Monday, 15 December 2014

THE PITY OF WAR

I recently read “The Flame and the Candle....War in Mayo 1919-1924” by Dominic Price. It deals with the fighting in one county during this grim period.

Dominic Price is a history teacher and his book is published by the Collins Press. 

Because I know the places where some of the actions in this war took place, and can recognise many of the surnames of the victims and perpetrators, this book brought home to me the horror of this civil war, in a way that a more general account would not.

I say “civil war” advisedly because most of the participants on both sides were Irish from the beginning.

The first victim was a resident magistrate, John Charles Milling, who had grown up in Westport, who was shot dead through the front window of his house on the Newport road in his home town in March 1919, when he entered a room  where the light was on to wind up the clock before going to bed.

Most of the RIC members who lost their lives were as Irish as the people who put them to death. Even after the RIC was disbanded after the Treaty was signed, its former members were killed.

For example, ex sergeant Tobias Gibbons from Westport was shot eight times in his hospital bed in Galway on 15 March 1922, as was his colleague Sergeant John Gilmartin. 

As the RIC was no longer a force that could threaten anyone at that stage, this was pure vengeance, with no military purpose. The file on this murder subsequently disappeared.

This book deals with the atrocities committed by the RIC themselves, led by District Inspector White, who was from Roscommon.

It analyses the main military actions of the war, the ambushes at Kilmeena and Carrowkennedy and other actions. 

The national politics of the time is skillfully woven into the local story. The land conflict also played its part in the background, and probably lay behind some of the local violence.

This is a sad and salutary tale of idealism perverted by the supposed “necessities” of war. It is a period to be remembered rather than celebrated.


Tuesday, 9 December 2014

WHO BENEFITS FROM GOVERNMENT SOCIAL SPENDING?

There is an ongoing debate about budget cutting in the world today, because revenue coming in is not matching the promise Governments made to their people of availability of pensions, unemployment support, and health services. 

This problem is particularly acute in countries whose populations are getting older faster, like Finland and Germany.

Who would suffer most if  crude across the board cuts in Government social spending were made were made? 

The table below, which appeared in a recent OECD report, shows up some surprising results.


In some countries the top fifth of income earners are the biggest beneficiaries of social supports in the form of cash payments from Government!

In fact, France, Italy, Austria, Portugal, Ireland and Spain give a higher share of their cash social supports (pensions, unemployment and disability supports) to the top fifth of their population than to the bottom fifth.

In contrast, Sweden, the UK, Finland and Belgium, and the US give more to the bottom fifth

The share of cash benefits paid to households in the lowest income fifth of the population is highest in Norway and Australia at 40%, compared to around 10% in Mediterranean countries and 5% in Turkey.

In these latter countries, social transfers often go to richer households, because these benefit payments are often related to a work-history in the formal sector, and often concern pension payments to retired workers. Earnings-related social insurance payments also underlie substantial cash transfers to the top income fifth in Austria, France and Luxembourg.

Perhaps the most striking thing about this chart is that the average OECD country distributes almost exactly 20 per cent of cash benefits to both the top and bottom fifth of the income distribution

Some governments do less “social spending” in places where the private sector fills in the gap, particularly when it comes to pensions and health insurance.

In the Netherlands, Denmark, the US, and the UK, for example, private pension payments are worth about 5 per cent of GDP each year, while American spending on private health insurance is worth nearly 6 per cent of GDP.

SOME COUNTRIES SPEND MORE ON THOSE OF PENSION AGE, OTHERS SPEND MORE ON THOSE OF WORKING AGE

There are interesting contrasts in where the money goes 

Pensions paid by government are 5.3% of GDP in Ireland, and 5.6% of GDP in the UK, but they are 13.8% of GDP in France, 14.8% in Greece and 10.6% in Germany.

In contrast, income support  by Government for those of working age  are 8.3% of GDP in Ireland, as against  just 4.7% in France, , 5.1% in the UK, 3.8% in Germany and a mere 3% in Greece(notwithstanding that country’s high unemployment). 

In Ireland’s case, it is worth noting that 40% of the unemployed who receive income support from government are long term unemployed (ie.more than a year out of work). The OECD has said that their skill levels are inadequate to the modern economy, which is a big long term concern. The longer people are out of work, the harder it is for them to get a job. I heard one person describe the experience of long term unemployment as worse than losing a spouse. 

Meanwhile the number claiming various forms of illness benefit has increased by 47% in the last 14 years from 150,000 to 220,000. This is surprising in light of the improvements in spending on health services in Ireland in recent years.

