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Ireland in Decline, or, What Austerity Looks Like

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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 06:17 PM
Original message
Ireland in Decline, or, What Austerity Looks Like
Ireland in Decline, or, What Austerity Looks Like
Marshall Auerback, New Deal 2.0

Governments are increasingly getting bullied into adopting austerity measures, apparently thinking it will help their economies grow. A number of us who oppose this approach suspect that the austerity measures now being demanded (and implemented) will undermine growth, and when growth finally returns it will be tepid as a result of other factors unrelated to the austerity. In the meantime, there will be massive casualties among the poor and disadvantaged. Ireland is exhibit A.

In April 2009, the Irish government forecasted a decline in Gross Domestic Product (GDP) of 7.7 percent in 2009, and a contraction of 2.9 percent next year, before returning to growth of 2.7 percent in 2011. It had originally projected GDP to shrink by 6.75 percent. There is no sign of growth on the horizon.

Fiscal adjustment (as the weasels euphemistically call it now) does not generate growth. It comes WITH growth. The raison detre of fiscal policy is to support growth when private spending is undermining it, and to constrain growth when private spending is supporting it. With high unemployment, high public deficits are inevitable. The only choice is between an active deficit, incurred by putting people to work or otherwise serving national needs such as providing a decent retirement and health care to the aged and a passive deficit, incurred because tax revenues necessarily fail to cover public spending at high unemployment. Cutting public spending or raising taxes, now or in the future, by any amount, cannot reduce a deficit due to high unemployment. The only fiscal effect is to convert an active deficit into a passive one with disastrous economic and social effects. Irelands experience, captured in a recent New York Times article, vividly demonstrates this point:

    As Europes major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight.

    Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.


more...
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virgogal Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 06:24 PM
Response to Original message
1. The Celtic Tiger is dead.
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sabrina 1 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 06:35 PM
Response to Reply #1
2. The Celtic Tiger was really Global Capitalism
Ireland was invaded by big Corps in the nineties, real estate prices went out of control. People made money for a while, but it was obvious it couldn't last, and it didn't.

Now, this is being used as an opportunity to kill programs that help the poor and the working class all over Europe. Those Global Capitalists never liked 'socialist' programs that provided health care etc for ordinary people.

I guess this is what Naomi Klein meant by 'Disaster Capitalism'. One group who don't seem to be suffering any bad consequences from all are the very people who actually caused it.

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Kringle Donating Member (411 posts) Send PM | Profile | Ignore Sat Jul-03-10 02:09 AM
Response to Reply #1
9. the Celtic tiger was a windfall of investment money,
that came from overseas,

and won't happen again
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bemildred Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 06:41 PM
Response to Original message
3. Tools get used. nt
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zeemike Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 06:58 PM
Response to Original message
4. the problem with growth is that it must end at some point.
And an economy based on constant growth must fail just as all things that get to big will fail in a finite world.
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RKP5637 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 07:47 PM
Response to Reply #4
5. Exactly! It's a ridiculous model. Anyone with just trivial math skills should be
able to determine constant growth in a finite space does not work.

We need to move into the 21st century but many are too backward to understand and other have such a gravy train going on for their personal wealth they don't want to disrupt the flow of cash to them.

It's a hopeless model and will eventually cave in on itself...
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NickB79 Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-06-10 05:25 PM
Response to Reply #4
10. Infinite global growth dependant upon finite global resources
What could possibly go wrong?
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OHdem10 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 08:02 PM
Response to Original message
6. They did not learn from "29, huh. Belt-tightening is the worst thing
they can do. This was Herbert Hoover's drastic mistake
in ou country and we were thrown into a recession.

Many European countries took a right turn a few years back.
Cut Spending-- while the recovery is still fragile is frightening.

It is a joke for them to expect a fast turn around.

Somebody had better get a pang of conscience and remember
the reasons for many of the job losses is gloabalization
in crisis. The Businesses have adjusted the workforce
they believe they will need for the next five or so years.
They know we will do well to have 21/2 to 3 % growth.
Understanding so many people without jobs cannot do much
purchasing of goods, cutting taxes will do much for business.
They cannot create jobs. They must make a profit so they
have or will adjust employment rolls lower.

The President and his team should have made a much larger
stimulus. Public Jobs are created in a Depression to tide
things over and keep money flowing through the economy until
the Economy can recuperate. The Republicans have not
one good suggestion. The Media will do this country harm
if they continue to permit the Republican to spew out the
same old tax-cuts as a cure all. Even Taxcuts reach a point
of diminishing returns.

Ireland will be in for long term pain. Those RW Turns come
around to bite one every now and then. I fear if all European
countries do like wise and pull others into a Depression.

Keynes tells us it is OK to run deficits in hard times like\
these, in fact it is necessary. Wait until real revovery has
taken hold before applying austerity meansure. I hope Obama
hangs tight against pressure from the Right. Every Depression
has been brought on by RW Belt=-tighting.
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jtuck004 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 11:13 PM
Response to Original message
7. I had to look twice to make sure they were still talking about Ireland...

when I read this
"In April 2009, the Irish government forecasted a decline in Gross Domestic Product (GDP) of 7.7 percent in 2009, and a contraction of 2.9 percent next year, before returning to growth of 2.7 percent in 2011. It had originally projected GDP to shrink by 6.75 percent. There is no sign of growth on the horizon."

Cause I had recently come across this
"U.S. Growth Is Revised Downward, to 2.7%" - "http://www.nytimes.com/2010/06/26/business/economy/26ec...


Interesting article. We seem to be following in their footsteps, yet thinking the same steps will lead us in a different direction.

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upi402 Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-02-10 04:45 PM
Response to Original message
8. History is valid, Econ is bogus
In my college economics courses, the foundational premise was that people act in their own-best economic interests. That the "free market" would work its voodoo magic on all issues.

But in history we were taught that;
"The country that takes its natural resources and sells finished product to other states -WINS!"

*Never* were we taught labor history, issues, or rights. Even though 98% were to trade our labor for income.

America is toast. Media propaganda worked. This 'New World Order' is the paradigm for the rest of my days. But I'm not resigned to victim-hood.
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