Posts Tagged ‘economics’

“DIY” Obama Advisor tells Irish Republic.

November 6, 2008

A very interesting set of comments from Dr Robert Shapiro, senior economic advisor to the US President Elect. For the last 50 years, with the Whitaker Plan and the creation of the tax-free zone at Shannon, the economic strategy (if that isn’t too strong a word for most of the period) of the Irish Republic has been to develop the economy through what is now called Foreign Direct Investment. In my post on the Budget last month, I pointed out that this was a budget in the interest of the multinationals, and not the people. But Shapiro believes that the south should seek to build up indigenous companies and industries.

“FDI was a transitional strategy, not an end-game strategy, that created a lasting impact.
The key to Ireland’s next stage was to make the entire economy a modern economy and not one that depended on the success of foreign companies.
The ability to develop ideas is the single most critical factor and source of wealth and growth for advanced economies today, replacing physical assets and this is what Ireland needed to focus on.”

This is both welcome and disturbing. Coming from such a source, we can hope it will have some impact on those in the southern establishment who have failed to sufficiently promote domestic industry, and instead put all their eggs in the foreign investment basket. However, at a time when people have been talking about the real economy, and the importance of not allowing the collective delusion that is high finance, it is worrying that Obama’s advisor still believes that “physical assets” are not needed. From a northern perspective, where the whole economic strategy of the Executive (while it met) was to beg the yanks for investment, this is extremely worrying. Back to the drawing board. Maybe, however, Shapiro is more of a believer in a socialist plan for the economy north and south than we are.

Ethics, Economics, and Eton

October 22, 2008

Just finished watching Newsnight, something I don’t do that often anymore as I think the quality has dipped of late. However this episode was fantastic. Three main things caught my interest. The first was of course the George Osbourne solicitation story. The second was the discussion of the Governor of the Bank of England’s statement that the UK is likely to be entering recession between Newsnight’s own shadow monetary committee of former Tory Chancellor Kenneth Clarke and two economists whose names I didn’t catch, and the last was the coverage of the US election.

However, for the sake of not having a totally ridiculously long post, and having missed the names of most of the shadow monetary committee, I’ll simply note Ken Clarke’s extremely effective – and I hate to say it, convincing – performance in a discussion that ranged across possible solutions and especially what role interest rates might have to play in attempting to attenuate the current crisis. I felt enlightened by the conversation. Similarly the report on the US election, which focused on what difference the change from Bush to either McCain or Obama might have on US relations with the world and for the rest of the world. I have deliberately being avoiding the US election, largely because I think that there will not actually be that much difference in US foreign policy no matter who wins. Certainly what it has become fashionable to call “the optics” of either of the two will be different from Bush and McCain’s would differ from Obama’s, but US strategic interests and policy will not change a great deal. I expect the US military presence in Iraq to be greatly reduced but not gone by the next election regardless of who wins. Obama may pull troops out at a slightly faster rate, but ultimately I think at most we are talking about timing. And as for Iran, the Middle East, (or Cuba, and the DPRK), let’s not forget Obama’s extremely belligerent statements about Iran, and complete lack of indication that he would be any more coercive of Israel to get the peace deal secured. I see again a change mainly in timing and rhetoric when it comes to foreign relations, not in policy and aims. Because of this conviction that one is not that different externally from the other, I’m not that interested, and don’t follow the thing as closely as many others (and besides, I preferred Hilary to either of them). For more detailed, and much more erudite commentary from a progressive viewpoint, see World By Storm’s many posts on the issues at Cedar Lounge Revolution.

So to Osbourne, Mandelson, and the richest man in Russia, Oleg Deripaska, another of those oligarchs who got rich on the backs of plundering the natural resources of the Russian people. Here we have an insight into the way politics works at the very highest level, and it is far from gratifying. The EU’s Trade Commissioner is staying at the (a?) holiday home of a leading financier, Nat Rothschild, a member of one of the world’s richest banking families, who introduces him to the billionaire trader in aluminium, the tariff on which Mandleson helps to set. Mandleson’s defence is quite simple – one cannot be involved in these types of negotiations with emerging economies like India, Brazil, South Africa and Russia without talking to important businessmen as well as politicians. The EU clears him, though as Nick Robinson of the BBC points out, should he do this now as a member of Cabinet, he would be in breach of the ministerial code. Given Mandleson’s track record, it is to say the least unsurprising that he would place himself in a questionable position. The Tories try to take advantage of the situation, with Osbourne briefing all and sundry about Mandleson badmouthing Brown.

