Michael Taft - Towards A New Economic Narrative - A Ten Step Left Strategy

http://www.irishleftreview.org/2008/11/26/economic-narrative/

Michael Taft (who is a site member) has published a 'capsule' ten point economic strategy as a starting point for a Left response to the crisis (Irish Left Review, Nov. 26th). I welcome his post. I agree with Taft that the agenda is being set by Fine Gael, and that essentially there is nothing different to the Fine Gael deflationary blind alley response to previous recessions.

There have been similar ideas to Taft's 10 actions discussed on this site, but Taft's proposal is the most substantial I've seen so far. At bottom, his strategy is for Keynesian expansion, with an emphasis on redistribution of wealth and development of Irish enterprise. Whilst there are many things in it I like, to me it looks overall as much of the current response does, as a recipe for a future tsunami of inflation. I think he is underestimating the extent of the systemic crisis, that is unleashing pent up contradictions going back many decades. Just the same, I think the individual ten proposals, and the strategy overall are a good starting point for discussion, which is just what he intended.

His 10 steps are

1. Borrow till we drop
2. Tax layabout capital, not work
3. Public safety committees to stress test expenditure for efficiency and equity
4. Spread it around to increase demand - free collective bargaining, wage related unemployment benefit
5. Increase price competition in energy and food
6. A spending binge on public works - schools, community and housing projects - insulate the older social housing stock.
7. A new green deal for infrastructure - energy and environmental management projects
8. Loosen money up - community development banking through An Post, socialise an element of the commercial banks, invest the Pension Reserve Fund in Irish enterprise
9. Deepen social partnership "down the food chain", training for exports
10. A mixed economy, with more co-ops and not for profit community companies.

"So there you have it:

Overcoming the fiscal trap by borrowing, taxing capital assets and opening up the Pension Reserve Fund to infrastructural and enterprise investment
Increasing demand and consumption through a new pay deal, extension of welfare benefits, anti-inflation measures
Putting our enterprise base on a new footing through a new Green deal, opening up new investment streams, an Enterprise Guarantee and new models of public economic activity.
Overcoming the fiscal trap by borrowing, taxing capital assets and opening up the Pension Reserve Fund to infrastructural and enterprise investment.
Do with these proposals what you will. Improve on them. Come up with better ones. Add and subtract."

There's a lot of stuff here worth talking about. For my own part, I would put education, and renewables, energy management and IT / broadband, food self sufficiency, culture and arts, at the top of the list and I would look for far more input from consumers and workers at decision making level.
The strategy seems to assume that some kind of social coalition will be possible. Personally I think a firm hand is needed to put the bankers and wastrel politicians back into their box, if many of Tafts good suggestions are to be carried out.

My opinion for what it’s worth.

7. There is some scope for.

1, 5, 6 & 9. We're already doing.

10. Nothing stopping that happening now.

2,3,4 & 8. Would make a bad situation worse.

tonys wrote:

My opinion for what it’s worth.

7. There is some scope for.

1, 5, 6 & 9. We're already doing.

10. Nothing stopping that happening now.

2,3,4 & 8. Would make a bad situation worse.

My eye was caught by the unemployment benefits so it'd be interesting to get some more detail on that part of #4 otherwise I think I'd cursorily agree with you tonys on the rest. Is your opposition to 2,3,4,8 because part of our problem meant there was too much money around and these points tend to want to restore that whole money-sloshing-around scheme of cheap credit ?

On the other hand of course there's the credit crisis and ordinary businesses trying to function. We are seeing deflation but is the way out of it to reinflate again or try to ? There are important environmental and infrastructural parameters to observe I feel and reinflating an economy would put more pressure on them again when we should be plugging the holes. Just the other day there was a boil notice in Limerick because of mistreated water coming out of a treatment plant. Now we have this little thingamajig with the pigs. Infrastructure doesn't just mean water, roads and energy - our legal and bureaucratic mechanisms might be worth giving a good overhauling while things are quiet like they are.

