Actual Individual Consumption (AIC) is a useful proxy for material standard of living and is based on goods and services actually consumed by individuals, irrespective of whether these goods and services are purchased and paid for by households, by government, or by non-profit organisations. In international volume comparisons of consumption, AIC is often seen as the preferable measure, since it is not influenced by the fact that the organisation of certain important services consumed by households, like health and education services, differs a lot across countries. Data are adjusted for price differences — Purchasing Power Standards (PPS) — and the AIC is more reliable than gross domestic product (GDP) per capita which tracks more than household welfare. Eurostat reports that in 2017 Ireland was again below the EU-28 average and also below Italy.

The Irish broad rate of unemployment was at 17% at the end of the first quarter of 2018. The Central Statistics Office (CSO) on Wednesday published the latest Labour Force Survey showing that the seasonally adjusted headline unemployment rate was 5.8% for Q1 2018 and the seasonally adjusted number of persons unemployed decreased by 12,900 to 137,300 (133,000 actual count) — the headline rate is based on employment of at least one hour per week according to an International Labour Organisation definition.

The average disposable income of the richest 10% of the population is about 9.5 times that of the lowest 10% across OECD countries, compared with 7 times, 25 years ago. Wealth inequality is even more pronounced with the top 10% holding half the wealth while the bottom 40% have only 3%.

The United States has had greater social mobility than large European economies such as Germany, France, and the UK, according to the Organisation for Economic Cooperation and Development (OECD) — a think-tank for 35 mainly rich countries including Ireland —  but the US has higher levels of income and wealth inequality.

Figure 1 above, shows that the US current account/ Balance of Payments with Europe has been approximately balanced since 2008 and has been in small surplus since 2009. It is the result of a substantial increase of the net income of companies (balance of primary income) and the surplus in trade in services with the EU. These gains are more than sufficient to outweigh the trade in goods deficit, and ultimately lead to a positive bilateral current account from the perspective of the US. Source: ifo Institute based on data from the US Bureau of Economic Analysis.

In Ireland we are familiar with distorted data resulting from massive tax avoidance and Eurostat, the European Union's statistics office also has a big difference in estimates of the Balance of Payments/current account balance with the US that is also related to the earnings of American companies.

A plan to exit the euro drawn up by Paolo Savona, now Italy’s new europe minister, “seems to confirm Germany’s worst fears,” according to a recent analysis by Daniel Gros, EconPol (European network for economic research) expert and director of the Center for European Policy Studies (CEPS). “But what is particularly astonishing about the ‘plan’ is […] the open intention to stick it to the rest of the world, particularly Italy’s euro partners,” writes Gros

How does Brexit rank among Germany’s concerns? Mark Urban speaks to President of the Bundestag and Germany's former finance minister, Wolfgang Schäuble, on the issues facing Europe. June 2018

The EU and UK will soon launch the latest round of Brexit talks next week, and one man will be speaking for the 27 remaining countries: Michel Barnier.

Profits of foreign firms in Ireland (mainly of US global multinationals) are almost 800% of their payroll costs in the country, according to a new academic paper that also says “close to 40% of multinational profits are shifted to low-tax countries each year.”

Thomas Tørsløv (University of Copenhagen), Ludvig Wier (University of Copenhagen) and Gabriel Zucman (University of California Berkeley and National Bureau of Economic Research) in their June 2018 paper, ‘The Missing Profits of Nations,’ write that “Between 1985 and 2018, the global average statutory corporate tax rate has fallen by more than half, from 49% to 24%. In 2018, most spectacularly, the United States cut its rate from 35% to 21%.” The authors say that the redistributive consequences of the process of shifting huge paper profits rather than actual productive capital “are major, and different than in the textbook model of tax competition. Instead of increasing capital stocks in low-tax countries, boosting wages along the way, profit shifting merely reduces the taxes paid by multinationals, which mostly benefits their shareholders, who tend to be wealthy.”

‘The Gilded Age’ was a satirical novel written by Mark Twain and Charles Dudley Warner, which was first published in 1873.  The book’s title became synonymous with graft, materialism, and corruption in American public life in the years after the end of the Civil War. The International Monetary Fund (IMF) asked at a recent conference titled ‘Digitalization and the New Gilded Age’ “Are technological advances leading to greater market concentration in firms such as Google and Facebook and, in turn, creating what could be described as a New Gilded Age?” — see video below.

