Monday, March 31, 2008
Mind you, I wouldn't be so sanguine about the economic situation if I was living in the United States. There things do seem to be gloomier with the likelihood they will get worse. Still, our American cousins are nothing if not optimists - and so it seems there's always a silver lining to every economic cloud - apparently you can have a good recession.
I think Irish consumers in general are sensible about money and their financial arrangements. Surveys point to a general unwillingness to go to the extremes of the USA, or even the UK (hence the still low levels of credit card ownership relative to both countries). We've had our Celtic Tiger 'blow out' (like students with their first credit card or overdraft) and we're now being a lot more sober about money it seems. Which suggest that we've learned many of the lessons about the psychology of money without suffering any of the pathologies.
Another reason for cautious optimism perhaps.
Sunday, March 30, 2008
I am an avid user of Google Desktop and it has often struck me that an 'implanted' version of same would do wonders for my memory (and for those can't-quite-put-a-name-to-the-face moments). Not unlike the scenario in Vernor Vinge's delightful novel Rainbows End.
Luckily I am not alone in spotting this opportunity: though it's not there yet, what about the idea of hiring your own paparazzi to record your public life? Of course, for the younger generation, Bebo, Facebook and MySpace sort of serve this extra-memory function. Better still, it seems that regular exposure to pictures of your loved ones increases commitment and fidelity. Thanks for the memories indeed.
The play touched me at many levels; first the story itself - enough to make any 'gentleman now-a-bed ... think themselves accurs'd they were not here, and hold their manhoods cheap whiles any speaks' of Crean, Shackleton and Scott.
More powerful still, perhaps, was Aidan Dooley's ability to bring alive in our imaginations the men, the landscape and the endurance of these giants of the human spirit. There really is something primeval about this human capacity for story telling, and for story listening.
Wonderful. Do go the next chance you get.
Saturday, March 29, 2008
Better still, it should inspire other teenagers to use their talents, energy and ambition to build their dreams: the internet represents the democratization of opportunity. And so far it seems to be doing a better job for many of our young men than the Irish education system. Maybe we should outsource the job to Google, Bebo and eBay?
Better still, the success of the Collison brothers might even inspire parents of teenagers to see beyond the usual, negative media depictions of modern teenagers. It has this one ...
Friday, March 28, 2008
More worrying perhaps is the ESB's politically correct plan that:
By 2020, ESB will be delivering one-third of its electricity from renewable generation. This will include over 1,400 megawatts of wind generation, in addition to wave, tidal and biomass. To promote this, the company will invest in emerging green technologies.Now I'm all in favour of renewable, clean technology: let a thousand wind turbines bloom and all that. But it simply isn't enough. First of all, most of the ESB's 1,400 megawatts is going to come from wind generation. The token genuflection towards wave and tidal is just that: a wishful prayer to imaginary abstractions that simply don't exist yet. If you don't believe me read the European Commission's Technology Map report that was prepared as an input into its Strategy Energy Technology Plan. Ocean power is up their with nuclear fusion: a great idea whose time has not yet come and won't for the foreseeable future.
So back to wind: and that's the scary bit. Go to Eirgrid's web site and click on the Wind Generation Chart. Then use the little calendar application to pull up data for Saturday, 16th February 2008 (that's right, last month). During the entire day of the 16th February, our installed wind generation capacity of over 1,000 megawatts was unable to supply even as much as 80 megawatts of electricity - or 8% of capacity. And in 12 year's time ESB wants to expose one third of its generation capacity to wind. You see the problem?
As I've noted before, we face daunting energy challenges - demanding radical innovations in how we generate, distribute and use energy. The ESB's politically correct bromide does not rise to that challenge, rather it dodges the big issue: nuclear power. In the short term we can hope that one or more East-West interconnectors with the UK mainland grid will keep our lights on when the wind doesn't blow (after 2012 anyway). But the UK faces its own energy challenges - and there is no guarantee that they will have any 'spare' capacity to send our way in ten year's time.
Matt Cooper has a thoughtful opinion piece in today's Irish Examiner setting out the case for nuclear power in Ireland - or at least the need to debate it. But in the end I think we will be victims of what in the IT sector they call 'the tyranny of the installed base'. In other words, if you and all your colleagues are used to IBM hardware and Microsoft software then it's hard to change to something else. In the case of energy, we face the tyranny of an installed base of coal and gas fired power stations and an expanding wind sector. We need them - but we also need the base load, non-fossil fuel, non-wind dependent certainty of nuclear power. We'll get British nuclear power over the interconnector to begin with, but ultimately we'll have to generate our own.
Unfortunately that's when our problems will really start. Ireland's biggest problem regarding nuclear power is that we don't already have it. In other words, we don't have the engineers, suppliers, know-how and networks that would help us expand to meet demand. It takes more effort (energy if you will) to get from nought to sixty than from sixty to one hundred.
And by the way: only one company - in Japan - has a near global monopoly on manufacturing key components of nuclear power stations - and they have back orders out to 2015. Maybe we should place our orders now and have our debate in the meantime? The queue's only going to get longer. A lot longer.
Thursday, March 27, 2008
But there is one sin left: and that is the sin of passing judgment on other people's lifestyles - no matter how appalling their behaviour or damaging the consequences of their choices. I recently watched a hilarious episode of My Name Is Earl in which the mother of one of the characters turns out to be a gambling addict. She does several things to fuel her addiction, selling the family car, selling the house - all without telling her husband and children. But every time she is found out she demands "don't judge me" of her accusers, playing the part of the helpless victim.
"Don't Judge Me" appears to be the mantra of a growing number of people in Ireland. Take births outside marriage: as the chart shows the proportion of births to unmarried mothers has risen from just over 5% of all births twenty years ago to nearly a third today (32% in Q2 2007 to be precise). In some parts of the country the figure is much higher - 54% of all births in Limerick City are to unmarried mothers (see Table 4, page 13 of this CSO report). And something tells me they're not all bohemian couples determined to shirk off the conventions of bourgeois society.
