tag: Economics



5
days ago

Dermot Gleeson renews his apology

Over the past few years the citizens of Ireland have, collectively, been plunged into crippling debt likely to last generations. This was done, ultimately, by a fairly small group of politicians, bankers and property speculators. Our response has been fascinating. With the singular exception of the water privatisation* issue (which has sparked protest and may yet prove a rallying point for a broader “anti-austerity” movement**) we’ve pretty much accepted it with a reluctant shrug. There’s been plenty of anger, don’t get me wrong. But it tends to be seething and grumbling and the narrowing of the eyes with us (rather than riots and petrol bombs and voting for socialists).

I could write at length about why the Irish collective psyche has reacted this way, but I’ll leave that for another day. For now I just wanted to highlight the weird way in which powerful establishment figures involved in the financial crisis occasionally pop up in the media ostensibly to “apologise” (or in this case “renew their apology” – how weird is that!?) but actually seem to be insulting the very people they have completely screwed over. What other explanation can there be for former Allied Irish Bank chairman Dermot Gleeson’s testimony in front of the Oireachtas Banking Inquiry today?

I feel confident in saying that every person reading this post had learnt and understood, by the time they were 10 years old, that “but everyone else was doing it” does not constitute a legitimate justification for doing something. Parents and grandparents will ram the point home with questions about hands in the fire and jumping off cliffs. We knew, as children, that doing something wrong because “the others were doing it” is bullshit plain and simple.

So I feel no hesitation in shouting “Bullshit!” when Dermot Gleeson acknowledges that yes, absolutely, AIB was indeed engaged in:

lending that was ‘expansive’ at a time of excessive risk taking on the back of a construction and property-fuelled boom

but that no single lender could have done anything about it. Because:

“if AIB had stopped lending, their competitors would have happily stepped in to satisfy the demand”

Dermot GleesonIt’s hard to believe, I know, but that really is the former head of Ireland’s second biggest bank telling a government committee that because all the other banks were running up huge unsustainable debts that would one day collapse the economy, it was OK for his bank to do it too. More than that, it was the government’s fault for not stopping him.

The regulator was “hopeless” he claimed. I can’t be the only person made furious by that, right? The man was in a powerful position with a huge amount of public responsibility… but he didn’t comprehend that the point was not to see how many insane things he could do without falling foul of the regulator. We clearly need regulators (not least because of eejits like this guy) but if you’re in charge of a bank deemed of national importance and structurally vital to the stability of the public finances and you’re playing a game of chicken with the regulators. Then you’re doing it wrong!

The heads of our major banks should not be tasked with seeing how close to the edge they can bring the institution in the name of ever increasing “shareholder value”. These banks, sadly, are too damn important to us – the people – to act in so reckless a manner. Or be allowed to. And if we’re still employing that kind of fricking idiot to run our big institutions (hint: we are, because absolutely nothing has changed in that respect) then we need to stop right now.

That said, Gleeson is correct in implying that the government are far from blameless… everyone involved should be writing their memoirs in jail. But as the head of the second biggest bank in the country it was at least part of Gleeson’s job not to run the bloody thing into the ground and the country with it. It’s not acceptable for the head of AIB to steer the institution in whatever reckless direction he fancies so long as he manages to find a way around government regulation and oversight.

Mind you, you kind of have to admire the way he so succinctly illustrates the central attitudes of capitalism with his every utterance.

Also let’s be very clear about something… if the second largest bank in Ireland had actively tried to put the brakes on during the run-up to the collapse; while it clearly would not have prevented the crash, it’s not unreasonable to imagine the country would be in slightly better shape today… a few billion less in debt at least.

And because that equates to a few billion less for the salaries of doctors and nurses and teachers and policemen and the coast guard… well, let’s just say that Gleeson’s failure to learn a lesson most of us grasped as children has caused a great deal of suffering and maybe even cost a few lives. But hey, he’s sorry. So leave him to his wealth. We will condemn him to the inconvenience of appearing before committees every year or two – that’ll surely deter future bankers from destroying the financial system.

* But it’s not privatisation, I hear you object. To which I say “Feck off!” And loudly at that. I’m well aware that this first step does not represent privatisation, but it takes a special kind of naive to think that the ideologues who forcefully rammed this current system down the throats of a defiantly unwilling electorate do not have privatisation as an ultimate endgame. We have been forced to borrow money to install a system at our expense that is perfectly designed to control, monetise and profit from our water usage. Even if the current gombeens in government aren’t aware of it, they’re setting that up to be sold off down the line as a nice little earner for the shareholders of Global Water Inc. (registered office: Cayman Islands). Why the hell else oppose – even in principle – a constitutional amendment on public ownership?

And let’s not go on about water being a scarce resource and metering being necessary to curtail usage. Study after study has shown that water-metering produces a short-term drop in usage followed by a return to previous levels over the course of a relatively small period of time. The same amount invested in infrastructure repairs produces a larger saving over a much longer period of time. Also… in global terms, yes. In global terms water conservation is a huge problem. In Ireland though, it’s just an infrastructure thing. We’ve got all the water we need falling from the sky and draining off the island into the sea. All the bloody time. The raw resource is there to be used and is effectively renewable so long as the Atlantic Ocean stays roughly where it is. With a growing population and plenty of money, governments over the past 20 years could have invested in a modern water collection, storage, treatment and distribution system and there simply would not be an issue today. They could have done that. But they didn’t. Instead they gave massive tax breaks to already wealthy people and proceeded to somehow allow the banks to magically create and destroy tens of billions of euro doing god only knows what, high on coke and spreadsheets, and saddling bus-drivers, hair-dressers and pensioners with the bill.

