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LTE: National Recovery Plan

by Frank Schnittger Fri Jan 23rd, 2009 at 08:05:28 AM EST

It is often forgotten that the Irish model of social partnership between the Government, Employers, Unions, and the Voluntary/Community sector was the one factor behind the success of the Celtic Tiger which was unique to Ireland.  Other countries had low corporate tax rates, were members of the EU, actively encouraged foreign inward investment, or promoted the development of a "Knowledge economy".

Now the Government is in talks with the Social Partners regarding the need to save in excess of €2 Billion per annum in Government expenditure to bring our Public Sector Deficit down from 10% of GDP per annum to a more sustainable 3% and in line with the EU Growth and Stability Pact.  This will necessitate huge cuts in public services, wage freezes, and tax increases.  

But why should the social partners agree to this unless they can also share in the benefits of recovery should these measures prove successful?  Social Partnership cuts both ways.  People will be more likely to accept sacrifices if they know that any resulting prosperity will be shared with them and not become the exclusive preserve of millionaire bankers, developers, lawyers and financiers.

Consequently private sector employees who accept wage freezes should be offered profit shares and share options in their companies.  Public sector employees should be offered guaranteed personalised pension plans provided directly by the National Pensions Reserve Fund (and not subject to the whim of a future Government).  Banks or other businesses which require public funding should be made explicitly responsible for providing clearly defined levels of employment, ethical standards, and publicly required services (e.g. low interest mortgages, loans to small businesses).

In addition there needs to be a national infrastructural development plan on the lines of President Obama's Stimulus Plan  which provides a clearly defined return on the investment that the public are being asked to fund.  Wind power provides such a clearly defined return on investment, reduces our carbon footprint, and saves a great deal of money on imported fuels (and exported jobs).  As it happens Ireland also has the best wind power resource in Europe.

Any National Recovery Plan has to give people hope for a brighter future in return for sacrifices made now.  It is time the Irish Government showed some courage, vision, innovation and leadership.  The same old bait and switch tactics will work no longer. People need guarantees that the plan will work to their benefit in the longer term.


The above is a draft LTE I am considering sending to the Irish national newspapers in an attempt to influence the debate around the Government's proposed National Recovery Plan.

In my view one of Ireland's greatest resources is a social one.  We have 20 years experience of moving away from a chronically disruptive, adversarial, and unequal industrial relations system (with some of the highest strike rates in Europe) to a much more consensual, pro-active, and coordinated approach at the national level with one of the lowest levels of disruptive industrial disputes in the developed world.

In contrast to Thatcher, who effectively demonised the Unions, Irish Governments have embraced them into a partnership approach and created a lot of supporting institutions - Labour Court, Labour Relations Commission, Equality Agency - and supporting legislation.  Whilst open to a lot of criticism, it has created a culture and framework within which key national issues can be discussed with all the stakeholders at a national level.

The Government is starting a new round of talks in this process today:

Government, social partners to discuss public finances - The Irish Times - Fri, Jan 23, 2009

The Government will today start consultations with employer and trade union groups on its package to tackle the crisis in the public finances.

The consultations on achieving spending cuts of €2 billion are expected to continue over the weekend, and Ministers hope to make a final decision on a national rescue package by next Tuesday, when the Cabinet is set to meet again.

Trade unions have rejected the concept of pay cuts, and some unions have said they will refuse to take part in any process in which pay cuts in any form are on the agenda.

Speaking this morning, David Begg, general secretary of the Irish Congress of Trade Unions (Ictu), said unions had presented a "far-ranging" paper to Government that took a longer-term, strategic and holistic look at the economy.

Mr Begg told RTÉ's Morning Ireland: "The only thing we have ruled out is we won't contemplate pay cuts." He warned such cuts would spill out into the private sector and lead to a "deflationary spiral".

"Our view is that the solution to this problem has to be some combination of pay and pensions and taxation and public expenditure and borrowing and time," he said.

The union leader said there was no alternative but to deal with the economic crisis and expressed the hope that an package to deal with the State's financial problems could be sorted out "reasonably quickly."

"I would hope that in the paper we submitted to Government several days ago that that is of serious intent and would be recognised by them as a real and genuine willingness to deal with these problems," he added.

