Wednesday, October 24, 2012

Irish Economy: All solutions are not in Brussels, Frankfurt or Berlin

Irish Economy:  Sir Mervyn King, governor of the Bank of England, gave a speech last night in which he said: "Such is the scale of the global adjustment required that the generation we hope to inspire may live under its shadow for a long time to come."

Many look to Brussels, Frankfurt or Berlin for solutions and the 'more qualified' (as used by a contributor on another thread or what David Begg might term 'people of standing' - - Jim Larkin had a point: "The great are only great because the rest of us are on our knees") tend to eschew radical solutions for what is under our control, while young people are targeted to bear the adjustments.

The recent report on food deprivation highlighted an issue I alluded to yesterday. Ireland does not have the English allotment tradition and what is striking are the current very high subsidies for farming for even watching the grass grow, which has resulted in a big change from the 1970s when most farmers grew vegetables. Ireland produces 5% of the Dutch output of potatoes.

Today, staples are likely to be imported and pricy while the tradition of the country cousins bringing produce to their urban relatives no longer applies.

On a bigger scale, the fact that 5% of Americans are responsible for almost 40% of consumer outlays (including consumer spending, interest payments on installment debt and transfer payments) while the bottom 80% by income account for another 40%, shows the level of dependence on a small number in an economy where consumer spending accounts for almost 70% of GDP.

In his 1776 book, 'An Inquiry into the Nature and Causes of the Wealth of Nations,' Adam Smith, a social democrat of his times, noted: "No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable."

It's strange that a plutocrat has an excellent chance of becoming the next president.

The heartland used be radical and the death this week of George McGovern, former US senator of South Dakota, highlights this change which Thomas Frank discussed in his 2004 book, 'What's the Matter with Kansas?' - -  why relatively poor folk vote against their economic interests.

In 1896, the 36-year old William Jennings Bryan of Nebraska captured the Democratic Party's presidential nomination with his 'Cross of Gold' speech arguing for a bimetallic currency standard to help rural residents who had endured 3 decades of deflation [in 1925, Bryan made a fool of himself when he  was the prosecutor in the trial of a Tennessee teacher, for teaching evolution. See the impressive Spencer Tracy as the defending lawyer in 'Inherit the Wind' (1960)]

Finally on austerity again, this is from the latest Stability Programme Update, produced by Ireland's Department of Finance:

"While taxation receipts in 2012 are projected to be just above 2004 levels, the gross voted expenditure of Government Departments and Offices in 2012, at an estimated €56 billon, is projected to be 37% above the level it was in 2004, despite the very significant adjustments to both revenues and expenditure since mid-2008. While the gap between the State’s revenues and expenditure is clearly on a downward trajectory, it remains at an elevated level and it will need to continue to be addressed by economic and fiscal policy over the coming years."

The foregoing is a contribution to a thread on the Irish economy blog.

Note how that specie known as the “rural TD” is much more identified with the wish lists of the IFA and vintner groups than desperate urban dwellers they represent; note how a charge for septic tank inspection to ensure safe water became a cause célèbre while the 30% increase in average farm income in 2011 was an unmentionable. Public welfare comprised 73% of average family farm income in 2011 - - a reduction from 97% in 2010. National Irish Farm Income Survey 2011 [pdf]