Now we’ve gone and spent another fortune, on tick, not to upgrade the system and fix the leaks and dig a reservoir or two… oh no, we’ve decided to add water-meters to every property in the country. Seriously folks… that’s only the kind of decision you make if privatisation is the endgame. It doesn’t make any sense otherwise (though maybe I’m giving this thing too much credit when I assume it makes sense on any level at all).

As a final thought, can I also point out that at a symbolic level, “charging the poor for water” has got to be one of the most singularly unchristian things I can think of. I’m not suggesting religion should play a part in public policy (it shouldn’t). I’m just suggesting that when someone betrays even the best, most enlightened, most cherished core values of their faith in the name of economic ideology… they probably can’t be trusted to take care of anything of real value.

 

** I put “anti-austerity” in parentheses there because I don’t entirely like the phrase. Firstly because I don’t necessarily think “austerity” is always a bad thing. Indeed it may well be appropriate for western societies to take a more austere approach to resource consumption in general. And how we do that should be the subject of informed and rational discussion (like that ever happens when it comes to important subjects). Secondly though, because I don’t think what we’re seeing right now is austerity – certainly those actually pushing and promoting the policy don’t seem to be living any more austere a lifestyle than they were prior to it. So while “anti-austerity” is a useful label because most people pretty much understand what you mean by it… it’s actually a little misleading.

1 comment  |  Posted in: Opinion


7
days ago

Syriza demands war reparations

For a little while now the Leftist government in Greece, led by Syriza and most visibly represented by Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, has been raising the issue of “German war reparations” whenever the Greek financial crisis is discussed. Up until now however, they had not proposed a figure. A few days ago they got down to brass tacks and suggested €279bn might be fair.

SyrizaOn facebook feeds and web forums I’ve seen a surprising number of people suggest that this somehow represents a “distasteful” strategy. That it’s somehow “below the belt”. So-called moderate leftists have been tut-tutting this apparently shameful behaviour and suggesting Syriza need to retreat to the centre, agree to EU/IMF instructions and calm the hell down. And it’s not just on social media you hear this… the bloody Guardian is full of these “moderate leftists” attacking Syriza. Going so far as to wonder aloud as to whether Greece’s Left is falling under the spell of Moscow. Yes, that is Britain’s flagship “left of centre” newspaper whispering “reds under the bed!” ominously in your ear. God only knows what the Mail and the Telegraph are up to.

There are two things to be said about left-wingers who call for Syriza to return to the centre… firstly, they are totally misreading the situation in Greece which is on a real knife-edge. And secondly, they are – unwittingly – calling for a course of action likely to produce a sharp swing to the far right in southern Europe. At best it’s an ignorant centre-right position. At worst it’s a bit more sinister than that. It’s certainly not “left wing”.

There is genuine concern among many Greeks about the volatility of politics there right now. By and large no modern democracy actually wants to be in a position where they are forced to vote for “a radical solution”. That almost always means something has gone terribly wrong and the safe, conservative, quiet middle ground is no longer working for some reason. And that’s the situation in Greece right now. The country is on the verge of economic collapse (in the sense of there being no money in the banks and no bread in the shops; not in the sense of middle class Greeks being unable to afford a second holiday this year). And the reason for this is two decades of centrist corruption, coupled with the subsequent European banking crisis.

If you’re one of the army of unemployed graduates in Greece right now, you’ve lived your entire life under a centre-left/centre-right political class which actively falsified national accounts at the behest of wealthy oligarchs who refused to pay tax. What’s more… pretty much everybody knew it was happening. Corruption was endemic and both the far left and the far right were shouting about it. But so long as the status quo permitted the Greek government to generate ECB credit; it was ECB policy to encourage it to continue.

And then, surprise surprise, the whole thing collapsed. The European financial institutions acted shocked (just as they did when the Irish property bubble burst… because that was never going to happen, right?) and demanded that the people of Greece be punished for the sins of their corrupt government. Try to remember… it was ECB policy to offer limitless credit to idiotic Irish property developers based on absurdly inflated valuations. And it was ECB policy to offer limitless credit to a corrupt Greek oligarchy (via the Greek Central Bank). I find it mystifying that so many people have bought into the idea that the citizenry of those countries be held responsible for the reckless debts and corrupt behaviour of a few private individuals and institutions.

And that, of course, is the point being made by Tsipras when he demands German reparations. This seems to have gone over the heads of many (or else they are wilfully ignoring it). He’s a pretty smart guy and he knows he’s not going to get any war reparations. He’s merely publicly highlighting a vast discrepancy… how the German people were supported after their government betrayed them, and yet the Germans (who are the principal drivers of European financial policy) are demanding the Greeks be treated entirely differently. It is not distasteful to point out a very relevant double-standard.

When a government betrays its people and rips the nation apart, the international community can offer a Versailles Treaty or a Marshall Plan. It was literally the single most obvious lesson of 20th century history, and we – quite staggeringly – appear not to have learnt it. (Hint: The Marshall Plan turns out better for absolutely everyone involved)

Tsipras and Varoufakis are walking a tight-rope. The IMF/ECB intervention was not working in Greece. The situation didn’t need “adjusting”, it needed a new approach. In Ireland austerity is biting very hard, but the fact is – life in Ireland today is still considerably better than it was for most of the past half century, so people have adjusted. It rankles that we’ve accepted this debt with so little resistance, but that’s how it went.

In Greece though… circumstances are very different and the country has been decimated by the policies imposed by the troika. In 2005 Greece had the lowest suicide rate in Europe. Today it has the highest. Let that statistic sink in. Seriously. Think about how radically a society must have changed for that to have happened… think about how socially damaging the policies of the troika have been to result in that outcome. Nobody can be happy when unaccountable international financial institutions are laying waste to their society. And nobody can be happy when all of their mainstream political parties have accepted this situation and speak almost casually of “a further 10 years of austerity”. Those are precisely the circumstances in which nations are stirred to seek “radical solutions”.

