Thursday, July 31, 2008

Our First Mental Recession

Here's a forecast I'm completely certain about: the vast majority of people now in jobs will still be in jobs in a year's time. I'll go further: the vast majority of people now in jobs will still be in jobs in five year's time. I'm beginning to think we should have something equivalent to the Government health warning on cigarettes included with all releases of unemployment statistics by the CSO (pdf). Something like:
Warning: a rise in the number of people unemployment does not necessarily mean an increase in the unemployment rate (as there may also be a rise in the numbers employed); and when there is a rise in the unemployment rate it does not mean an instant return to the 1980s.
Or something like that.

As I've mentioned before, we are going to be breaking all records for the numbers laid off each month for some time to come because we have a record number of people in jobs. Something that never, ever gets mentioned when the latest 'shocking' increase in the live register is announced. Nor is it ever mentioned that the latest unemployment rate (5.9% in July) is:

a) below the EU average below (and expected to remain so - see table on page 34 of pdf), and

b) not expected to come close to the unemployment rate of 10 years ago (8%) or 12 years ago (12%) - see graph 3.5 in excel file from CSO.

And yet it seems to be the unemployment trend that has spooked Irish consumers. I say 'spooked' because the reality, to repeat myself, is that the overwhelming majority of people in work are not at risk of being made redundant. Nor will they be. So it seems as if we are gripped by what an advisor to John McCain called (controversially) a 'mental recession'. I think he's right: the whiplash plunge we have seen in Irish consumer confidence and in retail spending suggests panic rather than plunging incomes. The same appears true of the EU as a whole, where confidence has fallen this month as sharply as in the aftermath of 9/11. Except there hasn't been a 9/11 ...

By the way, Ireland is now the only country out of the EU27 not publishing comparable consumer and business confidence data since April. I think it's a disgrace - yet there hasn't been any media coverage of this development.

One other thing pointing to our mental recession is the fact that there appears to be no significant connection between falling house prices and consumer spending. A fascinating paper on The Impact of Asset Price Trends on Irish Households (pdf) published today by the Central Bank does show that household net worth fell by 8% last year. Having risen by 82% in the preceding five years. See chart at top of post. Yet the Central Bank's analysis essentially shows that this has not had (and most likely will not have) any adverse impact on consumer spending.

So here's a thought: might the suddenness of the slowdown in consumer spending be a precursor to a sharper than expected bounce back in early 2009? Once people get over the gloom of winter and the most depressing day of the year? We shall see.

Zero Emissions, Zero Cost

There was me saying we should let the free market meet our needs for cheaper, better, and more environmentally friendly public transport when it had already started to happen ...

I haven't used the Ecocab service myself - but my wife has, and she's a big fan. I guess the only challenge is: how to carry 30-50 people at a time in one of these? I guess if we all pedaled we'd get healthier as well as cheaper, better etc transport?

There's a nice post about Ecocab over at Springwise - a great site for new business ideas.

Tuesday, July 29, 2008

Fear Triumphs Over Hope

It seems that mirrors keep us honest. This from a fascinating article on mirrors in last week's New York Times:
Subjects tested in a room with a mirror have been found to work harder, to be more helpful and to be less inclined to cheat, compared with control groups performing the same exercises in nonmirrored settings. ... people in a room with a mirror were comparatively less likely to judge others based on social stereotypes about, for example, sex, race or religion.

“When people are made to be self-aware, they are likelier to stop and think about what they are doing,” Dr. Bodenhausen said. “A byproduct of that awareness may be a shift away from acting on autopilot toward more desirable ways of behaving.” Physical self-reflection, in other words, encourages philosophical self-reflection, a crash course in the Socratic notion that you cannot know or appreciate others until you know yourself.

It's one of those delightful studies into brain/behaviour interactions which changes how you think about your own behaviour. The field of neuroeconomics is one I've blogged about before, and those of you new to the topic can get a great primer over at this week's Economist.

