Sunday, 14 February 2010

George Lee

Slí Eile: In the spirit of playing the ball and not the man...there may be more to George Lee than George Lee. Recent media reports suggest...well...a possibly different approach or emphasis on economic policy and that may explain in part his sudden departure from Fine Gael and political life. If we are to believe the newspapers George was, compared to FG colleagues, less enthusiastic about deflation and more supportive of fiscal stimulus as well as measures to protect the unemployed as well as conserve universal child benefit (a forensic search on the Oireachtas website might be instructive in this regard). Or shall we say deflation with a human face. I wonder if George would have been more at home in mainstream European social democracy? Certainly not in mainstream current-day Irish political economy. I specifically recall him worrying about the scale of deflationary impact in last year's April budget (when he was still a journalist)


Oliver Vandt said...

@Sli Eile
Personally speaking I do believe we did have to cut current spending. We may be able to borrow against the semi-states but otherwise I don't think our deficit - already very high - can go any higher. Other countries can have stimulus packages because:
A. They are not already borrowing so much.
B. They have their own currencies.

I was surprised therefore to see how much criticism George Lee got from the left. I can think of two particularly surprising media critics who are leftie veterans. I hugely admire the performance of both of them in the current crisis so there is nothing personal/partisan in what I say. One of them attacked George Lee for his lack of left wing belief, but had previously defended Brian Lenihan's achievements in cutting expenditure against, he said, the criticisms of younger people on the left! Both had differences of political theology with Lee.

1. Although George Lee was a Christian, he wasn't part of the church of the left. He kicked with the other foot and in the conservative, clannish, theology obsessed world of Irish left politics, that is what really counts.

2. His candidacy deprived Alex White, an excellent candidate, of a seat. Labour and the left are STILL visibly upset. The Left accuse Lee of being childish. But many in Labour and the Left criticise Lee just because he wasn't in their gang and stole the ice cream. Worse still, it's nine nine months later and they're voicing their petulance loudly and publicly. Now really, who's being childish?

Worse again, Labour TDs are now deriding the notion that Lee's candidacy and massive public support at his election, and now, are in any way connected to the failure of the political system. It's not the system that failed it's the government they say.

Stop digging. The government utterly failed and the system, in not stopping them or holding them to account ever since, has utterly failed.

Labour need to make transforming the system their issue. For the public Lee represented change. Slating him sends the message that the system is fine. That's not what the public want and it's not what the country needs.

Rory O'Farrell said...

I consider George Lee to be an excellent journalist, and probably the best economics journalist in the country.

However, Eamonn Dunphy is also a journalist, and maybe the best soccer journalist (I'm not a big soccer fan, so I can't really judge). However he certainly wouldn't be the best soccer manager.

Similarly George Lee was described as one of the countries top economists. He was not. He was very good at communicating economic ideas, but these were largely reporting what other people were doing, not thinking of creative solutions himself.

Slí Eile said...

@Oliver You wrote 'Personally speaking I do believe we did have to cut current spending.'

I cannot agree with you there. There are alternatives by way of creating socially useful wealth through smart investments in technology, skills and various public works that meet human needs. Cutting spending will worsen the crises, I think, and endanger our debt ratio.
In regard to the value of the ratio -
the net debt position is low by international standards (although I admit the scale of NAMA liabilities on the Irish citizen is huge and the implications are daunting...)
experience across the EU varies. As Michael Burke has pointed out Belgium has managed relatively high debt ratios, stimulus interventions and has managed to keep the bond markets from pricing them out of borrowing.
I suggest that the best way to get debt down is to get people people back to work.

Oliver Vandt said...

@Sli Eile
We are a very indebted country.
"A year ago, myself and Brian Lucey wrote an article for the Irish Times about the massive debt overhang in the Irish economy. Using IMF statistics we established that Irish economy stands out as the second most indebted economy in the world in terms of ratio of debts to GDP, the most indebted economy in the world when it comes to applying our real measure of economic activity - GNP, and one of the most indebted economies in absolute terms."

