:
- A new economic policy based on internationally traded services and products with completely new indigenous public, private and community enterprises;
- A new social and democratic contract that will replace the existing model of partnership and ensure the provision of a basic income for all and a 21st century European level of public services.
But how will this be paid for? And how will we dig ourselves out of the present financial hole? And where will be the political momentum come from?
What has progressive economics to offer? What could contributors to this blog suggest? What have non-readers who prefer to read irisheconomy.ie to say?
What is the minimum that a progressive coalition of economists, thinkers, politicians and social commentators and activists could agree on? Let's see. How about a set of ‘contestable’ statements to start a debate:
1 Banking – get this right as a top priority. It is a complex area but you don’t need to be a financial whiz kid to arrive at an obvious conclusion – only full ownership and control of Banking by the State can save this sector and the rest of the economy. Why wait for it to happen, and then say it is our only option. I appreciate that not everyone agrees with this …..
2 Fiscal policy – public finances are in dire straits and nobody denies this (at least since the start of this year). So, let's raid the rich (and not so rich) with much higher capital, new property, local residential and high-income taxes, while closing as many of the tax loopholes and reliefs which have long outlived their economic usefulness (if they every really had any). At the same time increase (yes!) public spending in a planned and strategic way to improve public services, capital infrastructure and job-retention and training while increasing public borrowing through a brokered ‘off-balance’ approach.
3 Jobs – a fiscal stimulus carefully targeted and forensically tested could arrest at least some of the jobs haemorrhage. Although there are no magic solutions, let's accelerate a programme of investment in select areas of research and development and link these to new enterprises – temporarily nationalising those firms that still have a viable future but are about to close, aiding firms in trouble through a new credit agency, converting unused land banks into productive social use and identifying potentially new growth areas for international services such as education, health and green technology. Fine Gael have made some valuable proposals in regard to a slate of new State companies and green technology (Rebuilding Ireland - a New Era for the Irish Economy)
4 Public Services - we need more, and not less, by way of health, education and protection against poverty. We are still among the most prosperous countries in the world but we need to move from being a society of nouveau riche and haves and have nots to a society where citizens and communities share the cost of providing an acceptable level of income, nurture, care and protection.
5 Reform of Corporations and Public Services
Linked to a reformed and enhanced public service is the need to democratise institutions (as well as reform public sector institutions, work practices and responsiveness). Our education and health sectors (to take just two examples) remain profoundly undemocratic and exclusionist in spite of all the talk about customers and inclusion. Likewise, the workplace needs to become a place where skills, team-working and decision-making are not the preserve of the shareholders or the managerial elite. Openness, transparency and accountability must reach into every public, private and voluntary organisations (but especially those in receipt of State subsidies or in charge of delivering some part of public or social services).
A new deal for a new Ireland. Five principles to start a national and international/EU debate. Who is up for it? Comments, disagreements, suggestions?
Or should we resign ourselves to waiting out the storm and someone else (IMF, ECB, EIB, ECion, London, Washington) will bail us out eventually ….? Surely we can do better than this.
Tuesday, 14 April 2009
Growing up about taxes
James Wickham: Maybe it’s time to grow up about taxes.
One feature of the Celtic Tiger years was the way in which Ireland’s role as a low tax economy became part of the national identity. This led to the absurd situation in which the Labour Party could claim that it supported the ‘right’ of Ireland to have a lower corporation tax rate than other EU member states. In other words, the Irish Labour Party defined itself in Europe as the Social Dumping Party.
There are several important consequences of this low tax mantra.
Most obviously, it contributed to the situation in which the major inheritance of the boom will be just a pile of rusting SUVs – of private goods that will deteriorate, not of public goods that will last. Historically Ireland missed out of the post World War II boom years (the ‘trente glorieuses’). These were marked by substantial social investment and the creation of the physical infrastructure of the European welfare states. By contrast, our boom involved relatively little public investment. Let’s be honest. Compared to ostensibly poorer European countries, our public infrastructure is pathetic. This is most obvious in public transport, but the same is broadly true in health, education, etc.