The mirror study got me thinking about its wider economic implications. Take trade, for example. What is trade if not a way of holding up a mirror to society? Our trade with others tells us much about ourselves: not just about what we can create that others want to buy; but also about our self-image and willingness to engage with the world and have the world engage with us. More importantly, as explored brilliantly in Paul Seabright's book The Company of Strangers, trade keeps us honest - otherwise people won't trade with us again - and keeps us peaceful (it's not good business to kill your customers etc.).

Which is why the failure of the Doha round of trade talks at the WTO is really bad news. Fear has triumphed over hope, and the vested interests of the affluent few have overridden the dreams and ambitions of the impoverished many. The mirror that is trade has been smashed, and there is no reflection to show the ugliness of protectionism and zero-sum gamesmanship now unfolding.

But we can't give up. We've come so far as a species, creating a world of unprecedented wellbeing and peace for billions of people, to simply regress to a world of beggar-thy-neighbour politics. Economics itself has moved on, and there is a far greater sense of the importance of free trade than was the case 100 or even 50 years ago. Even broken pieces of a mirror still show our reflection.

Monday, July 28, 2008

Let a 1,000 Buses Bloom

As we all know by now, the provision of bus services in Ireland is subject to legislation enacted in 1932. One could argue this is a bad thing (a few things have changed in the intervening 76 years etc), but maybe it's a blessing in disguise? Part II, Section 13(2) of the Act empowers the Minister to revoke the licence of any bus service operator on 31st October of each year.

So here's a suggestion: revoke the licence of Dublin Bus, and invite anyone with qualified drivers and insured vehicles - willing to risk their own money on establishing and promoting their bus services - to do just that. I don't doubt many of the current managers and drivers in Dublin Bus will thrive in such a scenario as they set up their own services.

Needless to say, not a penny of tax payers money should be given to any of these new operators. The tax subsidisation of transport is the single largest source of the mis-allocation of investments in transport. I include roads and road users in that by the way (why non-drivers should subsidise my driving experience through their taxes is beyond me).

It seems to me this is the only way to stop the predatory practices of Dublin Bus that choke off competition, as well as the farcical situation whereby the taxpayer is liable for both Dublin Bus' successes as well as its excesses. In effect, we will be doing the reverse of what the Government in Santiago in Chile did in the past year: they closed down 3,000 private bus operators and replaced them with one state owned service. The result: average journey times have gone up from 40 minutes to 2 hours; the combined profits of $60 million generated by the private operators have now been replaced by losses of over $600 million; and the operators of the new public service say they will go bankrupt if they are not bailed out by taxpayers soon.

This story of the dysfunctional state administration of public transport is explored in a very witty and sharp discussion over at Econtalk. It begs the question: why should the state have any act or part in operating public transport services? Does the Irish Government run our taxi services? Perish the thought, eh? Beyond setting the conditions for issuing licences (the conditions in Section 12, preceding those in Section 13 referred to above seem sufficient) it is not necessary that they do anything else. The same goes for emptying the bins - local authorities can be just as predatory as Dublin Bus in that regard.

Let's just try it: if I'm wrong, I'll even buy a season ticket on Dublin Bus, honest ...

Sunday, July 27, 2008

The Morality of Free Trade

I wonder if the IFA's Don Quixote stand on the WTO negotiations is their final showdown? The Irish Times carried a good piece yesterday by Alan Matthews arguing basically that Ireland's future economic wellbeing is more important than subsidies to Irish farmers. He's right of course. As I've argued before, the IFA's stance on agri-protectionism is a super-cynical exercise in feathering their own nest to the detriment of Irish consumers and third world farmers.

But the issue is about more than the benefits that will accrue to consumers and farmers (including Irish farmers willing to focus on what customers want rather than their next CAP subsidy). I see it as a moral issue: liberalising global trade in farm produce is a necessary step in ensuring that people living in countries with predominantly agricultural economies can join in the wealth and job creating process that is free trade and democratic capitalism. Necessary but not sufficient: for unless citizens in wealthy democracies such as Ireland mandate their representatives at the WTO negotiations to do what is right both economically and morally then the forces of protectionism will prevail - condemning the world's poor to a continuation of their predicament for decades to come.