If by incurring the extra debt we preserve a failed governance model
we will have lost doubly.
The big issues in Ireland are drastically reforming the failed governance model and getting jobs. Doing only the latter would mean that this whole recession and the huge debt incurred have taught us no lessons. We need jobs but I remain to be convinced that a country already running a deficit as high as ours - as high as the one Greece is promising to cut significantly - in a fixed currency area should increase it's borrowing.

It sounds like the left wing of the establishment's easy fix, just as the right's easy fix is to cut public sector wages and the minimum wage. In the end, the only people who would benefit are those we will be selling more and more government bonds to at higher and higher rates of interest.

Slí Eile said...

@Oliver Vandt Michael Casey let the cat out of the bag (see my other post): 'Greece has recently had its credit rating reduced to single A and has to pay up to three percentage points more for borrowed money (over 10 years) than Germany. This may reflect the presence of a socialist government rather than economic problems per se. Rating agencies are far from reliable and are not renowned for integrity or analytical ability.'

Anonymous said...

I’m rather amused about all hoopla in relation to the resignation of one person from a national party, never mind about the ramifications single politico’s departure. It’s becoming increasingly obvious that any national government’s room for manouvre is becoming increasingly limited by the free flow of international capital and tax haven destinations.

When we remember that only a short while ago the “crisis” narrative was heavily critical of the rating agencies and their many difficencies, it’s somewhat surprising how quickly they’ve been rehabilitated and the narrative utterly changed. They’ve now become the accepted measuring device that allows the incognito international bond market to determine efficient pricing policies on international debt. The same corporations who were thought to dense to understand derivative products and their impact on local and international economies are now savvy enough to determine the complex interplay between differently constituted national economies and the gargantuun flow of international money at any given point and time.

The upshot is that as various governments reflated the money supply through monetisation of debt, the world is once again awash with new currency on top of the already obscene amount of cash hoards already extant. It’s looking for a safe haven to invest. I suppose the and property bubbles are fresh enough in the bond market’s collective memory, so we have a return to an older strategy. This money is being directed towards governments and is somewhat reminiscent of the 1970’s and 1980’s strategy when excess capital looked to invest in second and third world economies. We know how well that worked.

However, this time the investment community (nice’ish term for the big financial behemoths) are able to graft the now dominant neo-liberal economic theme generally accepted by most Western governments into their ivestment strategies. The accepted narrative requires all wage earners to shoulder the collective costs of society whether through national taxes or the acceptance of mandatory fixed rate charges for services (and thus privitising tax revenue streams to create a profit margin), or a combination thereof. Therefore, as budgets are adjusted to fit the dominant economic theme, tax receipts are freed to pay the international bond markets. Sweet.

I prefer German bonds. But don’t go by my prognostications. I’m no ratings agency.

Rory O'Farrell said...

@ Anonymous

Regarding cash hoarding

Despite the pumping of money into the system by central banks there was a decrease in the money supply due to de-leveraging and knock on effects.

Anonymous said...

Rory O - yes, I'd have no problem agreeing that such classifications as M2 or M3 might have been "reduced". Yet, I'd think we could agree that significant amounts of new dosh has been concetrated into certain financial intitutions. Will a portion of this capital go into buying government debt? Nobody can know for certain, but it's figuratively sitting there looking for returns. I don't think we would disagree that there are significant and extant amounts of cash looking for a relatively safe haven and above inflation returns.

That I chose to call such capital hoards has to do with my own perspective on how our economies function and the results they produce. There is a general thesis that capital is becoming increasingly concentrated, and furthermore that the opportunities to invest in productive capital projects in the West is limited. It also generally accepted that a proportion of the capital markets like relatively safe returns but with as much vigourish as possible. The quick rehabilitation of the ratings agencies has proved useful in influencing individual government's decisions on fiscal matters while stirring up some additional vigourish. Imo, nothing new in this regard.