Mr Begg also called on the Government to address problems in private pension plans that were hit by the financial crisis.

Twenty years ago, such a constructive statement by the most senior trade Union leader would have been unthinkable. Industrial disputes were fought as a form of class war at the level of each individual business.  If there is to be a way forward for Ireland, the National Partnership Process is one of the most important things we have going for us. But it has to be made to work for everyone.

Display:
I appreciate the sentiment but recommend that you substantiate the following claim or omit it.

President Obama's Stimulus Plan  which provides a clearly defined return on the investment that the public are being asked to fund.

Bernstein and Romer forecast of recommended fed distributions are available in pdf and video format. With respect to job loss mitigation, you must be aware of the graph from that document being replicated on the interboobz. Because it a 1% "return" is clearly a poor investment rationale.

Alternatively, read the plan itself pdf, released 15 Jan 2009 (HTML tally) and compare its contents to interboobz professional and amateur analyses. Since its release and the inauguration WH commitment to "infrastructure" investment has actually retreated. The change to amounts published in the press are declining purportedly to balance accounting for tax cuts and subsidy of state, municipal relief.

Now, we could speculate here that the politicking is all the Republican Party fault. But then we'd also have to confront the facts of the Democratic Party "landslide" majority in both chamber. And that won't do. For the ethos of the legislature is clearly evident: That is to justify "price support" not of labor but of financial products.

I encourage you to strengthen those aspects of the LTE that vivify defense of HH income.

Diversity is the key to economic and political evolution.

by Cat on Fri Jan 23rd, 2009 at 09:21:37 AM EST
"The Job impact of The American Recovery and Reinvestment Plan" (9 Jan 2009) and the mysterious "multiplier" quotient.

[To] simulate the effects of the protoypical package on GDP. We use multipliers that we feel represent a consensus of a broad range of economists and professional forecasters. Our particular multipliers for an increase in governement purchases of 1% of GDP and a decrease in taxes of 1% of GDP are given in Appendix 1. They are broadly similar to those implied by the Federal Reserve's FR/US model and the models of leading private forecasters, such as Macroeconomic Advisers.

The final step is to take the effect on GDP and translate it into job creation. Not all of the increased output reflects increased employment [ya think its captured in securities volume? jeezus.] : some comes from increases in hours of work among employed workers and some comes from higher productivity [bingo]. We therefore use the relatively conservative rule of thumb [heuristic] that a 1 percent increase in GDP corresponds to an increase in employment of approximately 1 million jobs, or about three-quarters of a percent. This has been the rough correspondence over history and matches the FRB/US model reasonably well.  [emphasis added]

Forecast job creation is overwhelmingly Retail and Leisure and Hospitality sectors.

Diversity is the key to economic and political evolution.

by Cat on Fri Jan 23rd, 2009 at 09:52:28 AM EST
[ Parent ]
Forecast job creation is overwhelmingly Retail and Leisure and Hospitality sectors.
Isn't it obvious to the veriest fool that anyone who hits the job jackpot of government sponsored infrastructure projects is going to immediately take the family to Vegas, Branson, Orlando or on a cruise? :-/

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 23rd, 2009 at 02:17:17 PM EST
[ Parent ]
The venture funds are certainly trying to get into the wind energy supply chain

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 23rd, 2009 at 02:58:07 PM EST
[ Parent ]
Nah.  We'll make sure these bizarre diseases keep popping up on the cruises, and it's just a short ride up the Turnpike from Miami to Orlando, especially if they put that bullet train in that they've been talking about for (what seems like) the last few centuries.

Vegas needs money anyway, and screw Branson, 'cause Missouri didn't vote for us.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jan 23rd, 2009 at 03:06:01 PM EST
[ Parent ]
Drew - does it cause you sleepless nights that most of the wind is in red states?