But back to #4. Some of us here have been made unemployed recently and I'm probably not the only one who is fairly well educated and looking for a job now. A lot of us will have worked or been working for 13 - 15 years and suddenly find ourselves unemployed and needing reskilling or considering downgrading our job expectations or education or emigration. Could it be the time for a radical overhaul of the social welfare and education/retraining systems so I can benefit from it please ? I think after working for a dozen or more years here and a few elsewhere then the likes of us should be entitled to benefits that are a bit different. Maybe I'm selfish though.

Richard Bruton for example in Ennis the other day was talking about it - people on Job Seekers Benefit have to wait a year now before they can qualify to get trained/retrained by the state. He reckoned it might be better to strike while the 'blood was up' I think he said. I could be lounging around here for another year (how bad) before I get the smell of a job I half-want but I'd prefer to avail of training right now. Granted I'd feck off abroad afterwards but sure aren't we in the EU now ? Indeed this recession will test the seams and rivets of the European institutions and money system now. Can I even take my JSB abroad and learn a language I wonder ? I saw some tech support jobs in Shannon for German speakers with English and one other language. I have a basic level of all those and I'm sure I'm not the only one. How about giving the likes of us 6 or 9 months dole in Germany or Spain ? Do ye not trust us after working for 13 or 14 years here and getting a couple of degrees before that ?

People should be given a break.

Did my post put ye off or something ? At some point we're going to have to start talking about the affordability of social welfare - they've already started on the Pin 15% unemployed: can we afford the dole? where the OP gives these two little figures at the start :

Jobseekers' Allowance
Ireland €197.80 per week link
UK €69.79 per week link

Wasn't anyone else really surprised when the Social Welfare allowance was risen in the Budget ? Can we really afford it ?

Auditor #9 wrote:

Did my post put ye off or something ? At some point we're going to have to start talking about the affordability of social welfare - they've already started on the Pin http://www.thepropertypin.com/viewtopic.php?f=19&t=16252 where the OP gives these two little figures at the start :

Jobseekers' Allowance
Ireland €197.80 per week link
UK €69.79 per week link

Wasn't anyone else really surprised when the Social Welfare allowance was risen in the Budget ? Can we really afford it ?

I was just coming
Mass unemployment is so dysfunctional and wrong: its a sick economy. To be honest, I don't think that as a society we should accept it, so I think the issue of how much people get to live on should be way down the list. There needs to be work or education or training for everyone who is fit and well and wanting/able to do it.

If we get mass unemployment, that goes on a good while, there will be pressure on the money and I think we should cut the T.D.s money down to the bone before it came to that.

Auditor #9 wrote:

tonys wrote:

My opinion for what it’s worth.

7. There is some scope for.

1, 5, 6 & 9. We're already doing.

10. Nothing stopping that happening now.

2,3,4 & 8. Would make a bad situation worse.

My eye was caught by the unemployment benefits so it'd be interesting to get some more detail on that part of #4 otherwise I think I'd cursorily agree with you tonys on the rest. Is your opposition to 2,3,4,8 because part of our problem meant there was too much money around and these points tend to want to restore that whole money-sloshing-around scheme of cheap credit ?

My objections to 2,3,4 & 8.

2. Taxing capital
Capital is for the most part mobile, it would simply be moved elsewhere.

3. Public safety committees.
Public anything committees couldn’t organise a piss up in a brewery efficiently, not to mind decide what expenditure is good, bad or indifferent.

4. Free collective bargaining.
I remember that, it was FCB that had us wallowing around in dodo during the 80’s when the rest of the world was doing fine.
Social welfare payments.
If we can keep social welfare payments at current levels allowing for inflation, that is the absolute best we can hope to do.

8. Loosen money up.
Fairly standard left wing thought, what to do with other people’s money.
Use the PRF to fund enterprise.
The PRF should only be used as a last resort and definitely not for speculative purposes.

tonys wrote:

My objections to 2,3,4 & 8.

2. Taxing capital
Capital is for the most part mobile, it would simply be moved elsewhere.

3. Public safety committees.
Public anything committees couldn’t organise a piss up in a brewery efficiently, not to mind decide what expenditure is good, bad or indifferent.

