Thursday, December 31, 2009

Stop With The Twitta

I had hoped to end the year on something more profound, but I ran out of 2009 ...

This is fun (ht the normally rather more serious VFR/Lawrence Auster):

And for something more uplifting, check out The Specials doing a guest appearance on The Geary Blog.

Wednesday, December 30, 2009

Some Hope

It is nice to end a dismal year on a positive note.

AIB Bank have come on board to partner my company in developing the AIB-Amárach Recovery Indicator. It builds on earlier work by Amárach and is intended to keep businesses informed about the mood of Irish consumers when it comes to spending, saving and borrowing.

We'll be surveying 1,000 adults every month - combining online and face-to-face methodologies to ensure the results are as representative of the national mood as possible.

Furthermore, the ARI is designed to identify turning points in the economy: and right now we are at one of those points as the majority of people feel the economic situation is bad but stable or even improving. A stark contrast with when we first started measuring attitudes back in April as the chart shows.

You can download the first of the ARI results - for December 2009 - here.

All suggestions for themes/topics/questions that might be usefully addressed in a survey designed to guage trends in consumer behaviour and their impact in turn on the wider economy are welcome.

Tuesday, December 29, 2009

Lesser Britain

The execution of Akmal Shaikh by the Chinese is another, sad symptom of the United Kingdom's decline. He would not have been executed if he was a citizen of the United States. The Chinese still respect the power that comes out of the barrel of a gun - and America still has the bigger guns (economically as well as militarily). Britain obviously doesn't.

This matters to us in Ireland. Not in the "England's difficulty is Ireland's opportunity" sense of old (when, regrettably, it did make some sense). But rather in terms of the extent to which Ireland's economic prospects are still tied to those of the UK: our largest export market and the only country with which we happen to share a land border.

I've fretted about Britain before, and I'm still fretting. Like most Irish people I have a normal, neighbourly desire to see our cousins across the Irish Sea do well for themselves (bound as we are by the ties of history, trade, demography, culture and legal systems). Growing up a nationalist in Northern Ireland I had a rather different attitude. But I've got over it - as have most I reckon.

However the 'difficulty/opportunity' duality might be taking on another form. Optimistic as it may seem, I expect that Ireland will emerge from most of our present difficulties as 2010 progresses. Unfortunately, I suspect that Britain might well enter a very difficult period at the same time. The UK government has still to respond to the challenges of public sector overspending and massive deficits - nor will it until a Conservative government takes power by the middle of the year. Worse for us, sterling looks set to decline further - even precipitously - against the euro: with some already talking of sterling-euro parity in 2010.

At the heart of the uncertainty about the UK is the dawning realisation that Britain - like Ireland - squandered much of the boom on unsustainable policies and practices. As Max Hastings put it recently, Britain's 'long weekend' is over:
The national mood approaching Christmas 2010 and 2011 is likely to be much bleaker than today’s. Most people will have significantly less money. If the Conservative party wins power, it will fail in its responsibility if it does not cull large numbers of state workers. More businesses will go bust.

There are fundamental uncertainties about how Britain will earn its living for the rest of the 21st century, especially as its earnings from financial services shrinks. Optimists talk up the value of intellectual property and the English language. But how many people can live off the likes of television’s Top Gear programme, the history books of Simon Schama and the novels of Hilary Mantel?

The best British manufacturers are world class, but such bosses as Sir John Rose of Rolls-Royce offer warnings about the shortcomings of the educational system in sustaining a workforce fit to compete with young Singaporeans. Service industries, tourism notable among them, will continue to generate substantial in­come, but scarcely sufficient to fund the Trident nuclear deterrent replacement and other symbols of big power status, to which both the Tories and Labour cherish pretensions.

We are cursed with a bloated sense of self-entitlement, reflected in the excesses of public spending. If we possess a capacity for private contentment that some Americans might envy, the reverse of the medal is a reflexive lassitude.

Some lessons there for Ireland too, no doubt. I do hope that England's forthcoming difficulties do not hamper Ireland's opportunities for growth. Though our destiny will continue to be tied to the larger island next door for the foreseeable future - even if Britain's status in the world continues its inexorable decline.

Monday, December 28, 2009

Reality Checked

If you haven't seen Avatar yet - but intend to - then you might want to skip this post. I'd certainly recommend it for the 3-D, cinematic experience: all three hours of it!

Still here? Okay, if popular culture is a reflection of a society's values (however attenuated the expression) then what does Avatar say about contemporary American/Western values? To put it mildly I would say they are somewhat 'conflicted'. On the one hand we have a fantasy about a peaceful, indigenous people living in harmony with nature on planet Pandora - until the arrival of greedy humans wielding superior technology. On the other, we have the reality of 'greedy' humans creating the wealth and the technology that enables them to blow $300 million telling a tale about imaginary blue people on another planet ...

The storyline is a riff on Pocahontas/Dances with Wolves with a bit of the Matrix and a few other movie references thrown in for good measure. Which is not to detract from the visual power of the movie itself: it's pretty obvious where the $300 million went when you see it. Nor is there necessarily anything wrong (or even avoidable) about previously used storylines. The best stories are the ones we keep telling one another.

But the story's 'morality' is decidely different to that of, say, Lord of the Rings which was set outside human time, but featured some of the same themes of good vs. evil etc. Avatar, on the other hand, is set in human time: 2154 to be precise. And we are left in no doubt that it is we humans (or the English-speaking, Western variety) that are the baddies. This has already provoked criticisms from some: ranging from those who think it is anti-White to those who think it is pro-Libertarian. Take your pick.

Or maybe not: you could just enjoy the movie for its entertainment value and ignore any 'messages' in the story. As most people will I'm sure. Some how I doubt if anyone will to join the Green Party on the strength of it. The fact is, we Irish have a fairly clear grasp of the distinction between fantasy and reality. Take, for example, the recent Eurobarometer survey. Asked to what extent they agree that 'economic growth must be a priority for my country, even if it affects the environment', more Irish 'agreed totally' than any other Western EU country. In total, 61% of Irish adults agreed - compared with an EU27 average of 47%.

The Irish have never been shy about seeking opportunities elsewhere: so I guess there'll be a few on the first flight to Pandora - or its equivalent - when the time comes.

Sunday, December 20, 2009

Twitter Ate My Blog

I haven't been blogging much lately: the 'paid-for stuff' inevitably gets priority over the 'fun stuff'. But it seems I'm not alone. John Burns frets in today's Sunday Times that the number of Irish blogs has peaked and may be heading into decline.

Perhaps it's an economy thing: as the economy worsens more people like to sound off about it online in blogs etc. And when the economic situation starts improving then they're too busy making hay to be indulging in rants, no matter how therapeutic. Hmmm, blogs as a leading economic indicator - I had never thought of that before.

But Burns makes another point: more people are using Twitter and Facebook to get their messages across - and it's a lot less work than blogging. I don't use either (though I tried Twitter for a few months). From ePioneer to eLuddite in 27 months - I just can't keep up!

Apres Nous La Neige

They're calling it 'snowmaggedon' in America's North East as a record breaking snow storm brings Christmas shopping to a halt (and everything else besides). The big chill temporarily gripping Northern Europe and North America is perhaps a fitting end to all the hot air we witnessed in Copenhagen.

