It’s an established part of the Irish economic and political cycle.  Just when we are starting to see Christmas goods appear in the shops (in October, damn it), then we also start to hear the plaintive and deceptive tones of the special-interest groups trying to bend the ear of the Minister for Finance, and promote their own causes at the expense of everybody else’s.

There is a pattern to these transparently self-serving submissions.  Reduce (or more likely these days, don’t increase) the tax on this activity or that product, they say, and the effect will be a wonderful growth in jobs and prosperity, which will more than offset the tax foregone.  Alternatively, NGOs and quangos fire off a fusillade of demands that this allowance or that subvention should not only not be reduced but that, because their constituents are uniquely vulnerable, it should be increased (with wholly beneficial effects on the economy, of course).

And newspapers and other media blandly regurgitate the related press release without adding some proper analysis.

I am reminded of the famous candlestick makers’ petition revealed to us by Frédéric Bastiat (1801-1850) wherein they asked the French government “to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat”.

And how did our resourceful candlestick makers justify their demands? By pointing to the wonderful effects such a law would have on economic activity:

First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged?

If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.

If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.

Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate. Thus, there is not one branch of agriculture that would not undergo a great expansion.

The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honour of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc.

But what shall we say of the specialities of Parisian manufacture? Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls.

There is no needy resin-collector on the heights of his sand dunes, no poor miner in the depths of his black pit, who will not receive higher wages and enjoy increased prosperity.

It needs but a little reflection, gentlemen, to be convinced that there is perhaps not one Frenchman, from the wealthy stockholder of the Anzin Company to the humblest vendor of matches, whose condition would not be improved by the success of our petition.

A wily bunch, these French candlestick makers.  But our own special-interest groups are more than a match for them.  I can already hear the thundering hooves as they launch their cavalry at the poor Minister, armed with blustering press releases and practised in tugging at our heart-strings.  Pass the popcorn.

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Lowry should read Bastiat

27 September, 2011

So former Fine Gaeler Michael Lowry is miffed that the Government has turned down the plan he was promoting for a super-casino in Tipperary. That’s not a surprise, nor is it a surprise that the present incumbents have taken the first available opportunity to stick it to Michael, given his disgraceful and self-serving support of the last Government.  Of course it’s always possible that the fact that Lowry (whom Matt Cooper described as the most disreputable politician he’d ever met) was involved had nothing to do with the decision, and that it was made entirely on its merits. Anyway, the decision was undoubtedly the right one, whatever the reasons for it.

The Irish Times reported that

Mr Lowry …. said he wanted to support plans that would bring an economic boost and up to 2,000 jobs to his Tipperary North constituency….Thurles Chamber of Commerce president Austin Broderick said the area was “totally devastated” by the Government’s refusal to allow a large casino. “It’s unreal. One thousand jobs gone down the Swanee…”

Here we go again, with alleged job creation/saving potential being used to justify everything from continuance of dodgy tax breaks to loss-making capital investments, to opening yet more shops.  John Kay has neatly disposed of similar fallacies (see here), but to see the rebuttal done elegantly and forcefully, one needs to travel far back in time and read the works of Frédéric Bastiat (1801-1850), particularly his famous Parable of the Broken Window.

In Bastiat’s tale, a man’s son breaks a pane of glass, meaning the man will have  to pay to replace it. The onlookers consider the situation and decide that the  boy has actually done the community a service because his father will have to  pay the glazier to replace the broken pane.  The glazier will then presumably spend the extra money on something else,  thus helping the local economy. The onlookers come to believe that breaking  windows stimulates the economy, but Bastiat exposes the fallacy. By breaking the window, the man’s son has reduced his  father’s disposable  income, meaning his father will not be able purchase new shoes or some  other luxury good. Thus, the broken window might help the glazier, but at the  same time, it robs other industries and reduces the amount being spent on  other goods. Net result: a loss to the economy overall.

Building a super-casino in Tipperary may create jobs, but overall it will have a negative effect on the economy as it will divert limited investment capacity from more sensible (and more socially responsible?) projects which, as it happens, would also create jobs.