September 7, 2011

ESRI has been getting its forecasts wrong for years

Posted in Irish Independent · 129 comments ·

In Irish economic circles, you tend to take much more stick from having been right than having been wrong. Those economists who got it wrong in the boom and believed the hype about the soft landing, such as the ESRI, still manage to grab front-page headlines. In contrast, those who called it right are put under constant scrutiny and are still being dismissed by the establishment as cranks, celebrities or, at best, lucky opportunists.

The “insiders” rally round each other even when they are wrong and the “outsiders” are denigrated. In the economics world, for what it’s worth, the outsiders’ crime — the crime of being right — is particularly dangerous precisely because it exposes the limitations of the insiders. This type of insider/outsider prototype is commonplace in Ireland.

Yesterday, we saw more of this type of behaviour where the establishment insiders carry on with their forecasts despite their appalling records.

I woke up yesterday to hear the ESRI on the radio telling us that things would be grand in the next three years provided we just keep ploughing the same austerity furrow. Someone very clever, not sure if it was Albert Einstein or Roy Keane, once said the definition of stupidity was doing the same thing over and over again and expecting different results. This is what is happening right now.

Unemployment and emigration are rising, mortgage arrears are up all over the country and yet we are supposed to believe that after three more years of this, all will be hunky dory.

The interesting thing about the ESRI is that it has been getting things wrong for years, with apparent impunity.

For example, back in the boom, as late as 2007, one of the chief bottle-washers at the ESRI dismissed the chances of a property crash. This was picked up by a property editor who said: “If he believed there was a crash coming then he would sell his house and rent it back. Tellingly, he is not doing this because he believes, as I do, that if (and that is a big ‘if’) the market is going to crash, it will do so in a patchy, selective way which will not impact to any great degree on many of the existing homes in Ireland.”

What drivel!

Yesterday, the ESRI published its medium-term forecast and it was taken as gospel. But why is this? Why does no one take the ESRI up on its record? Look at some of the other forecasts it has made in the past.

For example, in December 2005 — when the odd non-establishment maverick was saying the economy would crash — the ESRI produced a long-range forecast (similar to the one it produced this week), which was supposed to tell us where we would be by 2010.

According to its “worst-case scenario”, Irish GDP would be €196,876m; in fact, it is €166,345m. At worst, according to the ESRI, our debt-to-GDP ratio would be 16pc; by 2010 it was actually 66pc and rising rapidly.

It forecast that the 2010 Budget deficit would be, at worst, 0.3pc GDP; it was, in fact, 14.3pc of GDP.

So, to use the vernacular, the ESRI, writing in December 2005, hadn’t really got its eye on the ball.

Remember, I’ve used their “worst-case” scenarios here.

The “high-growth scenario” in 2005 said that GDP would be at €208,718m, the debt/GDP ratio would be 15pc and unemployment in 2010 would be 123,000. Unemployment was three times that.

Even by 2008, when fellas in pubs could feel the heat, you would expect the dozens of well-paid economists in the ESRI to be twigging that something was going pear-shaped, but no, the ESRI released a forecast for the Irish economy, predicting that for the next seven years Ireland would “grow by 3.75pc on average per annum”.

It went on to say that, after a blip in 2009, “the economy would continue to outperform its EU neighbours”. Consistently since 2005, it said that a “soft landing” in the property market was the most likely outcome, with a collapse a “possibility” . . . but just that.

The point here is not to have a go at the ESRI — we all make mistakes — but to show that trusting an institution like that, which hasn’t exactly covered itself in glory, might not be the cleverest thing to do.

If this recession has told us anything, it is that the experts know nothing. Yet some sections of the Irish media are still respectful of institutions that are not up to the job. Why is this? Why do we pay for people like this? After all, they are on the public payroll, which means your taxes pay for these guys who call themselves professors, even though they don’t have any students to profess to.

It is time for an audit of these types of outfits to see what they do, whether they should be on the public payroll and maybe ask Colm Mc Carthy to have a gander at them to see where the value is to the taxpayer. If these types of public organisations — where the salary scales are close to the top range given the amount of professors working there — are not up to the job, it undermines other public services that are.

It is easy to lump all public-sector employees into one heap, the well-paid ones and the not so well-paid ones because of the conspicuous failure of those at the top.

A similar argument goes for the retirement package of the head of the civil service, who trousered more than €700,000 yesterday as part of his golden handshake. Anyone who knows about how this country works, will know that the real power lies in the “permanent government” — the head bucks of the civil service.

Yet, in terms of economic management, the Department of Finance and Central Bank, for example, have been worse than useless in the past 10 years.

Contrary to popular belief, the Irish banking and housing crisis did not start in 2008; it started in 2000 when the banks were allowed to go mad and the government used this credit windfall to fatten itself up and fuel the nonsense. All the while, the establishment bleated the “soft or softish landing” mantra while paying themselves fortunes.

The slump in the economy should lead to a clearout of those in positions of power who didn’t do their job. This is what is meant by getting value for money. The more prominent the person, the more responsibility they should take.

Politicians have been humiliated, so too have bankers — and some of them should go to jail. In Iceland, they put their politicians on trial; here we put them on TV3. But they are taking flak.

Yet, all the while, behind the scenes, secure with their bullet-proof contracts and their gold-plated pensions, the real establishment continues to draw huge salaries in the shadows.

They answer to no one, are threatened by no one and continue to operate with impunity while they tell the rest of us to tighten our belts.

  1. CitizenWhy

    There are no consequences to being wrong. These forecasts are just a way of being in with the right crowd. Absolutely no concern for accuracy. We surely do love our modern economic mythology.

  2. VincentH

    The ESRI has the job of being in the consensus not being correct.

  3. paddyjones

    Its just human nature to feather ones own nest that is the way it works and Irish civil servants are the best in Ireland at doing this . All they do is wait until the day they can take early retirement.
    The way to get on in the civil service is to say nothing ever, keep your mouth shut for fear that you might stifle your chances of a promotion.
    The difference between a private sector worker and a public service worker are profound.
    Private sector => risk takers
    Public sector => conservatives
    I call public service workers ….clever idiots.
    I blame the public service unions for developing the mentality of these people. If 100,000 were culled in the morning I doubt it would make a difference.
    Austerity will deal with these people …less government spending will concentrate their minds.

    • gizzy

      I worked for a short time in the public service and the advice I received from my boss in week one was ‘Say nothing and say it carefully’

    • Rory

      Yeah Paddy, use the media excuse of abuse at the top to abuse those at the bottom of the public sector pile. Re-read the article. Second point, private sector does not = risk taker, it = risk averse price gouger. Think about it, business must by definition be risk averse, otherwise they do not stay in business long, unless you think Baltimore Technologies is a good model to work off. price gouger because irish business is the most greedy in the whole of the EU. We are 30% more expensive than germany. Govt tolerates this because it has shifted taxes from income to consumption. 21% VAT. Everyone pays, not just the rich. Sick of being told how wonderful isme and ibec members are the only ones doing anything for the country. they are insiders too.

  4. John Q. Public

    They told us things would improve when the recession started.

    • Praetorian

      Cheapest bailout in history, turned the corner, on the road to recovery, a vote for Lisbon II is a vote for jobs but in hard times was it vote for a penal interest rate of 5.8% which resulted in €9 billion in profiteering or support for a mindless attack by the French and Germans on the Irish corporation tax rate?

      Come forth all those highly paid supporters of the European super elite while the closer to Boston than Berlin brigade seem equally silent.

  5. Great article.

    The infamous ESRI, “forecast for the Irish economy, predicting that for the next seven years Ireland would “grow by 3.75pc on average per annum”.”

    Above figure was used to justify NAMA, it was used to justify our impailment(‘bailout’) though unbelievably they stuck us PIIGS with 5.8%, but this was no setback to PIIGS in heat chasing the feeder bowl.

    Sure, we need an audit. Lets have a Truth and Justice Commission to publicly examine lending practices in Anglo and AIB and then move on to other sectors.