Here's one perspective on the morality of free trade - this time from a Catholic perspective:
There is also a moral aspect to free trade that ... seems to be forgotten. Economic freedom and the right to free exchange come from man’s natural right of association and his responsibility to take care of himself and his family. Economic freedom as a core element of political freedom grew out of the tradition of liberty in the West. In Spain, the medieval theologians that formed the School of Salamanca argued this well before Adam Smith came along, insisting that free exchange was a natural right and it lay beyond the government’s role to prevent it.
Church leaders in Ireland might take the lead in facing down the IFA and truly become the voice of the oppressed that they regularly claim to be.

Thursday, July 24, 2008

Poorer But Purer

The National Competitiveness Council published a curious paper yesterday about Wellbeing & Competitiveness. I say curious because having read it I'm not entirely sure what it was about. The paper seems to address two very important issues (wellbeing on the one hand, competitiveness on the other) without quite connecting the two in any especially relevant or insightful manner.

The NCC has published some excellent reports before on the issue of competitiveness - one that is undoubtedly the most important facing our country right now. But their discussion paper feels more like a brief digression rather than an important extension of their analysis of the nation's competitive situation. Just as well really. Mostly because I think the two issues are not significantly connected - other than at the level of the platitudinous (poor people are generally more miserable than the better off; competitiveness is an important means to ensure we're collectively better off).

I've written a few posts before on the subject of happiness and economics. So I guess I'm always on the look out for the kind of nonsense that implies we were all better off back in the 70s or 80s in our close knit communities: poorer but purer. We don't have to worry about such nonsense from the NCC - their concluding paragraph is solid, common sense:
In summary, there is limited scope for policy intervention in some aspects of wellbeing, such as factors peculiar to and determined by an individual. However, individual wellbeing is enhanced by access to income and material resources and national wellbeing is enhanced or maintained by high levels of national income. Therefore, having an emphasis on policies that support sustainable economic growth and competitiveness can play an important role in maintaining and enhancing national and individual wellbeing.
This can't, alas, be said for some of the comments on the report. The usually sensible Maureen Gaffney sails close to the wind of eejits like Oliver James when she writes in today's Irish Times about the NCC paper:
Concerns about the sustainability of current production and consumption patterns, environmental degradation, crime, social cohesion, equitable access to quality healthcare, accountability and standards in public life - all these concerns gnaw away at national wellbeing.
What a strange jumble of issues: somehow I don't think people are worrying as much about the growing incidence of flat screen TVs as they are about, say, the growing incidence of knife crime. Just a hint of crying into our orange mocha frappuccinos for Dublin in the rare oul' times. Also, given that we have some of the highest levels of satisfaction with our standard of living and quality of life in the EU then I'd suggest there's not quite that much 'gnawing' going on.

The important aspect of wellbeing that is at the heart of competitiveness of course is employment. Work is a major source of life satisfaction as well as material reward for most adults. And how we manage employment policies and practices has massive implications for our competitiveness. We can certainly learn from other countries how best to organise (or not organise) our labour market to enhance both wellbeing and competitiveness. It is interesting that France today ended it's insane 35 hour working week policy. Our own Small Firms Association has recently called for a reduction in the national minimum wage. A pity they didn't go further and call for the complete abolition of the minimum wage. That way we could join the ranks of hard core laissez-faire, free market capitalist nations like, er, Denmark. Indeed, Denmark's flexicurity policies might well contain some interesting ideas for the NCC to ponder.

There's a topic for their next discussion paper ...

Wednesday, July 23, 2008

Marx's Revenge

If there's one thing we can be fairly sure about in relation to the outcome of the next general election in Ireland it is that the Labour Party will be one of the parties in government. This has nothing to do with their likely manifesto or 'success' so far. It simply has to do with economics.

Evidence from different countries shows that economic downturns tends to lead to increasing demands for re-distributive policies; whereas periods of strong growth tend to lead to demands for lower taxes and less regulation. So far so obvious. But the interesting thing is to consider what this means in the context of the recession we have entered (and may well have to endure for some time).

