“On both sides of the Atlantic we are seeing stabilisation of the economy…”

As the Irish Times report points out, and RTÉ also notes, US President Barack Obama made particular mention of the Shannon airport stop-over provided to the US military, and the odd US politician, when pledging to “continue to co-ordinate in international fora as well as bilaterally to see how we can spur investment and private sector growth on both sides of the Atlantic.” He also received another “lovely” bowl. And the pre-clearance facilities at Shannon Airport are now available for all general aircraft, including private jets. Irish Eagle identifies the link between those facilities and US tax reforms.

That’s the insurance policy against being tagged as a tax haven. Avoiding tax haven designation is one of the keys to economic recovery.

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  • Greenflag

    ‘Avoiding tax haven designation is one of the keys to economic recovery.’

    A very small one . The biggest key is to increase aggregate demand in the economy (USA) which everybody in Washington DC knows is stuttering at the moment as the first stimulus peters out . To restore what Americans call ‘full employment’ i.e 5% unemployment will require economic growth rates of between 4 to 5% for the next 5 years . Not going to happen. The emisseration of the American middle and working classes over the past two decades has probably caused a shift in economic behaviour such that spending is being damped down . Those who have ‘looted’ billions won’t of course be spending it . They don’t have to .

    The USA could be facing an additional need for an greater stimulus to the 800 billion already pumped in come mid to late summer .

    The biggest tax haven and money launderer in the world i.e Switzerland is doing quite well as is Liechtenstein and Luxembourg but then none of those countries are spending 3 trillion dollars on Middle eastern wars while a fifth of their populations go without health insurance .

    Joe Stiglitz’s ‘Freefall ‘ is worth a read if for nothing else than to be appraised and made aware of just how far the USA has become a corporate oligarchy notwithstanding President Obama’s election .

    The stabilisation that we are seeing is the ‘stabilisation’ that the Japanese experienced in the lost decade of the 1990’s . Stagnation is probably a more accurate term. System’s broke -the bankers are still coining it and the big private health insurance companies and big pharm have ‘won’ getting their ‘paid’ puppets -probably some 85% of the Congressmen to do their bidding .

    As I get through reading Stiglitz I’m about ready to give up on the possibility of the USA ever being able to reform it’s major economic and societal dysfunctionalities . While such a situation is ‘tolerable ‘ for NI with HMG to cover it’s rear -there is state on the planet not even emergent China who can make up for a declining USA.

    For the Irish , British and other assorted Europeans a better ‘capitalist’ model may lie to the east -Frankfurt , Brussels and perhaps some day even further east to Beijing .

  • Mack

    Greenflag –

    For the Irish , British and other assorted Europeans a better ‘capitalist’ model may lie to the east -Frankfurt , Brussels and perhaps some day even further east to Beijing .

    I’m not convinced. The European social model has led to chronic long term unemployment and from many European immigrants I speak to in Dublin (esp. southern Europe) low wages..

    http://www.google.com/publicdata/explore?ds=ltjib1m1uf3pf_&ctype=l&met_y=emplage_t1&scale_y=lin&ind_y=false&rdim=country&idim=country:USA:DEU:BEL&tstart;=-126230400000&tunit=Y&tlen=41&hl=en_US&dl=en_US

    http://www.google.com/publicdata/explore?ds=ltjib1m1uf3pf_&ctype=l&met_y=emplgndr_t1&scale_y=lin&ind_y=false&rdim=country&idim=country:USA:DEU:BEL&tstart;=-126230400000&tunit=Y&tlen=41&hl=en_US&dl=en_US

    I’m very nearly finished Freefall – which is a good read, fairly neatly demolishes efficient market hypothesis and other nonsense. I think perhaps despite the odd nod of appreciation, he is too quick to set up rigid interpretations of arguments presented 50 years ago to demolish them (e.g. Hayek and Schumpeter were great economists, correctly highlights that Hayek was in favour of state intervention in many areas) but then dealt with Creative Destruction only in terms of competition by monopolies for markets.

  • Mack

    Incidentally McWilliams on the Keiser Report is also worth watching –

  • Greenflag

    ‘The European social model has led to chronic long term unemployment ‘

    I don’t believe there is a single EU country at present which has a higher ‘real’ rate of unemployment than the USA bar perhaps Spain . The ‘real’ rate in the USA is estimated to be around 17% with some states like Michigan and parts of Florida closer to 20% . With another 4 million foreclosures in the pipeline even the main ‘trump ‘ card i.e flexibility which the USA worker is presumed to possess in abundance over his Northern English or French or German or Irish equivalent has dryed up. if people can’t sell their houses to get the reduced equity to move across the country to take a job elsewhere ( there is virtually nowhere in the USA which has not been affected outside of areas where people don’t want to go or live anyway ). Think how many unemployed Londoners or Dubliners are looking to start new working lives in say Leitrim or Hartlepool ?

