Tag Archives: Capitalism

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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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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