Weather isn't climate of course, and even in Ireland winter tends to be that bit cooler than summer (though it can be hard to tell sometimes ...) But No Hopenhagen is better than Hopenhagen if we are spared the worst of both worlds: Europeans bearing the costs of self-inflicted eco-rectitude whilst the rest of the world keeps on going its merry, carbon-emitting way. Though it's probably too late for the 1,700 steel workers being made redundant in the UK, for which their employers - Corus - will be 'rewarded' with nearly £0.25 billion in carbon credits.

The farce in Copenhagen nevertheless appears to have succeeded in annoying everybody - unity of sorts I guess. Stewart Brand reminds us that there are four sides to the climate story, and I suspect that none of them are all that happy with what appears to be nothing more than a decision to make a decision later.

Richard Tol has a world-weary take on it all:
One could hope that the failure in Copenhagen will lead to a fundamental re-think of international climate policy. I’ve hoped that for over 15 years now, and I’m not holding my breath this time.
Nor am I.

Tuesday, December 15, 2009

Growth Conspiracy

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
Frédéric Bastiat 1848
I was talking to a friend the other day about how we were coping with the recession in our respective businesses. (Or conspiring to expropriate more surplus value from the proletariat, depending on your point of view of course.) He has fifty employees - twice my own number. But we have faced some of the same challenges: reducing supply to meet demand (including, unfortunately, staff levels), and reducing prices to secure sales. In terms of staff numbers and prices, both our businesses are back to about 2004 we reckon. Broadly in line with the economy I suspect.

Neither of us are content to stay in 2004. Like tens of thousands of businesses throughout Ireland who have made it this far, we are juggling the the dual concerns of surviving the remainder of the recession and positioning ourselves for recovery when it comes. Neither outcome is guaranteed of course. To that extent, growth-oriented businessmen are like Bastiat's 'good economist': dealing with the seen and the unseen, including an uncertain future that must be foreseen.

Oddly enough, economics itself has little useful to say about the nature of business, and especially the firm. Nor would it appear that the economic theory of the firm has improved much over these past twenty years - according to Paul Walker. But perhaps it doesn't matter. Most business people work in and run small firms with fifty or fewer employees: the quintessential entrepreneurs. Perhaps understanding the nature of entrepreneurship itself is enough in the absence of any fuller theory of the firm? I like Art Carden's perspective on the topic in an insightful essay entitled A Note on Profit, Loss and Social Responsibility. Here is his take:
The profitable entrepreneur does well by society in that he takes resources and converts them into something more valuable. The unprofitable entrepreneur does poorly by society by wasting resources; nonetheless, even entrepreneurial losses provide valuable information about market conditions and the range of employments of labor and capital that are (or are not) profitable. Profitable entrepreneurs show us what to try. Unprofitable entrepreneurs show us what not to try.

With apologies to Adam Smith, the entrepreneur brings about a socially beneficial outcome which was no part of his intention by seeking his own self-interest. Profitable entrepreneurs are rewarded for creating value, while unprofitable entrepreneurs, though punished for wasting resources, nonetheless confer benefits on society because their unprofitable ventures reveal information about production plans that do not create value. The prospect of profit means that the plan will be tried; the reality of loss means that revealed information will be trustworthy.
I also like Carden's idea that entrepreneurship - and business for that matter - is fundamentally about risk management:
Entrepreneurship is an exercise in risk transfer and risk reduction, and those who become entrepreneurs are those with a comparative advantage in bearing risk. We can say that this is ethically laudable: entrepreneurs (and, in particular, capitalist entrepreneurs) have a comparative advantage in reducing risk and in smoothing out future consumption patterns. It is the job of the capitalist-entrepreneur to advance income to current factors of production (labor and capital) in anticipation of being able to sell output at a future date for more than the costs of production.
This has important implications for Ireland's recovery. Just as there are good economists and bad, so also there are good unintended consequences as well as (the better know) bad ones. In fact, economic growth (and the affluence that it brings to billions) is an 'unintended consequence' of the decisions of millions of individual businessmen. Think of William Nordhaus' calculation that only 2.2% of the value of innovations accrues to the innovators: the other 97.8% goes to the users of the innovations. A very positive unintended consequence indeed.

Cambridge economist Sir Partha Dasgupta reminds us in the 2009 Royal Economic Society public lecture that there are a number of vital elements necessary to sustain growth (reported in the FT). These include physical capital, human capital and technological capital. Here in Ireland we have a quantitatively and qualitatively better supply of these 'capitals' as we end the decade than we had at the start of the decade. We also have considerably more social capital - including effective public institutions - than ten years ago. It is the combination of these capitals that Dasgupta sees as providing the basis to launch and sustain growth to the benefit of society as a whole.

My friend and I - any many other Irish people in businesses - can use these capitals to grow our businesses. Ireland's future economic success - both job and wealth creation - will be achieved one business plan at a time; even knowing that many plans will fail (risk again). Whether it is launching new businesses (I've been following the extraordinary story of Demand Media lately, ht MediaFuturist) or re-launching existing ones, it is unintended consequences that will secure a better future for all Ireland's people.

The 'foreseen unseen' - Bastiat would approve.

Sunday, December 13, 2009

Our Destiny Is Simplicity

I've written this blog post in Ommwriter (and then pasted it into blogger obviously). What is Ommwriter? It is a kind of 'ambient word processor' (for Macs only unfortunately): it is designed to filter out distractions - something we face all the time when we spend a lot of our time online (The Sunday Times reports that our brains are currently bombarded by 2.3 words per second, or about 100,000 words a day).

The experience of using Ommwriter is really ... rather ... mellow ... like something Brian Eno would produce. The experience is auditory as well as visual, so you can choose different background colours and even different keyboard sounds as you type.

I feel it is designed for poets and novelists rather than bloggers - there is no hypertext function for instance (the links in this post were added by me using Blogger). But then isn't hypertext the apotheosis of distraction?

On the other hand, I am working on a non-fiction book, and anything that reduces distraction is very welcome. Though I might be concerned about productivity - the experience is so mellow I could just get tooooo relaxxxed. What's the hurry man?

Ommwriter is another example of the Quantified Self (one of my favourite topics), i.e.: using the potentialities of emerging technologies to forge a deeper connection with the user - and to life's tempo - and a deeper level of self-awareness as a result.

What I also like about Ommwriter is how clean the user interface is. No menus (they're hidden until you move your cursor to the menu space); and a screen completely filled with a serene image (currently a snow covered field on a foggy day). I have often thought that our destiny is simplicity: that the ultimate trajectory of The Technium - to use Kevin Kelly's phrase for the evolving world of technology - is to enfold itself back into the world of flesh and blood people.

Robin Hanson is right, this is the dreamtime, and our descendents will look back at us in bemused wonder. But they will do so via tools like Ommwriter. A sufficiently advanced technology will be indistinguishable from humanity ...

Friday, December 11, 2009

Economists from Outer Space

Marx wasn't a Marxist and Christ wasn't a Christian. And now it seems Malthus wasn't a Malthusian. Or so says Adam Martin in a guest blog on Aidwatch who notes that Malthus never assumed that people would keep on having babies regardless of the consequences (namely: mass starvation). Instead Malthus observed that:
"Impelled to the increase of his species by an equally powerful instinct, reason interrupts his career, and asks him whether he may not bring beings into the world, for whom he cannot provide the means of subsistence."
In other words social innovations (marriage before sex) and technological innovations (condoms/the pill) could potentially avoid the outcome he and others worried about. The other side of the equation of course is food production. As it happens food production has outpaced food consumption since Malthus' time. Again thanks to the technological innovations of Fritz Haber among others.