    Fair dues to DmcW doing some auditing himself above. We’re not likely to see this on TV3 or Pravda RTE as they tip toe around our tulips whose lips are sealed.

  6. Malcolm McClure

    Back in February 2007 in IMF Working Paper No. 07/44 “External Linkages and Contagion Risk in Irish Banks” Srobona Mitra and Elena Duggar laid out the nature of the problem that exploded in September 2008.
    Here is their Abstract:

    The large and growing international linkages of big Irish banks expose them to idiosyncratic shocks arising in other countries. We analyze international interdependencies of Irish banks – during both normal times and in periods of large shocks or extreme events – using an existing methodology with distance to default (DD) data constructed from the banks’ equity prices. The data covers daily observations from January 1994 to November 2005. We first construct rolling correlations between DDs of Irish banks and those of banks from other European countries and the U.S. to analyze trends in cross-country interdependencies. We then use a multinomial logit model to estimate the number of banks in Ireland that experience a large shock on the same day as banks in other countries (coexceedances), controlling for Ireland-specific and global factors. We find evidence of increasing cross-border interdependencies over time; differing interlinkage patterns in the pre-Euro, post-Euro, and the post-September 11th periods; and significant cross-border contagion risk from the United Kingdom, the United States, and the Netherlands. This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

    It would be extremely interesting to obtain the ESRI’s comments on this IMF Paper using the FOI act.

    • What they are describing is the dangers implicit in a tiny international pin.

      What they don’t describe is our home grown property bubble being pumped up by our gombeens year on year, fed by soft ESRI data, Bertie laughing at his detractors’ warnings, FF and FG property croneys, government gombeen propaganda fed by incompetent mandarins in the Department of Finance, McGravy sauce.

      They should have written a paper using the neologism SillyBubble as title, to describe our Celtic tiger scamarama:) They didn’t. Pity that! :)

  7. By 12 th February maybe 10,000 civil servants will be retiring as and from today.This will be the most generous giveaway tax free bonus lump sum for a long time to come.

    And up to 66% pension pa for the rest of your life.

    By the way there will be no means test and they can work elsewhere afterwards even as a paid consultant to the same department they left.

  8. CliveG

    Impressive article David.
    The government decries wisdom as for ESRI they have forgotten that we’re educated.
    Does any one reading this blog believe this la la land rubbish the ESRI are peddling? This “insiders” response is part of a pre budget soft-soaping intended to create subterfuge and misdirection.

    The ESRI want to convince us that austerity will save Ireland and produce jobs. Regrettably the core of small Irish business won’t survive another 3 years.

    However, there is good news IBEC have figured it out… how to get the UN out of employment.

    IBEC is predicting growth at twice the European average for the Irish economy in the coming year and says our rapid response to the economic crisis leaves us well placed to weather the current storm in the international markets.
    Danny McCoy is director general of Ibec, the employers’ body

    The only thing he forgot to say was …
    “They all lived happily ever after”

    • Praetorian

      Just wait for a Fine Gael minister to come out and talk about exports and the IMF saying the Irish economy will grow.

      Close our eyes and we may just miss the €250 billion external debt (with interest of course), the 460,000 unemployed, the 100,000 in mortgage arrears, small businesses closing left, right and centre.

      And the unemployed better show some motivation or else!

  9. dwalsh

    Excellent article David.

    I’m quite certain that the oligarchs themselves do take notice of what you and others like you write. I don’t think they believe their own propaganda. Do you?

    The people you write about here are economic services providers to the oligarchs and they get well paid for it. The oligarchs don’t want economic truth or even good economic sense. They decide their policies for reasons which have nothing to do with economic sense or even the sacred cow of the Market; and everything to do with their own inscrutable intentions. They want academics who will provide them with theoretical cover (rationalisations) for their policies; and professionals who will design and implement the systems to carry-out their policies. None of this has anything to do with economics as a pure discipline; and everything to do with economics as a financial and social engineering technology.

    The reason all of this seems bewildering to us is we think the elites perceive our nations and societies more as we do and therefore we are taken aback when they make apparently daft economic decisions that damage our citizens and our nations. We are bewildered when their senior agents in the(ir) permanent government, and their corporate CEOs and professional advisors and technicians who implement the policies, not only don’t get taken to task in any way, but get handsomely rewarded. It all seems crazy to us; and it will continue to seem crazy so long as we assume that they see the whole affair as we do. They don’t.

    They don’t see things as we do. The whole global meltdown has another and entirely different significance for them. Until we begin to understand this we will continue to misunderstand what they do and why they do it.

    If you look at a problem through the wrong theoretical frame, not only will you not be able to solve the problem, you wont even be able to see the problem.

    • Emperorsgotnoclothes

      You’ve made a point here that can’t be stressed too much. I thoroughly agree with your view. So many people, in their innocent naivety, make implicit, unconscious assumptions about the holders of real power (politicians, top civil-servants, etc). For example – they’re essentially decent people(look to Bertie’s man-of-the-people act which has so many fooled); they’re acting in the best interests of the country; they represent the concerns and interests of ordinary people, and so on. This obvious nonsense is then reinforced by a servile, compliant media and swallowed by larges numbers of people.

      There were a very interesting series of social experiments conducted in the 40s-50s by Solomon Asch. He attempted to measure the capacity in humans for independent thought and judgement in the face of absurd consensus. The results of his experiments have frightening implications – a significant minority of people demonstrated the ability to think independently and to challenge an evidently ridiculous consensus view. It’s quite apparent that this human weakness is, and has been, ruthlessly exploited by those in power pushing nonsense and lies at the population of this country. Maybe if our friends in the ESRI repeat ad nauseum their predictions then they might actually start to believe them themselves.

      Of course our education system doesn’t encourage or promote critical thinking. It rewards rote-learning as the optimum strategy for “success” and “progression”. Isn’t it then naive to expect anything other than wholesale acceptance of the nonsense pronouncements from “on-high”? In fact, wouldn’t it be a startling surprise if the general response was one of critical comment, given the indoctrinating impact of institutions such as the education system?

      Judge power by what it does, NOT by what it says.

      People need to begin the process of engaging their brains and critical faculties. Otherwise we’re fecked!

    • miec

      Excellent point, as I was reading the article I sensed the same thing, the politicians, senior civil servants ERSI and other similar type bodies see and experience things from a very different perspective to the rest of us and contributes to this mess. I came across this excellent presentation (which the powers that be should look at) basically the Irish people have little or no trust in the government:

  10. Adam Byrne

    David’s Wednesday articles seem to go up at a funny time on the Irish Independent site (and here) these days, not morning but evening. Or perhaps I am mistaken? Oh well, it’s here now.

  11. ToJoe999

    David, the function of the ESRI is not to tell the truth but the tell the EU what the need (and want) to hear, to keep the EU money flowing to Ireland.

    The EU will subsidize Ireland for the forseeable future. Ireland is armed with a financial nuclear bomb – the threat of a Euro 200B to Euro 400B default that could inflict very serious damage on German and French banks.

  12. dwalsh

    I was recently dismissed by some on this forum for pointing out that from an elite perspective this is not a crisis but an opportunity; an opportunity to implement fundamental structural and governance changes in our world. In Europe for example National bankruptcy gives the Euro elites powerful leverage to fast-track European federalisation. They will be able to implement policies which would never go over with the public under normal conditions. This is one example of the difference between our street-level perspectives and the perspective of the elites.

    In fact I am nor personally opposed to federalisation so long as it has a democratic structure and robust regional (formerly national) autonomy.

    • Praetorian

      Fast track federalism and keep ‘the rabble in line’ by having them struggle for every penny now that they are so firmly indebted. Catch 22 played out with vicious consequences. The war on working people continues. Clock being turned back to year zero.

    • CitizenWhy

      Like the United States, a federal Europe will be A Republic of the propertied (that term does not include those who own a home, much too small to be considered real property), Capital in control with Labour seen as a menace. Like Ireland is now, so what’s the complaint?

  13. TJM

    What time is the revolution at?

  14. bentley

    Albert Einstein …. Roy Keane (??) … brilliant mathematician Nobel prize winner compared to dopey donkey soccer manager loser …. please !

