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The Luck of the Irish Runs Out
theodp writes "Looks like threatening to take their ball and leave paid off for US tech firms. The Irish government announced plans this week to tap the welfare state and working class for much of the $20B in savings they've pledged to find over the next four years, but the austerity measures will not touch large businesses like Microsoft, Intel, Google, HP, Facebook, LinkedIn, and Pfizer, which created jobs and fueled exports in Ireland after being lured by low corporate tax rates. More than 100,000 Dubliners took to the streets to protest the bailout plan, calling for the Irish government to default on the country's debts, and demanding an immediate election. 'We should default,' said a retired union worker, 'the idea that the workers of this country should pay for the gambling of the billionaires is disgusting.'"
It's the private bank's debts.
For some unknown reason the Irish government decided to guarantee all debts by banks in Ireland including banks that are owned and run by people who are not Irish or based in Ireland. These debts were not sovereign debts until the Irish government decided to unilaterally back them without any good cause. They did this back in 2008 and it's only now that they massive amount that they've basically handed over to private investors is becoming apparent.
It's pretty nuts that private investors had hoped to make money by investing in Irish banks - but now that they're actually facing losses the people of Ireland are going to step up and cover all these debts. So for the private investors it's a case of head I win, tails you lose - where there is no risk of the private investors losing any money - and no chance for the public to get a share of the profits that banks were making in the good times.
"Free software as in beer, copy protection as in racket" - Telsa Gwynne
Going default will be a short-lived remedy. The country will go back to 1990 in terms of market appeal and productivity. And yes, if the big tech companies leave, the hope of reacquiring a high-tech knowledge industry will go away as well.
Paul Krugman's latest column addresses this. The main point is that Iceland let the banks default, while Ireland took the banks debts as public debts and guaranteed it. In the end, Iceland has recovered while Ireland's people have to bear the burden due to austerity measures.
god n. : the Supreme Being, indistinguishable from a good random number generator.
These companies provide our jobs.
If all the jobs in your country, or even a significant majority of them, are provided by international megacorporations and conglomerates that can and will move them elsewhere if it benefits them, and use them as blackmail material to get the laws they want, then you've got bigger problems than whether to lower taxes or not.
As usual, many people are quick to defend these pricks, saying that if it weren't for them, everyone would be out of a job. Yes, the economy is in their power. Calling that a mutually beneficial relationship sounds like Stockholm syndrome.
If your very survival depends on receiving a living wage from a corporation that can simply choose to go away if it is asked to pay for the infrastructure it also uses, then you are not living a "dream" generously provided by altruistic corporations, but in slavery to organizations who can let you starve if they wanted to. Not only workers, even governments are forced to debase themselves before these corporations, lowering their living standard, their wage expectations, cutting their social system and their taxes bit by bit to compete with other countries that are forced to do the same.
Ireland, and the entire European Union at that, should make a stand against this and play hardball. The fact is that while corporations can move their production elsewhere, they do have to sell something eventually. A high-tech market requires a high-tech industry to flourish: If corporations leave the country, the economy goes to shit and nobody can afford the flashy gizmos these corporations are selling. Standardize the tax hike over all EU states, accompany it with an import tariff on technology not produced inside the country, and suddenly paying a little more corporate tax will seem like a much better alternative. The workers are not only their slaves, but also their customers.
Debt's that cant be repaid, wont be repaid. The only question is how you intend not to pay them.
09F91102 no, 455FE104 nope, F190A1E8 uh-uh, 7A5F8A09 that's not it, C87294CE no. Ah! 452F6E403CDF10714E41DFAA257D313F.
The debts involved are massive, too.
From this article (though note it was written back in September):
"Under the current program, we estimate that each Irish family of four will be liable for 200,000 euros in public debt by 2015."
Ouch.
According to whom?
Surely it's not the workers, because when Big'n'Big Co pulls up their tent pegs and moves shop, all the workers are suddenly unemployed.
It's probably not the consumer, because when Big'n'Big Co finds a way to half their cost of production, it's not guaranteed to drive prices down. Why bother cutting prices and taking a bigger market share when you can just shovel up a pile of cash big enough to buy your competitors (or a controlling interest in their stock)? Hell, why not just collude with your competitors to keep prices artificially inflated - then everyone's happy!
