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Tom O’Connor
College Lecturer in Economics & Public Policy
Cork Institute of Technology.
Member of Economists’ Network TASC
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1 trillion inc €750 in loans to EU states to
defend the euro by EU and IMF
“In October, the European Commission, the
EU's executive body, will draft new rules for
buying and selling credit default swaps, part
of the largely unchartered $600 trillion
derivatives market that ballooned ahead of
the global financial crisis” (Reuters May 17
2010)
The market has failed
Date
Unemployment
Tax Take
Exchequer
Deficit
31st Dec 2007
198,000
47.8 billion
1.6 billion
May- June 2008
201,800
Down 1.45
billion
5.65 billion
31st Dec 2008
352,000
41.6 billion
12.7 billion
31st Dec 2009
436,956
33 billion
24.6 billion (Inc
paid Anglo 4
billion)
Two Years 08+
09
238,956
14.8 billion
20.6 (minus
Anglo)
Unemployment Tax Take
Time
Aug 09
436,275
20.79 billion
Jan-Aug 09
31 Aug 2010
466,923
18.92 billion
Jan-Aug 10
+30,658
-1.87 billion
-18.2 (end 09)
Minus
Anglo+NPRF
11.7 (Aug 09)
minus
Ang/NPRF
-22 billion
(end 10) No
Anglo or NPRF
12.0 (Aug 10)
No Anglo or
NPRF
Excheq Bal
Govt ‘control’
of finances
(aug) is spin.
Worse off by 4
billion end 10
Aug 2009
Aug 2010
Income Tax 7,227,341
6,635,016
-8.19%
Corporatio
n
2,418,031
1,836,837
-24%
Vat
7,203,273
6,738,901
-6.4%
391
-56.3%
Income/Tra 896
ining Levy
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The govt budgetary estimates: Current
spending up by 4.7 billion (2010).
Dept of Social and Family Affairs spend
(voted) up from 10.6 to 13.6 billion
Taxes down 0.6 (after falling hugely)
Non-voted Capital Spend down 7 bill (Anglo
+ NPRF
Non tax revenue (central bank, national
lottery)=+1.5 billion
EB down by 3.3 billion, 25.3 bill to 22 bill
If Anglo and NPRF were left out, govt worse
off in 2010. Current spending is all
that’s left for 2011for cuts
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Taxes will fall more than 0.6 bill this year +
Unemployment payments will be higher than
forecast. See income tax fall of 8% earlier.
Current spending cuts all that’s left and spiral
downwards will result.
If economy was stimulated: govt tax receipts would
rise and social welfare payments would fall.
This would allow a modest increase in key public
service spending which is always necessary.
Instead cuts in key services in communities are
being cut to compensate for increased spending
due to the recession.
It would also mean that much of the capital
spending could be retained to help economic
recovery.
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The Competition state (Cerny) is obsessed
with supply side costs in particular labour
Focus on cutting wages
This will not work: Asian, African, Chinese
and Eastern European Economies will always
be cheaper.
This doesn’t justify un-sustainable wages
Low pay proposals are a race to the bottom
These proposals increase the power of TNCs
and Increase vulnerability to economic shocks
Tax Payers
Labour Force
0-20,000
700,000
20-30,000
1,000,000
70-100,000
160,000
Over 100,000
140,000
150- 1 mill
50,000
Year
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Unemployme
nt
16.6
16.2
14.7
13.4
14.7
15.4
15.6
14.3
12.3
11.7
9.9
7.5
5.7
4.3
3.8
4.3
4.6
Real GDP
Growth
4.7
5.2
5.7
8.5
1.9
3.3
2.7
5.8
9.6
8.3
11.7
8.5
10.7
9.2
6.2
6.1
4.4
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Wall Street Journal Jan 8th 2009 ‘The New Old Big
Thing in Economics: J.M. Keynes
‘So, nations are turning again to government
stimulus spending to try knocking the economy
back on track. Economists say that if governments
can get money into the economy quickly, targeting
projects that will have the biggest effect, and make
sure the spending is temporary, they can avoid
inflation and wasteful spending. "We do need a jolt
to really cushion the blow of this shock," says
Morgan Stanley economist Richard Berner. "We
need a stimulus that is temporary but substantial."
Robert Skidelsky (2009) Keynes: the Return of
the Master:
“ Economies wounded by these ‘shocks’ can, if
left to themselves stay in a depressed condition
for a long time. That is why the government
need to have and use fiscal ammunition to
prevent a slide from financial crisis to
economic depression. [another key part of
keynes] is ‘a moral critique of societies which
worship the persuit of money and efficiency
above all other objects of human striving.
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Stimulus packages have also been suggested
by Krugman and by the Stiglitz (Stiglitz
Report).
Double dip recession is a real possibility
Japan has just announced a new stimulus
package.
China is stimulating its economy.
Ireland has had a cultural aversion to
enterprise creation.
