Notes on the Front

Commentary on Irish Political Economy by Michael Taft, researcher for SIPTU

Deflation’s End

April 8, 2009

This article was originally written for Indymedia

I don’t intend to list the outrages that Fianna Fail has perpetrated in yesterday’s budget. We all have scars to show each other. And let’s leave the bank bailout for the moment (but everything about it is one more argument for immediate nationalisation).

Let’s get to the heart of the matter. What was this budget all about? Closing the deficit this year by a couple of percentage points? Proving our machismo to the international markets (if wiping 8 percent off the gross income of an average-income couple with two small children or abolishing the Christmas bonus isn’t macho enough, I don’t what will satisfy foreign hedge funds)?

The whole point of this budget is that, whatever happens (mass unemployment, increasing poverty, a hollowing out of our enterprise base, degrading an already degraded infrastructure), we must ensure, at all costs, that by 2013 the number that appears in the line item ‘General Government Deficit as a % of GDP’ is -3 percent or less. It’s that simple. Nothing else matters. -3 is the magic number. People can eat stale cake.

Please continue reading this post at Indymedia.

4 responses to “Deflation’s End”

Jim

April 9, 2009

Excellent, Michael. There are those that will counter that to risk investment may lead to a south american type of default if the global economy, or at least our place in it, was to continue for too long a time; down the line.
I agree that what is occuring now is effectively poorly managed nothing, and a thoughtless attempt at damage limitation. I also disagree with the pscyhology presented by the fear of current events leading us to reverting from any investment at these times. In the end the economy, as complex and dynamic as it is is a vehicle which allows the creation of stuff and the consumption of stuff. Any time there’s really new stuff that we all like we get a bit excited, slurge on that stuff (splurge in general), fall, and then have a rebalancing period. What seems clear to me is that we are at the tip of the iceberg in terms of an acceleration in the myriad ‘stuff’ that technology is chomping at the bit to bring to us. From nano-tech to genetic engineering, the imapct of cybernetic approaches and the increased reality of the virtual this may be a much more exciting time again as soon as we emerge from this phase. All these technologies require is for the economy to allow them to floursih, of to get out of their way. This is effectively inevitable as we are not going to forget these advances and we are as with all others going to make use of them. What is not of certainty is where teh hub will occur. The emotional deflation of a dole queue needs urgently to give way to the creation of a vast innovative centre and perhaps a dedicated leading reseacrh educational facility. Let indebted builders build their way out of debt without profits and with the only costs of paying wages to those that will work on these new centres and associated infrastructure. If we give banks that amount of money and tehse builders owe the banks there is no way they should be allowed go to the wall while dole queues are forming. When there debts are paid they are welcome to continue trading. If the owners refuse, bankrupt them and offer it to the empoyees. Have an MIT type facility out somewher around the shannon area and bring all those U.S. connections back on board for the future tech world european centre. Educate everyone who wants it for some part-time element of their welfare, give tax deductions to the colleges for these peoples fees. Consider abandoning employer PRSI.
And above all Michael, we got to get an election. In truth even if Fianna Fail were offering some good ideas the public would still be like a patient returning to a doctor who nearly killed them in the past. While this doctor may well have a good treatment for you, you are not going to believe in them and are going to ask to see someone else. Of course with FF they will just keep snouts in troughs and keep on killing.
If none of that works we could follow FF ideology to its natural conclusin and offer the ministry of Finance to a partner of government, Jackie Healy Rae; and he can gaurantee us all that the people of south kerry will be alright

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Fergal

April 9, 2009

Hi Michael,
Great post again.The various mouthpieces(newspapers,TV,radio) of the boss class have played a blinder by continuously sowing seeds of discontent between public and private sector workers.Then by deliberately underplaying one of the the most militant surges of working people on this island(Waterford,Ennis,SR Technics,Belfast etc)they increased the sense of defeatism.Finally,the media kept going on about how tough the budget would be leading some to think that it wasn’t so bad after all.One thing is now crystal clear, there is only one group holding the country to ransom and it’s the bankers.The next time a union is accused of “holding people to ransom”I hope the union steward reminds the interviewer of the banks’great swindle.Keep up the good work!

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Michael Taft

April 10, 2009

Jim, what a lot of commentators haven’t copped on yet (admittedly, there is so much wreckage to wade through) is the Government’s acceptance of far higher borrowing levels than laid out in their own projections. This will arise because of NAMA – we’re borrowing to bailout private sector banks with little influence over their future action. I don’t think there’s much chance of Ireland defaulting (the EU won’t let that happen to a Eurozone country, the knock-on effects could be too terrible to contemplate). But if there is something that could sink us – it’s this NAMA gambit.
Your general point is well taken – the need to transform the economic base to meet the challenge of new technologies and the knowledge-economy. How can this be done by sinking the economy further into, as you well put it, emotional deflation? There are negative multipliers at the macroeconomic level. These same multipliers will play havoc at the pyschological level as well. The more one looks at what the Government is doing, the more one despairs at the ledger-book approach they have adopted and to hell with everything else.
Your comments on builders and dole queues reminds me of the observation of Upton Sinclair during the Great Depression. He saw that there were (a) shoe-making factories closed down, (b) shoe-making workers out of jobs, and (c) people in need of shoes. Though in practice it may difficult, conceptually it doesn’t take a rocket-scientisit to connect the dots.
Fergal, thanks for the comment. The continuing deluge from the orthodoxy is clearly depressing – not only depressing the debate, but anyone listening to it. Still, I am concerned that the Left and trade unionists have still to put forward a substantial alternative. This is absolutely needed; otherwise, we get stuck with complaining what the Right are doing, but have little to offer, apart from incrementalisms, when the media turns on us and asks, ‘Well, what would you do?’. This is the work we must sit down to. And, as in other matters, despite the past record, I remain hopeful. Optimism of the will and all that.

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Mark Conroy

May 4, 2009

It appears the mainstream media are catching on.
http://www.irishtimes.com/newspaper/finance/2009/0504/1224245890044.html

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