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February 17, 2009



Thanks for the bonds explanation, Michael.

David Harvey makes a somewhat a related point I think, when writing about the US stimulus package:

"In order to work, the stimulus has to be administered in such a way as to guarantee that it will be spent on goods and services and so get the economy humming again. This means that any relief must be directed to those who will spend it, which means the lower classes, since even the middle classes, if they spend it at all, are more likely to spend it on bidding up asset values (buying up foreclosed houses, for example), rather than increasing their purchases of goods and services. In any case, when times are bad many people will tend to use any extra income they receive to retire debt or to save (as largely happened with the $600 rebate designed by the Bush Administration in the early summer of 2008)."

Whatever the argument for not increasing taxes now, I desperately want to see a reform of our taxation system so that those who can pay do pay, and that those that can't are assured access to quality public services and aren't threatened with having their meagre social welfare payments reduced. And I want to see it sooner rather than later.


Hi Michael,
As you would know I would broadly agree with much of your commentary on political-economy - can I just say that I think your performance over last few months has been particularly strong and looking at your responses I am delighted to see the veil of neo-liberalism being lifted for so many from the old-fashioned greed, self-interest and manipulation of current government party and many other central power sources. I would have little but minor disagreements with the majority of your recession diaries content, so rather than hunt these out to pass comment - can I just say again, well done, and keep it up


Thought you might like the opening lines of the bill to cut public servants pay:

"WHEREAS a serious disturbance in the economy and a decline in the economic circumstances of the State have occurred, which threaten the well-being of the community;
AND WHEREAS as a consequence a serious deterioration in the revenues of the State has occurred and there are significant and increasing Exchequer commitments in respect of public service pensions;
AND WHEREAS it is necessary to cut current Exchequer spending substantially to demonstrate to the international financial markets that public expenditure is being significantly controlled so as to ensure continued access to international funding, and to protect the State’s credit rating and reverse the erosion of the State’s international competitiveness;
AND WHEREAS the burden of job losses and salary reductions in the private sector has been very substantial and it is equitable that the public sector should share that burden;
AND WHEREAS it is necessary to take the measures in this Act as part of a range of measures to address the economic crisis;
AND WHEREAS the value of public service pensions is significantly and markedly more favourable than those generally available in other employment —


Thanks again Michael for all this information and analysis.

Here's another few slogans for placards on Saturday:

'No Solidarty Pact - Unions fight instead'

'No Solidarity Pact - No ICTU agreement to cuts'

'What's "fairness" - why should workers pay anything for the crisis?!'


Michael, I agree with Yvonne. There is no better time to redress the structural imbalances than now, not just on a political economy basis, but also from a macro economic point of view. And I can´t see how this is anything other than a structural crisis!

The government should increase the tax take, from those with surplus income, unproductive assets, etc, although not to balance the books, but instead to create the mother of all stimulus packages. This is the moment to increase the size of government. Provide state funded childcare, state funded univeral healthcare, state investment in infrastructure: public transport, green energy, a real energy conservation scheme. This would radically change the nature of the economy, provide employment and enhance our competitiveness.

Another slogan: I´m not sick, I don´t need medicine.

Thanks for this blog by the way. Especially appreciate the post on the bond markets. Illuminating!


Hi Michael,
Well done on another informative and informed diary entry.Is it just me but are the firms letting people go actually loss-makers?Didn't Intel,IBM,Dell(?) and Microsoft all make huge profits last year?So,why are they making people redundant?Is there no legal mechanism to prevent such anti-social,indeed asocial behaviour?Could such a law work?This recession is looking like an all out attack on working people....everywhere



Job losses are a natural part of development. For example M/soft employs around the same number of people now as it did 20 years ago, but the work done now is totally different. There is a huge difference between high end work such as R & D or software engineering and filling boxes with disks. The same would broadly apply to IBM, they have been moving from hardware to software. In the case of Dell, they are doing what they did 20 years ago, ergo Jobs gone.

In the case of Intel, the company has a problem of excess capacity throughout the world. However the number employed presently is well above the average over the past 20 years.

I would suggest that the problem is not large companies which employ mainly graduate or post graduate qualified and are consistently developing and investing. The problem relates to those who do not invest.


Great stuff. I enjoyed David McWilliams article on Sunday, but after the first column it just drifted away to nothing.


Interesting post. I have to say i'm slightly conflicted about the pension levy. I see it as being very fair (espec. in the context of the giveaway 'benchmarking process) but at the same time I accept it's likely to depress economic activity generated by the great mass of the economy which isn't otherwise under significant pressure. As a private sector worker who has very real fears as to whether I'll have a job this time next month (and as to whether my pension will be intact) I have limited sympathy on a personal level for those impacted by the levy.
But McWilliams piece was good and Ireland needs to start doing real things to help people start business and create jobs. Proper tax breaks for R&D and a reform of the personal bankruptcy laws would be two that come to mind.