    This analogy is especially embarassing after the appalling shambles displayed by the other RK and his “team” (with notable exceptions) in the National Soccer Squad both in Aviva and Luzhniki over the last week. Pravda !

  15. Praetorian

    I commend you for this article, asks the hard questions which no doubt will go unanswered.

    I know plenty of people in the public service on low wages who work dam hard with almost zero credit, there is a divide, as in the private sector, that is why they are called the elite, and I support calls for their salaries to be cut. The €700,000 for that former senior civil servant is obscene especially in times of crippling austerity, wage cuts and unemployment. Appalling time in our country’s short history.

  16. ‘Politicians have been humiliated, so too have bankers – and some of them should go to jail. In Iceland, they put their politicians on trial; here we put them on TV3. But they are taking flak.

    Yet, all the while, behind the scenes, secure with their bullet-proof contracts and their gold-plated pensions, the real establishment continues to draw huge salaries in the shadows.

    They answer to no one, are threatened by no one and continue to operate with impunity while they tell the rest of us to tighten our belts.”
    Carve the aforementioned paragraphs in stone-they should inspire a real revolution on this island.
    David you have a way with words,but you will be ostracised and sidelined.
    No man is a prophet in his own land.
    Besides, the loyal lackeys in RTE continue to recite the same propaganda.Why wouldn’t they?
    their gold plated salaries are guaranteed by the annual licence fee obligatory for every citizen with a TV in his home.

    • Deco

      Ireland – a country where you can bankrupt the banking system and still be entitled to free flights on the national airline for life……but if you don’t pay the TV licence, you get thrown in jail.

  17. ict

    Good Article.

    I must admit that I used to dismiss those on this site who refer to RTE as Pravda etc as being a bit OTT, but not any more. Listening to the latest optimistic predictions being trotted out I found myself, for the first time, realising what it must have been like living in the old East Europe / Soviet Bloc, knowing that the official line is BS but everyone playing along. Often used to wonder what that must have been like but never thought I’d experience it first hand, at home. It’s scary!

    • dwalsh


      You’re waking up to the matrix!

    • CitizenWhy

      Welcome to the club of those who know what it appears to be useless to know.

    • mishco

      A someone who lived for 4 years in the “old East Europe”, I don’t entirely agree with this comparison. OK, the insiders trousered plenty there too, and the economic predictions were a joke also, as were the media; but at least Joe Soap had a job, a good health service, a decent pension and a pretty relevant education.

      • dwalsh

        And lots of Russians today are a whole lot worse off than they were then…before the consummerist sacred cow arrived to liberate them…i.e. The Market.

        Ditto with Libyans in the years ahead. Not a fan of Gaddafi but what lies ahead for those poor sods will be infinitely worse.

        • Deco

          The problem with the Russian transition to a market economy, is that the Oligarchs grabbed all of the resources, in a bloodbath.

          Concentration of the resources in the hands of an unaccountable few is always a problem. Things would be even worse in terms of economic distribution, were it not for the fact that the KGB effected a coup of the political system. It is a case of political control as a price for less economic control at the centre. But in both cases, there is still too much centralization of power.

          We in the West cannot throw stones – given the increased centraliation of power in the hands of the few, in both Europe and the US.

          And I suspect, you are correct with regard to Gadaffi. The Saudis will be pushing for influence, with their model of wealth distribution, which is more archaic than anything from Gadaffi.

    • Deco


      The behaviour of Pravda, and the ESRI, reminds me of some sketches of the film “Googbye, Lenin”, where the main character tries to simulate a “soft landing” scenario for the DDR, and it’s Socialist Unity governing party. The pretend interview, in the library in particular.

    • Emperorsgotnoclothes

      The mainstream media, and RTE in particular, exist primarily for one reason only – to provide a platform from which the official view can be pronounced, whilst simultaneously giving the impression of impartiality through token debate and discussion where “dissent” is allowed with tightly controlled parameters.

  18. 500 more jobless families in Waterford today.
    Apocalypse now.?
    Gold plated pensions.
    Untouchable public sector wages?
    for how long more?
    How come a bankrupt country does not have to default on all this.?

  19. wills

    And a technocratic elites keep watch over rigging operations.

    The pay off keeps em sweet. Its a cushy job in a cruel world.

  20. madman

    The Irish electorate had their chance for change a few months ago but chose to elect another bunch of clowns ( who have been there for years and know little else than the Dail Eireann circus) to the same circus. The ESRI and other quangos of government that seem all equally incompetent are a reflection of the Irish electorate, an apathetic and intellectually challenged lot, making me realise there is little hope in this country for the election of visionary and radical leaders. Pity eh!

  21. Tull McAdoo

    On a more optimistic note, Enda Kenny has returned from his Fine Gael Thick Tank/ Septic Tank and has rowed in behind the growth figures produced by the ESRI/ Pravda RTE/Ballina Tribune.

    Kenny has decided to rest all his hopes for recovery in the new……. DIESEL TRACTOR ‘TD-54.’- and its Preparation for Mass Production. Kenny surprised journalists with his indebt knowledge of this latest addition to the tractor production factory in Athlone ( which its hoped will employ 350,000 Solus Technicians when in full production) as went on to explain how……….

    The new caterpillar tractor, going into mass production,, is based on the ST3-NATI machine, of good repute in agriculture. A 54-h.p. Diesel motor has substituted for the 52-h.p. gasoline engine of the ST3-NATI. The chassis of the tractor has been improved along with the system of lubrication. All operating parts and bearings are enclosed. The Diesel tractor has a five-speed gear shift, whereas the ST3-NATI has a four-speed shift.

    Kenny outlined how this Tractor would be the key to turning Mayo into the breadbasket of Ireland, just as the Ukraine had done before. He congratulated the Engineers for their innovative caterpillar tracks which had been tested over extreme conditions on the rocky terrain around Bellmullet.

    So there ye have it folks…. Full bellies from the wheat belt that is Mayo……..full employment in Tractor production………Decentralisation of 350,000 technicians to Athlone……..Take it away the Mayo choir and goodnight Ireland .sleep well…

  22. Bearded Poker

    I was tutored by my mentor in the middle east when doing business to always beware of bearded men because they hide more than you care to know especially if they are short .The short ones are nearest the ground and are more dangerous.

    Here is an interesting clip from a senior executive in ESRI relating to the above article:

    • dwalsh

      Heavens above…I found myself laughing uproariously at what that clown was saying…at least at first.

      such as: the European governments need to sort out their problems as quickly as possible because its beginning to impact on our exports…hello! what planet is this guy on?

      It’s like an episode from Monty Python…

      But not so humerous when he says that unskilled working class people should not be helped with mortgage or debt relief…they should be foreclosed. Help and relief should only be given to those who are highly skilled and have prospects in a future recovery.

      Separating the wheat from the chaff.

      Harrowing stuff.

  23. NeilW

    It’s another religion. The Irish are in thrall to another religion.

    The old religion puts in places the national thought processes and acquiescence that allows the economic religion to prosper.

    It’s the same everywhere. There is no democracy. You just get to choose the colour of the rosette on your corporate place man.

  24. DavidIreland

    David, good article.

    You’re spot on about these spoofers and chancers carrying on spoofing and chancing their arms, seemingly oblivious to the trail of spoof and bull they leave behind. They got away with it forever, only having to face some consequences if somebody somewhere happened to remember a previous spoof or piece of bull and bring it to everyone’s attention.

    Today, however, it’s different. Just like the facebook generation are being warned that stuff they say and do might come back to haunt them forever, commentators and politicians will gradually begin to see the problem for them when their spoofing is available all the time, everywhere and for everybody to see for all time.

    For example, I’m sure everybody here has seen this site many times before:

    For me, it’s one of the funniest, saddest and most insightful places in all internetdom. It also gives me an advantage over my friends in the pub when one of the spoofers comes out with his/her weekly/monthly/annual spoof.

    Spoofers of the world: SPOOF ON…big brother, little brother, Mum, Dad, Granny, son, cousin, everyone in fact is watching you.

