By Yanis Varoufakis, a professor of economics at the University of Athens. Cross posted from his blog
A conversation with Phil Pilkington on Europe’s disgraceful triumphalism regarding Ireland’s ‘exit’ from its ‘bailout.’
Contrary to conventional wisdom, Ireland was never bailed out and, moreover, it is nowhere near escaping the debt prison to which it was confined by its, supposed, ‘bailout’.
After the burst of the property market bubble, following the post-2008 credit crunch, Europe’s Central Bank demanded that the government shift the losses of five Irish banks, worth €60 billion, onto the shoulders of the taxpayers. Of citizens that had neither a legal nor a moral duty to burden this load. Why? So as to shield the fragile German banking system from the repercussions of taking large losses. The Irish took their wrath out on their government and elected another one which, nonetheless, saw as its priority the full implementation of the savage austerity program that came attached to the huge loans that the government accepted in order to repay the banks’ losses. The result was a catastrophic downward spiral for Ireland’s social economy and its people.
But now the newspapers and the electronic media are full of the ‘good news’ that this ‘fiscal consolidation’ program has ‘succeeded’. That Ireland has returned to the markets. That we have the first, tangible proof that the bailout worked. That Ireland is about to regain its sovereignty and the Irish can, once more, look at the Germans, the French, the Dutch proudly in the eye, restored to the land of the free and the creditworthy.
Alas, a far as I can see, all that has happened is that, after five years of a continuous comedy of errors, Europe’s leadership has now decided to declare victory, with Ireland as Exhibit A that the combination of bailout loans and severe austerity work. And if this required being economical with the truth, so be it.
For those who do not wish to be economical with the truth, let’s look at some numbers:
• Number of people employed: Reduced by 12.8% since January 2008
• Unemployed persons: Up from 107,000 in January 2008 to 296,300 today
• Annualised domestic growth rate: -1.2%
• Net emigration: 33 thousand annually
• Government deficit as a proportion of GDP: 7.3%
• Public Debt: 121% of GDP in 2013, up from 91.1% in 2010 and 105% in 2011
• Household debt: 200% of GDP
• Value of assets underpinning household debt: -56% since the crisis began
• Mortgages in arrears for more than six months: 17% of all mortgages
How can anyone claim that this economy constitutes a ‘success story’ and a cause to celebrate the end of the debt-deflationary spiral? Two are the arguments on which EU triumphalism is built. First, Ireland’s spectacular export performance (annual exports exceeding the nation’s GDP!) and, secondly, the collapse of its 10 year government bond yields to levels that make it possible for Dublin’s return to the money markets, rather than a return to the ESM for more bailout loans.
Let’s unpick these two great success stories, beginning with exports.
Ireland is the largest, floating tax haven on the planet. Companies like Google and Apple famously launder their revenues via Dublin in a manner that reduces massively their tax payments while bolstering to ridiculously fictitious levels Ireland’s GDP. Anyone who disputes this must offer an alternative explanation of the fact that each of Ireland’s Google employees produces €4.8 million of revenues annually! All this means that the wonderful export statistics translate neither in corporate taxes nor in a significant number of jobs from the which the government can claim income and indirect taxes so as to service its debts.
Turning to the government bond yields, an interesting question arises: Why are they so low when the data above reveals that Ireland, in view of the sluggish domestic economy, remains perfectly incapable of refinancing its gargantuan public debt? Why are bond dealers no longer dumping Irish government bonds (like they were doing in 2011 and until June of 2012)? The answer is simple: Because they gathered that the ECB and Berlin will never let Dublin default given Europe’s desperate need to proclaim Ireland as ‘proof’ that their policies are working. Bond dealers, put simply, trust that the ECB, via Mr Draghi’s OMT or otherwise, will find ways of allowing Dublin to redeem its bonds even if the Irish people and their government remain firmly lodged in debt prison.