The consequences of this for the parents, the children and the communities affected have been disastrous. Study after study has shown that children raised in families with both biological parents present fare better on just about every measure of health, education and wellbeing than children born to single mothers. The tragedy is that we have to justify the blindingly obvious - again, the accusation is that we are passing judgment on other people's choices when we propose that married parents have made a 'superior' choice to single parents. Though in the wake of the abduction of Shannon Matthews in England, more than a few eyebrows have been raised by the conduct of her 32 year old mother who has had seven children by five fathers. Maybe it will become fashionable to pass judgment again?
None of us wants a return to the valley of the squinting windows. But all of us have to learn the fundamental lesson of economics: INCENTIVES MATTER. Slowly but surely some in Government are recognising this - as witness Seamus Brennan's initiative to change welfare provisions for single parents. New research from the United States shows that raising children from otherwise disadvantaged backgrounds in families with both biological parents will go on to attain higher levels of education and incomes compared to equally disadvantaged children raised by a single parent. These choices have massive implications for the next generation and beyond.
We should also to look further afield to avoid using the wrong incentives. Such as in Spain: where couples are getting divorced in order to get their children into better schools. While we're at it, let's avoid the initiative in Australia to encourage couples to have children which offered a bonus of $3,000 for every child born after July 1st. Guess what, there was a collapse in the number of births in May-June and a spike in July-August overwhelming maternity facilities. Gee - who would have seen that coming?
Like I said: incentives matter. Not just in the wider economy but also in our personal and family lives. Let's be wiser about the incentives we put in place, and not be afraid to judge the consequences.
Wednesday, March 26, 2008
There on the wall behind the reception counter was a price list plainly stating that gentlemen's hair cuts were cheaper than women's. This struck me as remarkable - why would women put up with such blatant discrimination? I asked the stylist who cut my hair whether it was easier/quicker for her to cut men's hair on average than women's. Yes and no was her answer: older men (like me unfortunately) tend to have straight forward requirements (read: boring/conservative) - but in her experience younger men were increasingly demanding the same 'exotic' range of treatments as many women.
One key difference between men and women of course is that men have an alternative: the barbers. This readily available (except last weekend), cheaper alternative (by about 50% I reckon) means that hairdressers who want to attract male customers have to keep their prices lower for men. But not so low that their women customers will get really annoyed at the discrimination.
But hey: I'm not complaining - I don't want some inspectors going around demanding equal pricing for women and men. We know what that will mean: higher prices for men. This is one form of sexual discrimination I'm quite happy to put up with.
Tuesday, March 25, 2008
You get a sense of the tone by taking just one paragraph from the opening chapter on The Context:
Poor people are excluded from decision-making even when the decisions concern their level of income or their right to work. They are seen by many as a commodity, or are viewed as surplus to the requirements of society, and are dismissed accordingly. Society is now structured in such a way that people in these groups have no future prospects. Social and cultural life today requires money, and very often is organised around the place of employment. People who are poor and unemployed are excluded from the main life of the community.Just think about what this paragraph says: 'poor people are excluded from decision-making even when the decisions concern their level of income' - I ask you: WHO gets to 'decide' their level of income, poor or otherwise? And I don't mean just gross income: when was the last time the Revenue Commission asked you how much tax you would like to pay? What about some of CORI's comments on social exclusion: 'they are seen by many as a commodity, or viewed as surplus to the requirements of society'. Really? Who views them this way? I'm reasonably well read but I don't recall anyone advocating 'eat the poor' or 'export the lot of them' in recent times (post Dean Swift anyway). What about 'Society is now structured in such a way that people in these groups have no future'? Again, I wonder which planet the good folk in CORI have been living on in recent years? As one community worker I heard put it: 'even the junkies are getting jobs these days' - so who are these poor unfortunate people CORI have told 'have no future'?
The tone, in other words, is straight out of The Worker's Party manifesto circa 1981: 'they' (the nasty capitalists) are out to get 'the rest of us' (the workless classes). Like I said, I really do wonder if CORI et al are living in some kind of time warp: not so much Angela's Ashes as Ashes to Ashes, unaware that it's actually 2008? Certainly their language and contrived sense of wounded grievance would make you wonder.
CORI is much exercised by comparisons of national social protection expenditures in the EU - and how badly Ireland compares. Once again we are beaten up by the authors for not being Scandinavian enough - even though a lot of Scandinavian's would really prefer our lighter, keep-more-of-the-money-you-earn-yourself approach to taxation and social policies. CORI's report cleverly splices together terms like 'infrastructural and social provision deficits' as if roads and sickness benefit are the same thing. They're not: one is capital expenditure (possibly funded by borrowing) that will support income generation in the future, the other is current spending funded out of taxes on those currently in employment.
A key issue of course is the definition of poverty. As I've noted before, the issues of equality and poverty get conflated in much of the commentary on Ireland's social problems - as it does in the CORI report. CORI do finally get around - on page 29 - to admitting that the incidence of poverty is actually falling, and has done since 2001. They, of course, attribute this to higher social welfare spending (on the elderly in particular) for which they claim some of the credit. Of course this has had an impact: but the more significant impact is from job creation. CORI make a big deal about the fact that 6.5% of those in work are living at risk of poverty. Or, if you prefer (though they don't): 93.5% of those in work are NOT living at risk of poverty.
