Category Archives: Ireland

Thoughts on the early opening of pension pots in the 2013 Budget


[From your perspective] Allowing members of the public to access pension savings is a step in the right direction. It is the “Additional Voluntary Contributions” part of the pension pot which will become accessible. 30% of it’s value may be withdrawn (and then taxed).
If an employer requires that an employee contribute 5% of their income to a company pension plan, then it is the excess over this which an employee may have voluntarily put aside for their retirement that will be accessible.
It is perhaps unsurprising that a pension product so beloved by the civil service is the one which has become accessible.
People who are self-employed cannot have an Additional Voluntary Contribution pension pot.
There are two types of people who can use such a scheme. Those in possession of an Additional Voluntary Contribution pension pot and who are still in employment, and those who are no longer still in employment.
For the first set of people, they are likely to be unable to use these released monies as an investment to increase their income in the short to medium term (as they are employees) so it is likely that should they choose to use such a scheme, they will use the scheme to de-leverage (pay down debts).

Used wisely, this should allow them to increase their disposable income, at the cost of their long term earnings. This is not an unreasonable position for some to take, as the purpose of a pension is to reduce income variance across time. If they realise now that they are not as rich as they thought that they were going to be, then an inter-temporal transfer could be wise (particularly if they are paying down expensive debt).

As these people are currently in employment then the monies recouped are likely to be taxed at the effective marginal rate 41% income tax + 6.6% Pay Related Social Insurance + 7% Universal Social Charge.
For an employed person, 54.6% of monies withdrawn from an Additional Voluntary Contribution pension pot will be transferred to the Exchequer in recouped taxes.
The other set of people who may access such a pot are people who are now unemployed, and have previously paid into an Additional Voluntary Contribution pension pot.

For these it’ll make a lot more sense as they will be operating off a primary income of nil so they can probably withdraw enough to have a small basic wage for a year or two without incurring too much of a tax liability.

For former employees hoping to be entrepreneurial this may be of benefit.

There may be a missed opportunity in not also including the self-employed in this scheme. De-leveraging (for those with incomes) may  have some benefit for wider economy if those who  use it pay down expensive debt and then spend their increased disposable income.

As the Government seems to be engaging in financial repression (by increasing taxes on savings – increased Deposit Interest Retention Tax – Applying Pay Related Social Insurance to Deposits, along with last years Universal Social Charge) this might force people to spend in the present, rather than save for future rainy days.

However looking to the past suggests that people would rather fill their mattresses with cash instead.
For those without an income (including those who were self-employed) who are looking for capital for a fresh start, then this scheme could be very useful.

If however you are a deeply indebted person, then the fear is that the banks will simply use your pension pot as an extra asset to squeeze on the path towards bankruptcy.

Such capital would be used to pay down foreign debt (of the banks) the individuals long term income will decline, while short-medium income will remain unchanged, thus there is no net benefit to the economy (or even the exchequer, as someone on that path will probably only pay Universal Social Charge on the sum they redeem from their pension pot).

This seems to be the reason why the scheme is not being extended further.


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On why I voted no

When I went to the voting booth yesterday, I voted No.

It was not a case of last minute gitters, nor was it a case of my being terrified by the austerity threats of the no-campaigners; I just didn’t have it in me to vote yes.

This was the first time I’ve ever voted against a European referendum, and I did it because I have lost my faith in the institutions of the European Union.

On a whole the European Community has been a wonderful thing. Europe (if we ignore our collective culpability in the atrocities of the Balkans) has been at peace for longer than at any other period in history.

The results aren’t in but my sense is that there will be a marginal victory for the yes side. I didn’t campaign for a no vote, though mostly because I found those on that side of the debate to be too unsavoury, or too ideologically removed from me, or both.

My reasons for voting no emerge from a technical point within the treaty, which illuminates my wider difficulties with the institutions of Europe.