Here are a few things I expect:
  • there will be no significant cut backs in current government spending, especially on social welfare but also on middle class welfare (tax relief on mortgages, health insurance etc).
  • there will be no significant cuts in public sector pay or employment levels (on the basis that there are no consequences for refusing to make and take cuts).
  • there will be tax increases, firstly on the 'rich' (i.e.: other people), then on 'the rest of us'.

We never quite became card-carrying 'free marketers' in Celtic Tiger Ireland (after all, for a brief period, the powers-that-be were able to both cut taxes and raise spending); and we are about to 'revert to type' over the next few years as (exaggerated or irrelevant) concerns about inequality and poverty gain ideological ground. It is in that context that Labour can be fairly optimistic about their election prospects - assuming they're not run over in the rush to the left by every other party.

Mind you, it will leave an interesting gap on the right wing side of the political spectrum. Say for a party that champions better value for taxpayers (with an emphasis on lower taxes). One potential target for such a pitch: the generation that grew up with the Celtic Tiger (and who never quite imbued the traditional Irish guilt trip about money and the things it can buy) - they may well be open to persuasion.

Whatever happens, it'll certainly make for a far more interesting election next time round than the last one.

Monday, July 21, 2008

Losing Our Cool

I'm still trying to figure this one out. I've been having fun with Google Trends - the nearest you can get to an ECG test for the entire planet. You type in one (or more) terms and it shows how often that particular term has been searched for on Google going back to 2004. Note: it's an index of the volume of searches, not the share. So I was fascinating to discover a steady but inexorable decline in the number of searches on Google that include the word 'Ireland' in them.

Perhaps the word has got out about our dire weather with knock on consequences for holiday-related searches? Or is a (negative) dividend from peace in Northern Ireland (as suggested by Don Thornhill when I chatted to him about it). I'm not sure, to be honest. But it is interesting: as a measure of "what's hot, and what's not", does it mean that Ireland has lost its 'cool'?

Cool is a fairly nebulous concept of course (though it has been around for some time). And there's not a whole lot of economic analysis about cool and the wellbeing of nations. Though the Economics Search Engine does give us a great abstract of The Conquest of Cool by Thomas Frank.

So are we no longer cool as a nation: and does it matter to our future wellbeing (as exporters and entrepreneurs)? Maybe this is just the stuff of leprechaunic dreams: or maybe it's telling us something about the consequences of our delusional obsession with land and property speculation as a get-rich-quick scheme - definitely uncool. I'll keep watching the Google Trends, looking for signs of an upturn along with the more standard indicators.

Friday, July 18, 2008

No Country for Fat Men

The lastest study from the US Government's CDC reports that one in four Americans is now obese. After two weeks in the States I'm amazed it isn't a lot higher. America is one of the world's leaders in obesity trends, though Ireland is catching up.

Whilst there are many explanations for the emergence of the global epidemic of obesity I have one more to suggest: lawyers. Whilst holidaying here in the States I tried to organise several activities for my daughter and niece involving horse riding. They're both very experienced - we've done it several times before on holiday. So imagine my surprise to be told by several horse riding centres and farms I rang that they no longer provide ride outs and trail rides because of litigation and insurance costs. I was told there was 'only one place left in Massachusetts' that was even prepared to offer the facility.

That got me thinking: is there a correlation between the number of lawyers per capita and the incidence of obesity? America leads the world in lawyers per capita (as the chart illustrates.) There are now nearly 1.2 million lawyers in the United States. I can't find a decent data set to run the correlations, and there are obvious definitional issues (we've got solicitors and barristers in Ireland, after all). Still, you do get the impression in America of a society that is terrified of the next lawsuit - even the menus in restaurants warn you that under-cooked meat can make you ill. Sure - and life is terminal: any other statements of the blindingly obvious you want to share with us?

Then again, maybe they'll use the law to fight obesity: like in Japan, where it is now illegal to be aged 40-74 and have a waist measuring more than 33.5 inches if you are a man, or more than 34.5 if you are a woman. Lawyers with measuring tapes - you heard it here first ...

