Global city housing crisis and costly planning restrictions

BBC report August 15, 2018: How housing has divided the young 

I have discussed the impact of planning restrictions on property prices in the past (here for example) but while some, of course, are necessary, there is seldom an estimate of the cost — in 2015 Jason Furman, President Obama's chief economic adviser, cited a cost of 50% or more on a typical house in US urban areas; London School of Economics (LSE) research has estimated “that restrictive planning policies inflate the price of office space in the West End (of London) by about 800%. A square foot there is twice as expensive as in midtown Manhattan.” This year research published by the Reserve Bank of Australia estimated that that zoning restrictions raise detached house prices by 73% of marginal costs in Sydney.

James Joyce

Sylvia Beach meets James Joyce in her Parisian English language bookshop, Shakespeare and Company, in 1922 — this was the year she published 'Ulysses.' It began to be serialised in the US from 1918, resulting in a ban that was lifted in 1933.  

Last year a friend invited me to a performance of a revival of Tom Stoppard’s (b. 1937) brilliant 1974 play, 'Travesties,' at the Appolo Theatre in London. The drama is set in Zurich in 1917, and it brings together James Joyce, Tristan Tzara, the poet and founder of Dada — the nihilistic, anti-art movement — and, Vladimir Lenin.

The play is narrated by an elderly Henry Carr, who had been a clerk at the British Consulate in Zurich during the First World War. His memory is a bit flaky and he believes that he had been the consul in 1917, and the real consul had been his butler. In real life, Carr had a legal dispute with James Joyce about the cost of a pair of trousers worn by Carr in Joyce's amateur production in the city of Oscar Wilde’s 'The Importance of Being Earnest.'

Brexit and rickety foundations of the Irish economy

In the early heady months after the surprise June 23, 2016 vote of 33.6% of UK adults* to leave the European Union, Boris Johnson, a putative British statesman, invoked the “triumph of hope over experience” when the British army of Afghanistan was wiped out in 1842 – almost to a man. He saw the quest for ‘Global Britain’ as reflecting a country with one in eight of the people born in Britain “now living abroad – a bigger diaspora than any other rich nation, you ask yourself what impulse drives this astonishing globalism, this wanderlust of aid workers and journalists and traders and diplomats and entrepreneurs, because whatever that feeling is, it isn’t xenophobia,” Johnson said, and added to dissenters “who say we are now too small, too weak, too poor to have any influence on the world, I say in the words of Scottish poet Robert Burns: ‘O wad some Power the giftie gie us /To see oursels as ithers see us!’”

Facts of Week: Heatwaves the new normal of climate change

Bering Sea ice at record low — April 29, 2013 - April 29, 2018

Less ice formed in the Bering Sea during the winter of 2017-18 than in any winter since the start of written records in 1850. Normally, ice covers more than 193,000 square miles (500,000 square kilometers) of the sea in late April, roughly twice the size of Texas. The ice extent at that time in 2018 was only about 10 percent of normal. Changes in when and where the sea ice melts can affect phytoplankton blooms which, in turn, can affect the entire Bering ecosystem. Further, open water absorbs more of the Sun’s energy than ice, which contributes to the planet’s warming. Read more at NASA’s Earth Observatory

It's a fair guess that many climate change deniers who seek 100% irrefutable evidence of climate change, believe in a God despite no evidence of its existence.

Germany top beer producer in EU, Netherlands top exporter

To mark World Beer Day on August 3rd, Eurostat reported that in 2017, over 41bn litres of beer containing alcohol were produced in the European Union (EU), 2.5bn litres more than in 2016. The EU’s beer production was equivalent to almost 81 litres per inhabitant.

Brexit Video Reports: Sharp shift in UK public opinion

Sky Data poll: Public turning against Brexit — British public opinion has shifted sharply against Brexit, according to a new Sky Data poll. The survey reveals the government is haemorrhaging trust over Brexit, with two-thirds thinking the outcome will be bad for Britain.

Expected road chaos leading to Port of Dover and other reports.

Average Irish housing size lowest of EU's rich countries — Part 2

The average Irish housing size is the lowest of the rich countries of the European Union despite the low population density and the fact that houses account for 92% of housing stock in Ireland — the highest ratio in the EU.

Irish Housing Crisis: It’s time for radical solutions — Part 1

Ireland needs to take several radical measures to tackle the current housing crisis but a minority government would struggle to enact them.

Irish real house prices up 175% in 50 years, UK +405%, Germany -1%

Average Irish housing size lowest of EU's rich countries — Part 2

Land value capture

Land value capture (LVC) is a means of funding infrastructure improvements and providing finance for social housing by recovering all or some of the increase in property value generated by public infrastructure investment.

Trump’s America: A banana republic with nukes

This week it was reported that the US government paid more than $77,000 to President Trump’s Scottish golf resort ahead of his stay there last weekend. The Turnberry course has been losing “an astonishing amount of money,” including $23m in 2016, according to Adam Davidson in The New Yorker.

Davidson asks: “Did he purchase and rehabilitate Turnberry, as he did so much else, with other people’s money?” — i.e. was it funded via money laundering for Russian nationals?  

Irish real house prices up 175% in 50 years, UK +405%, Germany -1%

Irish real [consumer price index (CPI) inflation-adjusted) house prices rose by 175% in 1971-2016 (45 years); British prices rose by 405% in 1967-2016 (49 years) and German prices fell by -1% in 1968-2016 (48 years), according to the Bank for International Settlements — the BIS was founded in 1930 and is located in Basel, Switzerland. It is often called the "central bank for central banks."     