Article 3, section 1, subsection b states:

if the annual structural balance of the general government is at its country-specific medium0term objective as defines in the revised Stability and Growth Pact with a lower limit of a structural deficit of 0.5%  of the gross domestic product at market prices. The Contracting Parties shall ensure rapid convergence towards their respective medium term objective. The timeframe for such convergence will be proposed by the Commission taking into consideration country-specific sustainability risks…

So a consequence of this is that the commission would have a hand in guiding the budgets of the European countries. I am not against hard fiscal rules, though over forty years of experience in the United States has shown that they have no great net effect on the financial health of states.

My difficulty is that the Commission will decide, on a state by state basis, what budgetary conditions the state should operate under. This obviously confers a lot of power upon the Commission. The question I have is whether we can trust the Commission.

The treaty asks us to play a game where the goal posts have yet to be set and where, when they are set , they can be moved. This is not an idle consideration. The initial Stability and Growth Pact failed under the weight of the French and the German economies. When it became obvious that the French and the Germans could not operate within the strictures of the Stability and Growth Pact, the Commission amended their reading of the Pact such that “investment” spending such as infrastructural payments by the state, spending on education etc. did not fall within the terms of government spending; hence the French and the Germans were never technically in breach of the Pact.

This sorely undermined the Commission. When later it began to rightly argue that the Irish economy was overheating, the response from Merrion Street was that the Germans couldn’t live up to their own rules on spending, but regardless they were comfortable lecturing us on our spending.

The Commission has form when it comes erring in favour of the bigger European states while it is interpreting its responsibilities, and thus it has lost my trust.

I think that the European project has been a wonderful thing, though not universally so. The peace dividend which we have reaped, the defence of the rights of man, the trade and educational benefits have been marvellous. But I have come to the opinion that there was hubris among those who drafted the Maastricht treaty and beyond. The desire of the authors of the later treaties was to leave their fingerprints indelibly on history. They hustled the European Community into the European Union, I believe, with too much haste and without finesse. The institutions of Europe had become more important to these men, than the effects of these institutions on the citizens of Europe. The integration of the institutions outpaced the integration of the peoples of Europe, and by a long distance the integration of the economies of Europe.

And we bear the fruit of this poisoned tree. The ambition of those who wanted to be the authors of a European Constitution, have squandered the common wealth of those of us who will have to pick our way among the detritus of their decisions

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The Zollvererin roots of Germany’s sovereign power grab

When we try to understand the actions of Germany, with respect to the Eurozone, we have to look first at the Zollvererin league.

The Zollvererin was a stepping stone to a united Germany, and it is supposed that the Euro will be the bridge that leads to a united Europe (why else are there imaginary bridges on the notes).

But the logic immediately breaks down there. The Zollvererin was a currency which united the disparate Germanic states, of what had been the core of the Holy Roman Empire, after the excesses of Napoleon. But they were relatively homogeneous (certainly compared to the EU of today) and they were facing an existential threat (they couldn’t know that French imperial power was sundered at that stage) so first they united in commerce, and then ultimately in war (under Bismark against the French).

There is a large degree of myth making in the foundation tales of any nation, for Germany the primary myth it is the inevitability of Germany. There were epochs where events got in the way of a united Germany but there is a definite sense that regardless of all hindrances Germany would be one. So Germany became one again to crush the French (rather than say, wily politicians used the war to allow Prussia to dominate central Europe).

If you approach it from the perspective that there was a natural progression towards Germany, much as water flows towards the sea, then the Zollvererin was a vital prerequisite of the united Germany (as it allowed links of commerce and  culture to be forged under the protection of this initially international institution, which became ultimately federal, albeit is some detours in between).

It is almost as if, given that the Zollvererin facilitated the inevitable, then the Zollvererin must have been a necessary precondition to the united Germany; which is of course a logical fallacy.

But that is what Claude Levy-Strauss argues myths are for, to hide our internal contradictions, the conquering of cognitive dissonance.

This myth also fails to note that most currency unions end in failure, so it is not sufficient precondition for political union.