With these thoughts in mind, I turned to Phil Pilgington for his views on the matter. Have I missed something crucial here? Here is his answer to me question: “Phil, what is your reaction to ‘news’ that Ireland has exited successfully from its troika program?”
Phil Pilkington’s perspective:
Ah, Ireland’s return to the land of the markets… Let’s divide your question into two parts: economics and politics:
ECONOMICS
First of all, 10 year government bond yields. They were around 5% in Ireland until early 2010 in the lead up to the 2010 bailout. They then spiked around the beginning of 2011 due to the bailout and the uncertainty surrounding that action. But they quickly came down as investors realised that the country wasn’t going to go bust due to its access to said bailout funds. By 2012 the interest rates were close to 6%. And with the announcement of the OMT in that year they crawled down to under 4% in the beginning of 2013.
What does this mean? My reading of it is this: Investors are convinced that (i) the Troika/ECB would back the country so long as they adhered to the rules and (ii) Ireland would indeed adhere to those rules. If we assume that these two hypotheses are true, which they probably are, then investors are looking at a 4% yield for almost no risk in an environment where yield is completely dead.
Let me stress: this has NOTHING to do with recovery in Ireland, as the government is falsely proclaiming. Quite the opposite, in fact. The recent growth figures, for what they are, are totally skewed by foreign profits being washed through the country. I show this clearly here:
In summary: The claim of a successful Irish Program is complete rubbish. The Irish government has gotten its interest rate down through a mix of Troika/ECB backing and confidence in the government’s ability to follow the rules, but all the underlying economic problems are still there and will not go away. The Irish debt-to-GDP will continue to rise in the foreseeable future.
Will the inevitable rising stock of debt prove problematic politically in the EU? No one can predict the political repercussions at the moment the Irish and German electorates realise the truth of the matter.
Now, onto the politics…
POLITICS
The problem here has become ever more clear to me as time moves forward. But in order to understand it I think you need to understand the Irish political style.
Since the 1980s Ireland has tried basically to run its economic policy by appealing to the rest of the world. That is, by “sucking up”. Whatever everyone else is saying, Ireland will do with gusto. Mix this with a little bit of clever behind-the-scenes diplomacy and you have Irish economic policy.
After the crisis, the new government basically followed the formula that (supposedly) worked so well in the 1990s and 2000s. So, when the IMF/Troika/ECB said gGet your bond yields down through compliance…” the Irish government did exactly that.
There is a widespread belief in Ireland that this will automatically lead to economic growth. This belief is, of course, entirely irrational, but that matters little. The politicians have convinced themselves that, as long as they achieve this target, all else will be well. This is the typical delusion of politicians who are given an arbitrary target of some form.
So, what will happen in Irish politics now that this target has been reached and nothing changes? That is an interesting question and difficult to answer, but I shall have a go.
I think that leftwing parties like Sinn Fein and former right-wing parties like Fianna Fáil, who have re-branded themselves as center-left, are going to gain massively. I think that people will come to ask questions now that the government’s target, which has been pursued ruthlessly for nearly five years, has been reached. They will ask: Why has it made no difference to the real economy? They are bound to become agitated. As a result they will switch parties and throw those in government out. What will happen then? I have no idea. But the seeds have been sown.
So, it seems that Phil’s view from Dublin is not that different to mine. The Emerald Isle remains in the same prison of the original debt-deflationary cycle. And what seems to be a bright light shining through the cell’s cracks is just the neon light of Europe’s propaganda.
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The Republic has started to take on some of the role of the city of London in respect of the banking sector being ah-hem “regulated” with the lightest of light touches.
London’s reputation for anything goes financial permissiveness was starting to have the same effect of Bangkok’s “adult entertainment” industry had in causing and worsening the problem of sex tourism. So it’s trying to clean up its act.
All this is doing thought is shifting the real seedy stuff across the Irish Sea.
Now, onto the politics…
I doubt that the end result of Irish politics is much different from the other victimized countries like Spain, Italy, Cyprus, Greece, etc. There seems to be one common denominator in them all: parties run on a promising platform and then when elected they repudiate their promises either in coalition or as a majority government. This is the essential problem of politics: how does one hold the politicians accountable? All these victimized countries have Demockracies.
