Tuesday, September 27, 2011

Ireland and views of 'austerity'

A recent thread on the Irish Economy blog has been prompted by a comment from Paul Krugman, New York Times columnist, on austerity in Ireland and the Baltic nations. It begs the question as to what is austerity as the many beggars on horseback who in the past decade have had a donnybrook plundering the public purse, would object to reform and an end to their gravy train.

The following is one of my contributions to the thread:

It’s foolish to argue that cuts in public spending against the backdrop of a faltering recovery in developed countries, would boost economic activity in the short-term.

However, what should a country that is dependent on foreigners for most of its borrowing do?

Irish professional economists appear to be as lost for credible answers as the general public, four years after the onset of the global credit crunch.

Is there any research being done in this area?

The ESRI will likely publish material on the issue in years to come but expect nothing in the short term.

The issue of austerity reminds me of Harry Truman’s answer to a question on the difference between a recession and depression.
"It's a recession when your neighbour loses his job; it's a depression when you lose yours."
- - Harry S Truman, in Observer, April 13, 1958; 33rd president of US (1884 - 1972)

Politicians, senior civil servants and academics face personal conflicts of interest on the issue and in this recession, for the first time, trade unions have effectively abandoned advocacy on behalf of individuals in the unprotected private sector who are experiencing most of the pain.

The issue of mortgage debt forgiveness did briefly provide a glimpse of the plight of people who are generally invisible. It was also interesting that BlackRock Solutions, an American fund manager, was seen as providing an ostensibly painless solution.

So what does austerity encompass?

Greece has apparently thousands more teachers than classrooms; the well-off who generally evade taxes pay more in private tuition than the combined primary and secondary school budgets?

Would it be austerity for Ireland, a bankrupt country, to clawback the big payouts for politicians and public sector staff?

Not alone is there an Irish state guarantee of employment in the public sector and surplus staff are today being paid for doing no work, almost four decades after equal pay for women became an issue, it’s planned to have new permanent staff in the civil service on worse conditions than existing staff doing the same work - - all because politicians are afraid of upsetting the existing applecart and there is silence from others who choose less risky topics du jour.

Anglo Bank plans to cut its payroll to 900 but who believes that the defunct bank has work for all of them?; the citizens of a failed entity that becomes a ward of the State have exalted status compared with compatriots who are dumped on the street every week.

So ESRI, time for you folks to get ahead of the curve and try a bit of radicalism.

Finally, when should failed systems be reformed? - - when an economy is showing signs of recovery or flat on its back?

My answer is the latter, if it can happen at all.

Japan, Italy, Greece, Ireland…