  25. Peter Atkinson

    Guys I was pissing myself laughing this morning when I heard the CEO of the IDA discussing the job losses in Waterford.Obviously not laughing at the poor unfortunates who lost their jobs but listening to the CEO’s diatribe defending himself to the last man.And the name of the company he was discussing TALK TALK TALK.WEll folks that said it all.They should relaunch this operation and base it in Dail Eireann where no doubt it will be flat out busy into the next century.

    The ESRI are about as effective as Met Eireann with their long range forecasts.I imagine they had some involvement in forecasting our position during the laughable policies we adopted during the 1990-92 currency crisis and we all know most of us at the time lost our b@?#?#@s on that one.

    By all means invite Colm Mc Carty in to have a deco at this dodgy outfit.Speaking of Colm Mc Carthy, surely an outfit could be established to have a proper forward look ar Ireland and where it is going.I know at the moment you will say down the toilet but surely we could invite people who are eminent in their own fields and who have no political or personal agendas to sit down and draft a working blueprint for the future.Colm on the finances, another on the social aspect, another on industry etc. and let them publish a report that the people of Ireland can actually understand.

    Folks, the song “Won’t Get Fooled Again” by the Who has a line in it that states “same boss as the old boss” and the song sums up the position we find ourselves in. Cowen, replace with Kenny, Lenihan replace with Noonan and the galling thing is their opening line in every interview is “we inherited a mess from the previous government”.This basically means nothing will happen in our first term but if you give us a second bite we can really make a difference, or to put it another way, we haven’t got a clue how to sort the mess out, we can’t even open the letters coming through the letterbox and to be be honest its great to be getting all this attention from the media.By the way does the black or blue suit with the red tie look better on RTE’s Six One.


    28,000 punters on the scratcher in Waterford, 60,000 out of work in the 6 counties ! The former has a population one tenth of the latter ! Richard Bruton is hapless, sounds like the class swat.Career govt employee.Worse than the eighties.

  27. Here’s a polyanna speech Danny McCoy of IBEC made in 2010

    Love the disengenuous ‘numbers are complicated’ :

    “The numbers are complicated as a result of the openness of the Irish economy and the nature of the investment that flows through Ireland. The IFSC, our International Financial Services Centre in particular, accounts for a significant throughput of this

    Ahemmm, ‘numbers are complicated’ lets not say too much about the Dutch Sandwich, Double Irish capital flows through the IFSC, shall we?

    “My view is that the labour market is simply correcting itself after an incredible inward
    surge. I do not believe that we face the prospect of a lost generation .”

    De ye heard that, Waterford?

    “Broadening of the tax base will have to form part of the austerity programme: it should simply never have been allowed to become so narrow.”

    Even Enda knows more taxes will lead to more mortgage default and debt default, but overall this is true.

    “The cost of the bank bailout has now been fairly robustly estimated at about 50bn. There are 2.5 million tax payers in the Irish economy. This constitutes a debt value of about 20,000 for each person, which is an enormous figure.”

    Danny, the overall debt is in the region of €250 bn. And your figures per person are out by approx 25%
    Overall debt is approx €25,000/person
    According to the clock public debt is at €104 bn but the true overall figure could be as high as €250 bn when personal debt levels are taken into account.

    Danny gets truely and sadly lost in the following piece:

    “The real issue is whether we can afford to service the debt over time. At an interest rate of 5%, servicing debt at that level would require a take of about 1,000 per year or 20 per week per tax payer. This is a significant amount and certainly could be
    better spent elsewhere, on public services or infrastructure.
    But the scale of adjustment needed for Government to cover the costs of the bailout in itself is not unmanageable. Particularly not in an economy with one of the highest levels of per capita income in the eurozone. Despite the impact of the recession, GDP
    per capita in 2009 was the third highest in the EU. In fact it is almost one third higher than the average for the 27 Member States. ”

    Re: “Particularly not in an economy with one of the highest levels of per capita income in the eurozone.”

    Errr, unemployment is soaring, ‘highest levels of per capita income’ is largely paid for through ECB impailment money, this is also making us uncompetitive.

    ( Please give me a moment while I weep uncontrollably )

    Plus global growth is contracting and because we’re an open economy this will hit us hardest. Plus the euro exchange rate is dragging us down. Waterford’s and Dell’s Limerick experience is a trickle obviously turning into a flood. Our debt burden increases as a proportion of declining taxes due to unemployment and declining wages and a global recession…this is not bleedin bad luck Danny…need I go on?

    Sorry Danny, we not only need to cut your salary by 2/3 but you need to be fired! Goodbye.

    • Deco


      IBEC and ICTU need to be kicked out of the government process. It is a massive transgression of democracy to have IBEC and ICTU laying down the law to whichever politicians the people elect to power.

  28. johnm

    heres the view from todays sydney morning herald
    talking about gerry Harvey and his irish business…

  29. Excellent series on global banking from the FT to read over coming weeks:

    • dwalsh

      Passera in response to a question about global competitiveness talks about levelling the global playing field and that there is some way to go with that yet.

      That means further lowering wages and conditions in the west and raising them somewhat in the East.

      Interesting. I wonder does this levelling apply to bankers compensation?

  30. Praetorian

    Read the sign in the photo that accompanies this article, speaks of the Orwellian nature of the world around us.

  31. Prof Feldstein of Harvard who forecast the EMU was unworkable here gives a view I share that peripherals should seek to leave the EMU even on a temporary basis.

    The video that follows on from the above notes the drop in the Swiss Franc against the euro.

    That must have burned many of those reported a while back packing cars with Italian euros and heading for Switzerland…

  32. gerry

    Experts on the whole, including Economists, have a very poor record when it comes to making accurate predictions. In fact, many studies that have examined the accuracy of so called experts have shown them to be no accurate than dart throwing monkeys! Even The great noble prize winning Economist,Paul Krugman got it wrong in 1997 in relation to the Asian Crisis when he advocated for currency controls. And so did Peter Schiff whom, like DMcW, also predicted the housing bubble and sub prime crisis in the US. He got a lot more wrong than right. He just happened to get the big one, and the one that everybody remembers right- Have a look at Future Babble which documents and discusses this in detail.

    Human beings have a profound aversion to uncertainty. We prefer to know that something bad is going to happen than having to wait,in the unknown, unhappy with our present circumstances. Even if this prediction is given by someone with a poor record of getting things right, we’d rather cling to this ‘false prediction’ rather than be left not knowing. So, in a sense we create the demand for these forecasters, a demand that they all too willingly oblige.

    What’s more, we also tend to trust those experts who seem very confident with their predictions. Even though these types of people have been shown to be the worst at getting things wrong. And the big problem with this is that confident experts are the ones that appear on our news stations. We don’t hear or see the type of cautious, self doubting type of expert, who knows the limits of knowledge and who questions everything. Why? Because we want certainty and we are blinded by appearances, i.e. someone who looks and sounds ‘right’.

    So, my two cents is: always to remain sceptical about what I read, see or hear. Especially if someone comes across as being overconfident in what they are predicting. And also, to remember that the future has always been uncertain and that even though things look bleak now, nobody can say for sure what will happen in the future. For instance, who would have predicted that the children of the Great Depression would go onto be the most privileged of the 20th century. And I”m not only talking about Bil Gates:)

    • Good points, but we should also bear in mind that human greed, privilege, and power likes to consolidate/blind itself with that which helps its own self perpetuation – to the point of denying that which threatens itself aka Hitler bunker mentality or Macbeth and the Dunsinane Wood. The self in question, if its loaded with perks, commissions, bonuses, outrageous salaries…. can lose objectivity ….

  33. Deco

    With jobs leaving Waterford, and going to the UK, we badly need to do something about the national cost base. Alright, part of the problem, is inflation in the UK. But expensive elecrticity, and many other costs need to be addressed.

  34. Deco

    Privatise the ESRI.

    Let the market decide if it wants to pay for it’s forecasts. Seriously. The ESRI is abusing it’s position as a taxpayer funded organization. The state gets stuck with the bill, and the forecasts are of no value to the state, the taxpayer or anybody.