But let's not forget the economists. As Martin reminds us, the laws of economics are more powerful than the laws of physics:
I once saw Deirdre McCloskey illustrate this by placing a $100 bill on the table. The laws of physics, she reminded the class, dictate that an object at rest tends to stay at rest. Economics tells us that errant $100 bills laying out in the open do not remain unattended for long. She assured the students that, were she to leave the room for several hours, economics would better predict Mr. Franklin’s fate.
Indeed: and it seems that the biggest influence on population growth is affluence - women in more affluent societies tend to have fewer children, as noted by Andrew Jack in the Financial Times recently. However some observers fear that this process in now going into reverse:

Using data from 1975, he and his colleagues confirmed a classic straight-line inverse correlation between wealth and fertility in dozens of countries. A fall in total fertility rates – the theoretical number of births in a woman’s reproductive lifetime – coincides with a rising score on the UN’s human development index, a measure of standard of living, education and life expectancy.

But replotting to include data from 2005, they spotted a striking number of exceptions among richer countries that had exceeded the very high score of 0.9 on the index, suggesting instead a rotated “J” curve – the start of a rise after a steady drop. The US, the UK, Denmark, the Netherlands, Norway and Germany were among those showing a recent rise in fertility.

It's too early to tell perhaps. But now there are other worries: instead of worrying about Malthusian starvation we now have to worry about Malthusian climate change. Hence a new initiative by the Optimum Population Trust (OPT) which has launched PopOffsets whereby you can offset your carbon footprint by, er, funding the distribution of condoms and the like. It might sound dodgy but here's their reasoning:
The cost-benefit analysis commissioned by the trust claims that family planning is the cheapest way to reduce carbon emissions. Every £4 spent on contraception, it says, saves one tonne of CO2 being added to global warming, but a similar reduction in emissions would require an £8 investment in tree planting, £15 in wind power, £31 in solar energy and £56 in hybrid vehicle technology.
Fewer people = fewer emissions. Fewer poor people in poor countries that is. I'm uncomfortable with all this for some reason. So is Frank Ferudi, who observes about the OPT initiative that:
Once newborn babies are dehumanised and recast as little pollution machines it becomes possible to advocate their elimination as an exercise in the reduction of carbon emissions. A world that can place an equal sign between a baby and carbon is one that has lost its faith in humanity.

... The OPT’s trade-off between birth control and energy-saving technology – where a simple condom is said to be a better investment for ‘saving the planet’ than hi-tech inventions – is testimony to today’s disturbing mood of estrangement from human life. It is not surprising that offsetting carbon emissions through funding birth control is preferred to technological innovation. Because where technological innovation relies on investing in human potential, Malthusianism is focused on preventing the realisation of human potential.
Poor old Malthus, and maybe a little unfair. Here's Martin again:
What matters is that, when discussing population, we do not forget the basic lessons of economics. A top-down perspective on population that treats treats individuals like mindless lemmings will panic: “Unless we reduce the human population humanely through family planning, nature will do it for us through violence, epidemics or starvation.”

Malthus gets right what both his followers and his more technocratic critics get wrong: the institutions within which individuals make reproductive decisions matter. The way to increase GDP per capita is not to cut the denominator. And while today’s scare tactics (Mali is “really in for a Malthusian disaster,”) and recommendations to stop having babies are not as monstrous as those of yesteryear, we should be wary of those who would intrude on one of the most personal and sacred choices individuals confront – whether to have a child. Nor is population sustainability a mere horse race between libido and technology. Consistent with the approach of classical economists, Malthus treats human nature as constant. Different institutions drive differences in fertility outcomes. In this we should all be Malthusians.

He's right of course. It is economics working with technological innovation that creates a virtuous circle of affluence and abundance that solves the problems that might otherwise engulf us. The same goes for climate change. The government's decision to contribute €100 million to the EU's climate change aid programme is a ridiculous variation on the Population Offsets theme. Instead they and we would be better off announcing 10 x €10 million Carbon Prizes for technological innovations that tackle the causes and consequences of climate change. On the condition that the intellectual property attaching to any prize winning innovations is shared freely with the rest of the world.

We are a young species, only at the start of our story here on Earth. And it won't be confined to Earth. Surfdaddy Orca paints an inspiring picture of the future consequences from the fusion of nano, bio, info, cogno (NBIC) technologies in the latest delightful issue of h+ magazine (h for human that is). One forecast for 2050:

The vast promise of outer space will finally be realized by means of efficient launch vehicles, robotic construction of extraterrestrial bases, and profitable exploitation of the resources of the Moon, Mars, or near-Earth asteroids.

The result of an affluence+innovation wave fuelled by economics. So economics will take us to space: and in that regard, economists are the true astronauts. Live long and prosper ...

Thursday, December 10, 2009

Confidence Tricked

Yesterday's Budget was very, very clever. For weeks now I've been listening to consumers in focus groups and looking at survey results all of which pointed to fearful anticipation of Budget 2010. Now it has come to pass and guess what? ... it wasn't as bad as many (in the private sector, where four out of five work) had feared.

Consumer confidence will be boosted by this budget, and consumer confidence drives consumers spending in the short run. There are other consumer spending stimulants:
  • a reduction in VAT from January (which most expected)
  • a reduction in excise duties on alcohol (which fewer expected)
  • no increase in income tax rates (most expected an increase)
  • our very own 'cash for clunkers' deal on cars (which rather fewer will benefit from)
The carbon tax still leaves fuel prices well below their levels a year ago, so there will be little real impact there. And of course the reductions in public sector pay and social welfare payments will have a deflationary effect - though most if not all of this will be offset by falling savings ratios as people feel the worst is over and they start to loosen their purse and wallet strings. Nevertheless the Government does forecast a further contraction in consumer spending next year. That said, my faith in government forecasts is on the agnostic side I must confess (I like the recent idea from the UK for an independent Office for Fiscal Analysis to separately prepare the economic outlook for their government's budget).

But the recession isn't over yet. Unemployment and business failures are 'lagging indicators' of the state of the economy: so I expect both to worsen even as other indicators (including consumer confidence) start to improve. I expect to see a peak in business failures (especially retail) and unemployment in Q1 (possibly a sharp one); some levelling off in Q2; with the potential for real economic growth setting in in the second half of the year (including consumer spending).

Remember, most consumers don't have debts, and most employees (87%+) will keep their jobs. There is a lot of pent up replacement demand out there (cars especially), and deflation means a lot more bargains to tempt those with money to spend. Indeed, recovery might come sooner if exports improve more quickly on the back of an international recovery now underway; and employers move quickly back into hiring mode. After yesterday I think there's a 60-70% chance Brian Lenihan's bullish prognosis that the worst is over and recovery will gain traction next year is right.

The odds on a June 2010 General Election have just gotten shorter.

