Monday, January 21, 2013

Eurozone, Sweden, devaluations and Irish jobs for life

Sweden gives equal rights to public and private sector workers. Ireland maintains British Empire era job guarantees for its public sector staff.

In countries such as Sweden and Finland, it would be a huge scandal if a job had to be created for a senior politician’s partner on the same terms as an abolished position, irrespective of the responsibilities of the new make work position. She or he would have to apply for new position in an transparent system.

Swedish public administration has a long tradition of openness and accountability. The Swedish principle of public access to official documents – offentlighetsprincipen – is believed to be the oldest established system in the world. It dates back to the Freedom of the Press Act of 1766. In Ireland, transparency remains limited.

The concept of conflict of interest hardly exists in Ireland. The latest example is  Michael Torpey, who according to The Irish Times, was the head of the shareholder management unit in the Department of Finance and was one of the people to whom the minister delegated his powers as shareholder in the Irish banks. It was his job to make sure that Bank of Ireland and the other banks stuck to the agreements they had reached with the Government as part of their recapitalisation. "To this effect he would meet regularly with Richie Boucher, the Bank of Ireland chief executive, and other managers to review progress and presumably crack the whip if it had to be cracked." Now he has begun working for Boucher without any break in service.

Last week, Germany cutting its 2013 economic growth forecast to 0.4% prompted a thread on the Irish Economy blog on the Eurozone:

The following are my posts.

Post 1:

German industry is hardly going to pieces after output fell about 1% in 2012 following rises of 12% in 2010 and by nearly 9% in 2011. Rising demand in China and the US will fix that.

This morning Stephen Collins in the Irish Times reported that Enda Kenny had asked ministers to deliver memos with ideas on job creation.

So expect a number of more schemes, initiatives, actions etc but perish the thought that attention would be given to failed policies or addressing emerging challenges.

The hand wringing about Europe is on the same level. A massive stimulus program would temporarily mask the problems.

In the FT yesterday, Adam Posen who isn’t a right-wing ideologue, made some interesting points about the latest planned stimulus plan in Japan.

Europe is in the same boat and the solutions are not simple.

Post 2:

Lorenzo Bini Smaghi has a useful factoid in the FT today for use in zapping pub-stool economists, who see salvation in currency devaluations:

During the 1970s and 1980s, the cost of inflexibility was shifted on to the public budget and on to the value of the currency, which was devalued several times. The debt burden doubled in a decade, from 60 per cent of GDP in 1980 to 120 per cent in 1992. The Italian lira went from 250 to the Deutschemark in the mid-1970s to 990 before joining the euro.

As for Europe, rather than wait for politicians to wave magic wands, when it comes to big companies and jobs, Airbus has been a spectacular success in innovating from developments in several countries. This week it has been reported that it is considering buying a majority stake in a Spanish supplier that has been hit by credit problems. However, the aircraft firm plans to increase its dollar procurement to 40% as most of its revenues are in dollars.

Most other big European companies are old and their products are old technology but improved over time eg cars.

China will match US R&D spend in a decade and while there will be bumps on the road, its target is to have an educated workforce on a par with Europe and the US. It is focusing on alternative energy, energy efficiency, environmental protection, biotechnology, advanced information technologies, high-end equipment manufacturing and so-called new energy vehicles, like hybrid and all-electric cars.

There will be increasing competition for multinationals in their home OECD markets.

As for Ireland and jobs strategy, Forfás which would already operate in a mode: “what does the minister think?” will soon be absorbed into the Enterprise Dept’s spin machine.

The ESRI and the Central Bank produces some research in this area while it seems that little comes from the universities.

Stephen Collins in the IT reports today: “The Government has signed off on a range of measures designed to boost job creation that will be included in the 2013 Action Plan for Jobs to be published next month…The spokesman added that the Government was determined to create the conditions in which employment could grow and the measures agreed yesterday would contribute to that process.”

If George Orwell’s character Syme in his celebrated novel, ‘Nineteen Eighty-Four,’ was updating his Newspeak dictionary, he would surely include ‘process.’