Because we have accepted that taxation is inherently bad, we have allowed a continual denigration of the notion of public service. On the one hand, we have denied that many people work as nurses, as teachers, as civil servants etc. partly because they actually want to do something more useful than just earning more money for private consumption. On the other hand, we have accepted that the public sector is inherently inefficient. Consequently, despite all the rhetoric of partnership, the public sector unions have never become the champions of an effective public service. All too often, opposition to changes that would produce a better service has come from the unions themselves. Take the current conflict in Dublin Bus. Despite the efforts of some rank-and-file busworkers, the conflict over the cutbacks has been posed entirely as about employment. The unions have not taken any stance about the deterioration of this crucial public service that the cuts will involve.
The rhetoric of low taxation is linked ideologically to that curiously ambiguous person, ‘the taxpayer’. In a market society virtually everyone does, of course, pay tax. However, a discussion of public policy based on ‘the taxpayer’ is rather different to one based on ‘the citizen’. For example, whereas all citizens are equal, taxpayers differ in terms of how much tax they pay. So presumably those who contribute more should have more say in how ‘their’ money is spent. And the belief that taxpayers give ‘their’ money to the state ignores that ‘their’ money could only have been acquired thanks to the state and the wider society. Even the super-rich use public goods and depend on some residual social solidarity for their very existence.
Finally, the low taxation mantra was a crucial part of the PD project to move Ireland closer to Boston than Berlin. One subterranean theme in the Lisbon referendum was that ‘we’ didn’t need those snotty Europeans any more. Whereas, after 1973, membership of ‘Europe’ made Ireland less and less an island behind an island, the boom years then made Ireland more and more firmly part of the Anglo-Saxon world. Maybe it’s time to move again?
Professor James Wickham teaches in the Department of Sociology, TCD
One feature of the Celtic Tiger years was the way in which Ireland’s role as a low tax economy became part of the national identity. This led to the absurd situation in which the Labour Party could claim that it supported the ‘right’ of Ireland to have a lower corporation tax rate than other EU member states. In other words, the Irish Labour Party defined itself in Europe as the Social Dumping Party.
There are several important consequences of this low tax mantra.
Most obviously, it contributed to the situation in which the major inheritance of the boom will be just a pile of rusting SUVs – of private goods that will deteriorate, not of public goods that will last. Historically Ireland missed out of the post World War II boom years (the ‘trente glorieuses’). These were marked by substantial social investment and the creation of the physical infrastructure of the European welfare states. By contrast, our boom involved relatively little public investment. Let’s be honest. Compared to ostensibly poorer European countries, our public infrastructure is pathetic. This is most obvious in public transport, but the same is broadly true in health, education, etc.
Because we have accepted that taxation is inherently bad, we have allowed a continual denigration of the notion of public service. On the one hand, we have denied that many people work as nurses, as teachers, as civil servants etc. partly because they actually want to do something more useful than just earning more money for private consumption. On the other hand, we have accepted that the public sector is inherently inefficient. Consequently, despite all the rhetoric of partnership, the public sector unions have never become the champions of an effective public service. All too often, opposition to changes that would produce a better service has come from the unions themselves. Take the current conflict in Dublin Bus. Despite the efforts of some rank-and-file busworkers, the conflict over the cutbacks has been posed entirely as about employment. The unions have not taken any stance about the deterioration of this crucial public service that the cuts will involve.
The rhetoric of low taxation is linked ideologically to that curiously ambiguous person, ‘the taxpayer’. In a market society virtually everyone does, of course, pay tax. However, a discussion of public policy based on ‘the taxpayer’ is rather different to one based on ‘the citizen’. For example, whereas all citizens are equal, taxpayers differ in terms of how much tax they pay. So presumably those who contribute more should have more say in how ‘their’ money is spent. And the belief that taxpayers give ‘their’ money to the state ignores that ‘their’ money could only have been acquired thanks to the state and the wider society. Even the super-rich use public goods and depend on some residual social solidarity for their very existence.
Finally, the low taxation mantra was a crucial part of the PD project to move Ireland closer to Boston than Berlin. One subterranean theme in the Lisbon referendum was that ‘we’ didn’t need those snotty Europeans any more. Whereas, after 1973, membership of ‘Europe’ made Ireland less and less an island behind an island, the boom years then made Ireland more and more firmly part of the Anglo-Saxon world. Maybe it’s time to move again?
Professor James Wickham teaches in the Department of Sociology, TCD
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