CORI's solution to the - declining - problem of poverty in Ireland is 'fairer taxes'. Naturally the only fair tax is a higher tax on CORI-nation Street. But if CORI's ambitions stopped at higher taxes I would think fair enough: at least they are being consistent in demanding higher taxes to fund higher social expenditure (unlike some politicians who think you can lower taxes AND increase spending at the same time). But unfortunately CORI's ambitions don't stop there. Perhaps the most disturbing part of their report is that on Values - where I thought I might have had some common ground with them until I read this, referring to the Church's earliest teachers:
These early leaders also established that a person in extreme necessity has the right to take from the riches of others what s/he needs, since private property has a social quality deriving from the law of the communal purpose of earthly goods ... One of the major contributors to the generation of wealth is technology. The technology we have today is the product of the work of many people through many generations. Through the laws of patenting and exploration a very small group of people has claimed legal rights to a large portion of the world’s wealth. ... Therefore, no one can claim exclusive rights over the means of production. Rather that right “is subordinated to the right to common use, to the fact that goods are meant for everyone“.This is scary stuff: pure, undiluted Marxism with a dash of Anarchism ('property is theft'). As for the Irish people subscribing to these values: again I think the CORI folk have been time-tripping back to the 1980s. The Irish people, last time I checked, subscribe to the view that they should keep most of the money they earn because IT'S THEIR MONEY, and I think you'll find they're rather attached to their possessions as well (houses, cars, DVD players - though the latter might not have been invented yet on CORI-nation Street).
... Since everyone has a right to a proportion of the goods of the country, society is faced with two responsibilities regarding economic resources: firstly each person should have sufficient to access the good life; and secondly, since the earth’s resources are finite, and since “more” is not necessarily “better”, it is time that society faced the question of putting a limit on the wealth that any person or corporation can accumulate.
... Most people in Irish society would subscribe to the values articulated here. However these values will only be operative in our society when appropriate structures and infrastructures are put in place.
The CORI report is a shame really - because extreme poverty in the midst of extreme wealth is obscene: and the only countries to have successfully reduced extreme poverty are those that have embraced the transformative power of lower taxes, strong property rights, and free trade. Not quite the formula CORI have in mind.
Monday, March 24, 2008
I'm finally figuring out what all the fuss over Bear Stearns was all about - seems they had exposures totaling $13.4 trillion when things went pear shaped: that's equivalent to a quarter of the entire global GDP. And they're only the fifth largest investment bank in the USA. For a superb analysis of why things have gotten so bad see this from the New York Times: bottom line - expect a whole lot more regulation of Wall St in future (and a possibly less benign climate for our own International Financial Services Centre).
Good news for golf widows (and the smaller number of widowers) out there: it looks like the future of golf is gloomy indeed - nobody can afford the time any more (at least not those wanting to keep there jobs). What'll we do with all the golf courses: grow bio-fuels perhaps?
The great paper vs. plastic debate continues: it seems that on a lifetime impact basis we would all be a lot better off using plastic bags instead of paper ones. I wonder can we persuade the government to give us back our plastic bag taxes?
Thinking of a career in journalism? Think again - it seems that journalists are in the same position as blacksmiths who observed the arrival of the motorcar. One clue, most of the students studying for journalism don't, er, read newspapers ...
Sunday, March 23, 2008
Ireland's transformation from a poor, religious society to a rich, secular society is more or less complete it seems. We're not the first to undergo such a change, of course, but I wouldn't be surprised if we were the fastest. Though Ireland is not on the chart, we're somewhere down towards the bottom right hand corner I reckon.
We are at a fascinating stage historically in the ancient debate between religion on the one hand and secularism (or science or doubt or reason) on the other. We have witnessed this directly in relation to Northern Ireland, and it forms part of the ongoing Western conflict with Islamism. New insights from philosophy and historical exegesis are helping re-define the terms of the discussion. But despite the gloomier headlines I think we are witnessing a new dawn of reconciliation between religion and secularism. This historical moment is explored eloquently in a recent article in The Atlantic (which the chart is from), which concludes:
We have seen how rapidly religion has spread in the past, claiming adherents from competing faiths before the competition knew what hit them. Both secularism and secularly inspired ways of being religious are spreading just as rapidly—maybe even more so. Historians may one day look back on the next few decades, not as yet another era when religious conflicts enveloped countries and blew apart established societies, but as the era when secularization took over the world.This is not to herald 'the end of religion' or any such prophecy. Rather it is a recognition that perhaps we are finding a new vocabulary and shared perspectives to move the debate on - with both the religious and the secular perspectives contributing to a better future. Even as science turns its attention to explaining the religious impulse, we are discovering anew the role religion plays in social cohesion. Even economists now recognise that religious belief is a powerful mental insurance against economic turbulence.
And there's one other thing: visit any church or religious gathering and the one thing that will strike you is the gender balance (it certainly struck me this morning at one of my occasional visits to mass at Blackrock church). By and large, women seem to make up the majority of religious communities in secular societies. So it is women who hold the key to religion's future (in Ireland as well as elsewhere), and I suspect the benefits they derive will not be easily replicated by secular alternatives. Religion's future is therefore female.
I hope it's a happy Easter for you.
Saturday, March 22, 2008
In another experiment, the researchers gave participants a $5 or $20 bill, asking them to spend the money by 5 p.m. that day. Half the participants were instructed to spend the money on themselves, and half were assigned to spend the money on others. Participants who spent the windfall on others reported feeling happier at the end of the day than those who spent the money on themselves.Yet another useful finding from the field of behavioural economics. It got me thinking about our own Irish Aid efforts. As I've noted before, Irish Aid is in danger of crowding out the efforts of charities to raise funds themselves. This year, the Government will spend €914 million on 'official development assistance': or foreign aid to you and me. Though a lot of this will go to Irish charities working in developing countries, the vast majority of it will simply be given to non-Irish NGOs and other international bodies.
I think this is wrong - and indeed others are beginning to question the efficacy of our burgeoning aid budget. If Irish tax payers are going to fund overseas aid initiatives then at the very least the funding should go to Irish organisations leading such initiatives. Which brings me back to the research about happiness and giving. Why not let every citizen in the country decide how to spend Ireland's aid budget - that way you get the benefit of spending that reflects the wishes of the electorate AND they all get the good feeling buzz from doing good? Direct involvement, after all, is at the heart of the New Philanthropy as it has been called.