Oops. Big mistake. Rothschild seemingly regards this as a breach of trust, and decides to punish Osbourne by publishing in an open letter to The Times the details of conversations involving Osbourne and the Tories’ chief fundraiser Andrew Feldman (who had been brought to the villa by Osbourne for this purpose) that were had about a potential illegal donation by Deripaska to the Conservatives, possibly using one of his UK-registered companies as a front. Rothschild says that Osbourne and Feldman asked Deripaska for money. The Tories deny this, and correctly state that no money was given, but have to admit that the Shadow Chancellor and their chief financier were party to conversations about possible donations, and that they met Deripaska on his yacht. In additional fuel to the fire, Deripaska lets it be known to the BBC that neither he nor anyone acting on his behalf initiated the discussions, while Rothschild has named a witness in support of his version of events. From The Times

Mr Rothschild issued his statement at 9pm in what appeared to be an escalation of hostilities between the hedge fund manager and his old friend from Oxford.
In it, he directly contradicted Mr Osborne’s suggestion that there had been no discussion of channelling donations through a British company. He went on to say that his witness, Mr Goodwin, a former adviser to President Clinton and a prospective non-executive director of Rusal, Mr Deripaska’s aluminium company, recalled that the subject of a donation arose briefly after they went to the Russian’s yacht “but the conversation gained no traction”. He added that at dinner later that evening the donation was again talked about “and Mr Osborne was interested in whether and how such a donation could be secured”.

I’ll come back to the presence of an advisor to a former US President, and the fact that Rothschild and Osbourne are old friends from Oxford. What we have here seems to be a clear case of, at the very least, The Tories at the highest level being prepared to involve themselves in discussions about illegal donations. And, quite frankly, I am not charitable enough to believe this most charitable version of events. The stench of corruption pervades this whole episode. It looks a hell of a lot like potentially the next Chancellor has been grovelling for illegal cash. How can we trust his, and his party’s, judgment, when it seems that he will be in hock to such powerful vested interests? How can we forget what this says about the likely corruption levels of any Cameron government?

And what does it tell us about the way politics still works in the UK at the highest level? First, the old boy network is alive and well, and incredibly strong in the Cameron Tory Party. Call me Dave was at Eton, as were a lot of the Shadow Cabinet. Osbourne compartively “slummed it” at St Paul’s. Rothschild and Osbourne are friends from Oxford, where they were both members of the Bullingdon Club, a perennially obnoxious drinking society for super-rich Oxford undergraduates who delight in vandalism and other petty criminality, as were Cameron and Boris Johnson. Feldman, the chief fundraiser, played on the same tennis team in Oxford as Cameron. Are we getting the picture yet? These elite networks that look after their own and protect each other’s interests even when laws are broken are the type of people who are running the UK – its politics, its government, its legal and financial institutions, and its media and cultural institutions, as was nicely quantified and analysed by The Observer earlier this year here and here. Given this culture, is it any surprise that politicians are open to undue influence from financiers and other vested interests.

But it goes much futher than that. The elite network is clearly not confined to the UK, but is an international phenomenon. Hence the significance of the EU Trade Commissioner and an ex-advisor to President Clinton on the richest man in Russia’s yacht. I am not – I want to stress – advocating a conspiratorial understanding of political and economic policy across the globe. Rather I am saying that if we want a vivid demonstration of how class, wealth and power remain inextricably interlinked – and act as posion to the democratic process and the decisions that affect and all too often sacrifice the interests of the ordinary citizens of numerous states – we need look no further than the holiday home of one hedge fund manager. Oh, and did I mention Rupert Murdoch dropped by too?

The Thatcher/Major government collapsed under the burden of its own inadequacies and corruption. Blair left office irrevocably tarnished by the corruption that surrounded him and other prominent New Labour politicians. It looks as though should Cameron, Osbourne, and the rest of their public school/Oxbridge nexus win the next election, we can expect more of the same, except more shamelessly and more quickly. All this though may have positive benefits. Brown’s handling of the financial crisis, and the credit he has been given in the US and the rest of Europe, has resulted in a Brown bounce. The Tories, without power to affect the crisis, are already beginning to look a lot less confident, and have lost some of their lead in the opinion polls. It looks as though this crisis will be more damaging, and I certainly hope so. “Two-Brains” Osbourne is suddenly looking a lot less clever, and the Tory Party’s claims to have reformed a lot less credible.

Nevertheless, the main lesson to be drawn from this is the need for democratisation and transparency. In the administration of government, in the financing of parties, in the taking of government policy, in our relations with other states, and in the control we must now assert over the financial institutions in whose interests the UK and much of the world have been run almost without challenge for the last thirty years by the elite nexus represented by Mandleson, Osbourne and their friends and international equivalents.

On the Marx Again

October 20, 2008

Good news from Germany, where sales of Marx have gone up 300% in recent months. One publisher has seen sales of Das Kapital rise eightfold. While this hardly means the Red Flag is about to be raised over the Reichstag once more (and more’s the pity), it does speak volumes about the extent of the crisis, and the fact that people are looking for answers. Certainly there is no more effective critic of capitalism, and no-one more ruthless at exposing the flaws of its boom and bust nature, or the effects of the relentless, restless search for profit that led to the extravagant financial speculation that has led us to where we are today.