    I haven’t finished Stiglitz but as you seem to agree he neatly demolished the so called efficient market hypothesis then we ( Irish /British / American /German etc etc ) ‘citizens ‘ of the world should be looking in ever more focused detail on how the ‘house of cards’ was allowed to be built up over a couple of decades -nay not just built up but ‘jerry built’ with the enthusiastic abeyance of the ‘free marketeers’. And as Stiglitz points out the ‘financiers’ and ‘bankers’ etc who were the main creators of this pyre seem more than willing to restart another ‘pyre’ as soon as they possibly can .

    Meanwhile our politicians -all of them from Obama to Brown to Cowen all appear terrified of both Wall St and the big bankers .

    This is not democracy . It’s plutocracy with more than a hint of oligarchy and not much more than a short step away from full blooded corporate fascism . The ‘globalisation’ veil has served it’s masters well in that it has left the so called left alternative ‘denuded’ of any coherent response to the crisis of oligarchic capitalism and the plutocrats in whose interest the politicians serve -this being much more the case in the USA than in western europe at least for now .

    The European social model began to break down in the major European countries in the 1970’s for reasons which had more to do with the then oil crises and stagflation . Even so for the decades previous the UK, Germany and France all made substantial advances in living standards and earnings and in living standards , health care etc etc.

    And it’s still the case that the smaller european democracies Sweden , Denmark, Finland , Luxembourg , Holland , Belgium etc have nowhere near the degree of wealth inequality , prison populations per capita, murder rates , mortality rates , educational drop out rates , etc etc than the ‘model ‘ democracy across the Atlantic ?

    I’m not convinced of any American recovery and I don’t believe that either the UK or Ireland should be too optimistic that the ‘cousins’ can get their economic policies act together for an effective recovery any time soon .

  • Mack

    Greenflag –

    To turn your argument around slightly – I would be very surprised if the real rate of full-time employment in Europe was higher than in the USA (i.e. there are more people in Europe who were never able to find work, or have been long term unemployed (and off the official scale) for longer & there are much greater numbers on job share etc in contintental Europe than in the USA).

    There may not be an American recovery yet, but if not, it’s unlikely there will be a European recovery either. And I think, the USA will rebound more strongly than Europe coming out of this crises.

    I’m not holding up the USA as perfect – just that their achievements should be credited where appropriate. They have a stronger record on employment than Europe has and salaries there are much higher than here (employers are also much more likely to take a chance and hire & promote workers, because they know they can fire them if it doesn’t work out – working in the multi-national sector this is very apparent within my own company where in the US they’ll take a chance, in Ireland less so, and in France & Germany – forget about it..).

    Their health care and education systems provide best in class service levels to those who can afford it. The flip side is that those that can’t really struggle in the US. There is a lesson to be learnt here I think. We need to figure out how to provide a high minimum level of services – while at the same time allowing the market to innovate in service delivery and we need an ecomony that is structured so that it creates well paid jobs (‘measured’ employment in China is very high – but most of the jobs pay less than $1 per day).

    By the way, the reason why Stiglitz found so easy to demolish many of those arguments is that they are self-evidently ludricous and he made light work of very many easy targets. But, he did not hold is own alternative up to scrutiny – that of strong government that would intervene in markets to make them efficient as possible (an efficient market being one where no changes are trades are possible that would improve the well-being of one citizen without impoverishing another by an equal or greater amount). In theory, that sounds great. Who could argue with that outcome? Not Hayek or Friedman! To be honest, it’s heartening to see the common threads that permeates the vision of a lot of these thinkers. Hayek certainly wanted government regulation (but probably much less strong than Stiglitz). Stiglitz’s system is entirely reliant on a strong government acting remarkably fairly & wisely – without caving in to special interest groups (e.g. those that fund political parties, organised civic groups that can swing elections etc) to rig outcomes.

    Stiglitz has good arguments – and his message is incredibly relevant in the USA – but it’s not the whole story. I don’t think we’ve had a free market in anything – or even that one is acheivable. Hayek warned that organised capital is just as much a threat as organised labour (though events in Ireland would suggest that organised capital is much more dangerous – though they both pretty much divied up the pie between them during the good times – at the expense of society and, now it seems, our children).