So of course the Greeks have looked for an alternative. To do otherwise is literally suicidal.

The policies currently being imposed on Greece today are very similar to those imposed on Yugoslavia in the 1980s by the IMF (under the behest of a rabidly anti-socialist Reagan administration). Are we really dooming ourselves to walking that grim path again? Golden Dawn are unlikely to ever gain a popular mandate the way Syriza did… but the Greek people will not quietly trudge back to the centre ground if Syriza fails. They can’t afford to. And if Syriza fails, if the current government collapses, it is very possible that a right wing coalition will find themselves requiring the tacit support of Golden Dawn in order to hold power. And once you let fascists into government, even in an unofficial capacity, it can be pretty tough to get them out again.

I believe that Tsipras has one card – and one card only – he needs to somehow stall the EU and the IMF until the Spanish elections and hope (against hope) that Podemos somehow do in Madrid what Syriza managed in Athens. If that happens, it’s just about possible that a leftwing bloc within Europe, strong enough to demand policy change, could emerge. Very unlikely but it’s really their best bet (and I suspect they know it). Hence all the delays and stalling and missed meetings and “promises to review”. Also hence the demands for war reparations. It’s a stalling tactic*, but one with bite, and one with a real point to make.

Those calling for Syriza to fail in Greece (and right now, a call for a return to the centre ground is a call for their failure) are either hoping for a hard-right government or – at best – another decade of the Greek people watching the elderly kill themselves because they can no longer afford their medicine, and young men kill themselves because they see no future in a country where youth unemployment has now passed 50% and is still rising. The Greek people don’t deserve what’s happening to them. It’s crushing them. And it’s business-as-usual centrists… moderates… that are doing it and insisting upon years more of it. So the only real choice facing Greece right now is “left” or “right”?

Those who want the left to fail should – in this instance – be very careful what they are wishing for.

* I also think the logistics of a rapid switch to the New Drachma take a while to put in place so every day they can stall is an extra day of preparation (if Tsipras hasn’t got a warehouse full of newly-printed banknotes and a fleet of trucks on stand-by, he’s not as smart as I think he is).

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17
Dec 2014

Low oil prices – a threat to the dollar

I’m on an email discussion list that includes a bunch of people in the oil industry. On an average day the ratio of shop-talk to global conspiracy stuff is 10:1… and really, there’s only so many times you can read the same impassioned arguments about the merits of different fluid injection methodologies. But every now and then a discussion about a wider political issue gains traction. By and large these are sober, conservative (small ‘c’) engineers not taken to flights of fancy. So when they start saying things like “there’s only a 60% chance the US dollar will still be a viable currency in 18 months”, it piques my interest.

For the past couple of months there has been an almost complete consensus among these people that the Gulf States are driving down the price of oil in order to destabilise Iran. There’s even a guy who – having spent some time chatting with a staffer in the UAE oil ministry – claims that Saudi Arabia, Kuwait and the UAE are targeting $40 per barrel by the middle of 2015 and they intend to keep it there for a year.

As an aside, I read a message from a guy who said he expects 5 year oil futures to drop below $85 any day now. That there… that’s as close to a sure thing investment as the modern financial industry is capable of. What’s more, given the short-sightedness of the financial industry, I wouldn’t be surprised if you could buy November 2020 oil futures for less than $70 by this time next year. Pretty crazy.

Anyway, there’s no doubt that Iran’s economy is utterly buggered if this continues for much longer. Even if the $40 for a year thing is exaggeration, this is presenting Tehran with very serious problems.

Thing is, Iran isn’t the only place this is hitting hard. The Gulf States can weather this storm, but almost no other major oil exporter can. And while oil importers are quite enjoying this period of temporary price-fixing, places like Venezuela and Nigeria are suffering. The fracking industry in the United States is also in trouble (though this price drop is only one of the reasons for that) but America isn’t too worried about that because they like seeing the squeeze put on Iran, while the damage being done to the Russian economy is being seen – curiously enough – through the lens of Ukraine, the Malaysia Airliner disaster and what’s being viewed as Putin’s increasingly aggressive stance towards the west. So the Americans are offering their explicit support to the Gulf States in order to put Russia under pressure.

Now, let’s be under no illusions here… Putin is a dangerous man. I’ve noticed more and more western liberals buying into the Russia Today narrative and viewing Putin with a kind of grudging, “enemy of my enemy” respect. Which is madness, because this guy should be viewed as at least as big an enemy as western capitalist imperialism. Anyway, it’s simply inconceivable that Russia won’t respond dramatically to this very real threat to their national economy. And what response will that be?

Well, according to the mailing list people, Putin is getting ready to announce a major shift in policy. Early next year he will be switching all of Russia’s petroleum trading to roubles. That’s what they’re saying on the grapevine anyway.

A lot of people – even economically literate ones – don’t fully understand the important link between the US dollar and the global oil trade. The pricing of oil in dollars isn’t just a matter of convenience. All trade in oil actually takes place in dollars. Dollars get exchanged for oil. Not euro, or roubles or yen. This ensures a constant demand for dollars as anyone who wants oil… i.e. everyone… needs to buy dollars before they can buy that oil.

Not sure if you’ve noticed the huge collapse in the value of the rouble in the past week? And the huge Russian interest rate hike? Well, according to some people Russia has deliberately torpedoed their currency in order to buy back roubles, from anyone who has them, at a bargain price. Because if Putin goes through with this and demands roubles in exchange for oil and gas? He will instantly make the rouble into a European reserve currency. Demand will rocket and the dollar flight will begin.