    • gerry

      Agreed. And what a ridiculous header to today’s articles in The Indo and Times- ‘ESRI revises growth forecast down to 1.5%’. If you think about it, in the same sentence they are both admitting that they got their predictions wrong and asking us to take on their new predictions for the future.No doubt they’ll be revising their forecasts again in the not so distant future. One gotta ask what is the point of having these forecats in the first place. It’s utterly stupid. But I wonder how many people will even notice or pause to think about this.

  35. Deco

    Excellent article.

  36. BrianM

    IIRC Brian Lucey (one of David’s so called Mavericks) wrote a paper in Dec 2005 arguing that not only was there going to be a soft landing but in point of fact the banks needed to get more into the sub-prime lending market.

    Interestingly Alan Ahearne – once the darling of the mavericks who then was dumped for actually daring to try and help – was repeatedly writing in 2005 that there was little chance of a soft landing and in fact that when the crash came it would be much more substantial than anyone seemed to think.

    Was it not Mr Mc himself who called for a comprehensive guarantee of all Bank liabilities (deposits, senior and sub debt included)? That plan worked a treat didn’t it.

    Economists are all wrong regularly because they attempt to do the impossible and predict the future. Any of the predictions are based on a raft of assumptions which when wrong (as they invariably are) mean that the prediction is wrong.

    I’m not defending the ESRI, DoF or any economist for that matter – they are all generally wrong most of the time. I do have respect for any economist (maverick or not) who puts forward reasoned and logical argument for their predictions and who accept that they may well be wrong.

    A stopped clock is right twice a day but it utterly useless as a time piece.

    • By the above solipsistic argument we might as well send all the unemployed to go building pyramids in the middle of the Bog of Allen because ‘the future cannot be predicted’.

      Good science can certainly predict the future.

      Blow up a balloon and get a pin. Bet I can predict the future of that balloon if you stick a pin in it.

      Arguments such as yours lead to the sinking of Titanics and NAMA:(


      • gerry

        Economics is not a science in the true sense of the word. Though the masters of the universe in the height of the boom believed that they have found a way of predicting and controlling the Markets and Economy. Sure they had their PhD Mathematicians work on creating Finacial Products that could be used in the market place.

        The problem though is that very few people understand these products and how fragile the Financial Markets have become as a result of mathematical wizardry. Check out this discussion between Mandelbrot and Taleb

        • thx for link, Taleb and MandelBrot express their concerns very well. Around 7min Taleb on the dangers of globalisation, read earlier posts from myself and others re hedge funds/currency manipulation and intertwining interdependence exploiting liberalisation of new rules on derivatives and taking down of Glass Steagall…they are rightly worried about the €750 trillion loose cargo of derivative based financial products and what happens in a storm.

    • StephenKenny

      You seem to be trying to argue that everyone who attempts to forecast, in the public arena, will be roughly the same i.e. everyone will be wrong. The reason for this, if I understand you, is that it’s difficult, or “impossible” as you describe it, to forecast.

      You seem to be defending the ESRI, and the DoF, and everyone else (in the public arena) on the grounds that since, according to your assertion, everyone’s forecasts are equally useless, everyone’s forecasts are equally worthy of respect.

      I suggest that you consider that the usefulness of forecasts range from 0% all the way up to to 100%, and only God’s forecasts are 100%, for reasons that might be apparent. You might consider that forecasters who are above 50% in their accuracy are more useful than those below 50%, in spite of the obvious imperfections of both groups.

      McW is wrong fairly often, but the bank guarantee, given the paramaters he outlined in the public arena at the same time, was the best solution available. It was unfortunate that the parameters he outlined were ignored.

      • gerry

        I think if you read over my posts you’ll see that I’m not defending anyone. Especially not the ESRI! I’m actually doing the complete opposite.I’m pointing out that Economic forecasting has been very poor to date and that we should be very sceptical of any expert who says that they KNOW what will definitely happen.

        You’re point on forecasts, even if they are only 50 percent accurate, being useful, is an interesting one. It has been debated between Nassim Taleb and Daniel kahneman here /watch?v=LjGl6bZF6zs. Worth a look.

        The problem though is that being accurate less than 50 percent means that a coin flip would be as least as accurate a way of calling the shots. And in the studies that I’ve read about,that’s the percentage that most experts fall into. Meaning that your local taxi driver would make a better stab at predicting the future of the Economy than most Economists.

        • StephenKenny

          I don’t doubt that you’re right – my comments were in response to BrianM’s original comment. Taleb is always worth a look – there was an interview he did after all those co-called ’3 standard deviation events’ occurred in 2008, very entertaining as he explained how those definitions were inherently flawed.

          There is also the issue of the degree of correctness of a forecast, and the degree of usefulness. Weather forecasters have this problem – comparing a ‘cloudy’ forecast to a ‘rain’ forecast.

    • dwalsh

      “Economists are all wrong regularly because they attempt to do the impossible and predict the future.”

      I think this is a missunderstanding of what the ESRI et al are doing. They are not predicting the future…they are forward-rationalising current official policy; or in the case of corporate shills like Austin Hughes they are engaged in propaganda.

      While economics is not a hard science it is a lot more robust than these hacks make it seem. Most of the economists we get to hear are devotees of the Golden Calf and employees of the various Temples of Greed. They are forbidden to speak heresy…or truth.

  37. coldblow

    I came across the following paragraphs yesterday from towards the end of Crotty’s Ireland in Crisis, written around 1985. It seems to be relevant to this thread: propertied vs unpropertied, insiders vs outsiders. Some might find it an interesting alternative perspective. Apologies for length (I don’t think there’s anywhere online for it to be linked to) and any repetition from earlier threads.

    ” Incorrect Factor Pricing
    Undevelopment… is a failure of production relative to needs, so that more are worse off and/or fewer are as well off as formerly. It has also been suggested that capitalist colonialism, in all cases, has been the ultimate cause of undevelopment. Its operation has resulted in inefficient production and in generating needs that expand more rapidly than the capacity to meet them…

    The cause of low output in the former capitalist colonial Third World in general, and in Ireland in particular, have been seen to be the inefficient use of resources. Irish land now produces little more than it did 140 years ago. Irish capital has been prodigiously wasted. Half of Ireland’s labour has never been employed in Ireland. The ultimate cause of this inefficient resource use is a social order which retains, out of its original context, critical elements of the West’s individualistic capitalism. The proximate cause of inefficient resource use has been incorrect factor pricing. The cost to landowners of holding land has been minimized by first freezing and later abolishing land taxes or rates. Simultaneously, the attraction of holding land has been enhanced as a result of the accumulation of population and capital in neighbouring continental Europe, to the markets of which Ireland has gained preferential access by joining the EEC…”

    “Capital has been virtually free to the politicians…”

    “The corollary of low cost land and capital has been high cost labour…”

    “The heritage of capitalist colonialism, like infection with an incurable disease, persists in all of the 138 or so former capitalist colonies. The remarkable durability of this heritage is everywhere attributable to its profitability for powerful, entrenched interests that are part of it. Irish landowners profit from the the capitalist colonial institution of property in land…”

    “The Irish banks have profited enormously…”

    “Irish politicians have profited from the great enhancement of their patronal powers through the disposal of borrowed funds. Trade unionists have been able to secure privileged positions in the scramble for livelihoods in a country where there have been livelihoods for only half those who sought them. Innumerable bureaucrats and functionaries profit from a capitalist colonial heritage that has secured for them permanent and pensionable employment in a world of uncertainty. The majority who lose by the preservation of the heritage of capitalist colonialism, are coerced, in almost all cases except Ireland, by power-based, extremist right or left wing governments. In Ireland those who lost emigrated.”

    “The low cost of holding land, the low cost of borrowing capital, and the high cost of employing labour in all thte former capitalist colonies are major elements of the capitalist colonial heritage. Everywhere this heritage results in inefficient land use, the waste of capital and the unemployment of labour. Production in all the former colonies is depressed by this incorrect pricing of the factors of production.”