Monday, December 7, 2009

The Invisible Hook

Markets abhor a vacuum, which is one reason why piracy is doing so well these days. Did you know that:
Somali pirates have established a stock exchange in Haradheere to raise capital to fund their piracy. It seems to be quite an enterprise. Financiers from near and far are investing. Shares are traded just like on Wall Street, and 10 of the 72 so-called “maritime companies” currently listed have conducted “successful” (presumably meaning profitable) hijackings.
That's according to a fascinating article on the economics of Somali piracy. Piracy has been around for a long time and is probably one of the, er, oldest professions of a collective nature. And there is something admirable about their organisational abilities, even if in the end they are just crooks. As Peter Leeson explains about his book The Invisible Hook in a fascinating interview over at EconTalk, the pirates of old showed remarkable organisational skills in organising their affairs so that piracy was a positive sum game (for pirates that is) rather than deteriorating into pirate-on-pirate violence.

And not all piracy involves speedboats and RPGs these days. There is clear evidence that 'piracy' of digital content is increasingly accepted by young people around the world, regardless of the consequences. And the recession appears to be making it worse.

Here is Ireland we haven't had many pirates since the exploits of Granuaile. But their second cousins - smugglers - are still thriving, as witness the huge shipment of 120 million illegal cigarettes seized in October.

But there is an economic cycle to smuggling as well as to piracy. And a 'piracy bubble' may be at hand judging from developments in Somalia:
One woman interviewed in the Reuters report was waiting at the stock exchange to collect her share of a ransom collected from a Spanish tuna fishing vessel. She had contributed a rocket-propelled grenade that she got in alimony from her divorce. “I have made $75,000 in only 38 days since I joined the ‘company’,” she said.
Of course if they ever want to go legitimate and buy some cheap Irish properties with their ill-gotten gains then I'm sure NAMA could help them. The sooner the better for all concerned.

Sunday, December 6, 2009

The Celtic Leopard

The Sunday Business Post today reported on my article in the latest issue of the Irish Banking Federation's About Banking entitled: The New Normal - Why Personal Banking Will Never Be The Same Again (pages 9-11).

I suggest that Ireland's banks are like Fabrizio, Prince of Salina, in Giuseppe di Lampedusa's one and only novel The Leopard. They are on the cusp of a new era: driven in the short run by our economic crisis and in the long run by less favourable demographic trends.

Though perhaps an opportunity for a budding Don Calogero, the Prince's bourgeois nemesis in the novel.

Saturday, December 5, 2009

Tie Ulysses to the mast

The Government's negotiators need to put wax in their ears. The public sector pay debacle is a classic example of conflicting time preferences. On the one hand there is the short term promise of no public sector strikes if the government cuts a deal on unpaid leave. On the other, there's the long term need to secure fundamental, structural changes to public sector pay arrangements that will undoubtedly entail serious industrial conflict. Fragile peace at a price now or secure peace at a cost in the future?

David Eagleman explores this dilemma brilliantly (I've mentioned his delightful book Sum before):
After all, no one likes to wait. And the only thing worse than waiting is waiting with uncertainty. A team at Emory University examined what happened when people waited for an impending electrical shock. Some people dreaded the shock so deeply that they chose to receive a more powerful shock earlier rather than wait for a lesser shock to arrive at a later, random time.

One of the key jobs of the human brain is to simulate the future, and the less information it has to work with, the more anxious it becomes. Pinning things down in time makes waiting less troubling. With a clear idea about the order and timescale of events, people are more patient and less anxious.
Doing a deal on unpaid leave has the attraction of getting the shock over with, or so it might seem. But there's a bigger problem, as Eagleman points out:
It’s simply that the present holds more sway than the future. Recently, researchers used brain imaging to monitor people making money-now-or-more-later decisions, and they discovered that the neural networks involved in short- and long-term decision-making are fundamentally separate. In situations of choice, the two systems are often locked in battle against one another.

... People manage the influence of the short-term systems by proactively binding their future options. We see this when a person in good health signs an advance medical directive to pull the plug in the event of a coma, when an alcoholic rids the house of drink to avoid future temptation, or when a person socks money into a Christmas account to keep himself from spending it before December.

Such deals with oneself are what philosophers call Ulysses contracts, after the hero who decided in advance to lash himself to a mast to resist the sirens’ song. The present, calm Ulysses was negotiating with his future, more emotional self.

I think that is part of the extraordinary anger that we witnessed earlier this week in response to the government's apparent capitulation to the public sector unions on unpaid leave. The people of Ireland have in their own minds made a Ulysses Pact with themselves - we'll take the pain in the form of taxes, pay cuts, NAMA and the like so long as there's a binding commitment to secure the benefits from same for all the people in the future.

That anger seems to have caused the government to rethink its stance. Just in time: we're getting very close to the island of the Sirens. Put wax in your ears and tie Ulysses to the mast. And ignore, if you can, their haunting music ...

Friday, December 4, 2009

Family Failure is the Health of the State

We Irish don't invade countries, a fact I'm rather proud of. For some other nations war is the health of the state. But not for Ireland. Nor for most European countries these days. So if it isn't wars and armies and the permanent threat of 'the other' that justifies a stronger state, what does? The answer is obvious: family failure.

The chart is from the recent Demos report on Building Character which argues that 'style of parenting' - and the impact it has on children's characters - trumps everything else in determining the lifetime success of children. More important, apparently, than how many parents you live with, or even if they are your biological parents. The chart would suggest that actually these things do matter, but are dismissed by the authors with the observation that:
Figure 4 shows that children with married parents, both of whom are the child’s biological parent, do best in terms of outcome scores. This group is around twice as likely to be in the top 20 per cent of child outcome scores as are children from lone parent families or step-parented families. Conversely, children with married parents are only half as likely to be in the bottom 20 per cent of child outcomes as are children with lone parents or step-parents. Children with cohabiting parents do worse than those with married parents but better than those with lone
parents or step-parents.
Sort of seems obvious really; two parents potentially means two incomes which is, er, twice as many as one parent. But apparently not:
However, when we control for other characteristics – namely parental style and parental confidence – the relationship between family structure and child outcomes disappears almost entirely. The only remaining correlation is a small difference between married parents and cohabiting parents (probably because marriage is serving as a proxy for more stable and happy partnerships). Crucially, the outcomes for children of lone parents and step-parents are explained by the differences in other family characteristics such as parental confidence and self esteem; being a lone parent or a step-parent does not adversely affect child outcomes in itself.
Which sort of sounds like it's the parents fault don't you think? Indeed, Demos approvingly quotes Professor Stephen Scott as observing that:
Poverty is a factor, but not a central one… I am fond of saying poverty of what? And actually it seems to be poverty of the parent-child experience… that leads to poor child outcomes rather than poverty of a material kind.
Or as the Demos authors explain:
A rich research literature demonstrates that healthy psychological development requires nurture, affection, intellectual stimulation, security and stability. These vital ingredients of a good start in life can of course be provided within any family form. However, there is some evidence that lone parents and cohabiting couples do less well in terms of child outcomes than married couples.

But the causal factors at work here are not straightforward. An analysis undertaken by Kiernan of the MCS found that family status was only very weakly associated with children’s development, once other factors – like poverty, maternal depression and so on – were controlled for.
Which does rather beg the question whether family status and structure might actually have caused the poverty? Jennie Bristow has a few concerns with this. As she notes:
What is striking about this is not only the blithe assertion that all manner of social inequalities and life problems can be obliterated by parents simply setting a few house rules for their toddlers. It is the reduction of a child’s moral development, the building of character that takes place over the course of childhood within a distinct cultural context, to a particular parenting style that results in clearly observable attributes amongst five-year-olds.