Unlike other countries, the US will not be able to intimidate Russia into backing down on this. Especially given the huge hardship being caused to Russia by this US-supported Gulf strategy. And if it turns out to be a success for Putin (which I think it will do) then there’s really nothing to prevent other countries doing the same.

The Saudis, with the support of the US, are playing a very risky game right now. And one that could result in the end of the dollar as global reserve currency. Sleep tight.

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14
Nov 2014

Oil at 80 dollars

Those who keep an eye on such things will know that something very strange has been happening with the oil price over the past few months. Saudi Arabia, Kuwait, Qatar and the Emirates have been aggressively driving down the price of oil (and have just signalled their intent to continue doing so). This fall has not coincided with an equally precipitous drop in demand, and it is not – except tangentially, in a manner I’ll discuss in the fifth paragraph – related to the “unconventional oil” coming out of America thanks to the fracking boom. That whole fracking thing is smoke and mirrors of the first order by the way.

No, what’s happening with the oil price right now is geopolitical. What’s more, it heralds an era of increased geopolitical tension.. something that’s only starting to filter through into the mainstream. There’s a big wake-up call coming folks.

What do I mean when I say the price drop is geopolitical? Well, it’s important to understand that when it comes to oil, the Saudis (and the other Gulf Kingdoms) are very astute. Right now they possess a large enough share of the oil export market to effectively drag the global price any direction they choose. And this has a massive effect on the global economy. However, it is extremely unlikely they will still possess this influence in 20 years (even 10 years from now there’s no guarantee). Based on depletion profiles that they take very seriously (even if the western media does not), they will never possess as great a global influence as they do today.

Saudi Arabia is taking the lead on this, and is being backed by Kuwait and Qatar (with the United Arab Emirates a more reluctant fellow-traveller… this hurts their economy more than it hurts the others for a bunch of reasons). It’s important to realise that it is not an OPEC thing. In fact… OPEC is bloody furious. And with good reason; a number of OPEC nations are going to end up as collateral damage in all this (Venezuela and Nigeria are both being crucified).

Russia is also feeling the pinch. And the fracking boom in America is being hit very hard. That entire industry is a pipe-dream. It can only exist thanks to massive government subsidy in tandem with a very high oil price. Both of which can be arranged, it’s true, but more importantly… there just isn’t as much of it as has been suggested. Nowhere near as much. And ramping up production to cover the drop in conventional crude production simply isn’t going to happen.

Now, it’s unlikely the Saudis are willing to take such a large economic hit themselves simply to undermine the US fracking industry. That Financial Times article suggests that the low price could put a strain on US / Saudi relations, but as an overall economy the United States benefits from a low oil price. So I don’t see that being the case. Besides which, the US and Saudi Arabia are firm allies and they share a common enemy… Iran.

The real reason the global oil price is low* right now is because Saudi Arabia is waging economic warfare on Iran.

When a country gains a large proportion of its income from oil exports, it is possible to calculate a “breakeven oil price” for that country. That is, the price at which they must sell oil to cover government spending. Different economists tend to come up with different numbers (no surprise there) but if you see them as a guideline rather than an absolute value then they can be illuminating. CitiGroup say Saudi Arabia’s breakeven number is $89. The IMF says it’s $80. Deutsche Bank say $78. So you can see that having oil down below $80 per barrel is going to hurt the Saudis, but it’s something they can live with – this is not a nation that finds credit hard to come by. Qatar’s down in the mid-70s. While Kuwait’s breakeven is between $54 and $75 depending on who you listen to.

Not so Iran. According to CitiGroup they have a breakeven price of $130. The IMF suggests it could be as high as $140. And if you hear an analyst on the news try to explain the current fall in oil prices in terms other than an outright economic assault by Saudi Arabia against Iran, they simply do not know what they’re talking about. Because this is shattering the Iranian economy. It’s also giving a proper kicking to a bunch of other oil exporters. Nigeria and Russia both have notional breakevens above $110 and Venezuela is right up there with Iran when it comes to exposure to low oil prices. As for Iraq… if the country is to have any chance of surviving as a united entity it needs a reliable income stream, and with a breakeven price around the $100 mark, it doesn’t have that right now.

The effect on Russia is particularly concerning, especially if you’re a European like me who has just witnessed Putin sign a contract to sell a whole bunch of gas to the Chinese and can see the spectre of European gas shortages should this looming Cold War escalate (when the normally taciturn Finns start complaining about something, it’s a good idea to listen). The notion that “they need our money as much as we need their gas” has simply never been true (the Russian capacity for belt-tightening far surpasses the capacity of European governments to survive power-cuts and cold winters… so European governments will always cave first). And it’s especially not true now when the Asian economies can provide an alternate source of income. Falling oil prices puts additional pressure on Russia and is likely to drive Putin towards a more aggressive foreign policy (in my view).

But Iran is the target, and while nobody outside Gulf aristocracy knows how long they plan to keep up this assault, it is likely to only be the first in a series of oil price manipulations over the next few years. And as a result, we’re likely to see the kind of geopolitical brinkmanship that has the potential to end very very badly indeed.

* Incidentally, describing $80 as a “low” price for oil would have been dystopian madness just a decade ago.

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25
Mar 2014

There’s still money in mediocre coffee

For almost three years the façade stood bare. An empty shell of a building where once beat – symbolically at least – the dark heart of the Celtic Tiger. But the ephemeral nature of consumer capitalism means even the mausoleums are fleeting. A pause for reflection. But not too long, there’s still money to be made and we wouldn’t want to dwell, would we? We’ll always have the photo-montage I suppose… a reminder of how banal it all ended.