4. Free collective bargaining.
I remember that, it was FCB that had us wallowing around in dodo during the 80’s when the rest of the world was doing fine.
Social welfare payments.
If we can keep social welfare payments at current levels allowing for inflation, that is the absolute best we can hope to do.

8. Loosen money up.
Fairly standard left wing thought, what to do with other people’s money.
Use the PRF to fund enterprise.
The PRF should only be used as a last resort and definitely not for speculative purposes.

4. Is FCB talking to the social partners about them getting paid such and such ?

8. Loosening money up. Is it necessarily a socialist or left wing solution to pump some money into a recession ? I believe it's Keynesian economic recommendation - I don't know if he was a socialist or not though.

Is it totally out of the question that the Pension Fund be used for 'speculation' though ? I don't know why but I keep thinking of trees trees trees ... and not Christmas ones. If we were going to invest in anything wouldn't it be wise to increase the base of national assets - energy, educated workforce, etc.

What does loosening money up mean ? What money and for what ?

EvotingMachine0197 wrote:

What does loosening money up mean ? What money and for what ?

According to Mr Taft, it’s getting money from An Post, taking money from the “banks” after part nationalising them, throwing in the PRF and lashing it around in some non-specific community enterprise way.

One further problem I have with “A ten step left strategy”
Surely if you took ten steps left you run a serious risk of falling off something.

All sounds very vague, a bit too vague for my liking.

8. There's not enough detail in that point unless cactus has some more on it or Mr. Taft himself has if he's here.

More co-ops and community banks ... yes but don't these only work if there's a demand there for them ? I'd say we're not using the power of the internet and such information tools half enough to find the markets that are there. How do we know that a hefty number of people in the back of beyond aren't looking for a similar product or service or that a certain number of people have such and such ideas that would earn them some business ?

I think our community is quite broken in terms of person-to-person communication now in comparison to perhaps what it used to be. Money is something that makes that worse instead of healing it.

tonys wrote:

EvotingMachine0197 wrote:

What does loosening money up mean ? What money and for what ?

According to Mr Taft, it’s getting money from An Post, taking money from the “banks” after part nationalising them, throwing in the PRF and lashing it around in some non-specific community enterprise way.

One further problem I have with “A ten step left strategy”
Surely if you took ten steps left you run a serious risk of falling off something.

I'm coming out with hands up - that is my wording not Mr. Taft's. It is indeed less than elegant but I was trying to convey the thread topic in a few words.

Auditor #9 wrote:

8. There's not enough detail in that point unless cactus has some more on it or Mr. Taft himself has if he's here.

More co-ops and community banks ... yes but don't these only work if there's a demand there for them ? I'd say we're not using the power of the internet and such information tools half enough to find the markets that are there. How do we know that a hefty number of people in the back of beyond aren't looking for a similar product or service or that a certain number of people have such and such ideas that would earn them some business ?

I think our community is quite broken in terms of person-to-person communication now in comparison to perhaps what it used to be. Money is something that makes that worse instead of healing it.

I'm not sure if you're looking at my short summary or Michael's original blog, which is more detailed. He is also saying that this is a first lash at the job and invites criticism and different ideas.
http://www.irishleftreview.org/2008/11/26/economic-narrative/

On the banks - I think there would be demand - it seems to be happening already with that bank in Essex: interesting to see how that goes.

First, thanks to Cactus Flower for putting up my article from Irish Left Review. Many of the comments refer to the summary - which some have found vague because it is necessarily synopsised. The full text can be found at CF's link and that might, hopefully, make clearer the headings that were put up. However, to respond to a few comments:

Tonys - I wasn't aware that the Energy Regulator had withdraw all directives on tariffs and allowed the market to set the ESB bill nor that the National Consumer Agency had a real-time price monitor(point 5). Regarding point 6 - the Government is cutting capital expenditure by 11% in real terms over the next three years while local authorities are also cutting back their capital budgets (Dublin City Council is cutting over €300 million). Nor was I aware that there were tripartite sectoral planning committees within social partnership (point 9). As to extending the Comptroller and Auditor General's competence and powers into each Department (Public Safety Committees are a reference to the French revolutionary committees) - I don't see how that could make things worse.