Thursday, July 17, 2008

Energy Challenged

For some reason Hertz gave me a rental car with Pennsylvania number plates. But I'm staying in Massachusetts with the result on two occasions when I stopped to buy petrol (or 'gas') I was asked "how are gas prices out your way?" by different local drivers. I explained that 'out my way' was actually east, not west, and that where I come from we pay nearer $8 a gallon; not the $4 that has Americans so vexed! On both occasions they thought I was joking ...

Still, Americans do seem to be taking the energy challenge seriously: and responding as Americans often do - by shopping for bargains. I took the photo in my local Stop'n'Shop: it shows long life light bulbs on special promotion - the perennial 'buy one get one free' offer. I was impressed that the bulbs prominently displayed the expected savings in electricity costs the users could expect ($59). But what really impressed me was the price: $4.99 or $3.98 if you had a storecard. You get two for that price remember - so for the equivalent of €2.50 I could get two bulbs that would cost me €6-€7 each back home.

This is not to indulge in another whinge about rip-off Ireland, but rather to point out how remarkably capable the market in America is at providing cost-effective solutions to the rising costs of energy (household and transportation) that we all face. But transportation is the biggest challenge. Though making it easier to find oil is one response (opening up the national park in Alaska and off shore sites to drilling, for instance) it's clearly not enough (even if all the oil in Alaska's ANWR was available right now it would - by some estimates - fuel only six months of current US consumption).

The ultimate solution will be a mix of even higher gas prices, reduced travel, more public transport, higher density urban living, and energy innovation. Kind of like Europe actually. But not exactly like Europe - I've just finished reading Bruce Sterling's sci-fi novel Distraction set about 30 years in the future, and he has the main character Oscar say this about the (Native American) President in the story:
He's a socialist, he's gonna make us sane and practical, just like Europe. This place isn't Europe! America is what people created when they were sick to death with Europe! Normalcy for America - it isn't keeping your nose clean and counting your carbon dioxide. Normalcy for America is technological change. ... A massive rate of change is normalcy for America. What we need is planned change - Progress. We need Progress!
I'm a big fan of Sterling and I think he puts his finger on something peculiar to the American psyche. Sure it's a bit hyper and a bit naive - but it's also 'can do', not whiney. At the end of the day, the Americans will come with a solution that works for them - and with a bit of luck there'll be benefits for us in Ireland as well. We're very American in our current pattern of energy consumption as it is: so it'll be worth paying attention to try and avoid some of the grief ahead as we make the unavoidable adjustments that will be required to our own pattern of energy consumption. Including the light bulbs.

Wednesday, July 16, 2008

Not Made in America

One thing that strikes you shopping in the USA is the amount of products that have 'Made in China' printed on them. I am sure it's the same back in Ireland, but there must be some kind of statutory requirement in America to print the country of origin in a prominent place on the packaging.

Though the trade imbalance with China is one of those 'hot button' issues that flares up from time to time, the fact is that the United States is a key market for many of the world's exporters - including Ireland. This is especially important in terms of Irish growth prospects. Despite the increasingly gloomy outlook for the economy overall, most forecasters expect Irish exports to continue to grow. Evidence for this comes from the recent Eurostat report on industrial output in May: Ireland had the highest rate of monthly growth any of the EU27 nations. A lot of that will have taken the form of trade with the United States - a remarkable achievement, given the strength of the euro against the dollar.

America continues to be the world's largest importer. More importantly, the economy here in the States is not yet in recession (despite the negative trends in US unemployment and inflation). Let's hope the volume of products with 'Made in Ireland' on them continues to grow in the USA for the foreseeable future.

Sunday, July 13, 2008

Born to Be Timid


Get your motor runnin'
Head out on the highway

Lookin' for adventure

And whatever comes our way ...