    Constantin Gurdgiev has a really good article on the dangers of concetrating political and economic power too centrally.

    http://trueeconomics.blogspot.com/2010/03/economics-15032010-failure-of-state-is.html

  • Greenflag

    Mack .

    First re your post 2 above i.e the links on employment rates (ex 1)) by country for 15 to 24 year olds and the second one on employment rates (Ex 2) generally .
    You use the USA in comparison with Germany and Belgium .

    Had you used for example 1 above either Denmark,Sweden, New Zealand, Netherlands , Canada , Australia or even the UK you would have found that the USA scores less than all the above .

    The same goes for your example 2 for in that example Denmark, Netherlands , UK, Netherlands , Australia, Switzerland, Canada , New Zealand , Norway , and even Iceland all score higher than the USA .

    ‘I’m not holding up the USA as perfect’

    Just as well .

    BTW I’m not holding up anywhere else as perfect either 😉 nor am I holding up the USA as totally imperfect .

    Generally I don’t disagree with your points re the stronger record generally than at least the major european states bar perhaps the UK and Germany for lengthy period in the 60,s and 70’s .

    ‘Their health care and education systems provide best in class service levels to those who can afford it.’

    I would’nt doubt it but then what average American can afford either of the above from their ‘average’ incomes or resources if they had to rely entirely on the market . The median annual income for all Americans is approx 40,000 dollars .

    The ‘best ‘ college education will cost proably 200,000 dollars , any major operation close to 100,000 dollars and an average no frills house some 200,000 dollars .. Any average individual or family unlucky enough to have a couple of serious operations in a lifetime or a major heart or transplant procedure would simply be unable to afford it from their own resources .

    Even Americans at the 250,000 dollars income level would soon find themselves in economic hot water if they needed several major operations or had a few kids desirous of going to say an Ivy League College.

    It’s into the above quandary that the health insurance companies step and make the above affordable to many americans who can afford the premiums because they either work for large corporations who can afford to subsidise the true cost of selective insurance by offering it as an employment ‘perk’

    For the vast majority of americans who don’t work for the large corporations or the federal or state governments health care insurance costs are forever rising and forcing many companies even some of the larger corporations to drop health insurance provision or increase the cost to employees. The health insurance provider’s ‘profits’ must be maintained at all costs .

    Thus the 50 million plus Americans without health insurance and thus ever increasing costs on those who have and thus the forever increasing gouging out of those costs to some medical practitioners and for profit hospitals . No matter that an MRI is’nt strictly necessary for an individual the important thing is the MRI machine because it’s capital cost was so great it must be utilised as often as possible in order for the return on the investment to be made -not so different in practice from an hydraulic press machine in any industrial plant etc .

    ‘There is a lesson to be learnt here I think’

    I think the lesson is fairly obvious to anyone who has a basic knowledge of addition and subtraction and who takes it as a given that people will need health care /operations etc throughout their lives .

    For probably 80% plus of the American population they will NEVER be able to afford to pay for a College Education for their children nor for several major health operational procedures from their own resources. It would mean either going into huge personal debt or choosing to go bankrupt or preferably just die .

    In that context it would make perfect sense for most Americans to choose ‘universal health care ‘ for the 80% of the population who cannot and will never be able to afford private insurance to have an NHS type system . Meanwhile the beneficiaries of the ‘laissez faire’ free for all of the last 25 years could continue to live up to their economic principles by paying in full from their own resources for their health care with of course the participation of those few private insurance compnaies who would still be willing to run the risk .

    BTW Stiglitz may be more relevant for the USA but the USA is still very much relevant for the rest of the world economy at least for the next several decades .

  • Greenflag

    Organised capital has proved itself to be much more dangerous for the world’s economic and political stability these past several decades than organised labour . In the USA there is no organised labour which is why the economic emisseration of the american middle and working class has been allowed to gather pace . Some 11% of USA employees are ‘unionised ‘ and more than half of them are in the public sector i.e already protected at least up to the present downturn.

    Organised capital is now also globalised capital which can move as of now unfettered around the world to wherever the returns are greatest. Labour the other ingredient in the wealth building equation is much less mobile as we can see even from the EU experiment . Thus we have to counter globalised capital a kind of globalised labour develop i.e millions of illegal immigrants .

    IMO health care and education cannot be entrusted to the private sector to deliver for all. By virtue of the profit motif and affordibility they are obliged to cherry pick from those who have the most ‘income ‘ or the better health or the most educable .

