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« February 3rd Afternoon: The Recession Diaries | Main | February 6th Afternoon: The Recession Diaries »

February 05, 2009

Comments

Yvonne

Micahel, this is insightful viz price-setting in the electricity market - I must plead ignorance here. I particularly appreciate the following observation because it sums up for me the way in which it seems we are all co-opted by the media non-debate:

"Because now, thrashing out in the darkness, we are lining up in our sights anything that moves."

Pavement Trauma

".. the ESB wage increases will benefit the Exchequer more, and reduce the deficit further, than if they were retained by the ESB."

Last time I looked the ESB was publically owned and all its profits could flow back to the government as dividends. So this is a completely screwy way of looking at the 'benefit' of increasing wages. With fixed prices higher wages in the ESB equals lower profits equals less dividends for the government - equals less services / higher taxes for everyone else. This is Robin Hood in reverse. The *average* pay in the ESB is one of the highest of any major company in the country being >60k and if memory serves me right, with averages of above 120k for some sections.

cactus flower

ESB workers are also shareholders in the ESB - and with wages comparable to the head of a quango, a GP, or a politician, are financial aristocracy of the working class. This aristocracy was fostered when cheap credit was flowing but now it is more expedient for Government and particularly the wealthy to have a wedge driven between them and the middle and working classes.

This situation is also being used to advance the agenda of privatising the grid, imo a potentially disastrous piece of looting worse than eircom, which left us crippled with regard to broadband.

Where I differ with you Michael is your view that the economic crisis is simply one of inactivity, and that pumping a bit more money into the economy is the answer. The reality is that what has happened is that forty years of a credit bubble has been blasted apart by expanding global productive forces that have squeezed rates of profit to next to nothing. To find profit, artificial financial instruments have been created and let rip, so with the burst of the bubble there is an unquantifiable implosion taking place.

Monetarists have become Keynesians overnight in the vain hope that printing money will fix this but that will only devalue currencies.

Business is not going to resume as usual.

The is no getting away from the bankruptcy of the system and the political class that are part of it.



Michael Taft

Pavement Trauma - I'm a big fan of Robin Hood (and applaud Kevin Costner's film version where 'rich' and 'poor' weren't mentioned once and his Robin character looked like a medieval George Washington). But I'm not sure, whether reverse or not, it's applicable here. Yes, in theory all ESB profits could go to the shareholder/Minister. But why should a public enterprise act differently than a private enterprise. No one would expect - nor would it be prudent - to distribute all profits in dividends (ESB distributed 30% of profits back to the shareholder). Rather, some goes on dividend, some on pay agreements (freely entered into) the remainder reinvested back into the business. Seems reasonable, which is why I'm amused at all the uproar.

Cactus Flower, I can't disagree with anything you say except when you suggest that I view the economic crisis as simplly one of inactivity to be solved by the simple fiat of more money. I accept that much of the emphasis in my posts has been on inactivity and the soothing balm of economic stimulus. But that is only because, whereas in most other places, everyone has become a Keynesian, in Ireland the self-evident (to me anyway) rationale for stimulus is dismissed by some truly virulent fiscal conservatism. You're right, there can be no going back. Not only is this crisis a fatal challenge to the low-tax, low-spend, low-service economy we have nurtured for decades, it also undermines strategies based on FDI-led enterprise development. Wherever I look, at all the problems of economic governance, the answer is simple: a deepening and extending of social democracy (and I use that term in the good, traditional sense - rooted in the labour movement and embracing the broad progressive spectrum in a fundamental challenge to capitalism). But though the answer is simple, the programmatic solutions are not so, especially for a small, open economy. However, in the future I will pay more attention to exactly what this deepening and extending means.

After all, economics is about who gets how much. And that is determined by power in society - economic and political.

Pavement Trauma

"why should a public enterprise act differently than a private enterprise"

Well exactly. What do you think would happen in a private enterprise, if its parent company was in severe trouble and having to make cut backs? No effect? Business as usual?

Get real. You tried to make the point that the gov will get more money due to the wage hikes. That is patently false.

Michael Taft

No, I was only saying that in profitable companies the government gets more in revenue when part of the profit is distributed in wages rather than retained for profit. ESB is a profitable company - capable of paying wage increases per the agreement, paying a strong dividend and retaining profit for further investment. That is the kind of company we need more of, lots more.

Pavement Trauma

Dividends are paid out of retained earnings. If they are not paid out to the Gov now, they can still be paid to them later. The bottom line is the wage rise has deprived the Gov of either some present revenue or future revenue.

Fergus O'Rourke

What about Simon Coveney's point that the ESB cannot be regarded as truly profitable when its pension scheme is so seriously in deficit ?

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