New enterprises not been funded except by
VC. Government losing enterprise opps.
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Pay can be ‘decent’ if increased value goods
and services are produced.
This does mean using education, training and
technology to develop ‘high knowledge
industries’ to give a country a competitive
advantage in internationally traded areas.
Ahead of The Curve (2006): telematics;
sustainable energy; food ingredients; ethical
pharma; biomedical devices; export of
education and health services.
Need for sustained govt investment in
economy: next slide
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Currently: 60 Strategic Research Clusters
Nationwide: Biopharma, ICT, Export Services
28 Incubation centres with 240 companies
Only 1,000 currently employed (Enterprise
Ireland 2009)
Despite 2.65 billion spent in 2008 on Science
and Technology and about 1.5 billion this
year, only 30 spin outs projected from 20092013
Minister O’Keefe announced extra 5.5 million
for HPSUs but budget of only 187 million
2011-2016
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DETI Budget covers Enterprise Ireland, IDA
Ireland, County Enterprise Boards, Shannon
Development ++
Budget cut from 2.07 (2009) to 1.38 billion in
2010 a cut of 33%
DETE ‘Developing Skills of Labour Force’
Function cut from 1.08 billion in 2009 to 212
million in 2010 a cut of 80%
Policy to create employment working in
reverse
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In Sweden wages are about 32k pa
Universal services: childcare; geriatric care;
health care; re-training; strong welfare
payments are guaranteed as quid pro quo for
retraining: increases flexibility
This lowers cost of living and enhances
quality of life
Flexicurity promotes higher employment,
continuous job creation and workers moving
in to new areas.
Sweden has the highest employment rate in
world
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New policy on workfare is useless
Irish Jobseekers= €196
Nordic model= minimum of 75% of previous
net earnings
This works: Sweden highest employment rate
Workers are more flexible and can change
careers flexibly for different jobs. This
benefits the worker and the economy
System known as ‘flexicurity’.
Education
attainment
000
1991
%
000
2001
%
000
2010
%
Less
than 498
Secondary
43
524
32
528
27
Upper
Secondary
417
36
640
39
756
39
Third Level
235
20
483
29
679
35
Total
1,149
100
1,648
100
1,963
100
Insufficient Training Reponse: April Budget
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Department of Enterprise, Trade & Employment
Community Employment Scheme 400
Training Initiatives Strategy (10-week courses) 12,015
Training Initiatives Strategy (20-week courses) 1,833
Work Experience Scheme 2,000
Pilot Scheme for Short Time Workers 277
Sub-total 16,525
Department of Education & Science
Transition courses 930
Accelerated Certificate Programmes 280
Full-time 3rd level places 2,000
Post Leaving Cert Courses 1,500
Redundant Apprentice IoT Scheme (with D/ETE) 700
Part-time 3rd level places (with D/ETE) 1,500
Sub-total 6,910
Total estimated number 23,435
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Higher re-training allowances: €330 per
week: min of £180 in the UK
Training for ‘real jobs’ not workfare
State development bank and agencies: vetting
business proposals in ‘ahead of the curve
areas’ and financing.
Intensive training of unemployed in parallel to
fill skills needs.
Training infrastructure deficient (NESC 2005)
State loans/grants of 50% shared ownership.
This prevents company flight of even
indigenous.
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Part state ownership or full state ownership in
‘leaner’ new state SOEs (Mustachio).
Thomas Cook workers would be still in work.
Opposition to SOEs is totally ideological
These are considered a strongly viable option
in the post financial collapse era according to
conversations I’ve had with Prof. Aldo
Mustacchio of Harvard Business School
The commitment by economists to bank
lending is incredible: money supply has fallen
by about 7% and domestic credit expansion
has dried up.
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The state as a company owner
The Swedish state is an important company
owner in Sweden. The Swedish Government
Offices administer 55 companies, of which 42
are wholly owned and 13 partly owned. These
companies represent substantial values and
are large employers. Furthermore, they are
ultimately the common property of all
Swedish taxpayers. The state therefore has a
considerable responsibility to be an active
and professional owner. (Govt Offices Sweden
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In 2006 the aggregated turnover for the
state-owned companies amounted to SEK
339 billion (€40 billion) and the net profit
amounted to SEK 55.3 (€5.5) billion. The
dividend of the companies for the financial
year 2006 amounted to just over SEK 37
million. The value of the state-owned
companies administered totalled around SEK
770 billion in June 2007. (Govt Offices of
Sweden)
The "Good" SOEs of the Twenty-First Century
 We describe briefly three instances of SOEs
that have reached high levels of performance:
Indian Railways, Petrobras, and Statoil. They
hail from countries as culturally varied as
India, Brazil, and Norway, respectively. The
first one provides a service (transportation),
while the other two perform heavy industrial
activities. They all share, however, a
commitment from the state to adopt a proper
institutional framework that allows them to
succeed in a globalized world. We believe that
these firms can set an example for other SOEs
to adopt in the years to come.(Mustachio 09)
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Thank you!
Question time.