Friday, 12 December 2014

Why Austerity IS Working


Ok, let’s start with a revelation. Austerity doesn’t work, that’s a no-brainer. Economists have been saying this for centuries and anyone living at the thin edge of the wedge in Europe will be living its failure. Incomes have been slashed, debts become unmanageable and few see any sign of improvement on the horizon. The amount of people without any health insurance is at an unprecedented high and the government telling us the same old story.


We must help bail out an economy that we were complicit in scuppering. 

retail wrecklessness
Oh! those heady days
Austerity purports to tackle the world recession caused by credit-happy shoppers like you and me consuming beyond our means. It is sold on the micro-economic understanding that if a household cuts spending on non-essentials for a while it can pay off its debts thus reducing expenditure and bring its outgoings below income. It is the credit-binge hangover that we are told we all need to take responsibility for. The belief is that by cutting back on the state’s expenditure and increasing taxation they will be able to wrestle the public debt back to a manageable level where we can all breathe a sigh of relief and get back to business as usual. This is not happening. The lack of investment is causing widespread unemployment and even more widespread underemployment. This in turn, is making it more difficult for the government to collect taxes while simultaneously putting increased pressure on social benefit systems. The result is that while we are paying and suffering for our sins.


That said, unless you have had your TV repossessed and your Internet cut, we all know that that is just a tiny piece of the story. Due to systematic deregulation of the markets by governments giving more power over sovereign currencies than the national banks themselves, they went ape-shit inventing new and more toxic ways to make profit from the movement of capital (read debt). Their abuse of their new-found freedom with currencies made them a systemic risk to national economies and thus “too big to fail”. And so, their private debts, far larger than any kitchen refit or big-screen TV have been transferred to the public balance sheet. However, yet again we are reminded that these same banks loaned us money and helped us buy our beautiful houses that cost more than we could earn in ten years plus interest. So, once again we are complicit. Incidentally, these houses could not have reached such prices were it not for the freely available credit in the market. We are also told that if we did let these banks loose, we would be in the middle of a zombie apocalypse and would die a horrible death. Tell that to the Icelanders.  

Maybe we are all looking at the problem from the wrong angle. 

Let’s consider firstly that this strategy was not implemented by my mum, it was devised by some of the most proficient macro-economists on the planet with access to the studies of the greatest economists of history from Adam Smith through Locke to Keynes and Hayek. They also had great social experiments such as Soviet Russia, Hitler’s Germany, New Deal USA, Thatcher’s Britain and more recently Iceland. In fact, to give any credence to the “Ooops!” factor would be to believe that the people running the world economy are less competent than my Mum when baking a pie. No, austerity is working if you consider that

Its goals may have very little to do with relieving public debt. 

The economy at the centre of the euro-zone and one of the main architects of the current austerity strategy, the German has become strong due to exports. It has learnt that you become powerful by making stuff and selling it to the world. It was busy during the credit-binge selling the world and those naughty Greeks Mercedes, BMWs and Volkswagens, helping them to get in debt. It has worked hard to build a reputation for reliability and prestige and most of us will make a b-line for a German product from stationary to power-tools to supercars, given the choice. But, on the world stage they cannot support the whole of the euro-zone with their premium commodities. They have diversified, buying Skoda and other budget brands but this is not enough. If the EU is to be successful in the world economy. 

It needs to make impact in the mass consumptions markets. 

Depression
Discount dignity
In order for the Euro-zone to compete with the huge production centres of China, India and the Far East, they need one more element. Traditionally, in order for a nation to increase the mass saleability of its exports it has devalued its currency making its products cheaper and more attractive. This is not so easy in the Euro-zone, not to mention the fact that when one currency does it so do others igniting a currency war with all currencies finding a similar equilibrium to where it started. There is one other factor which will allow this relative price index for exports; cheap labour. And it is here that austerity is doing the business. The highly educated, highly skilled workforce of Europe is now on sale. But in order to truly compete they will have to get a little cheaper. 

Austerity is working. 

It is producing a more cost-effective workforce by lowering the expectations of this and generations to come.  This is not a conspiracy theory, it is a business plan. My conclusions are based on the evidence that we are living and take into consideration the business model of the central economy of the Eurozone. If it was a company, it would need to position its product line in the open market. Seeing as the premium market is not large enough to support the 350 million people of the EU, it would definitely need to reposition, at least some of is portfolio to high-volume markets.  

In my next article I'll explore the next step of a strategy that could put Europe back at the centre of world production and how the current fall in oil prices could be the lever to expand the Eurozone.
       
If you liked this, don't forget to subscribe through the cheeky MailChimp and link up on social.  Also check out my series The Century of DIY A Crop Of... More to come!

Wednesday, 3 December 2014

Episode 22: Seeing the Big Picture


From under dark clouds
From Under Dark Clouds
'From Under Dark Clouds...' is a Gonzo fictionalisation of current events in Greece as seen through the eyes of our unnamed hero as he fumbles from paranoia to public office, under the mentorage of the shady Socrates.


I can’t say I understood what I saw on the screen but I sat mesmerised, dear blogees. Mike put his arm round my shoulder, stoked to be able to share this revelation with someone who really cared. We locked each other in a hearty bro-hug.