Worse, we are told in the technical appendix to the Demos report that the children's behaviour and development they are supposedly measuring is actually based on the opinions of (mainly) their mothers in the survey. Not on any observed behaviour itself. Seems a rather weak basis to dismiss family structure as a significant influence on children's development.

But what has all this to do with the State? Lately I've been sounding like Mr Maguire in The Graduate whose career advice to Dustin Hoffman is just one word: Plastics. Only my advice to young people contemplating their future career options in Ireland is just two words: Family Law.
My advice is inspired by the less than inspirational Civil Partnership Bill. And I'm not referring to the first part of the Bill dealing with gay couples - which seems to be getting most (or make that all) of the airtime during the current debate.

No, my concern is with Part 15 dealing with Cohabitants from clause 169 onwards. As I've noted before, we are sleepwalking into a legal, social and economic disaster without any consideration or awareness. Though some legal professionals are finally beginning to take notice. The legislation purports to extend some of the same 'certainties' to cohabiting couples currently enjoyed by married couples. Only they are the certainties that go with the couple breaking up, not staying together. The bill means that any young man or woman cohabiting as a heterosexual couple for more than three years (two if they have children) are legally liable to have to share their incomes and wealth with the other partner should he or she decide to split up. Do you see the career opportunity here folks?

The gay partnership issue is something of a diversion (though a serious issue in itself). The reality is that the number of gay couples availing of the legislation will be trivially small. Just look at the experience of Northern Ireland whose Registrar General has just reported that in 2008 only 86 same-sex civil partnerships were registered in Northern Ireland, down from 111 in 2007. As I keep saying, gays are a tiny minority of the population and only a minority of gays will want to marry/form a civil partnership if the experience of other countries with gay marriage is anything to go by.

Contrast that with the incidence of cohabitation. According to the 2006 Census, there were 77,781 cohabiting couples without children, and 43,982 cohabiting couples with children. In the UK and USA, cohabiting couples are more likely to break up than married couples, and also more likely to break up if they have children. All of which means that the Civil Partnership Bill will entail more work for the courts, for social services, and even for the Gardai. A healthier State indeed.

But I could be wrong: maybe it's the final phase of the gender war and men have finally won? That's according to one tongue-in-cheek explanation anyway.

Family Law: it's going to be (even) big(ger).

Wednesday, December 2, 2009

Val Falvey TD for Taoiseach

Will Val Falvey, TD do to the Irish political establishment what Father Ted did to the Irish Catholic Church? There are some interesting parallels: in Father Ted, Ardal O'Hanlon plays the part of a bumbling, not-quite-sure-why-he's-there character, partnered by a wiser, more cynical sidekick. In Val Falvey TD, Ardal O'Hanlon plays the part of a bumbling ...

The parallels may not stop there. Father Ted made us laugh at the surreal pomposities of priests, bishops and a hierarchy only interested in serving their own interests. But eventually we stopped laughing and started demanding an end to the cover ups and lies that hid an anything-but-funny cesspool of criminal behaviour. With Val Falvey TD we get to laugh at the surreal pomposities of TDs, Ministers and a hierarchy only interested in serving their own interests ...

Which brings us to last night's extraordinary capitulation by Brian Cowen TD at the negotiations on public sector pay. There is now only one logical outcome: the taxpayers of Ireland will be screwed even more than was planned already. Not that logic has ever played much part in Irish politicians' dealings with the public sector. Val Falvey TD would have done a better job.

You heard it here first: Val Falvey TD for Taoiseach.

(You can catch up with the first two episodes on RTE Player by the way).

Monday, November 30, 2009

Good Debt, Bad Debt

The latest statistics from the Central Bank (table B2.2) show a continued contraction in lending to businesses (or should that be borrowing by businesses?) Should we worry? As I've noted before, sometimes the wisest thing in business is not to lend/borrow - even when the money is available.

But it begs the question: are we in danger of over-shooting as we swing from credit bulimia to debt anorexia? It's happening in the UK too, as reported in the latest Bank of England report on individual lending showing that consumer credit is now contracting.

We can learn lessons about business lending from the UK as well. Take the recent (and excellent) CBI report on The Shape of Business - The Next Ten Years. In relation to the banking crisis it has this to say about business banking:
The legacy of the credit crunch is expected to have significant implications for the cost and availability of bank finance for a considerable period. There are a number of reasons for this:

• There will be increased scrutiny and regulation of the financial services industry. Such regulation is likely to constrain banks’ ability to take as much risk in their lending practices as they did prior to the credit crunch, which will impact businesses’ ability to access credit.

• The capacity of the banking sector has reduced considerably as foreign banks have withdrawn from the UK corporate lending market. During 2007, they accounted for around 60% of the growth in lending to UK businesses. These lenders are not expected to return in such significant numbers, so the aggregate supply of credit available to businesses will remain constrained. While foreign banks were more frequently used by large businesses compared to small and medium size enterprises (SMEs) (85% of which use one of the big four banks), the impact of reduced capacity in the banking sector is likely to affect all businesses seeking finance as lending to large businesses by UK banks will displace some lending to SMEs.

• Bank lending will also be constrained during the lengthy process of balance sheet repair, with capital diverted for some time.

• Finally, the mis- and under- pricing of risk which characterised the period leading up to the recession has already been reversed, and is unlikely to be repeated by the next generation of market participants who were witness to these mistakes. Tighter due diligence requirements and higher borrowing costs for businesses will be the result.
Ditto Ireland. This can only mean less business lending/borrowing for the foreseeable future. As the CBI report notes:
Given these trends, the coming decade will see companies operating in a climate in which the availability, cost and degree of freedom to use capital is more constraining than in the recent past. This is expected to have an impact on companies’ finance strategies and may lead them to seek alternative sources and types of capital.
Worse for Ireland, too much of the commercial borrowing that was undertaken during the boom was to acquire assets that are not only worth a great deal less than the monies borrowed, but are failing to generate any revenue whatsoever to fund borrowing repayments. Dirk Bezemer has written brilliantly about this, here he is in FT:
Lending to the real sector is self-amortising: it creates a debt, but also the value-added to repay principal and interest. Such loans enlarge the economy in proportion to the debts created and are financially sustainable. By contrast, loans to create or buy financial assets and instruments are not, by themselves, self-amortizing. In a credit boom, successive owners may sell the asset at a profit, but their buyers will have to shoulder proportionally more debt in order to acquire the asset, balanced (for the time being) by the asset’s value. Asset trading may be individually profitable; but it is a zero sum game, sustainable only if the real economy furnishes enough money to support the rising debt burden. Beyond a point, the lure of capital gains diverts funds from real-sector investment, and households’ rising debt-service cuts demand for real-sector output. In both ways, excessive growth of financial asset markets is self-defeating.
He argues in his paper This Is Not A Credit Crisis that part of the solution to the overhang of malinvestments we now face is to shrink the financial sector. Here he is again:
Not all that long ago, the US economy did well with a financial sector only a third of its present size. Do we really need all of the other two thirds?