And so it was that the building that once housed Anglo Irish Bank lay empty for three years. Lurked more than lay. An unhappy reminder every time you were on Stephen’s Green of what happens when you gather all the greed and all the stupidity into one building and bizarrely hand them the reins of power.

But three years is a long time for Stephen’s Green real estate to lie fallow. I mean, decorum is one thing but wantonly throwing money away? Tch tch tch.

And so it was that earlier today someone captured a photo of the new tenants having their façade installed. Someone should tell Zizek, he’ll love this…

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10
Feb 2014

Bank of Ireland redefine time

Most of us, when we hear the phrase “that will take 24 hours” assume that means one day. The thing “that will take 24 hours” will be done the following day.

Not so the Bank of Ireland. For them, 24 hours seems to equate to “some unspecified time over the next week”. And this isn’t just a case of them being late in a particular instance; this is how the system works. They have redefined 24 hours to mean “some unspecified time over the next week”.

Last Thursday I logged into their online banking system. I clicked the relevant buttons to make a transfer from a deposit account to a current account. This process “should take 24 hours to complete”. So, in a world where bankers aren’t in charge of defining units of time; a world – in other words – where a modicum of sanity prevails; that means the money should be in the current account some time on Friday. Makes sense, right?

Well, it’s Monday afternoon and I’ve just spent 15 minutes on the phone with a nice lady at Bank of Ireland who, through no fault of her own, found herself insisting that 24 hours from Thursday afternoon can actually – under certain circumstances – mean Tuesday morning. It seems that when it comes to time distortion, the Bank of Ireland could teach Doctor Who a thing or two.

Bank of Ireland

Remarkably, during our conversation, she explained that when I make an online transfer between a deposit and a current account, I’m not actually setting the transfer in motion. I’m effectively sending a message to someone in a Bank of Ireland office to do it for me. That’s right, despite the shiny web interface and claim that I’m engaged in an “online transfer”, I might as well be mailing them a letter requesting they carry out the transfer for me.

As I pointed out to the nice lady at the end of the phone, if I’d popped down to my local branch on Thursday afternoon and withdrawn the cash at the counter, then deposited it directly into my current account, the transaction would have taken less than 5 minutes. Instead, thanks to the magic of modern technology, I’ll be lucky if it takes less than 5 days.

2 comments  |  Posted in: Opinion


12
Jul 2013

Solar activity Vs anthropogenic Climate Change

I read the news today, oh boy.

New research has been published indicating that solar activity has been in steady decline since the 1940s. This suggests that there is a tug-of-war currently under way between the effects of reduced solar activity on the climate (making the globe cooler) and the effects of human carbon (and other) emissions on the climate (making the globe warmer). Right now, it seems humanity is “winning” the battle.

Solar ActivityHowever, it does seem possible that might change if solar activity continues to drop as is predicted by the new research. Far from offering ammunition to climate change sceptics (how long before fossil fuel companies seize upon this as a marketing opportunity?) this presents an even more terrifying prospect for human (and other) life on this planet. Because it seems to me that this research conclusively demonstrates that we have passed the important tipping points with regards to atmospheric changes; the worst effects of which may have been masked by the decline in solar output.

So even if we do find ourselves drifting into a mini-Ice Age, the historical precedent for this drop in solar activity seems to suggest it will pick up again after a relatively short period of time (there was an 80 year period in the 17th century during which solar output went through the same kind of decline). One assumes the atmospheric changes we have wrought with our industrial output will be massively magnified once the sun starts to ramp up again. From Ice Age to near-global desertification in the space of a century?

We need not only to radically cut our emissions, but we need to return large areas of arable land to uncultivated woodland in order to capture some of the carbon we’ve already released. I suspect that’s politically impossible right now… let’s hope for a more enlightened tomorrow.

4 comments  |  Posted in: Opinion


2
Jul 2013

Free Trade, Subsidies and the CAP

There’s a post over at the Liberal Conspiracy blog that’s getting a bit of attention today. It’s called Why are UKIP silent supporters of the biggest EU rip-off of all? and it is primarily an attack on the hypocrisy of the UK Independence Party (UKIP).

UKIP, it seems, are quite unequivocal about their support for the European Common Agricultural Policy (CAP) and wish it to continue making large payments to farmers. And yes, given the stated aims (and general attitude) of UKIP, this does represent an interesting hypocrisy – one that appears to demonstrate UKIP’s allegiance to class above principles. Whether you agree with the principle of the CAP or not is irrelevant; it clearly represents a centralisation of power in Europe. Dishing out almost 50 billion a year makes it powerful. It’s enough to torpedo the economy of a small nation after all. The CAP should be against UKIP principles. They should be lobbying hard for its abolition (even if they believe food production should be subsidised, they should surely want it done by the UK government).
CAP
That they are not lobbying for the abolition of the CAP may well be because the CAP currently benefits, to a disproportionate degree, those who least need it… the wealthy. Where small farmers are being supported by the CAP – and yes it does happen – the argument is more fuzzy, but when the 8th richest man in Britain is being subsidised by the citizens of Europe to the tune of almost a million euro per year, clearly something is wrong with the system. The benefits – to the citizens of Europe – of giving a million euro of their money to the Duke of Westminster is surely vastly outweighed by the benefits of giving 100k each to ten struggling small-hold farmers. If you’re going to spend limited funds on subsidising food production, then do it properly. Otherwise just be honest and call it by its real name… theft.

The ultra-wealthy have gamed the system, and they have bought the support of – not the individual political parties, though they come with it – but the entire modern mainstream political system. Which is why a political party that all but defines itself by its opposition to European power can support those aspects of European power that unambiguously redistribute wealth from the bottom and middle to the top.

But what about The Principle of The Thing!?