Compounding this, there is the German tendency towards Hegelianism, that conflation of what is rational, with what is moral. The Germans have never been a logical people, but the see themselves as so, and therefore make the mistakes of the fundamentalist; they confuse believing that they are correct in thought and action with “right”, and so introduce the false dichotomy that those who disagree with them are either stupid or clever (but corrupt).

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Know thyself, and know thine enemy.

The citizens are revolting


Chatting with the #occupiers of Dame Street has been interesting, if not very revealing.

What seems to be happening is that they:

  1. know that something is wrong and,
  2. know that they are not happy.

What then seems to happen is that the #occupiers then interpolate these two facts and then engage in a process of  confabulation wherein they explain these two facts using whatever schema that they believe explains the social reality of the world around them.

Consequently every one of them seem to have their own story, founded on their personal prejudices, that is internally consistent  with their view of the world. There are some commonalities. At lot of mentions of the reintroduction of a gold standard, and plenty of discussion on how the IMF is raping the country. These thoughts are probably emerging from the Seomra Spraoí contingent of the Anarcho-Communist community, who remember the Argentinian default so well.
They are obviously wrong about a gold standard, there is nothing intrinsically valuable about gold beyond our desire for it. The only benefit is that it stems inflation, and reintroducing it would copper fasten the wealth of those who have it now, and enforce an era of deflation (making those who are wealthy now, wealthier, year after year).

And they are wrong about the IMF. The IMF want to see a European solution to a European problem (and they are lending to us at the lowest long term rates). The ECB want their money back (they have lent 104 Billion of short term money to the insolvent Irish banks @ 1.25 % – 3 cheers for Super Mario)

It is the oligarchs from the European Commission who are the enemy. They own the euro (and have allowed the Germans to fuck it up). And in the words of Brian Hayse they need a “win”. They need to salvage some form of victory from this mess. The EU civil servants have been completely undermined by the council of ministers from the start of this crisis. They need to show that their policies work somewhere. They can’t “win” in Greece, nor in Portugal. So they have to win in Ireland.

Ireland following their policy of perpetual poverty through decades of deflation will show the rest of Europe that at a higher, almost moral level, the commission is right after all.

Our permanent government is facilitating them.

Our elected government are too economically illiterate to raise objections.

Which is why we need the #occupiers. Their lack of coherence would suggest that they will accomplish little directly.

But, there are second order effects to consider. If our government are too economically illiterate to counter the arguments emerging from their civil servants. And if their civil servants are entirely in thrall to the European Commission then who is left to counter the proposals of the commission.

And parse the words of István Székel carefully. What they propose is perpetual poverty driven by decades of deflation. They that Ireland  will collapse it’s expenditure, but will not tackle the underlying perversities in the property sector that has undermined the constitution of the country.

For as long as property assets remain over priced (and they are still over priced) then they (as non-traded factors) will undermine our trading competitiveness.  But to allow a resetting of the property sector would demand a fresh injection of capital into the banks. Allowing the private and business rental sectors to hit their real economic level would require that rents would collapse: undermining NAMA,the buy-to-let housing sector (which by strange coincidence is dominated by civil servants with second homes), and so the banks would be hit by another wave of foreclosures.

The Brussels oligarchs want to avoid realising these losses and allow the slow inflation of the Eurozone to eat into them (which will take a generation). But with our leaders incapable of leading then we are defenceless.

Every set of oligarchs are conservative. They are the ones whom the current system suits, hence they fear change. They therefore fear revolt, and change is all they really fear. Highly visual dissent causes them pause for though. The Irish are remarkable. Every country that has ever required an IMF bailout has rioted, except us. While Irish people hurting Irish people for the sake of European money will never be useful, in the absence of real governmental leadership, public dissent – of a peaceful kind – will be all that protects us from the powerful

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The State that we are in

“Irish self-fascination is not productive and contributes to extremes in sentiment – hubris during the tiger year when Ireland knew best and self-loathing now as some believe the country is worst for everything. The truth is that all countries are unique. There is nothing uniquely unique about Ireland.”