    “The retention of an inappropriate system of factor pricing in Ireland as in all former capitalist colonies, as well as serving the powerful entrenched interests bequeathed from the capitalist colonial era, also owes much to persistent intellectual imperialism.
    “The concentration of power into the hands of Irish politicians necessitates a costly apparatus of state. This arises from the patron-client relationship between politicians and public. It takes such forms as the provision of cars, drivers and security guards for senior politicians, comparable to the original fascisti… Or it takes the form of a clamour to extend the resources available to Dail members to enable them to monitor better the state’s burgeoning activities, which they have brought into existence.

    “The return of power to the people, which will accompany the national dividend, will strip power from the state and from the buropoliticians who operate the state. Even the most senior politicians, under these circumstances, will have no more power, authority or status than the mayor of a substantial town now has. A situation similar to that which obtained in England 60 years ago would be appropriate. :The prime minister Ramsey McDonald, who had no offial transport, walked to the end of Downing Street to catch a bus or taxi to his destination. Given the much reduced role of the state and of the burpoliticans who operate it, it would be feasible and desirable to reduce very much the cost of such items as the presidential establishment, the oireachtas (houses of parliament), the office of the taoiseach, and to reduce also the cost of the services provided for these institutions by the other arms of government.”

    “The changes proposed are, first, the establishment by appropriate fiscal menas of factor prices that reflect economic realities and social priorities. Factor prices now preserve individualistic interests that are part of the capitalist colonial heritage and that are socially destructive. The establishment of economically correct factor prices will cause resources to be used efficiently. It is proposed to distribute the social surplus that will accrue from efficient resource use as a national dividend, paid equally to everyone on the voters’ register and resident in Ireland. These measures would effectively undo the Conquest. They would replace an inefficient and iniquitable social order with an efficient and equitable one and they would secure a livelihood for all the people of Ireland in Ireland.

    “Repudiating commitments: The measures proposed involve a unique exercise of the sovereignty that is the concomitant of political independence, for the purpose of casting off the debilitating heritage of capitalist colonialism. The measures proposed are perceived to be the means by which a sovereign, independant people, responding to a unique challenge, can save itself from continuing, and now accelerating, undevelopment. An exercise of sovereignty of this nature cannot be bound by the past, any more than it can bind the future; except insofar as the present deems it expedient to accept present commitments. Sovereignty implies the rejection of what Thomas Paine called ‘the vanity and presumption of governing beyond the grave [which] is the most ridiculous and insolent of tyrannies.’ The imperative need to escape from the present situation makes it expedient now to reject commitments made by those who in conducting the affairs of the Irish state have sought to broaden, deepen, enhance and preserve the colonial heritage.

    “The exercise of sovereignty now requires the rejection of the commitment by past sovereigns of the exclusive right of some individuals, their heirs and assignees to the use of Irish land (by which commitment most of the Irish are excluded from access to land); the commitment to others of the exclusive right to create and allocate money [he is referring to the banks]; to others the exclusive right to sell intoxicating liquor, to provide transport for hire, etc; to others the right to receive interest on, and the repayment of, money that was advanced to politicians who used it to buy office and left no assets to service the debt. The exercise of sovereignty requires the rejection of the commitment to others of the right of permanent and pensionable employment in the public service. The justification of this exercise in sovereignty — if such an act ever needs justification — is that the commitments mentioned have caused the undevelopment of Ireland, as similar commitments have caused the undevelopment of all the other former capitalist colonies. Only this exercise of sovereignty can ward off a crisis of unparalleled severity in the affairs of the Irish people; a crisis that threatens to hurl Ireland into a chaos comparable to any witnessed in the most disturbed and distressful parts of the Third World.

    “The repudiation of the public debt, of tenure of public office and of state and quasi-state pensions is an exercise of sovereignty that perceives these commitments to be excessive, unreasonable, ‘the most ridiculous and insolent of tyrannies’, and a barrier to the efficient and equitable reorganization of the economy. The proposed reorganization should result in most of those who lose by the proposed repudiations — including non-government employees whose pension funds are invested in public debt — gaining more from their share of the social surplus, or the national dividend, and from the better demand for labour. Only those with exceptionally large claims on public funds will lose more from the repudiation of those claims than they can expect to get from the reorganization of the economy made possible by that repudiation. Exceptionally large claims on public funds imply exceptional responsibility for ensuring the conduct of public affairs in a responsible manner which provided reasonably for citizens’ needs over a sustained period. The present debacle clearly indicates that Irish public affairs have not been so conducted; and, to that extent, those with the largest claims on public funds have most grievously failed in their responsibility. The scale of the individual’s claim against an inefficient, iniquitable and corrupt state is also the scale of the individual’s responsibility for the present condition of that state. That responsibility more than cancels any claim in equity for the loss of rentier incomes from public sources.

    “Repudiating public commitments, as well as removing the ability of politicians to borrow money and therefore to waste it, will also destroy the permanent and pensionable character of public employment, which is attractive for many. Against that, under the circumstances posited, there would be a very great diminution of the role of the state and a corresponding decrease in the need for public and semi-public employees. An adequate supply of persons of suitable calibre would almost certainly be forthcoming to discharge the duties of a greatly diminished state, notwithstanding the loss of permanent an pensionable character of public and semi-public employment. Indeed, it might well be that persons of a superior quality would be attracted to the public service than are now attracted by its present character. A high preference for permanence and pensionability is not characteristic of the world’s achievers.

    “An exercise of sovereignty that included the repudiation of debts incurred by non-mandated politicians and held overseas might generate a potentially damaging overseas reaction. The day passed, with the Suez incident in 1957, when metropolitan powers dispatched warships to enforce repayment of debts incurred by former colonies… But since the flooding of metropolises with petrodollars in the 1970s and the vast expansion in lending to the governments of former capitalist colonies to which that has given rise, there has been increasing nervousness about the global consequences of a general defaulting by debtor states in honouring these debts. An explicit statement by Ireland of its intention not to service either internally or externally held public debt might provoke reaction of an exemplary nature aimed at discouraging…”

    “Raising the cost of land and capital, reducing the cost of labour, and transferring decisions on spending money from the buropoliticians to citizens, as proposed, should greatly increase Irish economic efficiency. This would be manifested, among other ways, by the greater competitiveness of Irish goods and services on home and export markets…”

    “Punitive action against Irish exports by the foreign holders of Irish public debt would, however, remain a danger…

    “…Arguments could be advanced in relation to foreign held Irish debt similar to those Keynes put to the victorious Allies with regard to German reparations after the Great War of 1914-18. If the bankers are to receive interest and repayment of the funds that they lent irreponsibly to Irish politicians, who spent them without creating productive assets to service the debts, then Irish exports cannot be used to pay for current imports from trading partners. A choice is unavoidable between servicing the debts of profit-hungry, irresponsible, metropolitan bankers, or buying the goods and increasing the exports of metropolitan countries, and expanding employment in those countries…”

    From the chapter “A Radical Alternative”

    “An era now appears to be ending in the metropolitan West. The capital-less, proletariat class, which has been the product of factory capitalism, can no longer earn a living by their labour. This appears to be due to the combination of (1) the ending of capitalist colonialism and of the export of metropolitan unemployment to the colonies; (2) an increasing inflow of products from non-western, non-colonized Japan, Korea, Taiwan and also from Hong Kong and Singapore; and (3) labour-substituting automation. Western countries, where incomes are high and populations are stable or declining, have begun to adjust to this new situation, principally by income transfers from the holders of property and jobs to the propertyless and jobless. This involves a major extension of state welfare services. It is an adjustment that recognises implicitly the impossibility, in the post-colonial era, even under conditions of static or declining labour supply, of large sections of the population securing a livelihood on grounds other than their contribution to GNP. It marks a repeal of the key, individualistic, millennia-old ordinance, ‘thou shalt earn thine bread by the sweat of thy brow.’