Here in Canada, for instance, the system is gamed in a different way than Ireland but the result is the same: a repudiation of the promises and rule by the corporations. It doesn’t matter how you game it if the result is the same.
This raises the question of why, in the so-called modern world, we do not even have a rational, fair way of governing ourselves. Doesn’t say much for Human Intelligence.
I have been reading quite a bit on neurology over the lsst few years. It is fascinating to see how most of our systems are based on structures that do not account for how our brain works. In our human world, perception is reality and most of our systems are built around that, until the true hard reality forces us to change.
Science is quite advanced in diagnostic but still quite behind on the cure. So even if we know that our systems need to be changed, we still don’t have enough knowledge to help us fix it.
For example, we know that punishing a pedophile does nothing to change his behavior and we know that it would be better to rehabilitate him than incarcerate him but we still don’t know enough about the mind to fix is habit without affecting his entire person. Adding to the problem, is the fact that most of the population probably still believes in punishment which is an “old” system concept because of a generalized belief in free will. However, when you read neurology books, one quickly grasps that free will takes on a new definition.
I was a psych major in college and have kept up in the field to include sociology, neuro-science, and so on. When my kids were in school I was struck by the disconnect between what I had learned and continued to learn in those fields and how they were not applied in school. In fact, often things were taught in the opposite way from the developmental models.
I think all fields form education to medicine to political and economic science have been deeply corrupted by power-relations. Politics today, rather than theology, is the queen of the sciences or so it appears. And we seen this almost everyday on this blog of instances when official policies are implemented simply because they seem to go against reason–we tend to miss the fact that politics determines almost everything in modern society.
I remember when I was younger and hung out with revolutionary Marxists and I complained that they saw everything as political and it annoyed the hell out of me. Maybe they were right and I was wrong.
“…we tend to miss the fact that politics determines almost everything in modern society.”
Most everything that occurs of significance is political. Yet, most people will say “let’s not talk politics.” Well, let’s not discuss Life.
One of the greatest examples of this are folks who say they escape into Sportz to forget politics and Life. Well, Sportz are government regulated, mostly through mandated monopolies, and subsidized through tax subsidies and outright grants and loans. So, watch Sportz and observe politics in action.
Politics = distribution of resources = what you can do with your life.
I would be interested in as many concrete examples as you could give or could point me at. If this is something you have worked out in any detail.
Oops, my comment is aimed at Banger in reference to “I think all fields form education to medicine to political and economic science have been deeply corrupted by power-relations.”
LOL! Just wasted 5 minutes.
Not at all. Thank you.
Some examples:
Legal system: we know that memory changes over time. The more you think about your past, the more you change your memories. So the whole judicial system which is based on trying people using witnesses and juries is a farce.
Why do we put people in jail anyway? To punish, to get them off the streets or to get them to change their behavior? A system that incarcerates someone and lets them out with bad job prospects expecting the experience to transform them into a better citizen is not based on how our mind works.
Finance: We manage top-down knowing full well that people are social animals. We lower rates because we know it will induce consumption but from the bottom-up we blame people for over-consuming and believing they had free will when the system was promoting euphoria. Our system promotes bubbles and can not find a way to put and keep breaks that will keep our “animal spirits” in check.
Education: We know the brain is not fully developed until adulthood and that some brains mature faster than others just like some kids grow faster than others. Let’s say a 12-13 year old child is having trouble with math because his brain just hasn’t developed yet, chances are that if he took the same class the next year once his brain was ready he’d be quite good. Instead, chances are that he is left behind and made to feel like a failure. We should teach what a child’s brain is ready to absorb but we do not think that way. To make matters worse, we tend to look for child prodigies at an ever younger age (age 4), leaving behind some many people with great potential.