Dan O’Brien – Ireland, Europe and the World



The State that we are in:


We live in a benign country. Our weather is moderate, if damp. Year after year, regardless of the efforts we make, the sun fails to give us heat stroke. The last time we had a hurricane was January 5th 1839. An oiche gaoithe mór was an event so rare that it was used to determine whether a person was eligible for the five shillings pension that the British introduced in 1909. If you were old enough to remember the night of the big wind, then you were old enough to draw down the pension.


Our rain, while incessant, fails to be monsoon-like. Our rivers flood in an almost apologetic manner, they fail to rage torrentially, they rarely tear buildings asunder, and if they go about annihilating villages like their Andean cousins, well they don’t like to talk about it.


Spring does not bring us the drowning horror of the mudslide. Our summers do not sear the soil. Each autumn, brush fires do not threaten our homes. In winter, we do lot live under the terror of the thunder of an avalanche.


In Ireland we have few, if any hazards. Our most dangerous wild animal is the bumble bee. Getting on the wrong side of a bad heifer is far more likely than shark attack.


The only force of nature that we seem vulnerable to, is gravity.


Not only are we safe, we are safer than almost everywhere else. We are less likely to die in an accident than our European neighbours. According to the World Health Organisation’s 2009 country assessment[1], our roads are safer than the rest of the continent, we are less likely to die in a fire, be poisoned, drown or be killed by another person than our fellow citizens of the European Union.

Source: WHO 2009 [2]


Our children are less likely to be killed than is the European norm.


Even when we consider alcohol abuse, our people died from alcohol poisoning at a quarter of the European rate. And if we can extrapolate directly from the coroner’s data[3] even our death rate by alcoholic liver disease was only half the EU rate.


Despite the apocalyptic descriptions the HSE hospitals that accompany any discussion of health in Ireland, life expectancy at birth is higher than the European Region average, for males and for females. This is neither new nor unexpected; there was a downward trend in injury mortality rates the 1980s, a leveling off and a slight increase in the 1990s, and again a downward trend in the 2000s. Our birth rates are higher than the European average, our death rates lower, our mothers have a lower child birth mortality rate.


Our leading cause of unintentional injury-related death is falling.


The vast majority of us can expect to die of an age related illness complicated by life style issues, which we never got around to sorting out.


We are safe.


We are also relatively crime free. As the CSO states in their Quarterly National Survey “In 2010, 9% of all households experienced property crime. This was a reduction from 12% and 11% in 2003 and 2006 respectively. There was a fall in the rate of personal crime experienced by those aged 18 years and over in 2010 (4%) when compared with 2006 (5%).” Fear of crime has also been in decline, 40% of people worry about being a victim of crime, this is down from 58% in 2003.


Despite this more than four out of five people believe that crime in Ireland is a serious, or a very serious problem. Almost two thirds of people feel personally safe from crime. Three quarters of people feel safe walking home, alone, after dark. But there is an overwhelming belief that crime is getting increasingly out of hand.


Both the CSO[4] and the National Crime Council[5] agree that we have low rates of crime. Fortunately we have also lower rates of fear of crime than the Scots, the Welsh, the English and the Irish of Northern Ireland. Fear of crime has a particularly debilitating social cost as it leads to avoidance behavior and social isolation. And is an unnecessary social cost, like other countries, those who are most likely to fear crime; rural people, the aged, and the widowed are those who are least likely to experience crime. The typical victim of crime is the young, urban male, he is rarer than is European peer, and generally he doesn’t let it bother him.


What Dan O’Brien calls “The myth of lawless Irish… [our] self-image that [we are] a nation of inveterate rule breakers” is essentially untrue. We have a sense that our country, outside of our neighborhood, beyond the experience of our friends and family is a much more unpleasant place than it really is.

