These comments from March 2013, following the death of Hugo Chavez:

President Michael D Higgins:

“President Chavez achieved a great deal during his term in office, particularly in the area of social development and poverty reduction”

Sinn Fein president Gerry Adams:

“President Chávez worked tirelessly to improve the lives of Venezuelan citizens. He dedicated himself to building a new and radical society in Venezuela.  His progressive social and economic changes took millions out of poverty.”

And this from yesterday’s Washington Post:

“Venezuela is stuck in a doom loop that’s become a death spiral.    Its stores are empty, its people are starving, and its government is to blame. It has tried to repeal the law of supply and demand, and, in the process, eliminated any incentive for businesses to actually sell things. The result is that the country with the largest oil reserves in the world now has to resort to forced labor just to try to feed itself.”

Just sayin’.

 

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Below is a quote from Bobby Kennedy on what Gross National Product means and what it does not mean. 

“Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product … if we should judge America by that – counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.

“Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.”

Fantastic rhetoric, for sure, equal to anything JFK (or his speechwriter) ever produced.

But to add a corrective balance to RFK’s outpouring, look at what Eduardo Porter, in “The Price of Everything“, has to say.  If you are a romantic type, look away now.

Porter quotes Kennedy but goes on to add:

“Yet despite its growing popularity, the belief that money has little or nothing to do with happiness is misleading. Like Schopenhauer’s musings and Mariana’s troubles, the sweeping rhetoric about the emptiness of material wealth supports a dubious proposition that the pursuit of economic progress is somehow a waste of time because it does not deliver what is most important in life. Despite the scepticism about run-of-the-mill economic growth, despite the angry denunciations of materialism, it is usually better to have a big gross domestic product than a small one. Just ask one of the more than 3 billion people – half the world’s population – how happy they are making do with less than $2.50 a day.

In fact, surveys find that richer people tend to be happier than poorer people. That’s because money provides many of the things that improve people’s lot. Richer countries are generally healthier and have lower child mortality and higher life expectancy. They tend to have cleaner environments, and their citizens often have more education and less physically demanding and more interesting jobs.  Richer people usually have more leisure time, travel more, and have more money to enjoy the arts. Money helps people overcome constraints and take control over their lives.  Whatever Kennedy said, gross national product does allow for the health of our kids.

Researchers in Britain found that an extra 125,000 a year increased people’s sense of satisfaction with their lives by one point on a scale of one to seven. A study in Australia pored through surveys to understand how people’s feelings of happiness responded to life’s events. It found that a windfall of $16,500 to $24,500 provided more or less the same boost to happiness as getting married.”

And that’s presumably Australian Dollars.  So getting married is only worth €15,000 in happiness terms. Clearly something wrong with that analysis!

 

The profile of Irish investment preferences discovered by Barclays Bank in preparing their latest issue of Wealth Insights is depressing.  According to press reports, their research shows that Irish high-net-worth individuals (HNWIs) hold an amazing 55 per cent of their wealth in property, despite the collapse in property values in the past 5 years.  This is a higher proportion than any other nationality.  Irish HNWIs also hold 18 per cent in cash, 16 per cent in financial investments and 7 per cent in assets such as collectables.  And just how much private wealth do you think is invested in enterprise or business, the sector which is arguably the most vital to our economic future?  A pitiful 2 per cent.

A long legacy of under-taxation of property assets and transactions, only partly being addressed now, is an important factor in this mis-allocation of investment funds.  We all continue to pay a price for past policy failings in this area.

Historic factors are often also quoted as an explanation for our obsession with property. There is a pithy phrase in the famous Vanity Fair article by Michael Lewis (“When Irish Eyes Are Crying”) about how we crashed our economy:

Irish people will tell you that, because of their sad history of dispossession, owning a home is not just a way to avoid paying rent but a mark of freedom. In their rush to freedom, the Irish built their own prisons.

That sums it up nicely.

More economic nonsense from the Society of the Irish Motor Industry, reported in the Irish Times:

The motor trade is seeking a new incentive scheme, based on trade-ins rather than scrapped cars, to boost new-car sales next year. Work is under way on a submission to the Government seeking the introduction of a “swappage scheme”, in which motorists who trade in cars more than five years old would receive rebates of the order of €2,000 on the vehicle-registration tax due on the new cars.

The aim, according to Alan Nolan director general of the Society of the Irish Motor Industry, is to kick-start new-car sales and so increase the Government’s tax income.

“The Government’s tax take from the motor sector in 2007 was close to €1.8 billion. This has slipped to about €500 million. Meanwhile, employment in the sector has fallen from 50,000 to roughly 34,000. By boosting the sale of new cars we not only reduce the average age of the fleet but increase the tax take for the Government and secure thousands of jobs,” he says.

As I have noted before, this is the siren song of special-interest groups trying to derail proper financial governance, and promote their own causes at the expense of everybody else’s, just like Bastiat’s candlestick makers.