Surely then, it is the desperate - those poor starving people in $Third_World_Nation who desperately need employment of any sort. Except that, after their standard of living starts to rise, Big'n'Big Co just moves on to the next shithole and leaves the desperate unemployed too.
Well fuck, if it's not the middle class or the lower class, who the hell is left? :P
Oh, right, the bourgeois. Well, as long as they're doing all right, everything is just peachy! Hurray for Capitalism!
Each American family of four is liable for about $200,000 in public debt.
The problem isn't the multinationals that provide jobs - they will stay. Intel can't move a FAB overnight. The issue is with the shells like Microsoft Licensing - that employ 5 lawyers, 5 accountants and a janitor - and that do nothing but funnel profits. THESE companies will up and leave in a heartbeat, because an extra 2% on $62BN is ENORMOUS. At the moment the corp tax income on these companies is E110bn - and the IMF money is nowhere near that. Raising the corp tax rate might mean losing 50-100 jobs, mostly accountants and lawyers (not exactly going to get a sympathy vote from most people), but could leave the country more than E50bn a year down - not really an option right now.
That is why I figure the USA will default in 5 years, 10 tops. The only thing really keeping us afloat is the Fed printing money as fast as the presses will run and using it to buy our debt, basically making the money worthless. Then figure in the retiring boomers, huge masses of working poor that are only kept afloat by social programs, and the cost of two endless wars? Yeah I give it a decade tops. Enjoy it while you can folks, because from the looks of it another worldwide great depression will soon be upon us. The only question is whether we will learn from our mistakes and put heavy regulations on the banks like we did during the last one, or if those that believe in the free market fairy will win out. Without control free markets quickly end up corrupted when too much ends up in the hands of too few, just as we have now.
ACs don't waste your time replying, your posts are never seen by me.
How do you run a deficit without generating debt?
Leprechauns
Most of that money comes from countries where income tax is well above 50% (or even 72% in Denmark).
Yes even the Danes that don't use the Euro have pledged a substantial guarantee.
In the mean time two of the countries with the highest taxes, Denmark and The Netherlands, have the lowest unemployment of the Union, around or even below 5%.
The implied claim high taxes destroy the economy is yet to be proven.
"The likes of Facebook and WhatsApp are free to those whose privacy is of zero value."
in democracy with deficits allowed you are doomed to wreck your economy, because in order to win the elections you got to promise a shitload of 'freebies' (which are not free at all), otherwise someone else who promises a lot will win. Sanity and economic soundness are not valued by the average voter so it's the race to the bottom.
as Tocqueville said
The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.
Debt is intrinsically bad when it's gov't debt, because gov't is not supposed to be a business.
A business can invest money to generate some positive cash flow and then maybe even some revenue, gov't does not and shouldn't be expected to.
When gov't borrows to finance its programs, it means the same thing as taxes, only this is taxes + interest forwarded to the future generations of voters, which is theft, because those future generations didn't agree to any of it, and it would be best for those future generations to get their belongings and leave the country, rather than stay repaying the debts of their parents/grandparents.
Taxing consumption is the only true and honest way to fund a gov't, and gov't shouldn't be spending much on anything beyond basic protection against military invasion and a justice system *(and probably cops/prisons, to give teeth to the justice system.)
Gov't IS consumption, any citizens benefits from gov't only as much, as he benefits from any other consumption. Gov't is consumption, and thus its income (taxes) should be proportional to other consumption that people are willing to spend on.
When gov't taxes production, it cannot be controlled, the only feedback mechanism, by which a growing gov't system can be stopped (if it's taxing production) is basically loss of jobs and of productivity, which implies reduction in production and wealth and destruction of economy. In that case the gov't usually switches to acquiring debts, which shouldn't be allowed.
Gov't with a debt, is a gov't that cannot be afforded by its country current and especially future.
Consumption based taxes would provide gov't with enough money to finance the minimum required spending, while also creating a feed-back mechanism, necessary to control the size (budget) of gov't, because if people spend less on everything, they end up spending less on gov't, and this basically reduces gov't consumption just like all other consumption, and it is a good thing, needed to restructure a slowing economy.
Obviously all Keynesian shamans' brains explode at this very moment, but that's also a positive thing, we need their brains to explode, they have done enough damage.