…and maybe ‘innovation’?

“Most companies say they’re innovative in the hope they can somehow con investors into thinking there is growth when there isn’t,” Clayton Christensen, a professor at Harvard Business School and the author of the celebrated 1997 book, ‘The Innovator’s Dilemma,’ told The Wall Street Journal last year.

The Journal said that a search of annual and quarterly reports filed with the Securities and Exchange Commission showed companies mentioned some form of the word ‘innovation’ 33,528 times in 2011, which was a 64% increase from five years before that.

More than 250 books with ‘innovation’ in the title had been published in Q1 2012, most of them dealing with business, according to a search of

Post 3:

Africa used to be a dumping ground for French s/h cars. Now people there can buy new Chinese cars and phone handsets — some of which are good knock-offs.

However, don’t knock that!

Most Americans at least would say that Thomas Edison invented the light bulb.

However, Joseph Swan patented a carbon filament lamp in England in 1878, and Thomas Edison patented basically the same thing a year later in the US. At that time, there were no patent laws in the Netherlands, so in 1891 Royal Philips Electronics, as Philips, the electronics giant, was known at the time, could simply take the invention and claim it as its own. By 1900, Philips was the third largest supplier of light bulbs in Europe.

Ericsson of Sweden did something similar in 1876: it reverse-engineered Alexander Graham Bell’s telephone, which hadn’t been patented in Sweden.

This week’ Economist says Pascal Lamy, head of the World Trade Organisation, has suggested that Africa could be China’s biggest trade partner within three to five years. The EU is currently the no 1.

China is Brazil’s biggest trading partner and it represents nearly 20% of Brazilian exports, primarily in commodities such as iron ore, oil and soy.

Post 4:

@ anewdawn

Bloody constitution eh Michael and it’s auld guff on rights. Sure we should just ditch it fit a nice oligarchic friendly junta instead I guess?

So here again we have a Twitter style message from an individual who is a beneficiary of special priviliges in society: a State guaranteed job, premium pay and a special pension scheme — brazenly invoking rights for himself/herself that other citizens haven’t got.

Self-interest of course blinded the individual to my point that despite people like him/her in a lobbying group called the NRA in Washington DC, even more than a century ago, the Second Amendment right in the US Constitution in regard to the bearing arms, was not an absolute right.

So this individual today is in effect arguing from a selfish vantage point, that the former CEO of a bank bailed out by the taxpayer is still entitled to a huge pension because of a property right in the Constitution; the artificial creation of a scarcity of land for development can never be changed — in effect imposing a tax on purchasers of houses - - without a referendum.

“Legitimate expectation” is a great concept for those who can claim it; for the rest it’s: ‘Qu’ils mangent de la brioche’ or go to hell.

Greed is good!

Post 5

In countries such as Sweden and Finland, it would be a huge scandal if a job had to be created for a senior politician’s partner on the same terms as an abolished position, irrespective of the responsibilities of the new make work position. She or he would have to apply for new position in an transparent system.

Is that fair and apart from self-interest, what is the rationale for retaining a British Empire system dating from the 1850s?

Lifetime employment no longer exists for most public sector employees in Sweden and Finland.

In Sweden, public workers are now governed by rules that are practically identical to those that govern the private sector. Pay is connected to individual employment rather than the post.

Job security is guaranteed only by an employee’s competence. In the civil service, no priority is given to government employees in the assignment of vacant posts, candidates from the private sector receiving equal consideration. According to a report, contrary to what one might think, the individualised remuneration system quickly received the support of government employees and their unions.

Moreover, OECD researchers conclude that the system has so far achieved one of its main original goals, namely improving the recruitment and retention of the most qualified employees. 

Transparency International says New Zealand, Denmark, Finland and Sweden have been consistently ranked at the top of the Corruption Perceptions Index and are perceived to be the least corrupt of all the countries surveyed.

They all perform well in terms of government openness and effectiveness.