Community: People are generally quite bad at reading other people. Most of us can’t even tell when someone is lying to us! In small groups sociopaths can be controlled but in large groups sociopaths thrive. TBTF promotes this and goes against how our mind works.
Pension system: Most people’s brains are not geared for planning 40-60 years down the road. Our pension system asks everyone to take charge when most people are not wired to do this.
Just a sample…
Another example:
Compensation. Extensive research shows that financial rewards are not effective motivator (assuming some basic, reasonable and fair rate of pay is on offer) for all except a small range of short-term, repetitive tasks that require little creativity. Outside this narrow range of circumstances, financial incentives consistently reduce performance.
Ensuring people are given the relevant “tools” to do their job well, have more control on their work, and are able to participate in a way that they experience as meaningful–these are things that research has shown are more likely to support successful performance.
Compensation models nonetheless continue to focus on financial rewards only. Consider in particular jobs in sales or other executive-level pay, where sales results are directly linked to compensation through commissions and bonuses. There is a dearth of compensation models that do not use financial remuneration as the principal “incentive”, even though it is known that this does not work.
http://m.theglobeandmail.com/life/life-of-solitude-a-loneliness-crisis-is-looming/article15573187/?service=mobile
Article on how our social structures are making us lonely.
Essentially, the motivations of industries like the medical industry, the MIC, the FIRE sectors are to grab power for themselves and not provide services to the public. In order to accomplish that they spend a lot of money and effort to make sure the political establishment insures that they maximize profits and minimize value added. The medical insurance and financial industries provide no benefits yet they enjoy a whole series of legal benefits and entitlements this is spreading now to more and more sectors. They use gov’t to repress competition or rival technologies that would eat into their profits. This is why society is stagnant and stuck and why reform of any part of public life is impossible at this time.
We only have to go to the financial and real-estate crisis which featured racketeering and law-breaking on a scale never before seen in American history and, because of the political power of these criminals, they avoided prosecution and even were able to get bailouts and an unlimited ability to borrow money for speculation not productivity.
To put it another way, public policy in all areas that have a direct effect on corporate bottom lines, are created by these forces without much interest in the welfare of the public. Similarly, within these structures the quest for power and influence, i.e., “careerism” dominates corporate life despite the corny management attempts to promote “teamwork” and flat structures in fact hierarchies and pecking orders dominate as corporations lose any reason for existing besides profit.
I don’t think there is any problem with human intelligence. Nor is there any lack of knowledge of what works and doesn’t work in terms of political arrangements. The fact of the matter is that everything has become political in nature. A policy is implemented because the power balance indicates that the powerful parties have come to agreement. An utterly ridiculous bill like the ACA passes because it is what all the interested parties who are all holding revolvers around the negotiating table agree to. That bill and any bill or policy that comes out of Washington or any other capital is largely a result of that political calculation.
There are creative and rational solutions to all our common problems that can be, on a pragmatic basis, achieved. But the power-elite want all policies to benefit them not the average person–that’s just the set up. In return, the elite give the public what it seems to want: intellectual sleep, drugs, porn, games, toys, endless entertainment and pretty shoes.
IMO, you give too much credit to the power elite. In my experience, most are clueless and just keep on fitting pegs into a board. In the last few years, they noticed that the pegs are now square but with a good hammer can still manage to fit them in.
You may be right on an individual level, but collectively, their emergent structure has become very robust and dominates the scene. That structure may very well even be considered a kind of artificial life form with its own equally emergent agenda.
Good point. But we could say the same thing about the 99%!
The elite is obsolete and therefore has degenerated. It has no social function at all other than to perpetuate itself. Prior to 1960 or so (or in China even now), the elite was rapacious but did develop the nation. (OK, more precisely, they got everyone else to do it.)
The strength of the current obsolete elite is that they have successfully taken the knowledge worker stratum, which should be the driving force of a new economy, and turned it on its head. The bottom of the knowledge workers (adjunct professors, for example) are paid to create/spread knowledge, but the top of the knowledge workers (administrator, college presidents) are paid to create/spread ignorance.