I see it working this way: each voter on the electoral register is given a voucher worth their part of the total Irish Aid budget at the start of the year - that's about €286 each given a population of 3.2 million aged over 18. Each citizen can then 'spend' their voucher (during the year or the voucher is no longer valid) by giving it to any one of the Irish NGOs registered with Dóchas. The charities can advertise their activities in developing countries (as they do already) in order to attract voucher donations. Citizens should also be able to elect to pay their voucher directly each year by standing order to a charity of their choice, giving the charities some sense of continuous funding.
There would be a few details to work out, e.g.: what if not all citizens donate their vouchers by the end of the year? A simple solution would be for the Government to use any underspend to 'top up' charities funding pro rata to the amounts they receive from private citizens (and so achieve it's stated goal of overseas aid to the value of 0.7% of GNP by 2012). And what about all the civil servants working in Irish Aid? Simple: they should re-focus on championing free trade as the proven formula for making poverty history - like it did for us.
Such an initiative would increase funding to Irish NGOs, engage Irish citizens directly in Ireland's aid efforts, and make everyone happier to boot. The money would probably be better spent as well come to think of it. So why not?
Friday, March 21, 2008
The way I see it, TICodes will enable web and ultimately mobile users to a) never be lost again and b) never have to give directions again. Kind of handy that. But the really interesting stuff is the range of applications that I can't foresee - but others will. Just look at some of the applications from around the world that are using the power of GPS, mobiles and detailed mapping information to do things such as real world gaming; or even calculating the walkscore for how far it is to walk to different amenities from a house or apartment you are thinking of buying or renting.
The two dimensional world of the screen you are looking at is about to go 3D, thanks to your mobile phone and innovations such as TICode. Another example of how Ireland can use our natural born networking skills to seize the opportunities of Web 2.0 and beyond.
Here's my TICode, by the way. What's yours?
Thursday, March 20, 2008
There has always been an uneasy tension between town and country in Ireland, more so than in many other countries as we came late to urbanisation (come to think of it: the Vikings and the Normans forced it on us).
Nowadays that tension has been subsumed into a Dublin versus the (rest of the) Country dichotomy. But I think the tension has moved from harmless to pathological, as manifest in the Twilight Zone unreality that is 'de-centralisation' and regional planning in this state.
One of the most important reports I have ever read on the future of Ireland was published just a few weeks ago by The Futures Academy at DIT*. Called: Twice the Size - Imagineering the Future of Irish Gateways, the report paints the starkest possible picture for the future of our capital and our country if we persist with the lunatic notion of 'balanced development' and a political agenda that treats Dublin as an economic sow feeding the regional suckling pigs. And if you think I exaggerate just look at the recent analysis of taxes by county.
Our regional and spatial policies in Ireland have been a variation on Mao's Great Leap Forward. Only instead of steel furnaces in every backyard we get airports, motorways and industrial parks in every town with a population nudging 10,000. The result is Dublin: a capital city without proper city governance or adequate infrastructure, and a surging population that dwarfs all the demographic trends in the rest of the country.
Such pressures mean that Dublin has the dubious distinction of having a cost of living 22% higher than New York, and the forth highest of 71 cities surveyed at the start of 2008 by UBS. We were ranked 13th in 2005 by the way: boy have we got things out of kilter when we make Zurich, Paris, Tokyo and New York look cheap. A separate, quite extraordinary study on The Soul of the City by Gallup shows Dublin to be in the category of 'Good But Dis-Integrating' cities, along with London, Paris and Berlin. And it is obvious from the opinions of Dubliners reported in the study that we can see the dis-integration happening around us.
This also tells us that we need to see our capital city's future in a global context. In 2007, humanity's urban population surpassed its rural population for the first time in history. According to DB Research the future belongs to mega-cities, as well as to distinctive, smaller cities that create the right environment for business and cultural innovation. I've been reading a number of articles by Richard Florida, author of Who's Your City?, who has this to say about the future:
Globalization is not flattening the world; on the contrary, the world is spiky. Place is becoming more relevant to the global economy and our individual lives. The choice of where to live, therefore, is not an arbitrary one. It is arguably the most important decision we make, as important as choosing a spouse or a career. In fact, place exerts powerful influence over the jobs and careers we have access to, the people meet and our “mating markets” and our ability to lead happy and fulfilled lives.The Dublin Chamber of Commerce has indeed anticipated some of Florida's insights, and has identified the importance of our capital as a catalyst for the knowledge-based economy that will provide growth for the future. They and others realise that the future of Ireland as a whole is inexorably tied up with the future of Dublin. But economic arguments are one thing: political arguments are another. And as the Twice the Size report makes clear, the over-taxed, traffic-suffering, over-charged voters of the Greater Dublin Area will soon elect the majority of TDs once the boundary commission catches up with demographic reality.
Maybe then it will be the turn of the East to awake.
* For the record, I'm a Fellow of the Futures Academy, but I was not involved in the Twice the Size report.
Wednesday, March 19, 2008
With the Fed cutting its core interest rate by 0.75% yesterday the pressure will be on Jean-Claude Trichet at the ECB to follow suit in order to stop a further appreciation of the euro. The Sunday Business Post interviewed four bank economists at the weekend about the outlook for interest rates in the eurozone. Their answer: in short "we don't know"; while the longer version was "they might come down, they could even go up, but we don't know".
I sometimes think that economics will eventually be subsumed into social psychology, with the single exception of monetary policy. Monetary policy is part art and part science - hence the difficulty all economists have with the subject (never mind forecasts). This was brought home to me listening to a fascinating discussion on the nature of money and monetary policy in the context of the present crisis over at EconTalk. A great primer for those of you wishing to add a little theory to the headlines.
Coming back to Europe, check out this presentation by my old macro-economics lecturer Willem Buiter at the LSE. His bottom line: Europe isn't in anything like the same mess as the United States and we have a lot more room for manoeuvre for now. So maybe the ECB should start their engines but not take off just yet.
