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What price, Irish recovery?

by Frank Schnittger Fri May 31st, 2013 at 09:23:27 AM EST

Almost two years ago I wrote a diary called Light at the end of the tunnel? in which I posited the notion that the precipitous decline in Irish GDP and employment levels had halted and that there were some tentative signs of recovery on the horizon. Those green shoots have gradually taken root in the meantime not helped by a very difficult political and economic environment globally and in the Eurozone in particular.

Thus whilst Euro zone unemployment hits another record high, Irish employment has begun to rise, which, combined with net emigration, has begun to make a dent in the unemployment rate  which has declined from 14.1 per cent to 13.7 per cent in the first three months of this year. That this should be happening in the context of continuing government austerity, a continuing collapse of the construction industry, and slowing export growth in the face of Eurozone recession is all the more remarkable.

But we should be clear: this is no triumph for "expansionary austerity". Ireland's low corporate tax policies have continued to attract almost every major US multinational in the ICT, pharma and finance sectors to set up their European headquarters in Ireland, and to launder their European sales through the Irish corporate tax code. Tax competition seems to be working for Ireland as a recovery strategy, but it is hardly an option for the EU as a whole. Is Irish recovery at the price of contributing to global recession by allowing almost all incremental wealth to be hoovered up virtually tax free by global corporates?

To be fair, the nominal Irish corporate tax rate of 12.5% is close to the effective tax rate, and many countries with much higher nominal rates tax selected global corporations even less. But the real scandal has been the tax avoidance schemes used by some corporates such as the double Irish and Dutch sandwich which enable some corporates to pay almost no tax at all. Strangely, such arrangements, though well known for a considerable time now, seem to attract relatively little political and regulatory attention when compared to the focus on headline rates. Almost no effort has been made to close the tax loopholes in Irish, Dutch and US tax laws which make them possible even though it means that large corporates like Apple, Facebook, Microsoft, Eli Lilly, Pfizer and Google end up paying very little tax in any jurisdiction.

Now why ever could that be?


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In the long run, we're all misquoted — not Keynes
by Migeru (migeru at eurotrib dot com) on Sat Jun 1st, 2013 at 05:29:27 PM EST
Rise in numbers working part-time sees unemployment fall to 13.7% - Irish Economy News & Headlines | The Irish Times - Thu, May 30, 2013

On a seasonally adjusted basis, there were 7,700 more jobs in the economy in the January-March period than three months earlier. In the 12 months to the end of March, employment increased by 20,500 or 1.1 per cent, bringing the total number of people employed in the State to 1,845,600.

Since the post-recession low-point in the second quarter of last year, net employment has risen by 24,000. This increase took place despite a decline in public sector employment over the same period of almost 5,000.

Owing to the growth in jobs and a revision to earlier figures, the unemployment rate is now estimated to have stood at 13.7 per cent of the workforce in April. This is down from the previous estimate 14.1 per cent and is the lowest rate since 2010. Unemployment has been falling gradually since it peaked at over 15 per cent in March last year.

A 1.1% increase in total employment and a reduction in unemployment rate from over 15% to 13.7% in one year may not be huge in itself, but it is a significant turnaround from the free-fall in employment numbers we saw in the previous 4 years. The question is how sustainable this turnaround actually is, and can the rate of job creation be accelerated. To the extent that it is based on tax competition, my suggestion is that it is not very sustainable over the long run, but to date attempts at corporate tax "reform" have not amounted to very much.


Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jun 1st, 2013 at 07:43:10 PM EST
[ Parent ]
It's also based on part-time employment. So this is following the German model of low unemployment through precarious, poorly paid employment. The extent of the economic slum is hidden in the people who would like to work longer hours but can't.

In the long run, we're all misquoted — not Keynes
by Migeru (migeru at eurotrib dot com) on Sun Jun 2nd, 2013 at 03:03:58 AM EST
[ Parent ]
The extent of the economic slum

Slump, that is.

In the long run, we're all misquoted — not Keynes

by Migeru (migeru at eurotrib dot com) on Sun Jun 2nd, 2013 at 11:14:40 AM EST
[ Parent ]
No, you were right the first time.

"Slumps" are temporary.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 2nd, 2013 at 11:53:09 AM EST
[ Parent ]


In the long run, we're all misquoted — not Keynes
by Migeru (migeru at eurotrib dot com) on Sat Jun 1st, 2013 at 05:41:28 PM EST
Are there any equivalents of the US Freedom of Information requests in Ireland? If so I know there are journalists that can ask hard questions, so why not request information regarding all income, awards, trips, directorships, speaking fees, etc by Apple and other multinationals enjoying tax privileges to past and present members of the Irish government, especially those overall control and those involved with treasury affairs?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jun 1st, 2013 at 09:51:41 PM EST
I'm not sure whether Irish freedom of information requests cover what Ministers might claim were "private" activities done in their own time, I'm also not fully au fait with what conflict of interest or ethical standards might apply - and what sanctions other than public shaming might apply to miscreants.