The only way to get out of a recession is the way it was always done: stop spending, save money, rebuild savings, have a deflation by reduction of money supply, see prices for products and labor fall, use the saved capital to start new businesses, rehire people, start production.
The gov't wants to do it like so: print/borrow money, prop up spending on consumer goods produced in different economies, OK, so support economies of other countries while destroying the currency itself, and robbing everybody who holds it of purchasing power, do not allow the savings to be rebuild by low interest rates. Somehow hope that this will inflate another bubble that economy will somehow use to float on, but this new bubble obviously needs to be bigger than the previous one, that caused the last recession.
Every new bubble is bigger and will cause a bigger explosion, until the very bubble that will end up taking out the currency itself, as well as bankrupting the country and sending interest rates into the skies. Good luck with restructuring then, the pain will be enormous.
Oh, the next bubble to blow - US bonds. Then it's probably hyper-inflationary depression, because the gov't still relies on Keynesians like Krugman.
You can't handle the truth.
The implied claim high taxes destroy the economy is yet to be proven.
That, my friends, is the one truth that the millionaires and billionaires want to keep out of the public debate at any and all cost. Roosevelt called these people "economic royalists" and he was right. Every country that has high marginal taxes on large profits and large incomes and sticks to it has a strong and stable economy. When you embrace the insanity that Reagan and Thatcher brought to the world, you get bubbles followed by crashes. It happens every single time it's been tried, but it's wildly profitable for the uber-rich and the hell with everyone else, right? Then they go around and spend some of that money convincing all you free market libertarian or conservative types to vote against your own economic interests. Religion, marginalizing certain groups or points of view, extreme nationalism all get trotted out to make the uneducated or the delusional vote for policies that directly hurt them. Lather, rinse, repeat.
another G. W. Bush or Obama
I'd say the chances of this are pretty likely. Barring a major upset, Obama will get the Dem nomination and the GOP will likely pick someone that makes GWB look like Einstien. I wouldn't be suprised to see "we must stand by our North Korean allies" Palin get the nod from the GOP.
Sometimes the light at the end of the tunnel is the headlight of an oncoming train.
moving the capital around has everything with free markets, but exclusive deals, special treatments and subsidies for the chosen do not. Bailouts are such cases. Some failing bank or a car manufacturer gets bailed out, but your favorite bakery at the corner does not. Free market is a fair judge, treats all the same and the winners and losers are decided only by their merits, not by who they know.
The back and forth in this thread really just shows that a "free market" is an illusory concept. It is useful to a limited degree, but you have to keep in mind that it is not possible in real life.
Once you throw government into the mix, you necessarily limit the freedom of the market. But, without a government, you don't have the structure to set up anything resembling a "free market".
The other point that seems to have been missed is that, although you are right in saying that the Irish situation is not due to a real "free market", the term "free market" is what is thrown about to keep the proles in line.
Similar to the upcoming US election results
Except our mess very much isn't just the GWBs/Obamas of the US. We're in what, 13T(rillion) of debt right now?
The problem is that the baby boomer generation promised itself SO MUCH, we're going to go bankrupt from entitlements. Social Security is a small part of it. The real meat is Medicare. And that's not all LBJ. For instance, after Bush barred seniors from going to Canada/Mexico to appease the drug industry, he and Ted Kennedy (I think) pushed Medicare Part D to appease the huge senior lobby. This was called the single most financially irresponsible piece of legislation in history and will cost $10 Trillion dollars looking forward. The debacle shows how much the dear leaders here are really for free market, how dare people shop for cheaper drugs! /s
Looking forward, at current tax rates, we'll have a total of $50 Trillion dollar gap between revenue coming in and revenue going out. By 2030, the Federal Government will have little more revenue than to pay entitlements and interest on debt, nothing for it's official functions.
And is this surprising in a country where most government workers (including Army, USPS, many suburban Teachers depending on their local contracts, etc) work 20-25 years and can then retire on half pay and full health insurance the rest of their lives. How many private sector jobs let you start at 18 and quit with by 43? Yeah.