Monday, March 17, 2008
I remember a delightful BBC biopic about the life of George Orwell. In one scene a friend comes to visit him at his home on the remote island of Jura in Scotland. They step outdoors to survey the landscape and Orwell's friend asks him, rather worried, whether it was true that there were no police on the island. "Yes" replied Orwell, looking around him at the fields, hills, sheep and sky "as you can see it's total anarchy", his tongue firmly in his cheek.
And so it is when some people fret about there not being any 'politicians on the island' - I look around me and wonder: what's the problem with that? The politicians and the media might need each other to fill the column inches and air time, but the rest of us just get on with our family lives, our friendships, our work and our dreams without them.
There has been a lot of media coverage recently on the placebo effect in relation to the effectiveness of various drugs and medical treatments. According to Wikipedia, a placebo is a preparation which is pharmacologically inert but which may have a therapeutic effect based solely on the power of suggestion. A placebo effect occurs when a patient's symptoms are altered in some way (i.e., alleviated or exacerbated) by an otherwise inert treatment, due to the individual expecting or believing that it will work.
Which got me thinking about Placebo Politics. Could it be that we think politicians are important to our wellbeing because, er, we keep being told they are? There has been some fascinating work done on the placebo effect in economics. One recent study showed that participants in an experiment were convinced that more expensive pills for pain relief were more effective than cheaper ones (both, of course, were placebos). So the more government costs the better we think it must be for our collective wellbeing?
Perhaps we need a controlled experiment: I wonder what would happen if our politicians really did take a year long holiday? Maybe they would just get on with their other jobs?
Oh, and a happy Lá Fhéile Pádraig to you by the way.
PS: hat tip to the one and only 20 Major for the photo.
Sunday, March 16, 2008
The Irish Times quoted the European Commission’s president José Manuel Barroso, in reference to Ireland’s onerous 20% reduction target, as saying that "Our proposal is equitable, fair and technically sound - we will not change it.” He went on to say that "Ireland has benefited so much from structural aid from the EU because it was much lower than the average and now it is higher than the average." Moreover, if Ireland's leaders did not get on with delivering the target then they would be left with a "level of credibility close to zero".
To complicate matters further, it seems that Ireland's Greens want to set an even more onerous target of a 30% reduction in emissions relative to the 2005 benchmark: as reported in yesterday's Irish Examiner. Clearly we are heading into a turbulent political period as ratification of the EU climate targets proceeds with a view to completion early next year. There is an excellent summary of the issues available from the Institute of European Affairs.
It does seem we are again witnessing the democratic deficit at the heart of the European Union project, which ironically the Lisbon Treaty (née Constitution) is meant to address (at least partially). We are being presented with a 'consensus' on climate change strategy without our consent. Doesn't feel very democratic, does it?
Irish politicians (at least those who want to get re-elected) might want to think very carefully about how they proceed with the Brussels-mandated target for Ireland. A European-wide survey of public opinion about the environment published last week shows that the Irish are among the least willing to prioritise environmental protection over the competitiveness of the economy: second only to Bulgaria in our unwillingness among the EU 27 countries.
That won't, of course, stop the burgeoning number of unelected climate NGOs from making increasingly shrill demands of our elected politicians to Stop Climate Chaos. Here's how silly it gets, from just one email I received last week about CO2 emissions:
Right now each person in Ireland emits 17 tonnes a year. The Swedes emit 7.4 tonnes per person per year. The Chinese emit 3.9 tonnes, the Indians 1.6. As for the Malawians? They don’t even emit one tonne each a year.What the authors forget to mention, in the midst of their eco-flagellation, was that Sweden has 10 nuclear reactors providing 50% of their electricity, China has 11 nuclear reactors (and up to another 10 coming on stream), whilst India has 17 nuclear reactors and 6 more coming on stream. Now in fairness to Stop Climate Chaos, Malawi doesn't have any nuclear power stations: but they do have one of the world's richest reserves of uranium and are projected to produce some 14,000 tonnes of the stuff from recently discovered deposits.
But I am being unkind: perhaps this is just a subtle effort by Stop Climate Chaos to soften us up for the nuclear option - doing the politicians job for them. Then again, perhaps not. Still, it wouldn't be the first time a climate policy embraced by the greener fringes suddenly got dumped.
All that said, the issue of climate change and our responsibilities to future generations need to be taken seriously. Part of taking them seriously, as set out in the OECD's recent Environmental Outlook to 2030, is to ensure that the prices of scarce and/or polluting resources are properly priced. A carbon tax can play a part, but the greater contribution will undoubtedly come from the forecast spike in oil and commodity prices.
I also think we need to get real about our priorities and obligations as a nation. As pointed out in an insightful new paper from the Cato Institute:
Climate change is not now—nor is it likely to be for the foreseeable future—the most important environmental problem facing the globe, unless present-day problems such as hunger, water-related diseases, lack of access to safe water and sanitation, and indoor air pollution are reduced drastically. Otherwise, with respect to human well-being, it will continue to be outranked by these other problems and, with respect to environmental well-being, by habitat loss and other threats to biodiversity.But I believe we have a moral obligation as a wealthy nation to help those less fortunate, and I therefore concur with the conclusions in the Cato paper:
If one believes that developed countries have a moral and ethical obligation to deal with climate change, that obligation cannot, and should not, be met through aggressive emission reductions at this time - “cannot” because the planet is already committed to some climate change - and “should not” because the threats that climate change would exacerbate can be reduced more effectively, not to mention more economically, through focused efforts to reduce vulnerability or through broader efforts to advance economic development. Any such obligation is best discharged through efforts to reduce present-day vulnerabilities to climate-sensitive problems that are urgent and could be exacerbated by climate change.I think we would have a great deal more consensus about that approach than about any 'targets' from Brussels: and maybe even some democratic consent as well.