To quote Colm McCarthy from June 2011:

A good example of the futility of this line of thinking was the car scrappage scheme, recently phased out. This scheme directly subsidised imports, doubtless saved a few jobs in car showrooms temporarily but would have had its greatest impact in France, Germany and Italy, where they make the cars. A subsidy on foreign holidays would stimulate a few extra jobs in travel agencies too, but is hardly the most promising job-creation strategy. The car scrappage scheme was a similar mistake.

And here he is again from March 2010

Car Scrappage: Car sales have collapsed and some car dealers have gone out of business. The same has happened with €1,000 handbags, and some handbag retailers are struggling. Ireland manufactures neither cars nor handbags. The Car Scrappage Scheme will spend taxpayer money to sustain, temporarily, the retail distribution network for an imported consumer durable. Why not a Handbag Scrappage Scheme? This scheme is plain daft for Ireland. …… These ‘Something Must be Done’ schemes provide harmless entertainment for economists, fodder for the 24-hour news cycle and a playpen for lobbyists. But they contribute nothing to sustainable employment, cost the Exchequer money and hinder the necessary post-Bubble adjustment.   In contrast, the Economics of Doing Nothing is that this is often the best policy, and the cheapest.

SIMI’s proposed new incentive scheme is a blatant and brazen attempt to feather their own nest at the expense of everybody else’s.  The trouble is that few politicians are clued in enough to see this reality.

Just whose side is ICTU on?

6 December, 2012

A letter was published in today’s (London) Financial Times from Paul Sweeney, Chief Economist with the Irish Congress of Trade Unions.  Ostensibly it was an attempted rebuttal of a provocative opinion piece called “the best reform of Corporation Tax would be its abolition” which the FT had the temerity to publish last Tuesday.  The writer of the article was Michael Devereux of the Oxford University Centre for Business Taxation.

If Sweeney had restricted himself to the central issue dealt with by Devereux, that would have been fine.  But he goes on to say “Ireland, Luxembourg and Holland, which exploit so-called “tax competition” to reduce taxes for corporations and rich people, must be persuaded to co-operate with other states in the EU if the single market is ever to be a level playing field for all businesses…..The dividing line between “business friendly” and “the public  good” was crossed years ago in the area of corporation tax. The imbalance of taxation, which weighs heavily on citizens and lightly on multinationals,  has been set by the agents of multinationals, their professional advisers and, in turn, their professional bodies, taxation “institutes” and commissioned “research” ”.

It is (to put it mildly) disappointing to find ICTU trying to undermine our 12.5% Corporation Tax rate in such a manner.  At a time of crisis in our national finances, some might even call it treasonable.

Six months ago I revealed my plan to resolve the Eurozone crisis: all German workers would be given a 30% wage increase by their employers.  This would, I said, “at a stroke, level the competitiveness playing field within the Eurozone while, at the same time, putting lots of new Euros into the hands of Germans to spend on Greek holidays, Spanish wine and Italian shoes.”

Bizarrely, I have seen no evidence that my plan has been taken up by European leaders.  My phone has not exactly been hopping with calls from Berlin and Paris, expressing gratitude for my brilliant insight into how to solve the major economic crisis of our times.  Sarkozy, at least, will now have plenty of time to repent for his lack of action.

But at least one solid citizen (of the USA as it happens) has taken up the cudgels and written a letter to the Financial Times  (3rd May) promoting the very policy I suggested here.  Take a bow, Raul Elizalde, of Path Financial, Sarasota, Florida:

It’s time to recognise that Germany reaped enormous gains from the creation of the common currency. If it is really committed to the eurozone’s survival, it will have to give back some of those gains, not only by providing bailout money or booking private sector losses, as it is doing, but also by surrendering some of its relative competitiveness. The most direct way is by running a higher inflation than the periphery ……. recent German unions’ demands for higher wages present just the right opportunity. Conceding higher pay could ease some built-up political pressures brought about by austerity, reward the long contribution to competitiveness made by German workers, and make the periphery’s relative adjustment easier to achieve.

It’s simple really.  As John Maudlin says: “… the money to solve the crisis does not exist. The only way to find it is for the ECB to print money and print in size, enough to lower the value of the euro and make exports cheaper (which gives southern Europe a chance to grow out of its problems).”

That’s step one.  But there would remain the problem of the relative uncompetitiveness of the peripheral countries, especially Greece.  So here is my cunning plan, worthy of Baldrick at his best: all German workers would be required to be given a 30% wage increase by their employers.  (Same would happen in quasi-German satellites such as Finland, Austria, Netherlands.)

This would, at a stroke, level the competitiveness playing field within the Eurozone while, at the same time, putting lots of new Euros into the hands of Germans to spend on Greek holidays, Spanish wine and Italian shoes.