Most of my numbers came from David Walker, former US Comptroller General from 1998 to 2008, America's head accountant, appointed by both parties to various positions. Many of them came before the 2008 disaster although he was warning of a bubble iirc. It's probably worse now.
http://video.google.com/videoplay?docid=-7461407498377956300#
Anyway, I don't blame politicians except for bending to their constituencies. I blame following our democratic tendencies instead of our republican (small r) one starting with the 17th amendment. The People wanted entitlements, they got them.
The back and forth in this thread really just shows that a "free market" is an illusory concept. It is useful to a limited degree, but you have to keep in mind that it is not possible in real life.
It's not a very useful concept when used to argue we should remove trade barriers, which it is used all the time to do so.
That, right there, is the real problem. It's not that corporations can make special deals with governments, there is functionally no way for any country to stop other countries from doing that. There is no way to solve that problem, ergo, that can't really be the problem. If houses you build keep falling down, the problem to investigate is not gravity.
The solvable problem is that they then can continue to operate and sell in the US while not paying any taxes here.
We need to get rid of the idea of 'corporate' taxes where profit can mysteriously move from place to place and they pay taxes somewhere we've never heard of. (And they're way to easy to avoid altogether.)
We should tax them when they pay workers, in the location those workers are. We should tax them when they sell goods, in the location those goods are sold. (Or, easier, when those goods are imported.) We should tax their capital and real estate, in the location that capital and real estate is. We should tax their corporate dividends, in the location that stockholders live.
Fuck asking where the company, an entity that is an artificial creation, 'lives'. Tax the things that physically exist where they actually are and tax the money going in and out where it's actually going in and out.
If corporations are people, aren't stockholders guilty of slavery?
That is why I figure the USA will default in 5 years, 10 tops.
This keeps getting repeated and it keeps being wrong. The US CAN'T default on it's debt. Our debt is denominated in US dollars, which means the US government can always make payments, either through raising taxes or inflating the currency.
The only thing really keeping us afloat is the Fed printing money as fast as the presses will run and using it to buy our debt, basically making the money worthless.
So then, there must be rampant inflation then correct? According to economic indicators our currency has been strengthening recently, and inflation has been low to non-existent. In fact it has been too low which has worried some that we would enter a deflationary period.
Then figure in the retiring boomers...
Yeah, who will be taking their SS money and dumping it back into the economy. Sure it will stress the SS program but that money isn't evaporating into thin air. It will be re-entering the system.
huge masses of working poor that are only kept afloat by social programs
Mainly because we don't have a real education system in place for people to gain new skill sets. There's a reason why we rank far below other developed nations in education.
and the cost of two endless wars?
No argument there. The money that was spent on those two conflicts alone could have done much more good here in the US.
Yeah I give it a decade tops. Enjoy it while you can folks, because from the looks of it another worldwide great depression will soon be upon us.
You're a little late to the party on that one. So far it has mainly been a recession. The US is in a recovery, albeit a slow one.
The only question is whether we will learn from our mistakes and put heavy regulations on the banks like we did during the last one, or if those that believe in the free market fairy will win out. Without control free markets quickly end up corrupted when too much ends up in the hands of too few, just as we have now.
People like to think a free market is like nature, where survival of the fittest would yield the best companies. However this is naive. Companies will influence the market much like humans influencing their environment. Humans alter their environment, wipe out all competitors for resources, and any possible predators. Companies in a pure free market would act in the same regard. Eventually you would end up with one or a handful of companies that would completely dominate the market.
You will always need to control greed.
~X~
Debt is intrinsically bad when it's gov't debt, because gov't is not supposed to be a business.
That sounds like you've bought into that position as an a priori assumption. While I'd agree that governments aren't businesses, to say that all government borrowing is therefore bad is foolishness. The purpose of good borrowing is so that investment can be made so as to increase income in the future that will repay the debt and ensure more money to do other things with. When applied to a government, the purpose has got to primarily be to invest in steps that will lead to increased total tax take in the future, generally through increasing overall economic activity in some way.
This is all independent of how wisely governments in your locale are spending, taxing or borrowing. If you're going to make an argument, it helps to start out from an intellectually-sound basis, which saying that "government borrowing is bad" is not. Reality just doesn't allow for such simple distinctions, and any sane policy must be at least grounded in reality.
"Little does he know, but there is no 'I' in 'Idiot'!"