Friday, March 14, 2008
The lead story was the ESRI's forecast that GNP growth in 2008 will be the lowest since 1988. You know what that means of course: tomorrow morning you're going to wake up and it will be the Millennium Year in Dublin; Gay Byrne will be interviewing Roddy Doyle about his new book The Commitments; and someone will have dropped a box of detergent into the Floosie in the Jacuzzi. It will all have been a dream: even more spectacular than when Pamela Ewing woke up to find Bobby in the shower (if you're under 40, don't ask).
So I suggest you ignore RTE's mission to depress the nation, and that you read the ESRI's report for yourself. Yes, the economy will slow this year, BUT IT WILL STILL GROW. Consumer spending is expected to increase by 3.0%, and exports by 5.4%. The numbers in work will not fall, while most of the rise in unemployment will be driven by continuing immigration.
All-in-all a far cry from Barrytown - or from South Fork for that matter.
Thursday, March 13, 2008
It's a joint Irish/British production, written and directed by Martin McDonagh. The cinematography is superb, both in terms of the location and the action sequences.
The movie has a nice 'Europe at ease with itself' feel about it - such that just about every minority group manages to get a lash from the politically incorrect tongue of Colin Farrell's character Ray (even, er, the Canadians). Maybe we have entered the era of post-political correctness - and to think it all started in Bruge.
Tuesday, March 11, 2008
Nevertheless, I think their analysis is tad overdone - just another installment in the we're-all-doomed journalistic mid-life crisis that we are treated to on a daily basis nowadays. But the Telegraph is right to anticipate unforeseen consequences from our property fueled epidemic of binge borrowing during the past few years. Only I don't think it will be the banks who will hurt (any more than they have already: have you seen their share prices lately?)
No, I think the people to really feel the pain will be your friendly local government. The chart shows the trend in the value of 'development contributions' paid to local authorities plotted against the trend in house completions. Development contributions are 'levied as a condition of planning permission in accordance with development contribution schemes adopted under the provisions set out in sections 48 and 49 of the Planning and Development Act 2000'. In other words, they are a tax levied by local authorities on builders (and ultimately the buyers of their houses). Just look at the trend in their value: back in 1987, Irish builders paid over €6.6 million in contributions to local authorities. By 2006 the figure had risen to €671 million: that's a 100-fold increase in less than ten years. You can check out the data for yourself in Table 20 of the Department's statistical report here.
Needless to say, our local authorities have gotten used to this kind of revenue. But this year I suspect that contributions are about to take a nose dive, as implied by the forecast for house completions in 2008 in the chart. Worse, a number of them have undoubtedly anticipated a continuous increase in contributions in the years ahead - perhaps even banked on it. Just how important contributions have become is noted in a recent report into the operation of development contributions around Ireland:
This additional revenue has been used to fund a range of key public infrastructure such as roads, sewers etc. that are necessary for all housing and commercial construction to proceed and for purposes of specific community benefit (such as recreational areas, parks etc.) as well as for more general purposes supporting economic growth and competitiveness ... According to the National Development Plan it is estimated that €2.1 billion will be collected in development contributions during the lifetime of the plan (2007-2013).I don't think they are going to see €2.1 billion - or anything even close to it over the next five years. So then what will they do? Why it's obvious: they will fight tooth and nail to hold on to every cent of revenue they get from every other source. Hence the outrageous decision to effectively ban private suppliers of waste collection services in Dublin. Dublin's local government bureaucrats have an effective monopoly and like all good monopolists they want to hold on to it and to exploit it as best they can. Tony Soprano would be proud of them.
With revenues from development contributions drying up faster than bank credit lines then expect things to get a lot uglier down at your local town hall.
Monday, March 10, 2008
David points to the success of Israeli IT companies as an example of how Ireland can successfully weather the coming property storm. What he doesn't say is that a lot of the success of Israeli IT businesses has been the result of spin offs from Israel's (rather strong) military sector. That's an observation by the way, not a judgement.
Ireland plainly doesn't have a strong military sector, nor should it (that's a judgement by the way, not an observation). But if the next generation of Irish IT entrepreneurs are to play to our strengths then what are they? I think the answer is fairly obvious: it's our ability to network. Look at Irish usage of mobile phones or games consoles or social networks like Bebo. On many measures we are actually ahead of most European countries (and certainly the United States when it comes to mobile usage).
I think a lot of our use of technology is due to our culture and disposition as a people (the greatest talkers since the Greeks and all that). The international success of the iconic Irish pub plays to this sense of the loquacious, communicative, garrulous Irish: and it even helps with our various diplomatic efforts on the world stage when we're seen as English speakers without the (US/British) baggage.
All of this is to say that Irish IT entrepreneurs focusing on the networked future will at least be able to draw on the patterns and passions of their home market. So what is the networked future? I recently came across one exciting vision of such a future - or the New Ecology of Things, as it is being called. Imagine a world where cheap, embedded processors linked together over cheap (even wireless) communications channels are as easily assembled as lego blocks: with the same potential to design infinite combinations and applications. That's where we're headed.
I have been a big fan of futurist and science fiction writer Bruce Sterling for many years. He is one of the smartest, heck - the smartest, thinkers on the planet when it comes to teasing out the implications of today's unevenly distributed future. Bruce is working at the Art Center College of Design in California with Sun Microsystems Labs to imagine and prototype the networked future. He envisions a world filled with 'heaps and heaps of knowledge and data that don’t wear out.' In his view, a world in which history is made into a 'mineable resource' that will require words and ideas that don’t yet exist. Better let him explain it.
As I get older I find there are two professions I admire more and more: sales people and designers. (Professional discretion requires that I draw a veil over those professions I admire less and less ;-). I am thinking of a designer like Marc Newson who has a special genius to see things differently to the rest of us and then to share that vision with us through his work.
It is in that rich, breathtaking interface between design, technology and the future that lies the greatest opportunity for the next generation of successful Irish IT businesses. What is a diaspora if not a potential network just waiting to be connected? Only connect.