Hugh Green

Fergal asks:

'Didn't Intel,IBM,Dell(?) and Microsoft all make huge profits last year? So,why are they making people redundant?'

Niall responds:

'Job losses are a natural part of development.'

Job losses are not a natural part of development. There is of course a continuing focus in such companies in shifting labour to lower cost locations, and by depressing wages and conditions in the higher cost locations by threatening workers with moving their jobs elsewhere.

However, when massive job cuts are made in these companies, it's due to falling revenues, and the expectation on the part of investors that the number employed should be reduced in line with declining revenue. So a 10% fall in revenue should bring about a 10% drop in the number of people employed.

Even if a firm is profitable when revenue is falling, there will still be expectations on the part of its investors that its executives kick people out on the street in the requisite quantities.

That's capitalism, people.

Michael Taft

Yvonne and Liam - I absolutely agree with your points and I certainly don't want to give the impression that I'm against tax increases, per se. As you say Liam, tax increases must first hit revenue and unproductive capital that is not being used for the benefit of the economy. I will address this issue in a post soon.

Thanks, Tipster, for the read. It does say it all.

D_D, I'll look out for one of those placards on Saturday. And hopefully people will take note.

Jim, don't mind the minor or major disagreements. We all need to tease out the implications of very difficult issues. In many respects, we're stumbling in the dark, slowly (at least I am). Dialogue is always good.

Alec - yes, it did peter out a bit, taking up a suggestion from Argentina. Actually, the Enterprise Strategy Group suggested something similar - placing international marketing experts into indigenous companies. They realised that our home-grown companies need the kind of help they are incapable of growing themselves. So it's not really a new suggestion on the part of David. Still, his principle is sound.

Smoke, I take what you say. What we desperately need is a programme that can address your (and so many others) fear about their job. We also need a public sector wage strategy that is seen as fair, is egalitarian and appropriate for these recessionary times. What was agreed last year doesn't really fit. What the Government is doing doesn't fit either.

Fergal, though you're absolutely right about this 'asocial' behaviour, I'm dubious about legislative approaches (it would merely mean that foreign companies wouldn't come here in the first place - and we desperately need them because it's not like our indigenous crowd are up to anything else). In that respect Niall's analysis is correct. However, that doesn't mean we have to stand idly by while our economic base is being ruined. I hope to have up a post on this subject very soon. But I emphasise - we shouldn't suffer this in silence and just let it go.

Ah, capitalism, Hugh - you can't live with it, you can live without it.


Many thanks to Niall,Hugh and Michael for the comments.
Niall,I'm always sceptical when I hear the word "natural".If your analysis is correct then capitalism has achieved complete freedom in how it operates while those who "invest" their labour in firms remain at the mercy of so- called market forces.
Hugh,it sure is capitalism but of what kind?It could be called financial capitalism, that promises eternally rising yields for shareholders,year in year out with the current financial crisis just one consequence of it.
Michael,I suppose what I was getting at was some sort of socal contract à la Rousseau that the big companies are given carrots to come set up here but cannot let people go in their firm is making billions in profits.Would this frighten them off?I'm just trying to come up with ideas that don't hurt ordinary people and especially in the cotext of a govt.(what's happened to the Greens?)that seems incapable of standing up to capital.



Let us take two hi-tech firms which have survived for a very long time,Siemens & IBM.

Siemens are in their third century of existence because of an ability to make serious decisions about investment & when to stop investing. A company like Siemens, which is run by engineers, makes strategic decisions to enter certain markets thinking at least 10 years down the line. It also gets out of businesses if they see no future,i.e. they will not get a return on their investment.

I remember an excellent Siemens 486 computer I had manyy years, they are no longer in that business because they could not make it pay. They have also pulled out of computer chips and mobile phones,because perhaps there were others better than them.

The difference is that they have been willing to invest.

IBM are one of the three biggest private sector employers with Wyeth & Intel. Again they have pulled out of the PC market and moved to software in the case of Ireland, many staff have been retrained, if they had the skills. The move out of PCs was sensible because they were not able to get a reasonable return on their investment. I would not expect you to leave your money on deposit @ 1% when you can get 4% down the road for a similar level of risk.

I am not using my old Siemens 486 machine nor are you ringing your friends from the call box at the end of the road.

Dependence on foreign multi-nationals is always dangerous. But in Ireland they have probably been more dependable than the native business owner. Going back over the past 20 years, I can only think of one multi national which left Ireland and prospered.

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