This both impedes economic progress and blinds us to what is actually going on. TINA
The capacity of the elite to stifle alternatives thus far is impressive, but I would say that the Iraq war and the Obamacare roll-out are more indicative of the elite’s actual competence. Or lack thereof.
Ireland has returned to the markets! The bright neon light of Europe’s propaganda is shining through the cell’s cracks…
As Archbishop of Dublin Diarmuid Martin appeals for food to alleviate hunger in Dublin:
“Despite our current economic situation Ireland is still a very wealthy country and one of the temptations of the wealthy is not to see the extent of the poverty that’s there.”
http://www.irishtimes.com/news/social-affairs/archbishop-appeals-for-food-to-alleviate-hunger-in-dublin-1.1594923
Archbishop Diarmuid Martin:
“In today’s wealthy Ireland, there is a growing number of children and young people who are not able to access basic healthy nourishment…Families in at least 20 Dublin parishes not getting enough to eat…The poor rarely clamour. They just try to survive. When they cry out, the ears of the mainstream may well be too distracted to hear them…Ireland is still a wealthy society. A wealthy society always runs the risk of not seeing or of not fully grasping the shadows and the inequities around us.”
http://www.irishtimes.com/news/social-affairs/religion-and-beliefs/children-going-hungry-in-our-own-country-1.1597927
As emigration remains as a ‘safety valve’ for Ireland, with a youth unemployment rate of 28 percent. (An estimated 177,000 young people have left Ireland over the last five years.)
“At a time of high youth unemployment, poor labour market prospects, inadequate quality education and training options, and increasing youth emigration, Budget 2014 has delivered another devastating blow to young jobseekers … the decisions taken in this budget will contribute to further austerity for Ireland’s youth, and far from preventing youth disengagement, is likely to further marginalise young jobseekers living in Ireland and encourage more young people to emigrate.”
http://www.irishtimes.com/blogs/generationemigration/2013/10/16/cutting-dole-for-under-25s-will-accelerate-youth-emigration/
“We will exit the bail-out in a strong position… Our budget strategy is on track, and the Government deficit is now falling rapidly. Public debt will start to fall next year relative to the size of the economy.” – Taoiseach’s statement to the Dáil
[proof that austerity policies work]
[“Their final objective toward which all their deceit is directed is to capture political power so that, using the power of the state and the power of the market simultaneously, they may keep the common man in eternal subjection.” – Henry A. Wallace]
http://www.merrionstreet.ie/index.php/2013/11/statement-by-the-taoiseach-to-dail-eireann-on-exiting-the-eu-imf-bailout-programme/
Ireland remains in chains, nowhere near escaping the debt prison to which it was confined…
“Ill fares the land, to hastening ills a prey/Where wealth accumulates and men decay.” – Oliver Goldsmith, The Deserted Village
Great comment! I love the Wallace quote–we need to understand that all the “economic” issues we face are not, as such, economic issues at all but political ones. The object here is not to have a well-run system for human society to thrive within but to dominate vast populations and extract rents from them.
The really sad part is the majority of people in the West at least have been complicit in all this by taking the blue pill. There’s no other explanation for how Western democracies have morphed into oligarchies in just a few decades. Not that the old systems were free from corruption, only that the power-base was broader and involved to some extent the voices of the average person.
Even if there is economic growth it will not benefit the “citizens” as Labour remittances have completely reversed flows…from the Dagenham Yank spending his money in 1970s era Cork pubs to todays world where the majority of the taxi drivers , Fishermen , transport sector (high energy sector) etc etc are foregin nationals so as to reduce costs…….but the wages flow overseas.
As a youth I have lived through the deflation of the 80s so as to integrate with the larger union
The bubble of the 90s and the superbubble of the noughties.
For me talk of Ireland as a political unit is a joke as it no longer exists as a nation (if it ever was) or as a large part of a small union.
It is now a small part of a large union – she has been completly overpowered by global banking events.