Sunday, March 9, 2008
The latest issue of the International Property Rights Index fills this gap with a special section on gender and property rights. As the authors note:
Women’s rights, with regard to property, are regularly taken for granted in industrialized countries but are often non-existent in countries of the developing world (both in practice and now and again in written statute).They have created a Gender Equality (GE) Component to the overall index based on:
• Women’s Access to Land
• Women’s Access to Bank Loans
• Women’s Access to Property Other Than Land
• Inheritance Practices
• Women’s Social Rights
Ireland is ranked 15th in the world in terms of overall property rights, but a re-assuring joint 2nd (with quite a few other countries) in terms of the GE property rights component. Malta is number 1. Listen to a fascinating interview with economist Karol Boudreaux about her work on property rights in Africa, and co-author of the IPRI study.
We've come a long way in Ireland since the Married Women's Status Act in 1957 finally gave married women the same rights to property ownership as their husbands. The tragedy is that so many married (and single) women around the world still do not have the same basic rights to own property over a half a century later.
Saturday, March 8, 2008
You don't pay taxes - they take them!
It did get me thinking about taxes and our attitudes towards them. By some measures we pay lower taxes in Ireland than in many other countries. Though personally I find this about as consoling as being told that our rainfall is much lower than that, say, in the Amazonian rain forest. Nevertheless, I think we are going to hear a lot more about taxes in Ireland over the coming months and years, not least because the economic cake is not expanding anything like as fast as before. So the bigger the slice of taxes that are taken the more people are going to notice how relatively little is left.
This year the Government is projecting that it will raise nearly €49 billion in taxes, though even this will not be enough to cover current and capital expenditure. Of course, much of this depends on how the economy fares this year: and with tax revenues in the first two months down €684 million on the same period last year, the Government's projection looks increasingly doubtful.
Some 60% of the Government's tax revenues come from just two sources: VAT and income tax. The former contributes about 31% of total revenues, the latter 29%. But already VAT revenues are down on last year (reflecting weakening consumer spending and falling prices in some sectors). The problem with VAT (for Finance Ministers) is that it is applied as a percentage (21% is the standard rate) to the original price. But if the original price falls (due to competition, price promotions etc) then the absolute value of VAT falls even if the percentage remains the same. Another reason why deflation is every Finance Minister's greatest nightmare (and inflation is their greatest friend, though they won't admit that in public of course).
This only leaves income taxes as the one tap they can turn on quickly if the overall tax take weakens. And sure enough, income tax revenues were up in the first two months of this year, even as revenues from capital gains taxes, stamp duties and corporation taxes were significantly down.
Ireland, in common with all OECD countries nowadays, operates a Pay-As-You-Earn (PAYE) sytem of income tax collection. In other words, the Government pays itself first out of your wage or salary (or rather your employer pays them on your behalf) before you get paid. As social innovations go, PAYE was an act of creative genius in the evolution of tax collection (or evil genius, depending on your point of view of course). PAYE was first used during the American Civil War in 1862, then dropped when the war ended before being resurrected in both the United States and the UK during World War II. Indeed, it would seem that war has been as much a spur to tax innovation as weapons innovation over the centuries. Though you won't read about that particular synergy when you visit the new Revenue Museum in Dublin Castle.
So expect the battle lines to be drawn on income tax as we approach the end of the year and Budget 2009 takes shape. The Government has a €56 billion spending programme to fund this year, and a projected €59 billion next year. There will be those calling for higher taxes - such as Cardinal Seán Brady, quoted recently in The Irish Times arguing that:
... the case needed to be made for tax increases in order to provide better social and health services for more vulnerable members of society. ... a better balance could be struck between the pursuit of individual wealth and our duty to the common good in the form of better education for children and better health services for children. We need to strike such a balance. We need to reawaken our duty to provide for the common good, while at the same time we would all like to see the best possible public services delivered.In other words the Cardinal sees no problem with turning on the income tax tap as necessary to deliver the 'common good'. What is disturbing about the Cardinal's perspective is how ill-considered it actually is. He simply assumes that a) any such additional tax revenues will be as 'wisely' and 'effectively' spent as those raised before, and that b) increasing taxes on people on higher incomes will have no consequences for their behaviour (and therefore the total value of taxes paid).
This is dangerously naive thinking: but we are going to hear a lot more of it in the coming months. Here is a more considered view on taxes - from a Catholic think tank as it happens - which notes that:
Empirically, it’s well-established that low taxes diminish the rate of tax avoidance and tax evasion. This improves the quality of rule of law, a key ingredient for economic growth. An incidental effect is that those countries which have lowered their individual and corporate tax-rates in recent years, mainly through implementing flat taxes, have actually experienced increases in government revenues.There you go: Catholics for lower taxes - though it is unlikely we will hear any senior Irish Catholic figures propound a similar viewpoint. A pity really.
Low taxes also release more capital for productive investment, especially by reducing our need for tax lawyers and accountants. This benefits everyone over time, including the poor, by increasing living standards.
Capital is also freed up for private charity. When people keep more of their disposable income, they can be more generous instead of abdicating their responsibilities for their neighbor-in-need to politicians and bureaucrats. Lower taxes are not only just and economically smart; they’re good for our moral health as well.
One thing I do expect to hear, however, is calls for more innovative approach to taxes that work for the tax payer, the Government and the wider society. Take the Flat Tax idea, for example. There have been heated debates between candidates in the US presidential primaries about the right approach to taxes: with every prospect that we will see some interesting tax innovations, including possibly a flat tax or similarly radical change, whomever becomes President next year.
Of course, don't forget our own General Election in a few years' time. My daughter will be old enough to vote by then, and I have suggested that she reflects on her own tax experience when she makes her mind up about who to vote for in the next election. I suspect that many of her generation will find themselves more on the side of Chris Rock than Cardinal Brady come the next election.
