Wednesday, 20 June 2012

The advocates of austerity are now calling for growth

Paul Sweeney: When all of the advocates of austerity are now calling for growth as well as more cuts, is it no wonder the public is confused?

The peoples of Europe have clearly decided a) that the level of austerity imposed on them is too harsh, b) it is hitting the poorest hardest (what is new?) and c) it is not working (after four years, they know it for sure!). So the conservatives have a new hymn sheet with the word growth peppered at the end of every refrain instead of amen. But people are not fools. They know that the growth policies being proposed are “Structural.” They are impacting only on supply side, with cuts in minimum wages, basic hours, benefits and all the rest of it where it impacts on the precariat.

Our own government is deeply disappointing in its slavish adherence to the Supply Side Approach to the economy. Four years on, plummeting domestic demand – by 26 per cent and still falling - and large falls in GNP and GDP are worrying. There was a rise of 0.7% in GDP last year. This fact has been trotted out at every opportunity as a great economic “fact”. Unfortunately, this piddling performance could be revised down to 0.0 shortly and even at this pace, it will take 15 years to get back to where we were.

Sebastian Dullien has a good critical perspective on what needs to be done here. It ties in nicely with the finely honed Demand Side analysis, recently undertaken by the Irish Congress of Trade Unions for boosting jobs and confidence in Ireland’s collapsed economy.


Paul Hunt said...

All of this might have a bit of credibility if you could explain why it makes economic sense and is in Ireland's interest for the ESB to employ some of the proceeds of the 'financing tax' (which the CER levies on its behalf on all Irish electricity consumers) to invest in Britain and elsewhere creating jobs abd boosting economic activity in these locations.

Paul Hunt said...

I suspect the question I posed is proving a bit difficult to answer. I'll try to break it down in to bite-sized chunks. How does the ESB finance its investment? What are the percentage contributions from (a) cash generated from operations, (b) shareholder new equity, (c) net new borrowings and (d) customer capital contributions and capital grants?

The ESB has recently published its annual report for 2011, but it has yet to publish the summary regulatory accounts. (Why in this age it takes so long to produce these accounts is a mystery.) But it's all in there - and not difficult to extract. And should not be difficult to extract by those who who have demonstarted such a grasp of future investment financing options that is presented in the ICTU document.

There's little point making policy recommendations about how investment should be financed in the future if there is no public clarity about how investment is being financed now - or about how and where this investment is being allocated.

If people don't know where they are, how on earth can they work out where they should be going?