A debt unpayable without mass migration?

And another from Henry whilst we’re there (and he’s thinking of his forlorn homeland), he makes an important point about the unreal nature of expectations in Dublin. In particular he takes Stephen Collins to task for taking:

…as a given that Ireland’s growth rate from the mid 1990’s through 2008 or so reflected “normal economic and political conditions.” They didn’t. Ireland was playing catch-up with the developed industrial democracies – and during catch-up, one can hope for very high growth rates thanks to under-utilized resources. Even if the world’s economic system were magically to restabilize overnight, one could not expect to see a return of the conditions under which Ireland was able to eliminate its earlier debt overhang.

He picks up on Kevin O’Rouke’s astute analysis at the IrishEconomy blog:

If the left hand side of this equation falls too far below the right hand side, people will leave until equilibrium is re-established. … There are fixed costs to running a state, and the debts we are now being saddled with are not population-dependent. You don’t have to be Paul Krugman to see the potential for some pretty nasty feedback loops here.

Not exactly Chronos, who according to Greek mythology used to eat his offspring, but…

  • JAH

    Living in England I discovered that the idea of having to move countries to find work was/is as alien to the average English person as it is accepted as a fact of life by the average Irishman or woman on either side of the border.

    I have only 3 relatives left in Ulster, the rest are scattered throughout the world. Hardly unique. The past decade has been but a hiccup in the history of Ireland’s continual diaspora.

  • John East Belfast

    The problem with 21st century migration – where the knowledge industry is largely king – is that the type of people who will leave will be those with brains and education and a capacity to create wealth and pay taxes.

    It wont be a safety valve for the poor and manual workers who instead will have the incentive to remain in Ireland and exist on benefits and welfare.

  • pippakin

    It is not so easy to leave any more. If people leave now many of them will be taking serious debts with them making it extremely difficult to set up home in a new country. This disaster is not the same as any that went before.

  • John East Belfast

    Pippakin

    I suppose it really depends on your level of negative equity the magnitude of which could be very tempting to simply give the keys of your house to the Bank/Building Society and say goodbye.

    The thought of the country carrying Debt is bad enough for many people but if they have their own personal debts – that could take a life time for their assets to exceed their liabilities – then that might be just too much to bear.

    I think the big difference this time will be it wont be the navies and construction workers of the 19th and 20th Centuries leaving but the young, well educated and mobile who dont want to pay the level of taxation required to finance the country’s debt.

  • Drumlins Rock

    there is also the changing birth rate, although still one of the youngest populations in Europe, if Ireland returns to the high level of emigration of even the 70s and 80s will there be sufficient young people left to to maintain the balance of working and non working citizens.

  • pippakin

    John East Belfast

    But leaving the keys does not mean leaving the debt, or does it. I thought that if the bank/building society sell a house for less than the mortgage value then you would still be liable for the remainder of the debt?

  • anne warren

    I think this is an unpayable debt. Sooner or later Ireland will have to default.

    If those who can emigrate leave the country, then despite paying negative equity on property, they will be paying taxes etc in their new country. So nothing is going into the Irish exchequer and the negative equity payments will prevent them from achieving prosperity in the new country

    If those who can’t emigrate stay in Ireland, they risk becoming long-term unemployed or under-employed as very few jobs seem to be available. So their taxes are not going into the Irish exchequer or will be contributing very little.

    Ireland has approximately one-third the population of London. All things being set to “optimal”, how could the Irish even repay the interest on that mountain of debt?

    Some smart economist should weigh up the pros and cons of the ECB/IMF offer and default clearly for the people of Ireland and let them decide in the forthcoming elections what they want for themselves, their children and probably their grandchildren.

  • lamhdearg

    I cant see the unemployed wanting to stay as huge cuts are coming their way, i can see Englands dole queues geting a boost.

  • Mick Fealty

    Unlikely LD, since the dole is still way better in Ireland than the UK…

  • anne warren

    I can’t envisage the UK accepting the unemployed of Ireland on the dole
    I thought austerity cuts in the UK were going to bite the Social Services
    Wasn’t Ian Duncan Smith talking about “voluntary labour” for the unemployed?

  • Roger

    Sending back the keys does indeed not eliminate the debt – but if it is a few tens of thousands of euros/pounds they will eventually write it off if they can’t track you down (and in any case what can they do if they do? it’s not as if you have any assets left).