[1] Progress in the prevention of injuries in the WHO European Region – Ireland, WHO 2009

[4] “Crime and Victimisation” Quarterly National Household Survey

Central Statistics Office 2010


[5] “Fear of Crime in Ireland and its Impact on Quality of Life”

A Report Commissioned by the National Crime Council and published by the Department of Justice, Equality and Law Reform April, 2009

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Manufacturing and Capitalism in Ireland

Manufacturing in Ireland has been characterized by three threads of development.

There are:

The State/Semi-State Sector.

The Indigenous Manufacturers

The Foreign Direct Investment Manufacturers

From the formation of the state Ireland has suffered from an industrial deficit. This situation has often been exacerbated by transformations in the global economy and inappropriate policy making at home.

Our first experiments in industrial development, 1927, were focused on developing our predominantly rural/agrarian economy. The Great depression, and the perceived failure in globalization, strengthened the position of those who called for self-sufficient nation.

A self-sufficient nation had to first feed its people, and then its industry; these were the foci of our State Industries. The state re-created the infrastructure needed to support the food and drink sector that had been destroyed during the Civil War.

We invested in the industries that supported this sector. But trade had collapsed with the great depression.

The Second World War further compounded this regression in trade. As a result, we, like the Easter Islanders, turned our backs upon the sea. The economic isolation we suffered as a result of our protectionist stance continued into the fifties.

Without trade, we lacked the capital to invest in the high-grade imports would allow us to produce quality exports. Our manufacturers produced Irish goods, for Irish people.

T.K. Whitaker saw the solution to our industrial deficit as the importation of capital. With Foreign Direct Investment we could leapfrog the time required to develop an indigenous industrial base. Barriers to trade were brought down and continued as we entered the European Economic Community.

This allowed us to market our goods abroad, but true to the Ricardian Model of trade, our exports expanded in two dimensions:

Foreign owned capital-intensive manufacturing

Locally owned, food and drink exports.

Local manufacturing had to compete with better foreign imports that had recourse to economies of scale far beyond Irish Industry.

With the Common Agricultural Policy supporting prices for our food production the Irish economy became one where we balanced our manufacturing imports against our exported butter.

With a surplus of labour and a deficit of local Capital we lacked the incentives and the resources to invest in our indigenous tradable sector.

Foreign Direct Investment could buy in the fruits of innovation from abroad this, combined with the agreeable tax environment made, us an efficient location for foreign capital – which would ultimately be repatriated.

For decades Irish Research and Development has been under capitalized, even the foreign industries which locate here fail to invest in Research and Development to the same extent that they do elsewhere.

As the ESRI has noted (Recovery Scenarios for Ireland, 2010) perhaps the greatest cost, associated with the recent collapse will be the opportunity cost of our poor use of capital.

The Irish people finally, in the 1990’s and the 2000’s, had access to capital.

But instead of developing a generation of capitalists who could invest wealth to create wealth, we forsook manufacturing and trade for the illusory solidity of bricks and mortar.

We Irish find ourselves again in an era of restricted capital; the lesson we must learn is how to differentiate between speculation and wealth creation.

Ours continues to be an immature economy.

We have been making the mistakes other countries learned two and three hundred years ago. We have to learn that what we borrow today, we steal from tomorrow.

If the fruit of our borrowing does not compensate for the losses we will experience tomorrow, then it is not an investment it is simply consumption.

Manufacturing requires us to be entrepreneurial capitalists not consuming speculators.

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We are where we are

Our problems are great; we have a banking crisis where a housing boom has blown a hole though our banking system, and the economy itself.

There is a deficit crisis, which has arisen out of taxation system, which taxed, certain, narrow parts of the economy too heavily while expanding the government spend in the economy too quickly.

And, we are part of a Euro crisis where structural imbalances within the Eurozone – it is not, unfortunately, an optimal currency area, but I don’t want to get too technical – where structural imbalances within the Eurozone have been a great boon to Germany and as we can see a terrible burden upon Greece, Ireland, Portugal, Spain and Italy.

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