Gaming the multinational sector is a characteristic of Ireland since the 1930s – it is a result of non sovergin polices which have destroyed rational internal demand so as to pay off external debt for various follies constructed in this giant country estate called Ireland.
After 1979 this still relatively small sector within Ireland went ballistic so as to pay off the debt needed to sustain a super banking union.
With the older rusty multinational sector in Cork (Ford , Verolme Dockyard etc replaced by lower primary goods input Apple) almost immediately after the faithful decision of 1979.
For me the defining characteristic of a neo liberal economy is the lack of a rational domestic and or local production / distribution / consumption chain.
A neo liberal will destroy everything around him so as to preserve his claims on wealth.
In this sense the war mobilizations during the Keynesian era and the House /car mobilizations of the post war neo Keynesian era are the same event.
The history of the last 100 years (and beyond) can be clearly seen now….the game is not about sustained and sustainable wealth creation but merely the preservation of relative wealth claims.
Irish “growth” would do further damage to this broken society as it is a extreme conduit economy.
The euro plan is working.
They have again extracted wealth claims from Irish people….and having now further concentrated this wealth in the financial capitals will force sell us goods which we cannot afford and do not need for our internal standard of well being.
Essentially a more dramatic repeat of the deflation of the 80s (which wiped out the Irish domestic supply chain) followed by the production of useless goods is coming down the tracks.
I imagine many people who cling to the older vision of how things were done will be wiped off the slate.
The notion of “bailing out” a debtor who cannot service his debts, by lending him even more unpayable money, is so preposterous, as to be humorous.
Squeezing juice from the Irish people to satisfy euro needs, leads not to an “escape” from debt prison, but to filling of that prison.
Ireland, like all euro nations, is a victim of monetary non-sovereignty. Until they wake up and return to Monetary Sovereignty (boot the euro), they will continue to be slaves to the EU.
Their condition would be identical to that of the U.S. states, but for one important difference: Most of the U.S. states have a positive balance of payments with the U.S. government, and the U.S. government IS Monetarily Sovereign.
There are two, and only two long term solutions for Ireland: See: http://mythfighter.com/2011/11/03/there-are-two-and-only-two-long-term-solutions-for-greece-and-the-other-euro-nations/
Nice link.
Regarding the 2 options you propose, getting money for free (not loans) from the EU doesn’t seem likely; Germany would never agree. The remaining option of monetary sovreignty means leaving the euro.
Is a breakup of the eurozone the scenario that you foresee?
@Rodger
Well Ireland is a funny place.
As the plan is for the plan to not work.
To reduce the country by stopping the flow (especially in internal trade)
When internal trade is wiped out then external (mainly useless credit based goods) will replace the void.
Any look at the Irish energy balance stats will show how the economy is working or not working.
Ireland is simply a optimum & simple jurisdiction from which to manage euro area banking scarcity operations.
The December SEAI 2009 report (energy forecasts for Ireland 2020) – deep within the crisis I might add – is shockingly bad.
From its report….
Total primary oil energy supply forecast(excl non energy) : baseline Y2008
Y2008 : 8,964 KToE (recently revised to 8,961 Ktoe ? )
Y2012 forecast : 8,181 Ktoe
Y2012 reality(or perhaps not) : 6,005 Ktoe.
Whats more striking is how the private car consumption has maintained and increased its relative energy consumption despite seeing the largest % decline of oil consumption in Europe.
Total transport Y2007 : 5,749 KToe
Road freight :1,139 ( Peak in Y2005 at 1,218)
Private car :2,075 (Peak in Y2008 at 2,113)
Public passenger service : 166 (Peak in Y2008 at 201)
Rail : 47 (Peak in Y2008 at 50)
domestic aviation : 24 (peak in Y2006 at 26)
International aviation : 1,021 (peak inY2007)
Fuel tourism : 642
navigation : 64
Unspecified : 571
Total transport : Y1990 : 2,019KToe
Road freight : 334
Private car : 926
Public passenger service : 52
Rail : 45
Domestic aviation :17
International aviation :358
navigation : 7
Unspecified :279
Obviously Ireland has the strangest energy balance figures on the planet both because of the credit hyperinflation and the money deflation of recent years (i.e its extreme non local commerce international credit nature)
But I contend it will get even stranger.