“So, I can do my tax declaration online now?”
Mike visibly deflated and shook his head woefully. What we were looking at was the tax department’s files. This is where they calculate what they they will make us pay at the end of the year and we could change that for anyone. We began looking through the files on people we knew shaving a few euros from those we liked and adding a few to those we didn’t.
I stopped the game, “Don’t they have paper files on all these people?”
Mike stopped, “Yeah, sure they do, but who reads them?”
I pointed out that they may start reading them if they had a problem, if people started to complain. Who would complain about paying less tax? People never think they’re paying too little and when they submit paper that doesn’t reconcile, they’ll start following the paper. Not to mention the tax inspectors looking for a backhander. They were always looking for someone to put the screws on and they were old-school. This made him think.
I told him to go into the Spyros the supermarketeer’s file. His total owed was enough to run town hall for months. His list of assets, apartments, land, businesses. I looked to Mike incredulously.
“He made all this from coffee and corn flakes?” I asked.
He looked at me and smiled at my naivety. I put the question again. I didn’t really expect an answer, I just couldn’t believe that such a miserable man could have all this and still complain when I didn’t have change at the till. But, I had made a deal with him and Mike now had a roof over his head. We shaved a sum that would have paid Mike’s salary for at least six months, still leaving a fairly hefty contribution to the city’s coffers.
Mike pulled out a half-drunk bottle of scotch and two glasses. “I think some celebration is in order!”
I shrugged and made my leave. I would have loved a drink and with Mike, one of my favourite people right now but I wanted to be back home.
The wife was asleep but her warm snoring body was uncomplicated and comforting.
The next day, I set about my obligations. Meeting with some people of importance from central government. I made a point about our staff wages. There was no funding and our credit line had dried up, if I wanted to pay them I would need to find money from other sectors, maybe schools or the health centre. Essential work on infrastructure was still long overdue. The water was leaking into the streets in some areas and a motorcyclist had ended up in the emergency ward after hitting an enormous pot hole that had opened on the high street. I should put more pressure on those who owed local taxes. I reminded them that they were being collected by central and the electricity company now, bypassing my office. This evoked a shrug and I was told to look at the big picture. I was trying, but the pixels just kept getting in the way.
I rode my Vespa from a car park full of cars, all shiny and German. The rest of the afternoon was spent signing pieces of paper before they went to be stamped. I did, however learn that some more of the residents of the basement had moved into Spiro’s apartments to make a home, however temporary. This was the highlight.
I hadn’t spent any time with Socrates in ages and I needed his stoic council. He had got me into this and I had never needed him more. The waiter came to our table and he ordered for both of us but I had to tell the waiter to simply bring me a coffee. Socrates looked visibly shocked. The doctor had me on some medication that didn’t play well with booze and I simply didn’t need my wife and kids finding me dumped out of the door of a cab again. I was a new man, at least that was my ambition.
I told Socrates about the tragic state of the town hall with its staff living in the basement and no money for their salaries. He ummed and ahhed, occasionally looking over his glasses from some papers he was reading.
“They told me to take it out of the school’s budget!”
His reply was an exhaled SO. I was not getting through to him. I needed help from the only man I trusted to give me advice and he was too preoccupied with whatever it was that held his attention. I needed to shock him into listening. I told him about hacking into the tax department. He looked up and held me in his gaze, he had scared the living crap out of me with this look before but at least I knew I had his attention. I told him about the deal with Spyros the supermarketeer, which met with a Hmm of approval. I told him I knew it was wrong but I had no other options. He rocked his head and the corners of his mouth lifted a little.
“How did it work for you?” Socrates asked.
I told him that it had worked very well, surprisingly well but would not have been necessary if we had proper funding, not to mention that the thieving bastard had more money than God. His tax bill alone could have paid a good number of my staff.
Socrates’s glasses dropped down his nose, almost on purpose so his greying blue eyes could hold me unhindered. “You know what? You lack vision.”
I stuttered, something had changed since we had last met, he was no longer the grumpy old grandpa figure, in fact he appeared younger, more vital. I floundered for a riposte, but none came.
“You need to see the big picture, son.”
I wanted to tell him about pixels and definition and clarity and shit. All I could say was something about the staff, something recycled that didn’t need fresh thought.
“Things will have to get much worse, my boy. If they are to change at all.”
I sipped my coffee wishing it to be Irish and me to be elsewhere. He pulled the folder that had kept his attention throughout our conversation, placed it on the table and slid it toward me. I opened it. It was a list of names and dates and numbers each followed by a sum of money.
“You will give this to our man Micheal, he will know what to do with it.” He said.
I asked if they were more favours. Socrates told me that they were. I smiled, there was a lot of favours here, enough to do some real good work. Not just for the staff but for the town as a whole. I shared this thought with Socrates.
“Things must get much worse before anything can change,” he said before leaving me with the bill.



 previous  next



Don't forget to Follow and share with a friend, they'll love you a little more for it.Click the social links or send me your experiences through comments or Mail


 

From Under Dark Clouds

The Century of DIY