We should move away from supporting finance in toto. The new policy should be limit support to banks that serve the real economy. If some of the other financial firms specializing in asset price manipulation go bust, this will not the end of the world. This, after all, is what bankruptcy is for. It is a legally acknowledged and orderly debt workout mechanism and the natural consequence of commercial overexposure. Inevitably, there will be collateral damage to investors among firms, households and pension funds. To the extent that this has real-sector repercussion via falling demand and incomes there should be provisions to compensate. This may be financed out of the liquidity withdrawn from today’s blanket bank support, so it need not come at an extra cost. Most importantly in the longer term, this policy will allow the debt overhead - and the speculative part of the financial sector - to shrink back to more normal levels. This latter objective is important and is not achieved under present policies.
Eventually Irish businesses will identify new opportunities for the profitable production of goods and services that will justify borrowing money to invest in their realisation. Let's hope the banks have recovered sufficiently from their bad lending decisions of the past so as not to stymie good lending opportunities in the future.

Friday, November 27, 2009

Crushing Consensus

The Taoiseach is worried that 'overwhelming negativity' is bad for the economy and bad for the nation. And now I'm worried. The last time a Taoiseach fretted about people talking down the economy it was followed by the worst recession in living memory. And we're still in it. As leading indicators go this one is pretty scary.

It's in the nature of politicians everywhere to take credit for success and to blame others for failure. Ireland is no exception in that regard. But what is exceptional in Ireland is the political and cultural energy that goes into maintaining a consensus. Not so much 'cosy' as crushing. I think it's symptomatic of the deathly inertia of the Irish political system. Don't rock the boat and all that. Dan O'Brien has written eloquently about this - I'm enjoying his book Ireland, Europe and the World: Writings on a New Century very much at the moment. Here he is in The Irish Times recently:

What explains Ireland’s slump-slump-soar-slump record is not bad government, but a governance vacuum; it is not what government gets wrong, but what successive governments have neglected to do. This is to be seen in each of the three periods of chronic economic underperformance suffered since the middle of the 20th century.

After the second World War, the Atlantic democracies took the difficult decision to abandon 1930s protectionism. Uniquely, Ireland did not. It took 10 years of misery for government to act.

Again, in the 1980s, what marked Ireland out from most of its peers was its inability to take action, this time in dealing with its budgetary woes.

The current crisis is deeper in Ireland than elsewhere for the same reasons: inaction during the good years on modernising the management of the public finances; inaction on reining in the rogue bank; and inaction on dealing with the steady and sustained erosion of competitiveness. These failures to act have deepened, respectively, the fiscal, banking and jobs crises beyond those of peer countries.

But it is not only on economic issues that inertia rules. It is in evidence across the spectrum: on the teaching of the Irish language; on energy policy; on planning issues; on a range of foreign policy matters; and much else besides.

As undermining the economy and the nation goes that's a fairly consistent track record.

But the Taoiseach needn't worry. As a citizen, a taxpayer and an employer I don't need pep talks from politicians who have mis-managed our country into disaster. I don't need to be told about the consequences of actions - verbal or otherwise - because I deal with them all the time. And I certainly don't need 'leadership' or 'vision' from people who plainly lack either. What I need, along with my fellow citizens, is for the people who created this mess to get out of the way so that we can get on with our lives and get on with making a better future for our country, for ourselves and for our children.

The sooner he concedes that the better.

Wednesday, November 25, 2009

In Denial About Alarmism

One good thing that should come out of the Climategate scandal is a more sober, more open-minded discussion about the causes, consequences and 'cure' for climate change. Though there'll probably be a little more gloating by those traditionally labelled as 'denialists' for a while yet.

But once they've done gloating the task in hand will remain the same: filtering out actual trends in climate from the chaotic and noisy background of weather. Possibly one example of this new rapproachment is The Global Warming Policy Foundation, launched recently. Nigel Lawson is one of the founding figures, and he has been regularly labelled a denialist by those leaning more towards the alarmist wing of the climate debate.

But he is joined by an impressive academic advisory council - including our own Richard Tol. Richard is firmly in the camp of those who worry adverse climate change is happening and will worsen. But he is decidedly against the more alarmist responses proposed by some. As he notes in a recent VoxEU contribution:
At the same time, estimates of the impacts of climate change do not support the often-dramatic language of the media. Estimates suggest that the overall impact of a century of climate change is equivalent to losing up to 2% of income. The impact of a century of climate change is of the same size as a year of economic growth. In the worst case, impacts may be ten times as large. Still, a deep recession wreaks as much havoc in a year as climate change would do in a century. Climate change is therefore not the biggest problem of humankind.
So a proportionate response to a highly uncertain threat is that of a carbon tax - something he has consistently supported. It is important to adopt policies that are themselves adaptive - with some potential for reversal if they prove unnecessary or to have unforeseen and negative consequences. Human society is also adaptable, as Francisco Capella has noted in a more philosophical piece on climate policy:
There is no optimal climate, and conflicts for the climate's determination may arise if humans achieve partial control over it. Even if humans are adapted to the present climate, this does not imply that it would be difficult to adapt to different climates if the changes are not excessive.

... For almost all human problems associated with global warming, the influence of climate on them is usually small if compared with other more important factors that can be more easily and efficiently dealt with. Climate change alarmists seem to ignore relatively simple solutions for the problems they raise. Humans are proactive, they do not passively submit to natural influences, and the avoidance of climate change is not necessarily the best option.
Climate change, like the weather, has always been with us - and always will be. To the extent we better understand our role as a species in influencing change then the better we can respond to it - including mitigating strategies. A more open, more modest approach by those like the East Anglia CRU, who allowed their politics to get in the way of their science, will also help.

Tuesday, November 24, 2009

No Future for Trade Unions?

On a day when most public sector workers have gone on strike, it might seem perverse to wonder about the future of trade unions. Or maybe not. There are 370,000 people working in the public sector - the vast majority of whom are members of trade unions. Public sector workers comprise just one in five of the 1,939,000 in employment overall: so four out of five workers are in the private sector. The vast majority of the latter are not members of trade unions.

This pattern of a unionised public sector and a non-unionised private sector now seems fairly well established in most developed countries, with trade union density overall declining sharply outside of Scandinavia. As it happens, Irish trade unions have not represented a majority of Irish workers since the mid-1990s. Now as few as 3 in 10 workers in Ireland are union members.

You can look at this in two ways: either trade union membership is increasingly ghettoized among public sector workers; or, the trade union movement has been captured by public sector workers. Or maybe both. Ireland's prolonged dalliance with Catholic Corporatism aka Social Partnership has undoubtedly exacerbated these trends. Not least because one party to the partnership - the Government - also happens to have the largest, most unionised workforce in the country.

It is hard to be optimistic about the future of trade unions in their current form. They are failing to connect with younger employees (and not just in Ireland as noted by Michael Skapinker), a situation that can only get worse due to the shocking rise in youth unemployment and the prospect of fewer new labour force entrants (and hence fewer new union members).

The hospital pass by the banks to the Irish government (and Irish taxpayers) can only mean a decade or more of severe constraints on the capacity for the public sector to expand. Therefore the main source of trade union membership looks set to stagnate if not contract.

Where does that leave trade unions in Ireland? An increasingly flexible, more mobile workforce will simply not see the point of trade unions. But workers will still have critical needs in relation to protection, information and securing their future. In that scenario, trade unions might be better advised to return to their roots and become organisations dedicated to the long term welfare of their members - friendly societies if you like.

And with impoverished governments unable to employ people directly to provide the education, health and social services our ageing society will need then we might all be glad to join the union.