The only other option is to ask your local member of parliament to ask a parliamentary question. I will see if he is up for it.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jun 2nd, 2013 at 01:25:27 PM EST
[ Parent ]
Things not nearly as bad as they are often portrayed - Political News | Irish & International Politics | The Irish Times - Sun, Jun 02, 2013

One very important international measurement of a country's wellbeing and economic health is the United Nations Human Development Index. This ranks countries on factors including income, education, health and life expectancy.

Seventh best
The report for 2012 published a few months ago ranked Ireland seventh best off out of 186 UN states. It didn't generate a lot of publicity here, probably because it runs counter to the dominant media narrative of a country in the depths of depression.

Ireland had slipped two places since 2008 but coming in seventh overall and the third highest in the EU is remarkable given the scale of the current economic adjustment. The UK was in 26th place, and we were also ahead of some long-term rich countries like Sweden, Switzerland, Japan and Canada.

When the index was first published in 1990 the UK was in 10th position and Ireland was in 17th. We have come a considerable way since then and the financial crash has not destroyed most of the gains made in the interval.

The UN index is not the only international measurement that puts Ireland in the top tier. Average wage statistics from the OECD put Ireland second only to the United States in terms of gross incomes, while the World Economic Forum global gender gap index puts Ireland in fifth place last year, up from tenth in 2006.

A range of reports from the OECD, the European Commission and the ESRI have shown that we have one of the fairest income tax and income redistribution systems in the world. It means that those earning the most have borne the greatest share of the fiscal adjustment since 2009.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 5th, 2013 at 10:19:29 AM EST
Things not nearly as bad as they are often portrayed - Political News | Irish & International Politics | The Irish Times - Sun, Jun 02, 2013

In a recent paper eminent economist Brendan Walsh explored how Ireland had fared on a range of indicators for wellbeing from the 1970s to 2011. One of his conclusions based on Eurobaromoter polls was that life satisfaction had not shown a marked decline between 2007 and 2011, despite the fact that this country has been among the hardest hit by the financial crisis. While there was a small decline it was not as dramatic as that recorded in other crisis-stricken countries or during previous Irish recessions.

"Furthermore, contrary to expectations, other possible indicators of wellbeing, such as the suicide rate and admission rates to psychiatric hospitals, have not risen in line with the soaring unemployment rate, and the Irish fertility rate has remained high in the face of economic adversity. Overall, the impact of the current recession on wellbeing has been surprisingly small," concluded Walsh.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 5th, 2013 at 10:23:00 AM EST
Things not nearly as bad as they are often portrayed - Political News | Irish & International Politics | The Irish Times - Sun, Jun 02, 2013

One of the outstanding failures is the way the burden of the crash has been heaped on to the shoulders of the young. Tens of thousands of young people have not been able to get jobs or have been forced to emigrate because the pain has not been shared equally across the generations. A recent study by the ESRI established that those aged under 45 have been affected dramatically more by the recession.

The last government and the current one have protected the elderly and punished the young. Putting the economy back on a sustainable path is the best way of catering for the young in the long term but more imaginative short-term policies are also badly needed if Ireland is to retain its standing as one of the best places in the world in which to live.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 5th, 2013 at 10:25:36 AM EST
Also, see my thoughts on the bifurcation of the economy: the price is being paid by the poor and the young (often the same people ...).

But yeah, living standards are still much higher than they used to be (say) fifteen years ago for most people.

by Colman (colman at eurotrib.com) on Wed Jun 5th, 2013 at 10:37:16 AM EST
That was also the point of my diary on The Politics of Competitive Austerity and Class War.

However we can also take the "poor mouth" too far. What has happened in Ireland was a horrible rape by the banks and "the international investment community" ably abetted by a truly stupid government which imposed most of the "burden of adjustment" on the young. Ask my three well qualified children trying to make their living in Ireland at the moment. But things are not as bad as they are in Greece, in most of the "third world", and indeed most of the rest of the world full stop.

Migeru seems to find it difficult to believe that any Irish recovery is possible in current circumstances. Others seem to wallow in "Ireland is doomed" sentimentality and self-pity. But the majority seem to be just getting on with things as best they can in very difficult circumstance and are making quite a good fist of it. I actually admire their dogged determination and resilience and hope we succeed even if the Government and austerity economists will try to steal the credit.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 5th, 2013 at 11:21:29 AM EST
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