I believe that out energy balance figures will continue to follow a path towards 1990ish figures despite the addition of 1 million ~ extra people but if zee Germans (and the banks behind them) have their way our strange conduit nature will look even stranger.
Perhaps 2,000 Ktoe for private cars and 19Ktoe for everything else……………
The sicker your sense of humor the funnier this jurisdiction gets
Global forces exerting their control over the mirco is best seen in the old working class town of Blackpool Cork City.
A place centered on brewing and other limited added value manufacturing ..i.e. very basic secondary industry much of it consumed locally as there was 20 or 30 pubs in the area when now there is less then half a dozen and falling
During the deflation of the 80s it underwent a massive economic shock — the resources now not consumed in the local area was used to expand the Cork burbs to their now unsustainable scale where discretionary spending is now not affordable …..people need all of their reduced income for the now vital gas & car bills when coal was the main external fuel input of the past.
Of course the supermarket bill are cheaper then it would be if shops were smaller but their kids don’t work in the myriad of bars and shops anymore as they do not exist so cashflow is down turning the bulk buy savings of supermarket shopping into a money illusion.
Near the final stage of Blackpool collapse a supermarket was built on the flood plain of the river flowing through it when there was already a supermarket nearby.
Of course the locals lost the last of their labour value when external more dynamic workers were introduced to somehow sustain profits on a country in massive physical cultural & social crisis (hidden by external credit /capital) since it joined the larger banking union of the EU.
The coup de grace was the closure of the post office this year…….. then the Butcher left the building in August
The hairdresser , fishmonger (who is far better then the guys in the English Market) the cake shop etc etc will follow.
But the monetary egg came first – these dragon eggs create the physical world around us , the non human scale nightmare world of the present modern Europa market state.
Supermarkets and stuff need a hard currency to expand operations as their business model avoids labour value so as to centralize profits and crush smaller scale operations.
http://www.youtube.com/watch?v=Sqm7tP3AHVI
Even after all that has happened …….
Irish transport fuel balance
Year 2012 (Year 2011)
4,195 KToe (4,448)
Road freight : 651 ( 657)
Road private car : 1,919 (1,901)
Public passenger services : 161 (167)
Rail : 42 (44)
Domestic aviation : 5 (6)
International aviation : 581 (694)
fuel tourism : 300 (313)
Navigation :59 (56)
Unspecified :477 (610)
In a similar fashion the town of Dingle was a typical mixed fishing / tourist area in the 1970s and even 80s.
The fishermen got paid enough wages to buy pints in the town and enjoy themselves.
In effect the production , distribution and consumption of goods was more localized.
Now former citizens of Ireland must compete with workers who put their life on hold for 10 or 20 years -sending all their money back home – or perhaps in a more extreme fashion non euro area workers exploited to the point where they have little money to spend on themselves or indeed their families.
You can clearly see the distance of commercial relationships have jumped to a farcical scale.
This absurd trade system requires huge input costs which are imposed on society in a collective fashion.
The amount of oil which goes into the Irish fishing industry is very very small
Typically 20 Ktoe or less.
As Big fishing boats burn much less oil per ton of catch but the demand is no longer local as the wages do not exist to buy local goods.
Irish oil consumption in fisheries.
Year 2004 : 52 Ktoe
2005 : 47 Ktoe
2006 : 42 Ktoe
2007 : 39 Ktoe
2008 : 33 Ktoe
2009 : 31 Ktoe
2010 : 25 ktoe
2011 : 20 Ktoe
2012 : 23 Ktoe.
Total Irish oil consumption (inc non energy) remains 6,265 Ktoe in the Year 2012.