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 23rd, 2009 at 03:15:41 PM EST
[ Parent ]
Seems entirely apt, somehow.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jan 23rd, 2009 at 03:50:22 PM EST
[ Parent ]
Proof perhaps that, if there is a God, he/she/it clearly has a wonderful sense of humor?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jan 23rd, 2009 at 04:05:38 PM EST
[ Parent ]
You should get Howard Dean to run a 50 state wind strategy...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 23rd, 2009 at 04:14:15 PM EST
[ Parent ]
Where do I sign up?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jan 23rd, 2009 at 04:16:00 PM EST
[ Parent ]
Sorry Drew, its about harvesting wind, not generating it...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 23rd, 2009 at 04:19:26 PM EST
[ Parent ]
... if the most abundant wind resources were all in deep blue states ... it would make it far harder to get the New Energy Economy established.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sun Jan 25th, 2009 at 10:45:55 AM EST
[ Parent ]
I'm going to be amazed, quite frankly, if they can hold unemployment below 8%.  They should be smothering the Roosevelt Room in champagne fizz if they do, regardless of what sector the jobs are in.

To the point about retail, leisure, etc, while I think it's a very fair point that the stimulus package does not -- at least not yet (as you know, it may look completely different once Congress has its way with the bill, Congress being Congress) -- emphasize manufacturing and assorted green and tech jobs enough, some of the job creation in retail and other areas is probably anticipation of basically making up lost ground, given that a lot of retailers are going under and taking the jobs with them.

Still, I want to see more emphasis on trains for urban areas and greener automobiles for rural areas.  If I remember correctly, Amtrak, for example, has about $10bn in projects ready to go, but the package only calls for filling $4bn or $6bn of the hole.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jan 23rd, 2009 at 03:01:30 PM EST
[ Parent ]
I found it interesting that Obama talks not just about creating new jobs, but preventing the loss of old jobs.  I don't know how you measure the latter, but if he were an Irish politicians he'll be claiming he saved millions of jobs that would have been lost if he hadn't acted so decisively...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 23rd, 2009 at 03:19:05 PM EST
[ Parent ]
Has anyone 'serious' ever produced a useful map of the economy summarising capital flows between various sectors?

It seems if you're going to be doing some serious re-engineering, it would be useful to know where the money is and where it's going.

Or am I being naive and not serious enough here?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jan 23rd, 2009 at 03:52:29 PM EST
[ Parent ]
Simple.  My the laws of nature money flows from poor to rich areas

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 23rd, 2009 at 04:16:37 PM EST
[ Parent ]
Thanks for your detailed and thoughtful response.  The purpose of the LTE is to influence debate on the Irish Recovery Plan, not to dispute the balance or the merits of Obama's plan. (That is a US debate).

The reference to clearly defined return on investment was intended for inclusion in the Irish Plan (and specifically to promote the benefits of wind power).  A lot of public spending in Ireland has been perceived as wasteful and thus it is necessary to predicate any call for more on a requirement that it be well directed.

The reference to Obama was included only because:

a) He is very popular in Ireland
and
b) His plan is geared much more on increased public investment (and less on public expenditure reduction - which is the primary focus of the  Irish Plan too date.

So the case I am making is that any call for increased sacrifice has to be balanced by clear and measurable guarantees that those making the sacrifice also have to be the beneficiaries of future prosperity, and secondly, that Government cut-backs alone will not encourage a recovery - in fact they would make a bad situation worse.

The debate so far has been entirely on the need to reduce expenditure, so they reference to Obama was a handy way of emphasising that - provided the investment can generate a reasonable return - we must also be looking at stimulating the economy even at the cost of more borrowing.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 23rd, 2009 at 10:07:52 AM EST
[ Parent ]
The argument (whose merits I haven't examined) is that a stimulus plan won't work here because the money will just flow out of the economy. Which may be code for an intention to free-ride off injections into the Eurozone economy from other countries plans.
by Colman (colman at eurotrib.com) on Fri Jan 23rd, 2009 at 10:15:24 AM EST
[ Parent ]
That's why I haven't suggested a generalised "stimulus plan" but rather a very specific investment plan in wind  power which is actually import substitutive and has a definable return on investment.

With the current budget deficit running at 10% already, we can't afford a generalised plan of expenditure increases or tax cuts to "stimulate" consumer expenditure - which in the US makes up 70% of GDP - but which is more likely just to suck in imports here.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 23rd, 2009 at 10:29:17 AM EST
[ Parent ]
Wind farms and tidal energy should be on the forefront of Ireland's recovery....oh, and please someone tell the FF dinosaurs that their days are numbered!
by Asinus Asinum Fricat (patric.juillet@gmail.com) on Sat Jan 24th, 2009 at 04:31:24 PM EST


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