Yes indeed. The principle of European food production subsidies… what about it? I have heard right wing ideologues argue that the CAP represents a distortion of the free market and should be abolished entirely. I’m not going to address that argument right now. The people who make it are fools. The citizens of Europe can distort the markets any way they damn well please. The citizenry is not subject to the market. It is subject to them.

On the other hand, there is the “global development” argument against the CAP. The Overseas Development Institute (anyone know how reliable these people are? I have a basic distrust of organisations that call themselves a “leading think-tank”, and an initial flick through their website revealed an awful lot of fluffy management-speak and PR waffle, but very little of substance) published a short paper in which they argue that the CAP could be damaging agriculture in “developing” countries. And while they admit that the damage can’t be quantified without further research, the fact that the CAP budget far exceeds the annual total value of African food exports does give a person pause for thought. And when you couple that with the fact that the African continent is a net food importer, you can’t help but think that the CAP might be giving European farmers an advantage that their African counterparts simply don’t have access to.

And while the sophisticated right-wing ideologues might claim that’s actually a restatement of their argument, they’d be wrong about that. One argument states that “distorting markets is primarily wrong, because free markets are in principle the best way to run things”. The other argument states that “distorting markets is not necessarily wrong, but in this specific case it may be because it might be causing some people to go hungry”.

The latter is a valid argument. The former is a dangerous delusion.

The trouble is though, I think the latter argument is a good deal more complex than it appears to be… as is so often the case. And this additional complexity gets lost when people on the liberal left shout about starving children in Africa and people on the neoliberal right insist that everything would be so much better if we’d only allow the market to be free*.

Of course, first there’s the issue of just how much of the CAP actually goes to the already wealthy. I genuinely doubt that the Duke of Westminster’s land is any more productive than it would be if he wasn’t receiving that million euro prize from Europe’s citizens for owning so much land. And realistically, I doubt he’d need to charge any more for his produce if he wasn’t receiving that money. If anything is distorting the market in the case of the Duke of Westminster, it’s his own vast fortune. A free-market argument for high wealth taxation? Not that they’d ever admit it.

So there’s that… if the CAP is truly an instrument of wealth redistribution within Europe (from poor to rich) then it’s unlikely to be affecting global trade all that much. Which, weirdly enough, suggests that those most concerned with overseas development may well want to abolish the CAP, but if that is unachievable then at the very least prevent any reform from which the European citizenry could derive benefit.

Here’s the thing though… I feel strongly that the CAP should be reformed precisely with that goal in mind. And yes, even if that distorts global markets. This probably puts me on the opposite side of the fence to almost everyone discussing the CAP right now, bar small scale farmers (of which I’m not one, by the way), but fact is, I’m not a supporter of the principle of global free trade. I believe very strongly that the essentials for life should be produced as locally as possible. Yes, the scale of modern population centres makes that vastly more difficult than it’s ever been. In some cases, impossible – the island of Britain would probably have some difficulty feeding itself if all food imports were to stop tomorrow for example. But that doesn’t mean we should abandon the principle completely.

Food shortages and poverty in large areas of Africa and other “developing” countries need to be addressed as a matter of urgency. But it should not be done at the expense of European self-sufficiency in food. Let’s everyone get self-sufficient and then we can trade our surpluses in a sustainable manner; I have no problem with that. But if subsidies help ensure food production thrives in Europe, then that seems like a damn fine use for our collective wealth. Of course, we need to ensure the subsidies are targeted at those smaller farmers to whom it would make the biggest difference. Giving our money to multi-millionaires is just bloody stupid. And I hope it goes without saying that we should also be helping our global neighbours achieve thriving and sustainable food production for themselves. It’s just so important on so many levels.

Helping others achieve sustainable self-sufficiency is a moral obligation. Ensuring we achieve it ourselves is just basic good sense.

* I can actually recall using the “but there’s no market for starving children” argument back when I briefly dallied with libertarian capitalism in my teens. As a political philosophy for a grown adult, it’s a distressing state of affairs… but it’s a useful enough way-station on the path to a fully rounded intellect I guess.

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25
Jun 2013

Where’s Hell when you need it?

I almost wish the religious fundamentalists were right. I almost wish there was a hell in which the evil burn for eternity.

The reason I (almost) wish this, of course, is because we have created a society where the evil face no retribution so long as they have money or political influence. A society where people like John Bowe and David Drumm can giggle, sing and sneer while they rip the heart out of the country. The most vulnerable people in Ireland are being subjected to a death by a thousand cuts. And yet the Agents of Mammon who brought us to this precipice simply jet off around the world to find the country with the most lax bankruptcy laws so that they may emerge from the disaster they created relatively unscathed.

Hell, many of them don’t even need to do that. John Bowe, head of capital markets at Anglo Irish Bank, was made a director of the IBRC. This is the man who can be heard laughing and singing Deutschland Uber Allies on the recently released Anglo Tapes. The man who can be clearly heard conspiring to defraud the Irish people of yet more money even after he’d helped sink the economy (or in the words of Simon Carswell in The Times, “[seeking] to hoodwink the State into getting [Anglo Irish Bank] a bigger bailout than it let on it needed”). Yet he’s one of the guys our government paid to deal with the mess.

HilariousAnd the politicians who appointed this man to help deal with the mess? They are no better. One Labour TD has resigned from the party in disgust as they inflict yet more pain on those least able to bear it. The rest of them should just apply to join Fine Gael and be done with the tasteless charade that they are somehow a party of the ordinary people. Just like Fine Gael and Fianna Fáil, the Irish Labour Party represents the rich and powerful. It is one leaf in our trinity of Bankers’ Parties.