Image cred: In Male Fide

Monday, November 23, 2009

Not Ready for Take-Off

An old friend of mine once served on the aircraft carrier HMS Ark Royal. Any time I was going to catch a plane he would 'helpfully' remind me that "take-off is far more dangerous than landing". Something to do with heavy airplanes full of fuel, fixed length runways, the laws of physics - that sort of thing. He'd obviously seen more than a few ditch in the sea in his time. For some reason I always think of him when I'm on a plane taxying to take-off ...

But I thought of his observation in a different light recently. You might remember all the talk before the recession about a 'soft landing' versus a 'hard landing'. Instead we got a crash landing. Could recovery be subject to some of the same 'aeronautical challenges'? A 'smooth take-off' versus a 'stalled take-off', for example?

Bear with my analogy a little longer. Take the Central Bank's latest credit data showing that lending to every single sector of the economy (except for the financial sector) was down substantially in September on the year before. Think of credit as kerosene for the jet engines: we're low on fuel.

Then there's the recent pan-EU Enterprise Finance Index, which reported on the availability of finance for Europe's businesses and their commercial performance at present. As you can see from the chart, Ireland scored worse than any other EU country in terms of turnover, profitability or pricing power. Think of this as red warning lights flashing on the pilot control panel.

So as Ireland Inc taxis to the runway a few more things strike us. We're carrying too much excess baggage relative to our engine size in the form of commercial and personal debt. What's more, the aircraft's tyres are nearly flat thanks to weak domestic spending and rising taxes. But we need to take-off anyway and so we keep going, desperately trying to build up velocity as we head down the runway, seat belts on.

But what's that? The European Central Bank is planning to raise interest rates. So the runway is getting shorter, and the excess baggage heavier.

Should've taken the train ...

Sunday, November 22, 2009

Losing a Generation

Are Irish youth turning their backs on Europe? I've just read the Eurobarometer survey on Irish voting behaviour during the recent, second Lisbon Referendum (an update of a similar survey at the time of the first referendum). Two things struck me: the No vote was highest among 18-25s than any other age groups in both referenda; and opposition to Ireland's membership of the European Union increased in the same age group even as the percentage voting No fell.

Of course we could dismiss this as 'youth sounding off' behaviour, and blithely assume they'll 'grow out of it'. I'm not so sure. Firstly, as the chart shows, opposition to Ireland's membership of the EU increased in all age groups between the two referenda. Of course it's still a minority opinion (and not one that I share). But it isn't too difficult in these turbulent times to imagine one, two or more developments that might lead to a surge in opposition.

Take the announcement by our newly unelected EU President Herman Van Rompuy that he supports the idea of a 'euro tax' to fun the Commission's expanding operations in Brussels. Try selling that to the mass unemployed youth of Europe (now experiencing an average 20% unemployment rate). And try selling it to Ireland's depressed taxpayers (they'd demand their Yes votes back). Still, at least we didn't get Tony Blair as president; I wouldn't be too keen on sending Irish soldiers off with their EU counterparts to invade countries containing imaginary weapons of mass destruction.

Nevertheless, Van Rompuy's appointment sends a powerful signal that Europe has gone as far as it's going to go. The leaders of the main member states want to keep the balance of power between member nations and the European Union more or less as it is. To my mind this suggests that a period of circling stagnation lies ahead for Europe, a situtation hardly likely to assuage the concerns of Irish youth, and more likely to exacerbate them.

Which is a pity. Europe faces a triple economic, demographic and democratic challenge in the years and decades ahead. The Van Rompuys of this world lack the political will to secure real changes that will benefit Europeans (e.g.: scrapping CAP, delivering a real Single Market); and they lack the imagination to inspire us with a vision of Europe's place in the emerging future (beyond the now moribund climate change agenda). Helping Africa join a world of free market democracies would be one such vision in my book.

Ireland's youth will likely carry their less than enthusiastic feelings about Europe into middle-age and beyond. The job of any future referenda organisers is going to get a whole lot harder.

Saturday, November 21, 2009

Power to the Statisticians

This is another entry in the 'praise where praise is due' category. Admittedly a limited category on this blog ...

I was recently pointed to the HSE's Healthstat facility on their website, which I had completely missed. It provides an excellent, up-to-date guide to the performance of our hospitals - and in some detail too.

Take, for example, the recent furore over sick leave in the public sector. Healthstat shows the monthly incidence of sick leave in each hospital and whether it is certified or not. Intriguing to see that Sligo hospital a) has an above average level of sick leave (though not the highest), and b) the sick leave is overwhelmingly uncertified in contrast to all other hospitals.

It might be an aberration - but if it's not then it's the kind of thing that can focus a health service manager's attention on the priority problems that need fixed. Which can only be done if you have the statistics to support your decision-making.

I never thought I'd say it but - well done HSE.

Friday, November 20, 2009

Impoverished by Poverty Thinking

Responding to yesterday's SILC 2008 report from the CSO, Fr Seán Healy was moved to observe that, without social welfare payments, 43 per cent of our population would be in poverty. Indeed. And if everyone stopped eating 100% of the population would die of starvation. I'm sure there's a point there somewhere ...

I think we all get the importance of social welfare payments to the wellbeing of recipients. In fact, we have been so generous with our social welfare payments in Ireland that the incidence of 'poverty' (using the elastic definition of 60% of median incomes) has fallen massively and consistently since 2005. Moreover, the standard measure of inequality - the GINI coefficient - has also fallen: to the point where Ireland is 'equal' with the average EU level. So less poverty and more equality.

Something to celebrate surely? Not if you're Social Justice Ireland (a better name, I admit, than 'Continuity CORI' now that the latter is synonymous with sweetheart deals costing the taxpayer hundreds of millions of euro in abuse compensation). Fr Healy's worried that the much touted cuts in social welfare payments in the forthcoming budget might lead to an increase in poverty. But he needn't worry. Those who insist on the ludicrous definition of 'poverty risk' as equal to 60% of median incomes are about to see poverty levels plunge as median incomes fall: leaving those on even modestly reduced social welfare payments comparatively 'well off'.

This process has already started. Households headed by an employed person saw their disposable incomes rise by 1.1% between 2007 and 2008 (average inflation, by the way, was 4.7% during the survey period). Households headed by an unemployed person saw their disposable incomes rise by 25.2% over the same period (Table 1.3). The ratio of equivalised disposable incomes of unemployed to employed rose from 56% to 65% in just one year (Table 1.4).

We've had deepening deflation since the start of this year, coupled with falling nominal wages and salaries for many. So don't be surprised to see less 'poverty', a lot more equality and an even narrower income differential between the employed and unemployed (and also between the employed and the retired: a ratio of 77% in the case of the latter in 2008).

Nevertheless this is bad news for the Poverty Industry. Their problem is that we have been spectacularly successful at eradicating a great deal of poverty in Ireland thanks to the blessing of economic growth in the past ten years. Those traditionally most vulnerable to poverty - the elderly - have effectively been freed from poverty, as the chart above shows (from the same SILC report). This is something we should be justifiably proud of in Ireland. But the remaining problem isn't one that can simply be fixed with higher social welfare payments (real or nominal). We've taken that as far as it will go (and probably a lot further in the case of some recipients).

There is, though, one group that remains especially vulnerable to poverty - and it's rather obvious from the chart. Now you might think that this would lead to loud and persistent calls from likes of Social Justice Ireland/CORI to do something about the problems arising from the incidence of lone parent families in Ireland. On every measure presented in the SILC report - disposable incomes, relative poverty, deprivation etc - households comprising one adult with children consistently and persistently score highest on all the wrong indicators. So whom does SJI/CORI fret about? That's right, the working poor and people living in the Midlands. Go figure.