So what use is Marx today? It is no good those of us on the left smugly saying see, we told you so, trotting (so to speak) out the usual quotes from Marx and leaving it at that. Marxism is a tool for analysing and changing society, not a set of sacred texts to genuflect before. The left likes to think it has a clear understanding of how we got where we are, but answers are proving harder to find. The parliamentary left everywhere is proving as useless as we might expect. So, as I wrote in one of my first entries, is the European Congress of Trade Unions. Isolated statements are popping up here and there, and Mark McGregor flagged up a very sensible statement from the President of the European United Left/Nordic Green Left in the European Parliament here that stressed the need to use governments’ powers to protect those on lower incomes and stimulate the real economy, including through the use of selective credit to encourage sustainable investment and job creation. This is the type of thinking we need from the radical left, creative and practical and focused always on concrete goals but with a longer term vision.

In Ireland, north and south, the left should be arguing for the state to focus its resources not on propping up the banks and their shareholders, but on beneficial investment – in houses especially, and in job creation. The Thatcherite mantras of the inefficiency of the state and EU competition rules have been cited by too many even on the left for too long against the state taking over or creating industries. These arguments look very hollow at the present time, when the power of the state could not be clearer, and the reality of the dependence on capitalism using the state to its benefit is equally clear. In southern Ireland, the consequence of an economy with an insufficient native industrial base is clear in a budget designed not for its own people but for foreign countries, while on Channel 4 news today a former chairman of a bank was pointing out that the UK lacked the export trade that enabled the Japanese to climb out of the collapse of their banking system in the 1990s. If we are seeing the return of Keynesianism as has been suggested, investment must go to the real economy, to real and productive jobs, not more call centres, and empty headquarters that transfer profits out of the country. It is time that not only the revolutionary, but the social democratic left found its voice, and spoke with confidence.

There is an assumption among many that the current crisis will lead inevitably to a swing to the left. This is not necessarily the case. On the contrary, we can see in the southern budget the swing to the right, while New Labour ministers have begun the rush to scapegoat immigrants. Left politicans, trade unions, political parties all have a responsibility here. We on the left must redouble our efforts to ensure that it is us and not the likes of the BNP that benefit.

Update: The Times has this piece discussing the renewed interest in Marx, which includes comments from Eric Hobsbawm, Martin Jacques, and various ex-Trotskyists and Alexi Sayle, an ex-Maoist.

Update 2: Eric Hobsbawm on BBC Radio 4’s Today programme here

Extra Marx: From The Guardian

Budget Follow Up

October 16, 2008

I thought it was worth following up on reaction to the southern budget, just to remind people what an utter bunch of callous incompetents are running the show.

“It was a Government decision” so stated Brian Leninhan about the decision to end automatic entitlement to medical cards for the over 70s. The government is removing the entitlement of the top third of pensioners, a huge number in real terms, and if we think of this in terms of taxpayers, we can see how far down the scale it will hit. All this to save about 100m Euro per year. Peanuts. Especially in terms of the sums the southern government has had at its disposal, and the amount being expended to shore up financial speculators. This also helps put in perspective the commitment in the Lisbon Treaty to constant spending and upgrading of military capability. And by the way, I would hope that decisions taken by any minister are government decisions. Doesn’t say a lot for the efficiency of the thing that this needed pointed out.

What of some of the other reactionary aspects of the budget? The INTO is warning that with the removal of substitutes for uncertified sick leave, children will probably be sent home from January, and that the removal of substitutes for teachers on trips etc will hit sport and other extra-curricular activities. The Minister for Education has confirmed that the government was aware of the particular challenges” this will pose to those running schools. Not often you hear a government brazenly admit it is too cheap to educate your child properly. And so much for the health of the nation’s children. Not so much cherishing the children of the nation equally as telling them to go take a running jump. But only metaphorically, as there won’t be any PE.

The ICTU has stated that it will seek those earning 23,000 Euro and under be exempt from the Lenihan levy, but David Begg continued to defend the pay deal, something a lot of those he represents will be less than pleased about in light of the budget.

World By Storm has a piece of the usual high quality over at Cedar Lounge Revolution mocking the squeals of the guilty, as the Irish Times bemoans the fate of the middle class under the budget.

I’m not really going to add a great deal to all this. Just to say that the southern economy has been in “negative growth” (a linguistic trick if ever there were one) for not that long, and already we are seeing the slash and burn instinct coming out in the government. What will the Budget of 2011 be like if we are still in recession then? A cheery note on which to end.