The religious fundamentalists are wrong about the evil burning in hell. But I almost wish they were right. Because the vile excuses for human beings that inhabit the upper echelons of our political and financial institutions will never be held accountable for the damage they inflict on the rest of us. Bankers and politicians worked hand-in-glove-puppet to bleed Ireland dry. Then, when they’d done as much damage as they possibly could, they appointed one another to well-paid positions in the clean-up operation. And, as the Anglo Tapes reveal, this clean-up operation was simply viewed as yet another opportunity to unleash their bottomless greed.

I don’t know who our next government should be. But let me say this now, as loud and clear as I can… if at the next election, dear reader, you vote for Fianna Fáil, Fine Gael or Irish Labour, then you are also complicit in the destruction of this country. There can be no more excuses. I only hope that none of them dare knock on my door when canvassing for votes, because frankly I’m at the final straw stage – and I could do without having to face an assault charge in the courts. Our politicians and bankers need to be replaced immediately. And most of them should be imprisoned for their complicity in the subversion of the Irish constitution.

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27
May 2013

Even the ‘centre left’ is on The Right

A little while ago I put together a graphic as a metaphor for just how much the political spectrum has shifted (specifically in the western liberal democracies) over the past few decades. This shift wasn’t started by Thatcher and Reagan, but they – and those who followed them – did most of the heavy lifting. The result of this shift was to effectively exclude the left-wing from mainstream politics, so that today, those who would once have been viewed as being centrists, are now the hard-left. Views that would label one as a moderate left-winger in the 1960s would – in the opening decades of the 21st century – place one firmly in the radical communist camp (and as such, essentially irrelevant when viewed from the mainstream).
Modern political spectrum
In my view, this shift has been tremendously damaging to the societies in which it has happened – and to western civilisation in general. By narrowing the discussion, we narrow the possibilities available to us. The result is a significant reduction in the amount of flexibility* within our culture. Thatcher, Reagan, their acolytes and fore-bearers quite rightly must shoulder a large proportion of the blame for this loss of flexibility and consequent social damage. But the blame does not lie entirely with them. Indeed an argument could be made that their role in this political shift was less influential than that of the leftists and centre-leftists who allowed themselves to be dragged – or in many cases, who willingly stepped – to The Right.

And the fact that – for example – the Labour Party in the UK can still be described as “left wing” in the mainstream media demonstrates just how insidious this shift has been (it’s “the country’s leading left-wing party” according to The Guardian; a supposedly “left-wing” newspaper). This is despite the fact that some members of the Labour Party have denounced unions for “exert[ing] excessive left-wing influence” (source). At the same time, the party talks openly of its plans to “rescue capitalism” (source). When rampant capitalism plunges the entire world into major crisis, anyone who is genuinely “on the left” would be talking about ‘a new socialism’ or asking ‘how do we replace capitalism with something more just and sustainable?’ If your priority is to “rescue capitalism” then you are “on the right”. To suggest otherwise is ignorance. Or it’s propaganda.

Meanwhile, across the Irish Sea…

This shift to the right has, of course, not been restricted to a few places. Certainly there are exceptions (often significant ones… most notably in South America), but as a general rule it has swept across the globe and infected almost all so-called “liberal democracies”. Ireland’s socialist traditions were savaged by the Celtic Tiger, and the speed with which our own Labour Party dashed rightwards was undignified in the extreme. They almost kept pace with Tony Blair… and that’s saying something. Strangely enough though, our media appears to be slightly more perceptive than that of our British cousins, and it’s quite difficult to track down a recent example of the Irish Labour Party being described as “left-wing” in the mainstream media. Nonetheless, they are still described as being “centre left” by most political commentators and are still members of Socialist International and the Party of European Socialists.

This ill-informed nonsense really needs to be challenged. When a member of Labour (or indeed one of their critics) describes the party as being “left” or “centre left” they should be robustly lampooned for the sheer absurdity of their utterance. They should be viewed in roughly the same light as a spokesperson for the North Korean regime who insists on describing the nation as the “Democratic People’s Republic”. Sometimes labels are important. And when the Irish Labour Party talk about being “a centre left alternative” they not only make a mockery of our public discourse, they actually damage the political fabric of the nation. How can people – especially younger people who have grown up with this new political spectrum – possibly understand political reality, and hence make sensible use of their political influence, when identical policies born of rampant capitalism are labelled centre-right by one party and centre-left by another?

The Irish Labour Party was formed by James Connolly, William X. O’Brien and James Larkin… genuine revolutionary socialists. When I see the modern Labour Party’s annual Connolly Commemoration, it’s difficult to hold down the vomit. There’s a lot of “comedy of dubious taste” that I will admit to finding amusing. But this graceless charade is deeply unfunny, and they should really be required to stop it. If I were to visit Arbour Hill Cemetery every year to urinate on the grave of James Connolly I suspect I’d soon find myself behind bars. Why should Eamon Gilmore be treated any differently?

An Apple a Day keeps the Revenue Commissioner Away

Of course, these thoughts aren’t new to me (or this blog). But every now and then something will prompt them to bubble back to the surface where they must be vented, lest the pressure build up and blow the top off my head. Today that prompt was provided by Labour Senator, John Gilroy. In a single tweet, he illustrated just how far rightwards the Labour Party has moved since the days of Connolly, Larkin and O’Brien.

The tweet came as part of a conversation between Gilroy and Michael Taft. Taft is “Research Officer” for the Irish UNITE trade union and is one of the most recognisable faces of the modern Irish trade union movement. Of course, just as with mainstream political parties, the Irish Trade Union movement has been a victim of the rightward lurch. Thankfully, they’ve not been dragged quite as far from their original principles as the Labour Party and haven’t been quite as eager to embrace selfish individualism and unfettered capitalism. Yes, they’ve all but abandoned any tendency towards militancy. And their opposition to the austerity policies imposed by – among others – the Labour Party with which they are affiliated, has been muted and ineffective. Nonetheless, Taft and others within the movement have at least continued to publish the data which demonstrates the truth behind government lies.