    “It is futile to imagine that Ireland, which has failed to provide a livelihood for half its population throughout the era of factory capitalism — when the world’s workforce increased fourfold and Ireland’s declined by two-thirds — provide employment for all its people. The limitations of preserving jobs in Ireland by curbing wages — ‘incomes policy’ — were brutally demonstrated in the 1840s when wages dropped below the subsistence level, workers starved, and the number at work collapsed (Chapter 4). The limitations on preserving jobs in Ireland by public debt expansion have been reached after nearly 40 years of public borrowing. Other stratagems, such as ‘job sharing’ or the IDA’s inducing foreign firms to locate enclave industries here at great cost to indigenous, integrated industries, are more likely to cause accelerated job decline that to provide new jobs (Chapter 6). One of the results of the Whitakerian-Geraldine era is a system of taxation that raises the cost of labour to its users to over four times what the supplier receives (Chapter 7).”

    “Not only is it futile for Ireland to attempt to create jobs for all its people; it is incongruous that it should contemplate doing so, especially now when the western world is adjusting to the need to distribute wealth on different principles..Ireland’s preoccupation with job creation is indicative of an utter failure to grasp the nature of the social, economic and political problems confronting the country. Under the socio-economic order that exists in all former capitalist colonies, there is no possibility of achieving anything like full employment. There is, under that socio-economic order, no possibility of providing a livelihood for all the people in Ireland, any more than in the other former capitalist colonies.

    “Under a different socio-economic order, where development had replaced undevelopment, employment creation would cease to be a policy objective. The over-reaching policy objective of the socio-economic order proposed would be the efficient use of land, capital and labour in order to secure the largest possible output of goods and services; and the distribution of that output in the most equitable manner possible. That would of necessity involved the reintegration into society of the landless, jobless masses that everywhere in the Third World are the enduring consequence of capitalist colonialism. That policy objective, which implies the ending of unemployment, is very different from creating jobs. Creating jobs is a policy that appeals to the idle rich, who believe that the devil finds work for the idle hands of the poor; and to the incorrigibly unimaginative who can perceive no greater attainment in life than their own success in securing permanent, pensionable and usually utterly unproductive employment.

    “GNP, under the proposed changes, would be maximized by charging users the full economic cost, but no more than that, for land, capital and labour. The difference between the amount produced and the amount needed to secure the required supply of factors of production — which is the social surplus — would be distributed equally be means of a national dividend to all resident citizens. That arrangement would, in Ireland’s case, effectively reintegrate into society the landless, jobless masses, who formerly emigrated and who no comprise the country’s burgeoning unemployed. That arrangement would end unemployment and make emigration unnecessary.

    “The proposals that have been made here, that are specifically designed to end undevelopment and concurrent unemployment, would also cause an increase in employment. However, that would be quite incidental to, and would in no sense be an objective of, the measures proposed. More work, like more savings or higher prices (and their corollaries, less leisure and lower consumption) can be warranted only in so far as they make possible higher consumption now, or less work and/or higher future consumption. The measures proposed [the steepest poss. taxes on land and bank interest, paring back of State and consequently of taxes, introduction of a universal national citizen's dividend, abolition of barriers to various employments subject to suitable qualifications etc] would, however, reduce greatly the supply price of labour, which is now in surplus.

    “Demand for labour would be increased at the same time as its supply price would be reduced. The various fiscal and redistributive measures proposed, by increasing the demand for goods and especially for services, would increase also the demand for labour. Taxing land and other government-created monopolies would force into retirement or semi-retirement many who are now unable to operate efficiently the land and capital they control, which would make these resources available for operation by more competent, and generally, younger people. Both bank and land taxes would have the effect of redistributing the bank credit. Banks now optimize by lending to owners of property, the value of which is increasing because of the banks’ inflationary increase in the money supply. Bank taxes would remove the banks’ existing incentive to expand inflationarily the money supply, which now increases property values. Land taxes would simultaneously appropriate for society the value of landed property. Just as a land tax forces landholders either to use it effectively or to surrender it to those who can do so, a bank tax would force banks either into liquidation or to lend money to those able to pay the highest interest on it and therefore able to make the best use of it. These people would, again, for the most part be young, virile, able persons, possessing little or no capital or land and therefore best able to use both capital and land productively This redistribution of the nation’s savings would add very much to the demand for labour.

    “The simultaneous reduction in the cost of, and increase in demand for, labour will transform the status of the individual supplier of labour from that which has obtained in Ireland since the sixteenth century Tudor conquest. The individual, by the fact of being a member of society, will share in the substantial portion of the total product of that society that properly accrues to society: the social surplus. Thereafter he will be free to contribute to the total product, by ‘deferred gratification’ or working, increasing by individual effort both the portion of the product that properly accrues to him as a return for his labour and savings; and portion that properly accrues, through increased land values, banking and other monopoly profits, to society. Unemployment will cease also in the sense that there will be no unemployment benefits or assistance, paid conditional on the citizen doing no work. The citizen’s national dividend will be paid unconditionally and will be uninfluenced by income from other sources, including employment.

    “It does not follow from the above that employment will increase. It probably will; though it may not. Citizens in receipt of a national dividend, when given the choice of increasing their incomes by working or saving more, may choose to work and/or save more. Alternatively, they may choose to work and/or save less. Giving people the option of increasing their incomes by working more implies terminating unemployment; for unemployment means denying the people the opportunity to secure even a moderate income by working. The critically important policy objective is the abolition of unemployment so that people should have the option of increasing a basic income by working. How people exercise that option is irrelevant, at least from a national policy viewpoint. Providing employment, or job creation, is an irrational policy objective.”

  38. coldblow

    “Pseudo-science wielded on behalf of special interests turns mathematical abstraction into a vehicle to strip away what used to be the major concern of classical political economy, and indeed economic reform, over the past two centuries. The aim of classical value and price theory was to isolate land rent, monopoly rent, and financial interest and fees (and “capital” gains) as a free lunch accruing to privilege.”

  39. Praetorian

    Are people surprised??????????

    Serious commentators and documentary makers who are not in it for the money and have some sense of the public interest have been pointing out the appalling role of ‘economists’ and academia in not only not warning but playing an active role in bringing about this crisis (The film ‘Inside Job’ did a pretty good examination of that).

    Those highly paid talkers in the public sector weren’t hit too hard (despite their inability to see the greatest financial crisis since the Great Depression coming down the line) while those in the private sector are paid to put out bullshit, one ‘economist’ with a certain company said some months ago that she thought house prices had bottomed out. I nearly collapsed from laughter that night watching the old telly, a soul sold cheaply.

    Duplicity abounds with a certain type of human, the greedy ones, who put profit before people everytime. As the old timers used to say ‘you’d need eyes in the back of your head’ especially in the cutest of all cute hoor lands, Eire, the Republic of The Quick Buck (at some elses expense naturally).

  40. David says :

    ‘In Irish economic circles, you tend to take much more stick from having been right than having been wrong’

    This reminds me of the Priest/ Vicar on sunday preaching about sin and the congregation is not listening.Strangely they do not talk about ‘The Truth’ .Maybe its fear that it might draw the penitants up a bar and they might ‘think’. And we know what happens when everyone begins to think .Then the Priest / Vicar would then become the congregation and he definately does not want to listen .It then follows why David says the above quotation .

  41. David says:

    ‘The “insiders” rally round each other even when they are wrong and the “outsiders” are denigrated.’

    This happens in most families .The kids always seem to be on the inside track and blame the parents when they are accused of not understanding the nuances of their new lingo . This gives causes for languages to change constantly.It also shows us why the language of teenagers in the 1930s would not be understood by their counterparts in 2011 .Thus we can understand why sub-culture is born.

  42. David says :

    ‘So, to use the vernacular, the ESRI, writing in December 2005, hadn’t really got its eye on the ball’.

    Can you imagine Grafetti in Dalkey and in Sherriff Street .Could the corresponding residents in each location understand either ?

    And the Government proclaim ESRI to The Nation !

