Wednesday, 23 February 2011

From tiger to bailout

Ireland’s deep financial and economic crisis results from failings in its growth model, policy mistakes and systemic failures within European Monetary Union. The bail-out agreement with the IMF and the European authorities and the associated austerity package will not resolve the problems faced by the country and must be renegotiated. Instead a package is needed to promote economic recovery and jobs growth involving elements including: sovereign debt rescheduling and a lower interest rate, fundamental tax reform, and an investment programme financed by the sovereign wealth fund. That's the opening of an ETUI Policy Brief co-authored by former TASC Director Paula Clancy and Policy Analyst Tom McDonnell. The full paper is available for download here.


Paul Hunt said...

Bang on cue. Some living, breathing evidence supporting the contention in my earlier comment. These are precisely the types of policy proposals that drive people who would be prepared to support a progressive agenda into the arms of the centre and the right.

Yes, of course the tax base needs to be widened and deepened and tax on property and immovable assets that generate rents makes sense, but water charges are not a course of general taxation. They are required to finance efficient provision of water and waste-water services. The shift from the NPRF to an SWF is interesting, but it conceals the reason for its establishment, the need to build it up (via privatisation of state assets) and the need to diversify its investments internationally and by sector.

And there's no question of increasing taxation on 'bads' such as CO2 emissions which would attract investment in renewables - and avoid the need for direct public financing. And, of course, we have to go easy on deficit redcution - even though a suspension of current EU/IMF support would mean the deficit would have to go to zero overnight. And, even worse, no consideration of the deadweight costs being imposed by the non-tradable sectors (both public and private).

All in all, it's remarkably similar to Labour's policies. Little wonder their support has been declining continuously in the polls.

paul sweeney said...

“Competitiveness was eroded; nominal wages and prices were increasing faster than in the Euro area as a whole”. Disappointing to see such excellent TASC people falling into the trap of equating competitiveness with wages. This sounds like the usual line from the OECD, World Bank and especially the Central Bank, the guys who should have been focusing on other things. But even the Irish government often has a more sophisticated view of this complex issue.

Surely a quick read of the many articles on this site itself would assist the authors in a better understanding of the issue, for example the blog by Prionnsias Breathnach on Wed 16th of this month which mentioned the NCCs 100 competitiveness indicators?

It is correct to say that wages did rise here faster than in Europe but inflation was twice the levels and the price level here is second only to Denmark. For example, food is 29% per cent higher than the average Price in EU27. Congress sought cuts in indirect taxes rather than direct taxes, in order to help bring down prices and lessen the necessity to chase inflation, to no avail with McCreevy.

Maybe this simplistic statement on competitiveness illustrates the deep penetration impact of the dominant economic ideology!

Paul Hunt said...

@Paul Sweeney,

"Congress sought cuts in indirect taxes rather than direct taxes, in order to help bring down prices and lessen the necessity to chase inflation, to no avail with McCreevy."

Did it never occur to Congress that more efficient provision of public services, effective restructuring and more efficient financing of semi-states and a better resourced and empowered Competition Authority bearing down on abuses in the private sheltered sectors might be a more effective way of bringing down prices than shifting the burden from indirect to direct taxation?

I'm not calling for job cuts and lower pay - I decry this race to the bottom - but some honesty about the true sources of these excessively high prices would be welcome.