    This happened to my sister’s family in the eighties UK crash – three or so years later they had no problems getting a new mortgage (although this obviously required some strategic economies with the actualité…)

    And for the younger Irish you can just flee the country leaving your debts behind forever – be interesting to know if the migration stats are reflecting this yet?

    One wonders if it will take an East German like flight of the population before what must truly be Europe’s most corrupt and incompetent political class finally gets consigned to the dustbin of history?

  • Alias

    “The problem with 21st century migration – where the knowledge industry is largely king – is that the type of people who will leave will be those with brains and education and a capacity to create wealth and pay taxes.”

    Not in these circumstances. The type of people who will emigrate are the unemployed with a 400k mortgage on a property that is worth 150k. In other words, defaulters who intend to dump their mortgage on the taxpayers via state-indemnified eurosystem banks.

    Ireland’s ‘entrepreneurial’ class from 1999 to 2008 were ordinary property speculators since that is where the money was to be made. That class now has large debts, and is not in any position to unleash its entrepreneurial flair in other realms of enterprise.

    Apart from that, and something that Stephen Collins and ilk are utterly ignorant of, is that Ireland’s economy since joining the eurozone consisted for borrowing a couple of hundred billion a year and spending it. In other words, it consisted of a credit card. That card is now cancelled so the economy doesn’t exist anymore. What now exists is the other part of a spending spree: paying for everything you bought. Unfortunately, Ireland’s economy doesn’t have the means to generate 1.67 trillion euros plus interest so penury and bankruptcy beckons.

  • pippakin

    At the moment the dole is better here but the cost of living is higher here and who knows how much is going to be cut from the dole. I’m sure the cuts will be severe.

  • Greenflag

    Any Irish who emigrate to the UK will be provided with bicycles by Mr Ian Duncan Smith so they can cycle from where there are’nt any jobs to other places where there are’nt any jobs but at least it will keep them fit :(

    The truth is slowly beginning to dawn in some circles at the top of the economic policy making strata in the western democracies that the ‘private sector ‘ is simply not capable of providing full employment other than at slave labour rates for that section of the population at the bottom of the economic pyramid . Despite ever more incentives to businesses in the form of tax breaks , low corporate taxes the inevitable race to the economic bottom continues .

    There are now more slaves in the world than ever before in history some 27 million is estimated . For those who cheered the ‘defeat of communism in the former Soviet Union and the rise of a new corporate Russian fascist state, the social statistics accompanying privatisation of the Russian economy are a revelation . A drop in life expectancy of 10 years for Russian males and a population implosion to 103 million by 2050 if current trends are maintained . Russia is estimated to have the same population size as the Yemen in 2050 .

    Brave new world indeed !

  • lamhdearg

    Pity the russians could not teach the rest of the world how to achieve “population implosion” to many bipeds.

  • Greenflag

    Actually there’s nothing to teach . All you have to do is to deregulate any State controls on alcohol and allow the free market to make a bottle of vodka cheaper than a pound of sausages at the same time as replacing a sober President Gorbachev with an alcoholic President Yeltsin and the job is oxo . It helps to have massive unemployment or underemployment and a culture that is patriarchal .

    Actually most of the planet’s population is imploding -faster in the western countries of course . Even in Africa there is evidence that birth rates are declining .

    Ironically enough there is only one part of the world and it’s a democracy where at least a section of the population has increased the number of births per woman from 5 to now 9 and as a consequence has tripled the size of this ‘population ‘ in the past 30 years . It’s a democracy supposedly ‘western ‘ . living close by is another population with also a very high birth rate of some 8 per woman -but these populations are not related apart from geographic near proximity ?

    Would anybody like to guess where these fecund populations are to be found ? I’ll answer tomorrow circa noon ?

  • pippakin

    Greenflag

    Are you by any chance talking about England and Ireland?

  • Glencoppagagh

    Previous bouts of emigration from Ireland were as much to do with excessive population growth as economic conditions.
    Although Ireland’s birth rate has slowed, it has continued to be one of the highest, if not the highest, in the EU and it was only the exceptional economic expansion of the decade up to 2008 that temporarily halted emigration. In other words, emigration is a normal part of the Irish condition.

  • Alias

    “At the moment the dole is better here but the cost of living is higher here and who knows how much is going to be cut from the dole. I’m sure the cuts will be severe.”