The Poverty Industry simply prefers to ignore the blindingly obvious for the politically correct. Hence the likes of NESC fretting more about the impact of pets on children's welfare than lone parenthood. Like I said, this isn't social policy so much as phrenology. Luckily such fashions come and go and eventually (though probably not soon) we'll get serious about eradicating childhood poverty (now much more prevalent than poverty in old age).

The United States is ahead of us in this regard. A recent study from Brookings on Creating An Opportunity Society has examined the drivers of upward social mobility around the world. The authors conclude that the transition to the middle class is all but guaranteed for poor children in the United States if they do three things: finish high school, work full time and marry before having children. Reviewing their book, Clive Crook in the Financial Times observes:
At this many liberals will bridle, as they will at the claim that the “success sequence” of school, employment, and children after marriage requires firmer pro-family suasion and incentives. “To those who argue that this goal is old-fashioned or inconsistent with modern culture, we argue that modern culture is inconsistent with the needs of children.” So there.
Sadly I can't see any of our poverty advocates in Ireland (not even those belonging to the Catholic Church, God help us) going there just yet. Not even challenging the insane plans to extend the same legal protections afford to married couples to cohabiting couples, creating even more instability for children in families.

Perhaps they will after they've sorted out the Midlands. Pity the children.

Thursday, November 19, 2009

Man Up

Happy International Men's Day everyone (or should that be every other one?) I was alerted to the day that's in by the wonderful Dr Elizabeth Celi (most definitely not a man, but a brilliant commentator on the health and other inequities facing men nowadays).

Treat yourself to The Art of Manliness as a reminder of the things our fathers and grandfathers knew (and we'd do well to remember). And enjoy this, typically Australian take on the, er, task in hand:

Wednesday, November 18, 2009

Smarter Schools

The Government's Smart Schools initiative is a missed opportunity. That's a pity. Yes it's good to see schools finally catching up with late 20th century technologies (laptops and overhead projectors): but what about leapfrogging to the 21st century and giving every child an ebook?

I've blogged about this before, and I'm not the only one thinking this way - so is Arnie. The idea has been around a while. Indeed, some Irish schools are experimenting with this - including several in South County Dublin. So I was staggered to find that the Department of Education's/ICT Ireland's Smart Schools = Smart Economy report doesn't contain a single reference to ebooks. Not even one. Surely the smarter thing to do would be to align ourselves with the next generation of pedagogic technologies and to enable a cluster of supporting Irish businesses to grow up around them? Laptops and projectors won't do it.

Of course there's the cost issue. The Government's €150 million spend over the next three years will equate to just €179 per child in first and second levels combined (498,914 in the former, and 341,312 in the latter according to the Department's statistics). On the other hand, giving every child the latest Amazon Kindle (or equivalent) would currently cost $259 - that's about €173 at today's exchange rate. I'd imagine the Department might even get that price down a bit if they were to order, say, 900,000 (just to have a few spare) ...

Moreover, we then have to factor in the savings: parents spend a fortune on school books every year (an average of €100 per primary child and a great deal more per secondary child according to Barnardos). By my rough reckoning, if we assume €100 per year per first level child and €150 per year per second level child then that's €101 million spent on books EVERY YEAR.

We can be certain that the prices of ebooks will fall rapidly as sales take off. I believe we need to adopt a smarter schools strategy than the one proposed (incorporating key elements of the current strategy). And as a parent a smarter strategy would certainly get my vote (and taxes).

Tuesday, November 17, 2009

Taxed and Spent

We don't have a Taxpayers' Alliance in Ireland - more's the pity. Mind you, if we did, the No vote might have won the Lisbon Referendum if they had produced this sort of stuff:

Sure it panders to the perennial anti-EEC/EC/EU prejudices of the English, but I do like their have-a-go attitude towards our 'betters'.

Monday, November 16, 2009

The Nuclear 'Debate'

Tom McGurk called for a debate about nuclear power in yesterday's Sunday Business Post. On the same day the Sunday Tribune lead with a story reporting that the proposed design for new nuclear power stations in the UK is dangerously flawed. All of which is a useful reminder that when someone in Ireland says something needs to be 'debated' it usually means either a) that the matter is so contentious that there's no way it's going to be debated; or b) there is no point in debating the matter as everyone has made their minds up anyway.

As I read it the main danger facing the UK is not the design of their proposed new reactors but the fact that they have left it so late to build them. Which is dangerous for us as we'll be increasingly dependent on UK electricity to make up any shortfalls in our own generating capacity in the decade ahead. Though our economic collapse may have postponed that requirement for some time (there, I knew I'd find a silver lining ...)

But there is a bigger prize for Ireland in Britain's new found nuclear ambitions. In the short run, Irish construction companies should ensure they play their part in what will be the biggest construction programme on these islands for the next thirty years. Certainly a less belligerent, less ideological stance by the Irish government with regard to the UK's nuclear practices might help in that regard. However, the real opportunity lies in the medium to longer term as Irish construction and engineering specialists have the chance to learn a great deal about building and operating nuclear power stations before adopting an appropriate nuclear solution to our own energy needs in the next few decades.

That's if we're still not 'debating' it, of course ...

Sunday, November 15, 2009

Indebted to Feminism

Is negative equity the ultimate legacy of feminism? A movement that began in Ireland as elsewhere desiring that women should be free to participate fully in society ended up fetishising paid employment over all other choices. And one consequence of this fetish has been the explosion of household debt now gripping hundreds of thousands of Irish families.

I've charted the trend in total mortgage lending outstanding (from Central Bank data) against the participation rate of all married women (from the CSO). One consequence of the unprecedented and rapid increase in married women's participation in the workforce (passing the 50% mark in early 2005) was the ability of households to borrow money. Instead of borrowing against one income they could now borrow against two. And the banks, God bless 'em, were only too eager to lend. Way too eager as we all realise in hindsight.

This rapid increase in women's participation in Ireland's workforce is addressed in yet another Equality Authority report on the plight of Irish women - A Woman's Place: Female Participation in the Irish Labour Market. Oddly enough, nowhere in its 102 pages does debt, borrowing or mortgages get mentioned. Instead we are treated to the usual bromides about pay gaps and unequal household divisions of work. All of which are, if you read the text carefully rather than the press coverage, almost entirely explainable in terms of the choices women - working or otherwise - have made for themselves (and with which the vast majority of women are happy).

You might think then that the authors would propose leaving well enough alone. But of course not: what would the Equality Authority be left doing if that was the case? So instead we get the usual political shopping list of better pre-school provisions, more flexible employers and less selfish husbands (or partners as we say nowadays). They want to increase the participation rate of women in the workforce not because it's what women want (it's simply assumed) but "for Ireland to achieve and maintain the targets set for female employment within the EU" (last line of concluding text). Whose 'target'?

The small matter of the economic depression now gripping the country is acknowledged by the authors. But not the debt binge that preceded it. They wonder if rising female unemployment might lead to a regression in female participation as women give up hope of getting work. But they shouldn't worry: the legacy of family indebtedness left behind by fetishing paid employment over all other choices a woman might make will ensure that hundreds of thousands of women will have no choice but to keep on working. Slaves to debt, and slaves to the consequences of a flawed ideology.

What a legacy.
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