Fianna Fáil’s Eighties Revival

October 14, 2008

Quelle surprise. Economic difficulties rear their head in the Republic, and Fianna Fáil reacts in the only way it knows how – a reactionary budget that punishes ordinary people, amidst a great deal of talk of belt tightening, difficult conditions, the need for patriotism, and hard choices. We’ve heard all this before, most recently in the 1980s, while the late and unlamented Charlie Haughey was having his suits handmade in Paris, and his buddies were making fortunes from corruption – a house of cards brought down, lest we forget, by Tomás Mac Giolla’s exposure in the Dáil of the nature of the Goodman company. The south, through a combination of EU membership, a young, English-speaking, relatively well-educated and relatively cheap workforce, low corporation tax, and being in the right place at the right time, has as we all know been transformed in the last two decades. Oh yeah, and let’s not forget an unsustainable Thatcherite housing bubble. There has for a large number of the last fifteen years been a large budget surplus, and some good has come out of it – investment in transport and infrastructure (although of course with the usual incompetence and stupidity as over the Dublin Port tunnel, the trams, and the failure to deal with the gridlock in Dublin), investment in education, better services in some areas, more employment, and an undoubted rise in living standards. The liberalisation and secularisation of society has also been accelerated by these trends. Those who raised doubts about the extent to which the money being made was being transferred out of the country by the multinationals, or concern about the short life span of factories owned by multinationals, or the failure to develop a significant native-owned industrial sector, or the vastly uneven distribution of the new wealth, or the failure to tax it properly, were mocked as remnants of the past, economic illiterates, begrudgers, and fools who refused to recognise the profound transformation wrought by recent economic development.

Hmmmm. The arrogant assumption that the Celtic Tiger was a juggernaut impossible to roll back, and that the economic growth would inevibatly continue looks a lot more silly than the questions raised during the height of the boom. What has happened is that a problem centred in America has radiated out from there and is on the verge of wrecking the southern economy. Obviously, every country in the world will be hit, and hit hard, by serious difficulties in America, but the south is particularly vulnerable as probably the most open economy in the developed world, with a huge proportion of its investment coming from the US. That is all understood. The question is, what resources does Ireland have to fall back on when its main sugar daddy cuts the purse strings? The answer is simple. The money accumulated during the boom years has been frittered away, and a government that makes a great deal of its skills in economic planning through its much-trumpeted National Development Plans has done precisely sweet bugger all in creating and sustaining native industry that was not almost completely dependent on the goodwill of others. This was of course very much a consequence of ideology. Not I admit a word much associated with Fianna Fáil, for whom the famous quip “You don’t like my principles? Wait, I have others” could have been invented. However, Fianna Fáil for the last five decades has been committed to a policy of free market economics and reliance on foreign capital for economic development, as have the other main parties in the state.

And we can see the consequences of this in the Budget. Here we have the Minister for Finance:
“The Government is determined to retain and enhance Ireland’s reputation as a pro-enterprise economy and as an attractive location for foreign direct investment. The most important action we can take in this regard is to stabilise our public finances.” The budget speech also spoke at length about the importance of foreign direct investment, added to some references to indigenous industry. There was a great deal of discussion of cutting the debt, ensuring fiscal stability, and all the other buzzwords so beloved of the right internationally – except when it comes to bailing out multinationals and funding armies. So what does all this actually mean? It means that the budget is dominated by the interests of foreign capital, and the people expected to make the sacrifices are the ordinary taxpayer, the young, and the old. As usual.

Corporation tax will stay where it is. Irish government policy will continue to serve the needs of the multinationals. And the Irish bourgeoisie. A 1% levy is being added to incomes – to the gross of all incomes – up to around 100,000 Euro. 2% on anything over that. So much for all the talk of fairness. 1% of 20,000 Euro means a lot more to the person earning that than two percent does to the barrister or whoever earning a million Euro. Not only that, but child benefit is being restricted, numerous education grants – including to Travellers – are being cut, and automatic medical cards are being taken away from the over-70s. This last measure in particular is quite simply barbaric. And turning the clock back not so much to the 1980s, but to the Dark Ages. In a demonstration of how little has changed in government priorities since the creation of the Free State, farmers are getting a great deal of continued support and relief.
Let’s make no mistake. This is not far from the most reactionary budget thinkable in the current circumstances – a budget for the multinationals and the rich at home. A budget right out of a different era, despite the populist pay cut for Ministers.

At least in the 1980s, there was a vibrant movement opposed to the right-wing initiatives of government. The PAYE workers’ campaigns, a less pliable union movement, and a serious and committed left voice in the Dáil in The Workers’ Party, which was active in promoting an alternative set of economic priorities through its Research Section. And, as we have seen, exposing the corruption of the establishment. We lack that voice now. And we are going to suffer for it.