Born to Be Wild, Steppenwolf


Sunday in Ireland brings out the 'Sunday drivers' - in Plymouth, Mass it brings out the 'Sunday bikers'. The beach front attracts (mostly) middle-aged and older men (and their female passengers of a similar vintage) driving ludicrously loud and unweildy Harley Davidsons. The absurdity of the spectacle is made all the more pronounced by the nature of US speed limits. Driving in the United States is a stressful, distracting experience. And the distraction isn't the scenery (or even the Harleys), rather its the speed limit signs that seem to be located every few hundred yards, and which change regularly, even on similar stretches of road.

John Staddon (an Englishman living in the United States) has written a good piece in the latest issue of Atlantic Monthly on the conterproductive nature of US traffic signage. He notes the problem of inattentional blindness, the effect of competition for the observer’s attention: by looking for one thing, we miss another that should have been obvious. And he draws on international data on road traffic accidents to show that the US actually has a worse problem of traffic accidents than the UK (and, on some measures, Ireland).

Maybe the US should learn from the application of social psychology to road safety and lose the signs? But I suspect not - this is a country that does seem rather fond of warnings and instructions. I guess I'll just have to "head out on the highway, lookin' for the traffic cops ..."


Friday, July 11, 2008

Going DABDA

Probably my favourite ever episode of The Simpons is the one where Homer goes to a Japanese restaurant and eats fugu (from the deadly poisonous blowfish) and learns he's going to die. There's a hilarious exchange between Homer and Dr Hibbert who tells him the bad news. The doctor explains that Homer will experience the five stages of grief, but as he lists them Homer experiences each stage instantly. It's a lot funnier than it sounds, honestly.

I always think of this scene when I hear a particularly gloomy forecast. The five stages of grief were first delineated by Elisabeth Kubler-Ross and are as follows:

1. Denial
2. Anger
3. Bargaining
4. Depression
5. Acceptance

Or 'DABDA' for short.

Right now I think Ireland is going through a collective grieving process for the untimely demise of the Celtic Tiger. Our denial phase was when we voted No to the Lisbon Treaty. We then got angry with the politicians when the ESRI brought out their "we'll all have to emigrate" economic commentary; then we started bargaining about public sector pay - like that would solve things for us. So now I reckon we're at about stage 4: depression - to judge from the competition between banker and stockbroker economists to publish the gloomiest forecast. Maybe we should all stand in the rain and flagellate ourselves with a copy of Goodbody's latest economic outlook?

The weather only adds to the gloom, of course, and the troubles at Dublin airport sort of implies there's no escape, right? Still, I think we'll get to the stage of acceptance some time around September when we will have had (hopefully) a few weeks of actual summer, and the usual routines of school and work (and government) will be back upon us again.

We may not have progressed through the five stages as quickly as Homer, but we've moved at a fair pace nevertheless. Anyone for sushi?

Wednesday, July 9, 2008

Smith Vs Malthus

Willem Buiter has a great post over at Maverecon about the prospect of $500 oil. Fundamentally his views on the outlook for energy prices in general and oil prices in particular are the same as my own: as demand rises and supply declines then there's only one way for price to go in the long term.

One of the comments on his post makes the point that economic history has been an ongoing battle between the forces of Adam Smith and Thomas Malthus. The latter famously described a future in which the rate of population growth would inevitably outpace the growth of resources leading to a future of mass poverty. The former, on the other hand, foresaw a future in which the market mechanism would provide the means whereby individual effort and genius would create collective benefits sufficent to offset any resources constraints.

And so the battle continues - indeed, it may be hotting up. Driving around New England I am struck by the radio and press coverage given to the cost of petrol - or gas, as they say. Of course, coming from Ireland I am also struck by how cheap petrol is here - at just half what we pay, and many others as the graph illustrates. But that isn't how Americans see it, and, as ever, they're working on how to fix the problem.

One recent phenomenon has been the growth in demand for public transport - reversing a half century long trend in this part of the world. For example, in nearby Boston, use of the subway is up 9% on a year ago. It seems Americans are looking to Europe's success with public transport (especially trains) as a guide to future policy choices - especially if Obama becomes President. Though somehow I don't think they'll be including Ireland in their itinerary should they visit Europe on a fact finding mission ...