The BIS has been tracking house prices since 1989, initially 18 advanced countries including Ireland. Data are supplied by national central banks, that may come from the national statistics offices or other credible sources.

Brexit, the lost empire, and dodgy modern UK economy

The Week That Broke Brexit: A Telegraph documentary on how Britain got a Remain prime minister after a Boris Johnson cricket match and a boozy barbecue with an insipid Michael Gove, egged on by his wife to seize the big prize.

On December 5, 1962, Dean Acheson, former United States secretary of state (1949-1953), asserted that Britain's role as an independent power was "about played out."

Acheson said at a conference on American affairs at the West Point Military Academy that “Great Britain had lost an empire and had not yet found a role.” He added:

Britain's attempt to play a separate power role — that is, a role apart from Europe, a role based on a 'special relationship' with the United States, a role based on being the head of a Commonwealth which has no political structure or unity or strength and enjoys a fragile and precarious economic relationship — this role is about played out…Great Britain, attempting to work alone and to be a broker between the United States and Russia, has seemed to conduct a policy as weak as its military power."

The blunt comments from a key architect of the postwar Western Alliance triggered consternation in London.

Best countries in world to start or run a business in 2018

Ireland has had a positive environment for business for many decades as successive governments sought to make the country an attractive location for foreign direct investment (FDI), besides the offer of low tax rates. During the general election campaign in early 2011, Enda Kenny, taoiseach/ prime minister, stressed the aspiration that by 2016 the country would be "the best small country in the world in which to do business."

“I will seek the trust of the Irish people to implement Fine Gael’s plan to get Ireland working again,” Kenny said on Jan 27, 2011. “I firmly believe that by 2016, Ireland can become the best small country in the world in which to do business, the best country in which to raise a family and the best country in which to grow old with dignity and respect.”

"Since coming into office 7 months ago I have told nearly all audiences that by 2016 I intend to make Ireland the best small country in the world in which to do business," Kenny said on October 28, 2011. "An integral part of this vision is to transform Ireland into the Digital Capital of Europe."

When 600-year old French word entrepreneur replaced capitalist

Ballyheigue, situated on the County Kerry coast between the mouth of Tralee Bay and the Shannon River Estuary, was the birthplace of Richard Cantillon, the 18th century economist and controversial Paris banker. He died in London in a fire at his home in 1734, where he may have been murdered. It is believed that the ancestors of Cantillon had left Northern France to accompany William the Conqueror in his 1066 invasion of England [genealogy: de Cantelon, Cantillon, Cantlon, etc.; Norman 'de Cauntelowe,' Latin 'de Cantulupo,' i.e., of Chanteloup in France (Seine-et-Oise)]. The name Ballyheigue comes from the Gaelic 'Baile Uí Thaidhg,' the town of the clan of Tadhg or Timothy. It is believed that the reference was to Tadhg Cantillon and in the 1300s, the family had a local castle when it was said to have been held by Ric de Clahull (Richard de Cantillon).

The word entrepreneur was first included in the ‘Dictionnaire de la langue française’ in the 1437 edition and it had been derived from the verb entreprendre, which has been in use from at least the 12^th century.

Entreprendre means to undertake or set about doing something and the word entrepreneur was defined in the dictionary as “celle qui entreprend quelque chose” (in both 1437 and in Émile Littré’s edition in the 1870s; See here.) According to Bert F. Hoselitz (1913-1995), the Austrian-born economist who sourced the earliest record of the word, the entrepreneur in the early centuries was typically a contractor for the king, involving big projects, and of course, there was a risk in seeking profit from a fixed-price job.

High growth firms as the Holy Grail or fool’s gold?

Click image for original size

In 2006 Finfacts reported that Xsil, an Irish firm producing innovative laser micro-machining systems to the semiconductor industry, had won the top prize in that year's Deloitte Technology Fast 50 awards. The company had achieved an impressive aggregate growth in revenue of 17,333% in the previous 5 years. Three years later Peter Conlon, the co-founder, told The Irish Times that Xsil Ltd had no assets to speak of except stock, which had been valued at “a couple of hundred thousand dollars, but we’d be lucky to get a cent on the dollar for it” — note that the superlative performance was based on revenue, not profitability.

Economic Facts of Week: Brexit videos and Ireland's low science base

FT Whitehall editor James Blitz looks at the mounting frustration of leading UK companies — Siemens and John Lewis — over the Brexit process and the UK's future trading relationship with the EU.

Irish 2017 per capita standard of living again below Italy and EU-28 average

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.

Irish broad rate of unemployment at 17% in March 2018

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.

150 years for poor Irish child/ descendants to earn national average income: 60 years in Denmark

Click image for bigger version

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.

Economic Facts of Week: US 2017 Balance of Payments surplus with EU at $14bn- EU says it had surplus of $170bn with US

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.

Plan of Italy’s new Europe minister to exit euro includes 50% debt haircut

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

Brexit video reports May/June 2018

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 US firms in Ireland at 800% of payroll costs

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.”

Economic Facts of Week: Rise of corporate giants & New Gilded Age June 10, 2018

‘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 very low employer firm startup rate- UK is 4 times bigger

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.

Currency devaluations alone do not magically provide growth

Click image above for full size

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.