  43. Realist

    Hi David,
    very nice article of course showing the usefulness of GDP, growth and such terms.
    Growth is the term coming from the biology where it is a good thing. In economy we all decide do we want to grow (save/invest) or not to (consume). It is action of all humans that is not calculable by any mathematics.
    Even only maybe 50% is left to us to decide what to do, to consume or invest, as 50% is taken by the government (where the growth is none or very limited).

    I think we should not spent time on terms that have no proper economic meanings.

    This is an excellent article to explain the fallacy from the Austrian school of economics view:

    In summary:
    We can thus conclude that the GDP framework is an empty abstraction devoid of any link to the real world. Notwithstanding this, the GDP framework is in big demand by governments and central bank officials since it provides justification for their interference with businesses. It also provides an illusory frame of reference to assess the performance of government officials.

    Growth fallacy from one of excellent and classic books:

  44. The Valley of The Squinting Windows

    David says : ‘Yet, all the while, behind the scenes, secure with their bullet-proof contracts and their gold-plated pensions, the real establishment continues to draw huge salaries in the shadows’.

    So much for ‘behind the curtins’ and ‘corridors of Power’ .I might include Irish Trade Unions in that pack and the ‘Soft Power’ in the ESB .

  45. StephenKenny

    Just to reiterate Realist & dwalsh’s comments, do any of us really believe that the people concerned are so stupid that they don’t know what they are doing? Make no mistake, these people are smart. They are smart, and they know that the media will simply, unquestioningly, trot out all this nonsense.
    Privatisation would be no good either, as the results we’d get would suit the organisation that paid for them – look at the US ratings agencies.

    The system is broken, in my view because everything has become politicised. This is also true in the US & UK where government statistics are laughable – they’ve recently (about 10 years ago) started to include McDonalds burger flippers (and other cooks) in their ‘industrial production’ statistics.

  46. David, I don’t think our job is to believe the ESRI and its arguable that the ESRI’s job is to tell the absolute truth. They are in large part aiming this kind of stuff at an external audience that doesn’t have boots on the ground so knows no different. If the WSJ and others like to punt stories about how Ireland is in recovery (which in theory it is) then why shouldn’t they roll with that?

    I agree of course that “we all make mistakes”, but this is more than just getting things a bit wrong. I would say that you are being quite charitable towards the ESRI.

    The ESRI that warned in 2000 that Ireland was becoming too dependent on housing and construction is long gone, what we have now is a spin machine and its outputs should be judged with the appropriate ladle-full of the appropriate condiment material.

  47. Presse a la Punto

    Can you smell the aroma .Its like a strong old pungent rustic stale coffee .Well I can see the army of skilled tradesmen of papercraft turning their old ‘ presse mechano ‘ in the long dark burrows of the government buildings .And boy is the going getting tough .
    I hope they dont have to resort to counterfeiting old prisoners rags as what happened in the Auswitz Camps.Will there be enough paper ?

    I might soon be starting again to collect the next collection of rare over printed stamps .My favourite will be £5,000,000 punts .

  48. Trichet continues his disastrous bond buying spree , Stark resigns, Weber resigned last Feb. Once again markets plunge.

    Meanwhile with NAMA, the banks, austerity program, more austerity to come, we’re doing great, according to Enda The Mistake. The gulf between fantasy and reality in Ireland widens.

    Last time we were doing this well the Troika came to town to celebrate:)

  49. dwalsh

    Deco wrote:

    “Concentration of the resources in the hands of an unaccountable few is always a problem.”

    Good point. I believe the great weakness and danger in capitalism as we have it in the West is the inevitable concentration of power into fewer and fewer hands and the inevitable use of that power to usurp democracy and government.

    The explosion of financial capitalism in recent decades has amplified that danger geometrically.

    The beauty of the system for the financial and corporate oligarchs is that most people will blame their political protégées (the governement) for the policies implemented and believe that if they vote in a new crowd of politicians things will change. Of course things don’t change in any substantial way; but it takes the public a while to realise it and by then its time for another round of political musical chairs and a new crowd of politicians.

    And so it goes on.

    In reference to ESRI
    I was horrified to hear john Fitzgerald of the ESRI say in reply to a question about debt forgiveness for citizens in negative equity who are falling into mortgage arrears that arrangements should only be negotiated with those who have skills which will be needed in the expected recovery. Those who do not have skills which will be needed in the recovery should be foreclosed.

    Separating the wheat from the chaff.

    • CitizenWhy

      Ah yes, the Neo-Liberal meritocracy in stark terms. No common good, just “you get what you deserve.” If you’re rich, you’re deserving. If you’re a big bank, you deserve bail-outs. If you’re poor or in any kind of trouble, you deserve it. The “parasites” – salaried workers, non-professionals – deserve nothing except low wages. Only the rich are the productive class.

      Meritocracy and a Republic of the Propertied (not including homeowners) is what the right wing and the Neo-Liberals believe in. Democracy they despise.

      • Deco

        The neo-liberals don’t believe in meritocracy. The believe in assymetric state intervention, in an institutional climate where they can lobby for intervention in such a manner to prop up their wealth.

        Just look at the line taken by Suds with regard to the banks, and lobbing the taxpayer with the bill.

        Meritocracy is something that they opt out of. If they were in favour of it they would never have lobbied for the concept called “too bid too fail”.

      • Deco

        The banking sector deserved to get walloped for their own stupidity. But they did not get what deserved. Instead we had “Marxism for multimillionaires”. Let’s bail out the Anglo bondholders. Let’s ensure that the people never hear who the anglo bondholders are. Please support our advertising sponsors.

        • redriversix

          What are we going to do…..what are we going to do….what are we going to do….what are we going to do…!!!!!!! am I getting to I getting to you …am I getting to you…….

          deco,dwalsh,colmbrazel etc…..We are all fine their is nothing to worry about were all going to get out of this in 2/3 years time we will get decent jobs and be able to look after our families.We wont have to worry about healthcare it will be fine,Our education system is great.We will be able to contribute to society in a caring manner.We will be able to raise our children ,in a safe society.

          Europe and America are our friends they said they liked us and we were very good in class.
          They have promised to take care of us if we do as we are told.

          The Euro is fine,Dollar will recover,Gold is useless, that,s a silly investment

          All the leaders are working hard for us in Europe,not for the Multi-nationals, for us.

          Why would they lie to us,? We voted for Maastricht and Lisbon 1 and 2.We voted wrong on Lisbon 1 but they were patient and showed us the error of our ways and we are very grateful for that.

          America is winning the War on terror in Iraq & Afghanistan ,AL-QAEDA is on the run their is maybe only 5 or 6 members left.

          Democracy is flourishing in Egypt.Libya has been liberated without any outside help.

          They will be a proper democratic country within 6 months.

          President Obama stimulus package will be a huge success within 6 weeks.China will forgive all Americas debt and help them get back on their feet.

          Irish Bankers will realize their mistakes and issue a public apology to the people.They will close their business if its not viable and return taxpayers money and we wont have to pay senior bondholders.

          O.P.E.C will disband its hold on Oil prices and lift all limits on oil production which will help everybody from Oil tanker owners to taxi drivers and they will fix oil barrel prices at 8 dollars a barrel for 2 years and cap it at 35 dollars a barrel.

          Israel will recognize Palestine and hand back all lands,it took from them and set up a new Marshall plan to help them for the first 5 years.

          Our exports are going to grow by 150% over the next two years and we will return to full employment.MULTINATIONAL Companies our going to pay Ireland to let them come here to avail of our highly educated work-force and our excellent health service and low crime rates.

          There is nothing wrong with the 9/11 commission report.America investigated 9/11 throughly and found nothing wrong.The collapse of the twin towers was completely due to fire and W.T.C 7 just fell over.That happens all the time.

          Bush was a great President and the War on Iraq was entirely justified.The C.I.A never interfere in other Countries business so how would they know anything about Pre-planned attacks.

          In conclusion, i really do not know what any of you guys are talking about.Everything is fine.

          Your friend
          Idi Amin Dada,General Retired


        • Realist

          Does anybody know did Anglo bought Irish government and other government bonds to use them as collateral in ECB ?

You must log in to post a comment.
× Hide comments