June 28th headline in the New York Times:
In Ireland, a Picture of the High Cost of Austerity
June 30th headline in the New York Times (from the Associated Press):
Ireland’s Economy Posts First Growth in Two Years
In the first story, which appeared on page A1, the reporter does some great editorializing in a front page “news” story:
As Europe’s 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.
“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’ ”
Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Re-read that last paragraph. Without that stimulus money their economy shrunk and remains in recession. And though there was “no sign of a rapid turnaround in sight” a mere two days later came the second story:
Ireland has resumed economic growth following eight straight quarters of sharp declines, the Central Statistics Office reported Wednesday.
The government agency said Ireland’s gross domestic product grew 2.7 percent in the first quarter of 2010. It was the first such rise since the latest quarter of 2007, when Ireland’s economy began to buckle amid a bursting bubble in construction and property speculation.
But GNP (national not domestic product) fell 0.5% in the first quarter. But the turnaround does appear to be in sight:
Increasingly economists are forecasting that Ireland’s G.D.P. and G.N.P. will record gains in 2010, setting aside earlier predictions of another year of declines. By contrast, Ireland’s G.D.P. fell 7.6 percent and its G.N.P. 10.7 percent in 2009, the biggest such falls in Irish economic history.
I know. It seems impossible. How can the economy recover without government stimulus? Let’s keep an eye on Ireland.
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I'm not sure I understand how they are very different. Why have a shadow economy in a capitalist system? And just to clarify – I don't consider the U.S. a capitalist system anymore. It's pretty fascist and I don't see much difference between fascism and socialism.
“Why have a shadow economy in a capitalist system?”
Surely you jest.
“And just to clarify – I don't consider the U.S. a capitalist system anymore.”
I've used Capitalism and Socialism as arbitrary endpoints on a mythical spectrum. I see the move from left to right vs. the move from mythical right to true right as profoundly different moves.
No, I'm not jesting. I'm really don't know what you mean.
You are using Capitalism in its true form — a form I'm unfamiliar with. I only know it as an endpoint in a debate forum. From my perspective of Capitalism, shadow economies make perfect sense.
Oh sweet merciful…. This is a discussion board, not an academic journal series. One thought per post is sort of the limit. If you want to develop sustained arguments regarding firm size then, you're right, that's a topic for a different venue, frankly. Also, decide if you want to talk about government or the state. Two different things. A large firm of course has a bureaucracy. This is not part of the state, however, unless the large business develops some political power.
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ah.
I beg your pardon?
My point was that the Government, the State, and Big Business (define it as you like) are inseparable.
Sorry to have conflated the Government with the State. Please advise me so I can distinguish them in the future.
There's more to that “ah” than appears on the page
I tell you what – Bastiat does a masterful job of distinguishing government (something we set up as people to take care of things we don't want to) from the state (an entity that imposes its will upon the people). I think it is in “The Law.” I do not know how you are using big business. If you mean “large firm” then I fully disagree. If you mean “politically connected” then fine, but that definition just assumes itself and so is meaningless.
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Would you agree to use the terms as they are used in fact as opposed to how they are used in theory? Then we can quit arguing semantics — and I can declare victory (not that I'm competitive
I'm perfectly aware people use these terms willy-nilly. I try to be more thoughtful and careful.
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I think the recent paper Russ published set the balance correctly. When the government assumes an entity is “too big to fail” — they're taking a personal interest in the business. What is their interest?
Most business owners understand running administrative and accounting divisions that lose money, and they maintain them (or alter accounting practices) because the profits are recorded somewhere else. Do you think the government is different?
Add political considerations to the accounting and see what you come up with. If you're in a close election, what is the market value of 5,000 votes against a billion dollar commitment? Division doesn't work well here — because the commitment is so diluted.
Let's expand the question. Why does the government even give a shit who succeeds and who fails? That should allow you to answer your own question.
That's why Rush is such a thorn in their side. Whatever you think about Rush, his regular montage of confirmation bias — or what Nasim Taleb might describe as the ignorance resulting from too much information — is interesting.
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