So why has a island with a richer fishery then Iceland have almost no domestic fishing activity ? when fishing activity remains a large part of the Icelandic liquid fuel balance.
Whats really going on ?
Ireland a extreme conduit – from a financial capitals perspective they prefer to concentrate capital via the mechanism of compound interest as it is more efficient.
Small boats returning to the local village is not efficient when seen through Londons eyes…as they cannot get a yield from such local activity.
….but the monetary pollution which comes back out of London and elsewhere cannot be consumed for local areas anymore.
All they can sell people is cars and other junk….not social goods.
You get a general breakdown of society especially during the final stages when they flood banking jurisdictions with people of other cultures so as to extract the marrow from the already dead carcass.
RE: Emerald Isle Remain in Chains
Ireland should renounce the Euro while recalling their ancient motto: “Ourselves alone”. (Up Sinn Fein!).
It will be very hard for a short while, but increasingly better as time goes on and the industrious and hard-working Irish and all other Europeans, including the Germans (whose economy is increasingly crippled and lame), detach themselves from insane and destructive banks, and especially from the deranged, quack economists driving the whole crazy process.
The Irish could be the inspiration of Europe as they have been before, or they could wait until sombody else does it (somebody almost certainly will) and they become just a footnote to modern European history.
Consider: The Ukranian-Russian dispute is now heating up again. Blaming the Russians is useless (the frowns and clenched teeth from Moscow haven’t ever changed and never will). The real reason for the dispute is that the Ukranians cannot possibly join Europe while economic affairs remain so desparate. Right now, anyone outside the Euro (Scotland probably soon, Scandinavia, Poland, etc.) would never join the Euro any more than they would join Beelzebub!
European countries have to fact the facts squarely: the Euro system has failed abysmally. It up to them to accept it and make their own economies work for themselves and their people!
Spot the difference …..
From the IEAs energy stats of OECD countries 2013.
Icelands Diesel consumption Y2011
266 Ktoe TFC
of which
Road transport : 106 Ktoe
Fishing /Ag/Fos. : 125 Ktoe
Irelands diesel consumption Y2011
2,998 ktoe
of which
Road transport : 2,063
Agriculture /For. : 200
fishing : not incl.
However – Ireland is the mirror image of the Baltics & not Iceland – in both locations economic activity does not service domestic demand.
In Ireland primary goods input is destroyed before the locals can really use it to their benefit.
In the Baltics the stuff is not available.
Cue the transport of people from one side of the continent to the other in order to so something completely pointless so that the financial capitals can earn a yield on “investments”.
Very accurate analysis by both Yves and Phil Pilkington.
To which I add–
Ireland’s status as a tax haven comes not primarily from its nominal 12.5% corporate tax rate.
Rather, it is because there are massive loopholes designed into its R&D tax credit, including private agreements with large multinationals that allow them to somehow classify much of their global expenses as being “R&D”. In some cases they even get money back.
When accused of being a tax haven, the Irish government always responds by stating that its corporate tax rate is clearly defined, which it is. Unfortunately critics never dig into the issue of the bogus definitions of R&D tax credits used by multinationals in Ireland to reduce or eliminate their tax burden, and the private agreements regarding qualifying vast amounts of expenses and even revenues as being “R&D expenses” which can be capitalized and qualify for various kinds of tax breaks and tax credits.
The details are convoluted, which is why most people don’t know about it and don’t ask about it. “The devil is in the details.”
The Irish government keeps falling back on its easy defence of its transparent corporate tax rate being uniformly applied, as if this is the source of the main tax advantage, when the corporate tax rate is not the cause for being a successful tax haven. While not irrelevant, the “corporate tax rate” issue is a shiny object–a convenient distraction that does not address the R&D tax break.
In a way it’s the equivalent of personal tax rates being discussed in the USA, and the average person being misled because the discussion does not show the tax foregone by low capital gains taxes, and the relative impact of payroll taxes in addition to income taxes. When discussions of taxes don’t consider the overall picture, it is easy to mislead people into the wrong conclusions.