    There is no doubt a market for exclusive privatised health care and higher level education for a small wealthy minority – Let them pay for it I say . For the 85% plus of the population (USA , UK . Ireland etc) who will never be able to afford to pay for a 200,000 dollar operation or a 250,000 dollar Ivy league/Oxbridge education then the State has to spread the risks for everybody by insuring everybody and by general and specific taxation . Nothing is free -this we all can understand . I’ll have a gander at gurgitating Gurdgiev a little later today .

    PS Mind those graphs especially those you have selectively selected 😉 Remember Churchill’s mantra re lies and damned statistics -It’s still the case nowadays perhaps even more so -which of course is not to deny entirely their use as tools for analysis and policy prescription as long as the inherent assumptions underlying them are in accord with ‘reality’ . I refer you to the former Federal Chairman Greenspan and his enthusiastic pronouncements on the ‘soundness’ of the American financial house of cards 😉

  • Mack

    Greeenflag –

    Had you used for example 1 above either Denmark,Sweden, New Zealand, Netherlands , Canada , Australia or even the UK you would have found that the USA scores less than all the above .

    Actually Sweden is much lower. But of those all but 2 follow the an economic model that more closely follows the American system than the continental European social model. Worth also pointing out Norway is a petro-state – see less selective graph below – countries with flexible labour markets perform significantly better at job creation than those adopting the more rigid social approach. And these graphs say nothing of salaries

    I think your stats on college and operations are probably wrong. An Ivy League college education may be out of grasp for most, but a state education (with student loans) is not. Albeit that most Americans would agree that inflation of costs in education is a severe problem. And on operations – most Americans have health insurance, most Americans benefit from the system. In part that’s why Obama’s plans are so controversial.

    http://www.google.com/publicdata/explore?ds=ltjib1m1uf3pf_&ctype=l&met_y=emplage_t1&scale_y=lin&ind_y=false&rdim=country&idim=country:USA:DEU:BEL:SWE:NOR:AUS:NZL:DNK:NLD:ITA:LUX:AUT:FRA:GRC:PRT:ESP:CHE&tstart;=-126230400000&tunit=Y&tlen=41&hl=en_US&dl=en_US

  • Mack

    but a state education (with student loans) is not.

    State as in State University

  • Mack
  • Greenflag

    mack ,

    ‘Actually Sweden is much lower.’

    My error I put Sweden in the wrong example . In example 2 overall employment rate Sweden rates higher than the USA .

    And going back to assumptions your example 1 above the age group comparisons are based on ages 15 to 24 . Are full time college students included as ’employed ‘ . Would a high percentage of employed in the above comparisons indicate lower second level and third level participation rates . Drop out rates for Americans at second level education are very high at least by ‘reputation’

    The college costs I referred to above are at the top end of costs i.e Ivy League but for many Americans ‘student loans ‘ particularly in the legal and medical professions are another mortgage to pay back . There is or was almost justice in that situation for the USA is probably the only country in the world where a medical/law degree is almost an entitlement to ‘millionaire ‘ status .

    Thus the medical colleges could not maintain their enrollment figures from USA applicants alone thus the huge percentage of non USA applicants for medical degrees from the families of the super rich minorities in developing countries .
    And on operations –

    ‘most Americans have health insurance, most Americans benefit from the system .

    Those on Medicare benefit although that’s been tightening . There is continued attrition of big company insurance provision for many Americans and even if the baby boomers are covered the next generations are unlikley to see anything like the same insurance cover as part of employment as their elders .

    From another perspective because health insurance is employment rated it has become a juggernaut against labour flexibility with those who have good health insurance staying put in their jobs and larger companies and government being able to attract the ‘best’ employees not necessarily the most innovative . With the average American now expected to have seven or more employers in a lifetime the cost of constant change in providers and for medical recording is immense . Far easier and far less expensive to have countrywide insurance provision from a single payer system with some individual state involvement and control . Small businesses and individual contractors pay over the odds simply because they are neither employed by a large corporation or by government.

  • Greenflag

    Mack,

    ‘Outside of the present crises only Luxembourg, Autria and the Netherlands of the European model countries performed as well as the USA…’

    That’s if you believe that the US official statistics are actually measuring the true unemployment rate . Most commentators that I read of in the USA rate the true unemployment rate to be 5 % more than the stated official figure i.e closer to 17% than 10% on average and higher than 17% in states like Michigan etc.