The IMF says that the rise of corporate giants extends beyond Big Tech and has raised fresh questions about whether this trend might continue and, if so, whether some rethinking of policy is needed to maintain fair and strong competition in the digital age. However, corporate market power is hard to measure and common indicators such as market concentration or profit rates can be misleading.

The chart above is based on an upcoming IMF working paper using data for publicly listed companies from 74 countries. It tracks average markups on goods and services across all companies, comparing pricing in advanced and emerging and developing economies. A markup — the ratio between the cost of a good or service and its selling price — provides a measure of market power.

Ireland has the second-worst employer startup rate among mainly rich 29-member countries of the Organisation for Economic Co-operation and Development (OECD). Belgium has the worst rating while the United Kingdom is the best with a rate that is almost quadruple Ireland’s.

Ireland’s employer firm birth rate as a percentage of active employer firms was 4.1% in 2015 compared with Belgium’s 3.5% rate and Britain’s impressive 15.7% rate of birth. Ireland’s rate was at 3.7% in 2014. The death rates for 2014 and 2015 were 3.7% and 3% — meaning that the net growth rate of employer firms was stagnant in 2014 and very low in 2015. See table below

While the term ‘startup’ has become synonymous with the tech industry, we use it here as interchangeable with enterprise births, which is used by the OECD and Eurostat — the statistics office of the EU — in respect of the area of business statistics known as Business Demography.

The focus on employer firms with at least 1 employee at birth is important in terms of potential economic impact compared with a 1-person operation which may never grow even though many surviving employer firms also don't grow. Most new employer enterprises in OECD economies are created with between one and four employees. The average number of persons employed in employer enterprise births is typically higher in industry than in services, reflecting economies of scale.

John Maynard Keynes, the renowned British economist, wrote in 1919, “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency.” The quote comes from Keynes’ book ‘The Economic Consequences of the Peace’ – the searing indictment of the vengeful Treaty of Versailles. In April of that year the London newspaper, The Daily Chronicle, and The New York Times (see image above) had published a story from Geneva, in which the author claimed it was based on “authentic notes of an interview with Vladimir Ulianoff Lenin, the high priest of Bolshevism, which were communicated to me by a recent visitor to Moscow.” Ulyanov was Lenin’s family name.

Germany had goods trade surpluses with 159 countries in 2017 (using a threshold of €150m) compared with 56 for the United States (using a threshold of $160). While German surpluses come from all regions of the world, the American surpluses are both smaller and are mainly concentrated in Latin America (excluding Mexico, Ecuador and Venezuela,) the Carribean and the Middle East.

The United States last had a goods trade surplus in 1974 while Germany has had a surplus every year since 1952 and it has had a combined goods + services trade surplus every year since 1993.

German export value (goods + services) in 2017 as a ratio of GDP was 47%; France was at 31%; Italy's ratio was 32% — up from 26% in 2006, while Spain rose to 35% of GDP compared with 25% in 2006. The US rate was 12%.

China’s export value/GDP ratio was 19% in 2017 compared with over 35% in 2007.

Italy's anti-establishment coalition partners reached a new deal on Thursday with a revised list of ministers, and Sergio Mattarella, the Italian president, will swear in the 66th Italian government since 1946, today Friday.

I wrote this comment on an Irish Times op-ed on Thursday. Below, I have added additional material including some positive news!

A populist alliance is likely to form the 66th or 67th government since 1945, and the president may well have been wise in seeking clarity on plans about the euro.  The published draft programme of the Five Star Movement and the League is unlikely to address the serious problems of the economy but the alliance should govern. As banks' retail customers often invest in bonds, the alliance doesn't wish to see them burned.  

Italy has a long-term problem with an annual budget surplus achieved only once in about 110 years and in its 157 years as a unified country, Italy has had a debt-to-GDP (gross domestic product) ratio below 60% in less than 30 of those years.

Eurostat reported Thursday that the Euro Area (EA19) seasonally-adjusted unemployment rate was 8.5% in April 2018, down from 8.6% in March 2018 and from 9.2% in April 2017. This is the lowest rate recorded in the Euro Area since December 2008. The EU28 unemployment rate was 7.1% in April 2018, stable compared with March 2018 and down from 7.8% in April 2017. This remains the lowest rate recorded in the EU28 since September 2008.