Nevertheless, if I had to place a bet, I'd wager my appreciating dollars on Smith any time.

Tuesday, July 8, 2008

American Contradictions

A friend of mine once said that everything you say about America is true, including the opposite. I'm in Massachussets on holiday and some of the contradictions are remarkable. American's do seem to like issuing instructions and warnings - 'the coffee in this cup is hot and could burn you' kind of warnings. Or the example in the photo that I took at the South Shore Plaza Mall in Boston today.

For 'The Land of the Free' (celebrating their freedom over the July 4th weekend just past) Americans do seem to impose a lot of restrictions on themselves. Take the local supermarket where I could get just about anything I wanted: except beer and wine because they don't sell alcohol. On the other hand, the instore branch of Citizens Bank was open - at 11am on a Sunday morning.

Like I said: lots of contradictions. But some of the contradictions are local rather than national, and some are just peculiarly American. Say, shopping centre security staff with firearms and the perennial America debate about the right to bear arms. It seems to me on my reading that the folks who drafted the constitution didn't have uzi-sub machine guns in mind, but I admit I'm not intimately familiar with the debate, and have no desire to do so.

But none of this is to indulge in the unfortunate tendancy of some of my fellow countrymen to deride and belittle all things American. Indeed, like most Irish people I have a great deal of affection for the United States and its people. If Failte Ireland could bottle and import their friendliness and courtesy for our own tourism industy it just might compensate for the effects of the euro/dollar exchange rate. Though probably not even that will help right now.

Better still, I do admire the way American's get focused on the solution rather than whinging about the problem. Take their economy and their stock market: the vibe here appears to be that the worst is over and that people just need to knuckle down and see things through. In marked contrast to the daily happy slapping the Irish stock market seems to be experiencing.

Maybe we could all do with a bit more American spirit - even with all the contradictions.

Saturday, July 5, 2008

In Denial About Climate Denial

Poor William Reville, occasional science writer for the Irish Times. He wrote recently that the attitudes of some environmentalists reminded him of religious fundamentalists. Nearly as bad as the Pope accusing some Muslims of having a propensity to use violence. Needless to say Reville's comments provoked a furious response (though not quite as extreme as the Pope's) - not unlike those of, er, some religious fundamentalists (of a Muslim or Christian orientation, we're an equal opportunity offender on this blog ;-).

Dr Reville isn't anti-green or - worse - a climate change denialist (the new Satanists in the Green panoply of eco-heaven and hell). He just argues for common sense:
The green movement draws attention to important issues that everyone must take seriously and it has played an important role in galvanising action from mainstream politics. But many green interpretations and solutions are largely intuitive and some have little scientific justification. Take the notion of the idyllic state in which simple pre-modern societies lived/live in nature. This is simply a myth, as anthropology confirms. Inter-tribal warfare, intra-tribal murder and violence were and are commonplace. Also, what is idyllic about an 80 per cent infant mortality rate and complete vulnerability to disease?
But common sense upsets some folk it seems. Still, I have immense faith in the common sense of the Irish people. In the recent Eurobarometer of EU citizens' main concerns, only 4% of Irish people thought that protecting the environment was one of the two most important issues facing Ireland at present (see page 76: the EU27 average is 5%, by the way). The environment is on the list: just nowhere near the top.

This must be terribly frustrating for those of a green fundamentalist bent. Especially when their colleagues are spending €12.5 million of taxpayers' money trying to persuade the taxpayer to Change their behaviour. And there's the problem: people think others should change - not them. The Change campaign's own research shows that the majority of Irish people disapprove of a range of potential initiatives such as raising taxes on coal, gas and heating oil (see slide 23). But they're happy to see people in SUVs pay more. I'm guessing most of those approving don't drive SUVs ...

This is not to say that keeping people fully informed about the environmental consequences of their private choices isn't worthwhile. Of course it is: a better informed decision is usually a better decision. For example, research shows that consumers are more likely to change their behaviour in response to energy and recycling labels on products than, say, organic and fair trade labels.