    According to the already out-of-date National Recovery Plan published last week, it was 14%. However, this week’s loan adds an extra 4 billion in interest payments to state expenditure so that will have to be financed by additional cuts of circa 13%. The target level for social protection systems would be harmonisation with the EU average (1.4 % of GDP or 5.7 % of total benefits).

    The UK level of unemployment benefit is a fair level, and Ireland should have cut it to that level long ago. We now need to do what Friendman predicted that all states with an open immigration policy would have to do: dismantle the welfare state.

  • Alias

    Friedman*

  • aquifer

    So it looks like it will have to be Ireland of the thousands of welcomes to keep populations up.

    Expand the third level education sector fast?

  • Cynic

    Kevin O’\Rourke’s analysis is deeply flawed in one respect. Yes there may be feedback loops but Labour isn’t perfectly mobile. Quality of life is a factor in the model. There is a resistance to emigration and many people with just stick it out if they think things will get better eventually.

    Furthermore there is the issue of Ireland as an entrepôt to the EU for US and other foreign companies from countries for whom English is a first or second language. Ireland still has many competitive advantages – it just has to work harder now to exploit them and lower real labour costs may help.

  • sammymehaffey

    Greenflag

    Turkey and another Muslim country?

  • http://www.labourbelfast.blogspot.com DC

    Can someone explain to me the rationale behind mass migration paying down Ireland’s debts better?

  • Greenflag

    sammymehaffey & pippakin

    The most ‘fecund’ people in the world are the ultraorthodox jewish sect who have created a society of scholars in which around two thirds of men between the ages of 20 to 55 study rather than work . They are largely dependent for cash on charity and live off welfare payments from the Israeli State about which they are so ambivalent that they refuse to do national service . These ‘students’ are are all married and average over 8 children per family. They make up a third of the Jerusalem population and more than half it’s young population . Israel now has 750,000 Haredi who make up 15% of the population. Spilling semen is a sin according to Hardi rabbis who rule the roost so no condoms . Parents ‘pair up’ the youngsters before they are 20 and once married they are expected to ‘produce ‘ straightWy otherwise it’s the in vitro fertility clinic (three times as many per head as the USA ).

    The other high fertility group is to be found less than an hour’s drive from Jerusalem i.e the Bedouin of the Negev desert . Once a nomadic people they now live in seven ‘recognized ‘ villages allocated to them by the Israeli authorities in the 1970’s . There are 45 unrecognized villages .Wadi Nam is one of the largest unrecognized villages , a collection of corrugated iron shacks nestled under power lines between an industrial complex , a chemical waste dump , apower station and the road from Beer Sheva to Eilat.

    When the Israeli State was established in the 1940’s there were about 90,000 Bedouin in the Negev . Most fled to Egypt, Jordan or Gaza leaving behind about 11,000 who now have grown to some 200,000 .

    If anyone is interested in the future of world populations I recommend ‘The Coming Population Crash and our Planet’s surprising Future ‘ by Fred Pearce -a former mews editor at the New Scientist .

    All the above facts re the Haredi and Bedouin are from the book as well as Pearce’s chapter read on the Irish famine titled ‘the Road to Skibbereen ‘and other demographic milestones including the coming ‘girl’ shortage over much of Asia .

    Disclaimer – I don’t necessarily agree with some of his ‘futurism’s’ and I think Pearce does not give much thought imo to the political consequences of future demographic trends . By 2050 there are expected to be almost half a billion migrants around the planet which is more than double the number today (200 million).

  • Greenflag

    error above -the Israeli group is known as the Haredi . I expect they study the Talmud /Torah etc in between acts of procreation ;)

    The poor Bedouins now that they can’t herd their sheep keep themselves occupied in the desert by breeding more Bedouin instead .

    I wonder in retrospect if one of the reasons for the high birthrate in Ireland was relatively higher unemployment in the past ? Just a thought;) I mean what else are people to do with all that spare time now that beer is so expensive ?

  • Greenflag

    Alias ,

    ‘We now need to do what Friendman predicted that all states with an open immigration policy would have to do: dismantle the welfare state.’

    We don’t need to dismantle the ‘welfare state’. It may need a little pruning here and there on a temporary basis but as long as international capital can skip from one speculative banking crisis to another on the other side of the globe in a few seconds and as long as elected governments are subservient to the rule of the mega bankers -the masters of economic disaster then the welfare state will continue .

    I note the DUP in NI is moving to the centre and way from the rabid nonsense put forward by the neo con nutters of Friedmannism and the followers of batshit crazy Ayn Rand!