Today for instance, Taft responded to the embarrassing nonsense emerging from the government on the subject of corporate taxation. For those who haven’t followed the story, it recently emerged that the largest corporation in the world (by certain metrics), Apple, “paid taxes of just 2 per cent on its foreign earnings”. It did this “by channelling much of its huge overseas earnings through a network of Irish subsidiaries to minimise its tax bill.” (source) In response to this revelation, the US Senate condemned Ireland’s status as a “tax haven”.

What was the response of the Irish government? Well, initially at least, it hasn’t involved a promise to clamp down on corporate tax avoidance. Instead, we’ve had both coalition parties issue whinging statements insisting that Ireland is not a tax haven, and how dare anyone suggest otherwise. In fact, our government plans on writing a stern letter to the US Senate to that effect.

“Yes”, they will say, “the largest corporation in the world funnels huge amounts of profit through our country. And yes, we pretty much ignore it and don’t even require them to adhere to our already laughably pro-corporate taxation regime. But that doesn’t make us a tax haven.”

They don’t really explain why Ireland isn’t a tax haven. I mean, they try of course; they talk about how US corporations actually employ people and manufacture things in Ireland, which is a far cry from buying a P.O. Box in the Bahamas. But while technically true, it’s misleading to the point of almost being a lie. Apple funnelled almost two-thirds of all profits earned in 2011 through Ireland despite less than 5% of its global workforce being employed here (source). So no, Ireland isn’t identical to the Bahamas, but in terms of tax policy, we certainly have a hell of a lot in common.

And today Michael Taft ably demonstrated this fact with an article (Tax Haven Dictionary) on his website. It includes data to prove that Ireland’s effective corporate tax rate is far closer to the likes of Luxembourg and the Bahamas, than it is to places like France or the UK. This article then sparked a twitter conversation between Taft and the Gilroy (the Labour Senator). Gilroy’s final contribution to the conversation was to pose the question: “does the current tax regieme give ireland a competitive advantage?” If it hadn’t been typed, one imagines it being asked in a fairly triumphalist tone of voice.

Now, Taft’s response to the question was: “Less than is imagined. Will be discussing that in an upcoming post.” However, I want to ignore that response (at least until Taft’s article is published) and concentrate on the question and what it implies about John Gilroy and the Labour Party in general.

The Purpose of Taxation

If you were to ask any one of the founder members of the Irish Labour Party, “what should be the prime motivation of Irish taxation policy?”, their responses would have all been along similar lines. “The redistribution of wealth with the purpose of reducing socio-economic inequality”. Pretty simple really. It’s a philosophy that underpins all genuine socialism, and – I would argue – is at the heart of any attempts to achieve widespread social justice in a large society. Taxation policy, therefore, is primarily designed with the interests of the majority in mind.

By the 1980s however, “redistribution” had become a dirty word and the left wing – as part of their inexorable shift rightwards – had begun to describe taxation policy as a means to fund essential social services for those who could not afford them. Already at this point we see a major change in the mainstream left’s attitude towards taxation. It’s no longer primarily aimed at reducing socio-economic equality and is now focussed on providing a basic safety net to prevent the poor from starving or dying of easily-preventable illness. The rich can get as rich as they want so long as they chuck a few quid into the bucket to pay for minimal social services. Taxation policy by this point (in the eyes of the mainstream left, remember) is no longer about the interests of the majority and has become a question of accommodating the interests of a small minority while retaining enough of a welfare state to ensure corpses don’t start piling up on the streets.

By the late 90s of course, the right wing was already begrudging society’s expectation of a minimal contribution from the rich and powerful. At this point the mainstream left could have salvaged a shred of dignity by standing firm, insisting that they’d already made a massive compromise in their wholesale abandonment of the social justice agenda, and The Right would just have to accept the obligation of the wealthy to allow the occasional crumb to fall from their replete table.

But they didn’t.

Instead they simply bought into the right-wing agenda of rampant greed and the increasing concentration of wealth. So now we have a Labour Party Senator openly acknowledging that taxation policy can be justified by how well it serves the interests of large multinational corporations even if it is clearly not catering for the needs of the wider population. It’s obscene. And any vote for Labour at the next election is obscene too.

Some might suggest that John Gilroy and his ilk are more concerned with the international competitiveness of Irish tax policy than they are with its fitness for purpose. But it’s a lot worse than that. John Gilroy and his ilk see Irish tax policy as perfectly fit for purpose. Because they see that purpose in terms of international competitiveness, not in terms of social justice. John Gilroy and his ilk need to be cast firmly into the political wilderness; they have no right to a place in our national discourse. Instead they should go work directly for the corporations they represent. Though I doubt they’d be considered competent enough to do so.

* I am using the word “flexibility” here in the Batesonian sense; see: “Bali: The Value System of a Steady State” and especially “Ecology and Flexibility in Urban Civilization” (both in Steps to an Ecology of Mind, by Gregory Bateson). At its most basic, Bateson’s “flexibility” can be defined as “uncommitted potential for change”, and he argues that any reduction in this flexibility will have negative consequences on the ability of society to handle crises. Ultimately, if you reduce flexibility enough you will be left with a society that cannot cope with even minimal change without sustaining damage (up to and including finding its very existence threatened). In this sense, flexibility becomes a measure of the health of a society. Bateson also argues that as the flexibility within a culture decreases, there is a corresponding decrease of flexibility within the environment that sustains the culture, but that’s a discussion for another day.

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