But for a climate agnostic like me (and Dr Reville), I take heart from the refusal of the Irish people to be browbeaten into eco-guilt and shame, despite the earnest proselytizing of the Green faithful.

Friday, July 4, 2008

In Praise of Inflation

Unfortunately I had other commitments and couldn't get along to Richard Douthwaite's talk at the Feasta Seminar Series last week. Richard is undoubtedly one of the most interesting economists in Ireland today. He has written and edited a number of insightful books, including The Growth Illusion and Growth: The Celtic Cancer. As you'll have figured from the titles, he's not quite the stockbroker economist type.

But what Richard lacks in orthodoxy he makes up for in originality. Which is good enough for me. You can catch his talk last week online: well worth watching. One of his slides (image above) caught my attention: the capital base of Irish banks relative to their loan book is less than a ninth of the total. So a bad debt ratio of just over 10% 'wipes out our banks and wipes out our savings' as he put it in his talk. It certainly got my attention.

Richard's prescription is as radical as his diagnosis is gloomy: the Irish economy needs a sustained bout of inflation to tide us over as we transition to a new energy era in which energy is much more expensive relative to labour (rather than vice versa, as it has been until now). But to instigate such a deliberate, 'benign' inflation (as he puts it) will only be facilitated by Ireland leaving the euro and reinstating our own currency. He thinks we should go further and introduce regional currencies to allow different parts of the country to adjust as appropriate to the challenges ahead. Like I said: radical.

I don't agree with several aspects of Richard's analysis: I think he understates the impact of inflation, especially on those on fixed incomes such as pensions - though he does acknowledge this. I also think that he overstates the personal debt problem since much (though by no means all) of this was invested in income generating assets - such as commercial and private rented property - that will provide an income to fund interest and capital repayments. Also, a relatively under-developed economy like Ireland's was 10-15 years ago was inevitably going to experience the kind of borrowing/investment surge we have witnessed; so it is a transition and will pass as the economy matures.

Furthermore, I think he makes a good case for an old fashioned gold standard if you follow his reasoning: though he would probably deny this. Still, I do admire his originality, and I have no doubt that the challenges we will face - including those set out in Richard's talk - will demand something like the imaginative and brave responses that he advocates. I am glad that we have people like Richard focusing on solving our problems - he will undoubtedly play a part in creating effective solutions.

Get Over It

As we come to grips in Ireland with our risotto recession - and the prospect that our standard of living next year will fall to, well, where it was last year - then maybe we just need to keep things in perspective. A global perspective, come to think of it.

The World Bank has been reviewing the numbers and has established that they got it wrong about China. They had thought that some 250 million people had been lifted out of poverty during the past 14 years. They've issued a correction: turns out the real number was 407 million. By the way, they're talking dollar-a-day poverty: not the "we'd better ski in Gstaad rather than Aspen this year" kind of lifestyle adjustments.

I do hope we don't lapse into a bout of poor mouth begrudgery in Ireland. Now's the time to be looking outwards, not inwards. We all of us are faced with challenges in relation to energy and food, but some of us are better placed than others to deal with the consequences. That in turn puts the onus on those of us who are wealthy beyond comparison with the bottom billion of our fellow human beings to act responsibly - not selfishly.

And that means supporting initiatives such as AIMS - the African Institute for Mathematical Sciences - designed to find the Next Einstein. Ignore the self-serving parochialism of the Irish Farmers Association and remember that free trade and globalisation are the best means yet invented to end poverty. Just ask the Chinese.

Tuesday, July 1, 2008

Pyongyang, Co. Dublin


There's something slightly North Korean about the temporary coverings applied to some of the partially built apartment blocks in Sandyford, Co. Dublin (where I snapped this picture yesterday evening). Ghostly images of occupants and furniture appear several stories up what is still an unfinished building.

The Sunday Independent suspects it's something sinister; though I'm inclined to accept the developer's expanation at face value, for now.

Still, it might start a trend: could we drape a few temporary motorways, hospitals and schools across the country? Would look good from a satellite and possibly impress a few inward investors? I'm joking, really ;-)
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