TI says well performing countries typically have a long tradition of government openness, civic activism and social trust, with strong transparency and accountability mechanism in place allowing citizens to monitor their politicians and hold them accountable for their actions and decisions.

Swedish public administration has a long tradition of openness and accountability. The Swedish principle of public access to official documents – offentlighetsprincipen – is believed to be the oldest established system in the world. It dates back to the Freedom of the Press Act of 1766.

Despite the sense of grievance about the former colonial power, the inherited systems from the UK remain largely intact.

The De Valera Government which was generally happy with the UK Children Act of 1908, introduced the Children Bill in 1940 to provide for additional restrictions. Both Deputy James Dillon and Deputy Alfie Byrne, a former Lord Mayor, sought to have a provision for a medical and psychological examination of children before their committal to the industrial and reformatory school system. When positive examples of the way children were provided for in Glasgow and a number of American cities were referred to, Thomas Derrig, minister of education, found the comparisons objectionable:

“It is really painful to hear the case made here that there is some psychological disease or other in the City of Dublin, just because clinics have been established in Chicago or Detroit, or some other city. Where is the comparison between conditions in the Catholic City of Dublin and in the City of Chicago? There is no comparison.”

Post 6

The camels have difficulty seeing their own humps.

So the tack is to demonise inconvenient views by tarring them with the label of an extremist ideology that is the opposite their own but similar in some ways . The wealthy do it in the US in the red states by getting relatively poor people to vote against their economic interests by appealing to their racial, anti-gay and anti-women rights prejudices.

So Sweden where the mixed economy/social democracy model developed, they’re anti worker rights by providing the same advanced rights to all workers. What a crime!

However, they are not fools to believe that job guarantees for everyone would work.

How many socialist nirvanas are now left where everyone has a job for life?

Deng Xiaoping (1904-1997) who began the modernisation of China once said: “Whether a cat is black or white makes no difference. As long as it catches mice, it is a good cat.”

That of course was anathema to the useful idiots in the West - - some of whom were not surprisingly living well in the capitalist system.

It’s laughable that the corruption argument would be used today to justify systems that were put in place more than a century ago, when most workers were effectively serfs.


This briefing has references to various reports:

Post 7

So corruption hasn’t existed in Ireland because civil servants have jobs for life? There is no need for accountability because everyone means the best!

The Swedish Ombudsman institution dates back to the 18th and 19th century, when the Chancellor of Justice (abbreviated JK and first established 1713) and the Parliamentary Ombudsmen (JO, established in 1809) were created to act as the representatives – or ombud in Swedish – and attorneys of the King and Parliament respectively. They are thereby the oldest Ombudsman institutions in the world. JK and JO are the only two institutions that are allowed to press charges against ministers and justices for crimes committed while in their official capacity. Of the two, the Parliamentary Ombudsman is perhaps the institution that has received most international attention.

Post 8

This OECD report compares the systems in several countries. Ireland did not supply some information but it’s not an state secret.

Post 9

Sweden is not a distraction to the theme here.

A century ago, it was a poor country; from the mid-19th century to 1930, about 1.5m Swedes emigrated, out of a population of 3.5m.

Other countries cannot directly emulate its subsequent success as there are cultural and historic differences. However, apart from the long history of transparency, people should be open to changing Victorian mindsets in Ireland.

It was the success of the private sector that sustained the social democratic model.

The Wallenberg banking family opened a bank in Stockholm in 1856 that through a merger more than a century later, became known as Skandinaviska Enskilda Banken (SEB).

In 1916, the Wallenbergs spun off their investments in industrial companies into a separate company that is today called Investor AB.

They were active investors in almost all of the internationally known Swedish industrial companies.

Marcus Wallenberg (1899 - 1982) had his son and heir Peter (b. 1926) manage overseas sales companies in the group I later worked in.

It was an example of banking wealth being used to build the country’s industrial base and wealth.

As to culture, a Scandinavian economist is said to have once remarked to Milton Friedman: “In Scandinavia we have no poverty.” Milton Friedman replied, “That’s interesting, because in America among Scandinavians, we have no poverty either.”