Thursday, March 6, 2008
I found both stories remarkable as they were coming from two previously communist societies. (Yes, nominally China is still communist, but you know what I mean). It also struck me how much we take for granted the middle class in Ireland, overlooking the key role they have played in our recent economic and social transformation. Most people in Ireland consider themselves to be middle class (as reported in a study my company did a few years back). But unlike the Russians and Chinese, many of our own intellectuals (themselves mostly middle class), tend to disparage and even despise the 'petty bourgeois'.
Why is this? The middle classes throughout history have championed freedom of conscience, human rights, privacy, property rights, reason and science (not all of them: but enough to make a real difference). And they have usually done so in the face of opposition from the aristocracy and ruling classes, and sometimes with (and occasionally against) the working classes. So why this pervasive intellectual disdain for the middle class in 21st century Western societies?
I can only guess it has something to do with what Friedrich Hayek called 'The Fatal Conceit', or the notion common among intellectuals (especially those in academia) that because they are smarter than most people (as they are) they therefore know more than most people (which they don't). So ultimately what riles a lot of intellectuals (on the left in the main) is that they think society would be much better off being run by clever people (like them, coincidently): rather than leaving it to all those dull-witted shop keepers and merchants to get things done. There's a great interview with Thomas Sowell over at EconTalk on this very issue, by the way.
So give me traders to intellectuals any time. I'm with Presidents Dmitry Medvedev and Hu Jintao: the future belongs to the middle class.
Wednesday, March 5, 2008
Take the trend in agricultural output prices (the price of agricultural produce sold by farmers). The latest CSO report on agricultural price indices shows a staggering rise in the price of certain products sold by farmers. Cereal prices charged by Irish farmers were up 67.7% year-on-year in December. Milk prices were up 49.5%. In the chart I have plotted the trend in annual inflation for both milk and cereals going back to January 1996. Right now we are experiencing something unprecedented in domestic food price trends.
Martin Wolf writing in yesterday's Financial Times puts the trend in food prices into a wider, global context. Commodities are on the rise everywhere it seems, with rising energy prices fueling rising food prices. It is only a matter of time before these trends start to show up in the headline inflation rates in Europe and elsewhere, putting the European Central Bank and others in a very awkward position vis-a-vis interest rates.
When the prices of milk and cereal starts pushing up mortgage rates then I think the matter will receive a lot more attention than it has been getting until now.
Tuesday, March 4, 2008
The publication of the study lead to some interesting discussion on the nation's airwaves about why Irish consumers a) pay more than other Europeans do, and b) don't take greater advantage of savings when they are available. It has certainly mystified me at times: not least because a short hop across the border to Northern Ireland reveals a far more intense consumer culture of value shopping and price comparisons.
There may, however, be one explanation that has been overlooked in relation to the alleged lack of price competition in Ireland, namely: the growing percentage of Irish women in paid employment. A recent economic research paper from the World Bank shows that there is a direct, causal relationship between the participation of women in the workforce and retail price competition. Not surprisingly it is an inverse relationship: the more women who go out to work the less divergence there is in prices between competing retailers.
The paper's author has a simple explanation: as more women shift from unpaid work in the home to paid work in the labour market, the opportunity cost of any time they might spend comparison shopping goes up. In other words, their work commitments mean that they can no longer afford the time to look for bargains as they might have in the past.
So ironically, one consequence of the massive increase in female participation in the workforce in Celtic Tiger Ireland has been a 'free pass' for Irish retailers to keep their prices higher than they might have otherwise. Of course, a recession would reduce the number of female (and, er, male) workers, freeing them up to do more comparison shopping. The only problem is - they wouldn't have any incomes to spend, even if they found a bargain.
Another example of being careful what you wish for perhaps?
Sunday, March 2, 2008
I grew up a Catholic in Northern Ireland through the grimmer decades of The Troubles, and the many-layered symbolism of this picture strikes a deep chord with me. Of course, the story behind the picture is one of politics, not religion. But the story of conflict in Northern Ireland was about religion - and economics, politics, culture, identity etc etc. Nevertheless the role of religious faith and practice was an essential element in creating and sustaining the conflict that lasted more than four decades.
This is not an argument for the 'God Delusion/God Is Not Great' school of religious criticism popularised by the likes of Richard Dawkins and Christopher Hitchens. They see religious belief as inherently 'evil' as evident from its history. But having seen religious hatred and sectarianism up close, it seems to me that religion's capacity for evil lies is the way in which it can easily becomes a tool for politicians intent on securing power at the expense of others. Science has the same capacity of course (after all, it is politicians who create the demand for nuclear bombs: not scientists, priests or business people).
Nevertheless, this is not to deny that religion has been a force for untold misery and suffering. I am reading A. C. Grayling's book Towards The Light and his chapter on The Reformation confirms the truth of the observation that:
In The Brothers Karamazov, Alyosha expresses the idea which panicked Dostoyevski more than any other: Without God, 'everything is lawful'. But as Mohammed Atta can explain, the opposite is true. Without God, murder is forbidden by human law; it is only for those acting on behalf of God, that everything is permitted.So perhaps it is not religion we should fear but rather those who claim to have a direct line to God and to know exactly what she/he/it wants. Still, maybe I am being naive: perhaps the universal propensity towards religious belief means that we are doomed to suffer at the hands of another Torquemada or Calvin for as long as we have religion? And not just the Christians, will Islam always be a victim of Islamism?
Yet, as the image of Raymond McCord speaking at the Sinn Fein Ard Fheis shows, things do change for the better. Reason can triumph over blind faith - though it is not inevitable that it will do so. On balance, I am optimistic about the fate of religion in human affairs. Though I don't expect a dawn of Faith 2.0, as the Financial Times recently called it. Rather my optimism is inspired by the philosophical writings of 'post Christians' such as Don Cupitt; and the brave, ongoing work of historians such as Thomas Sheehan.
Hope and religious history might also rhyme some day.