Further, property is not terribly mobile. And its hard to hide. That can be taxed. And with the top 5% (75,000 households) owning €325 billion in capital assets - much of it imbedded in property - there's a lot of tax revenue to run around.

Also, I never called for free collective bargaining. I proposed a flat-rate payment combined with local bargaining within the social partnershp structure.

Finally, the Pension Reserve Fund is already being invested in 'speculation' - that is, the equities market. That's why it's lost €3 billion in value. It can be invested in 'safe', 'dull' capital projects with a commercial return. They already do that abroad.

Auditor 9 - your own situation that you have described is the point I was making re: reintroducing pay-related benefit to Jobseekers' Benefit. The collapse of people's income following job loss is not conducive to taking up medium-term training options. And, yes, we can afford social protection. Indeed, we can't afford not to - poverty and unemployment are the biggest drag on the fiscal balance. If we carry such a high level of low-incomes we will never be able to restore demand to the economy, which is one of the highest priorities today.

EvotingMachine - I go into detail on 'loosening up money' in the article. In short, we are likely to face into a considerable period of tight credit - even after saving the banking system. This is part of a fundamental de-leveraging process that is going in here and in other countries. In this period, we will need to free-up lending. This can be done through the establishment of a public enterprise-community banking system, using the successful models in the US. This would be combined with 'socialising' a small percentage of the banks' deposit base - diverting them into Enterprise Development Funds which, through the social partnershp process, would be used as venture, seed and developmental capital of public and private enterprises in the traded sector.

Ah thanks Michael - we'll have to read your link properly now.

4. With that point can you give us some example of what you have in mind for wage-related benefit ? I believe in other EU countries once you qualify for welfare you may get the equivalent of your wage for a while - maybe only a few months though. It's probably within certain limits though - If Brian Goggin (€3M) or David Drumm (€3.3M) have to go on the dole then slightly different rules might apply.

How do you see it working ?

Michael Taft wrote:

Tonys - I wasn't aware that the Energy Regulator had withdraw all directives on tariffs and allowed the market to set the ESB bill nor that the National Consumer Agency had a real-time price monitor(point 5). Regarding point 6 - the Government is cutting capital expenditure by 11% in real terms over the next three years while local authorities are also cutting back their capital budgets (Dublin City Council is cutting over €300 million). Nor was I aware that there were tripartite sectoral planning committees within social partnership (point 9). As to extending the Comptroller and Auditor General's competence and powers into each Department (Public Safety Committees are a reference to the French revolutionary committees) - I don't see how that could make things worse.

Further, property is not terribly mobile. And its hard to hide. That can be taxed. And with the top 5% (75,000 households) owning €325 billion in capital assets - much of it imbedded in property - there's a lot of tax revenue to run around.

Also, I never called for free collective bargaining. I proposed a flat-rate payment combined with local bargaining within the social partnershp structure.

Finally, the Pension Reserve Fund is already being invested in 'speculation' - that is, the equities market. That's why it's lost €3 billion in value. It can be invested in 'safe', 'dull' capital projects with a commercial return. They already do that abroad.

I replied to the original post as presented, I see little point in you moving the goal posts and then proceeding as if you hadn’t.
That said, I don’t like the look of your proposed property tax, which is what it is, for a number of reasons;

1. Property & earnings from property are taking a hammering at the moment, I don’t think property owners are best placed to take on an extra tax burden just now.

2. The last thing the property market or the economy needs right now is another reason for investors to stay out of the market.

3. Property as an asset is bought & paid for with tax paid earnings, further, considerable taxes, in the form of VAT & stamp duty, are paid at the point of property purchase, why should the owners of these assets be asked to pay yet more tax, when they have already paid tax, twice, on the value of their asset?

I would prefer an upfront honest proposal that for people holding assets over a certain value and despite their already having paid all due taxes on the value of those assets, you want the Government to come back for another slice.
If you want to raise more revenue through tax, I suggest doing it on earnings, at whatever level is necessary, but once you’ve had your slice, there’s no justification in coming back looking for more tax from the same money.

In the meantime I’ll have a look at the full text of the rest of your proposals.