Health spending as a percentage of GDP is 8.6% in France, and 8% in Germany as against 5.8% of GDP in Ireland, which is below the OECD average of  6.2%..But health spending is rising in Ireland and the  National Competitiveness Council  says that, since 2001, Ireland has had the fastest rate of inflation in health insurance costs of 17 Euro area countries.

THESE CONTRASTS MAKE IT HARDER TO DEVISE A COMMON POLICY FOR THE EURO AREA

These contrasts between countries make it harder to devise a common economic policy, even for the countries who share the euro as their currency.

They lie behind some of the arguments about immigration in the European Union and the accusations of “welfare tourism”, These accusations are mostly wrong

For example, a recent study in Germany showed that the average immigrant to that country pays 3300 euros more in taxes and social contributions than he/she takes out in benefits. In fact immigration yields a 22 billion euro surplus to the German taxpayer. Yet 66% of Germans believe immigrants are a burden! 

The same applies to the UK.

In countries where government spending goes to the well off, one can expect well placed interest groups to be particularly effective in resisting changes or reductions in expenditure.

Another conflict of interest will be between households with high debts, who are finding it hard to meet their obligations, and households who have made significant savings over the years, and who wish to protect the value of those savings. 

Household debt, as a percentage of household disposable income, is 326% in Denmark, 288% in the Netherlands, and  230% in Ireland..as aginst 58% in Poland, 90% in Austria,  and 94% in Germany.

For example, a policy that favoured low interest rates and inflation would benefit the debtors, but hurt the savers. The savers would also have an interest in protecting the value of the bonds issued by banks, companies and governments in which their pension and insurance funds are invested. Debtors, on the other hand, would be more relaxed about “burning “ these bondholders. 

These genuine differences of interest need to be brought out into the open because there are reasonable concerns on both sides of the argument.

Wednesday, 3 December 2014

URBANISATION....AN INEXORABLE TREND, BUT IS IT GOOD FOR US?

In global terms, the pull of ever bigger cities seems inexorable.

In 1970, a third of the world’s population lived in cities, more than half do so today, and by 2050, it is predicted that two thirds of the world’s 9 billion people will live in cities.

City dwellers consume more energy per capita, produce more greenhouse gases, and are more exposed to crime.

A 1% increase in the urban population leads to a 2.5% increase in energy use. Cities  often expand close to the coast line where they will be exposed to rising sea levels caused by climate change.

Big cities lead to anonymous atomised lives for many....lost in the crowd. This makes big cities harder to govern democratically, because the social networks that facilitate democracy and discussion in rural areas, are often missing in big cities.

Yet people seem to prefer to live in cities.

Why?

A recent study says that , on average the bigger the city, the bigger the income per person,  and  the higher the proportion of the population with higher level degrees.  But the same study also shows that the bigger the city, the higher is the incidence of anxiety and transmissible diseases.

A study published by the Royal Society in London last month suggests, using data collected from tracking people and their mobile phones, that the  bigger the city, the more friends people have, but the more frequently do  they change their friends!

It even discovered that bigger the city, the faster people walk, probably reflecting higher stress levels! 

Attaching importance of things that can be measured in money seems to drive this rapid urbanisation of the world’s population. 

But one must stand back and ask if this sort of living is best for children growing up, if it facilitates children having enough time with their parents, and if it is good  for the quality and cost of the schooling  children receive. 

A living pattern that is not good for children may not be sustainable in the long run.

This drive to live in ever bigger cities seems also to be a function of the increased specialisation of people’s lives. 

Jobs have become so technical that fewer people understand the work that their next door neighbour does, and only in bigger cities will ne find a critical mass of people  with specific inter relatable skills.

That’s what attracts firms to big cities and may explain why property prices in Dublin are more dynamic than elsewhere.

REASONS FOR IRELAND’S SUCCESS....CONSISTENCY OF POLICY

As a small island off another island, distant from the European mainland, Ireland has done exceptionally well to develop critical masses of skilled people in sectors like pharmaceuticals, medical devices, software, certain financial services, use of big data and food technologies. 

Foreign direct investment continued to come into this country in these sectors even in the worst period of the recession.

As I work abroad for IFSC Ireland, I am repeatedly told that what attracts firms here is the ability to recruit the right people, either locally or among people who are willing to come here to live and work.

Since the abolition of exchange controls, money can come into a country quickly. But it can also leave it quickly. Money often has the legs of a hare, but the courage of a mouse! That is why confidence must be constantly maintained by steady management and consistent fiscal policy.

It is thanks to this continuing overseas confidence in the Irish economy that we have been able to meet our fiscal targets, borrow at reasonable rates, and restore economic growth. But such confidence is volatile and fragile, and prone to sudden changes in sentiment due to media headlines. We must remain vigilant.