As a fairly frequent visitor to Ireland, it’s impossible not to notice how expensive everyday items are and when you look deeper at the cost of houses and vehicles and almost everything else, i was wondering what pinsters thought would be necessary in terms of deflation for the average wage earner to live in an average house , drive an average car, and live what could be considered an average lifestyle
The general cost of living needs to fall by a full one third just to get us down to the European average day-to-day cost level. If we want to become really competitive the general price level needs to fall by something close to half.
The thing is, the really really obvious elephant in the room that everyone is determined to ignore, the thing is that a vast amount of the high prices in the Republic can be traced directly back to FF legislation and tax policies skewing a whole range of industries and sectors in favour of their incumbent buddies and preventing new entrants.
For those who cry “but nothing can be done, and sure the other crowd are just as bad” I say : piffle! A revolutionary reforming Government could very easily, in a matter of months, completely dismantle all the corrupt scaffolding holding up all the cartels, licenced croneyist industruies, restrictive practices and all the rest of it, could rampage through the intricate web of indirect taxes charges and fees, and could quickly take immediate steps to dismantle one of the primary cancers, the 1960s-era High Land Price policy and all the dodgy corrupt insitutions, practices, tax dodges and croneyist legislation that flows from the 1963 Planning Act.
The cost of living in the Republic - which, I say again, is completely artificially inflated by a whole series of FF devices - would then drop like a stone very very quickly indeed. The whole FF mess could be wiped out within a year and the economy put back on a stable footing with a sane cost level. Vastly reduced costs would mean that SMEs and MNCs would be far more willing to stay in business and protect employment levels, a whole myriad of new entrants will start up to get their slice of the newly-opened no-longer-protected sectors, nominal wage levels can fall - and if nominal wages fall by slightly less than the rate of the Great Deflation then the real position of workers will improve (shades of MacSharry’s “contractionary fiscal expansion”) and the debt overhang can start to be steadily chipped away at.
At the same time all the pure waste in the public sector - all the useless quangoes and their staff, all the army of “administration” wasters in the HSE etc, all the corrupt croneyist supply contracts, all the advertising and PR budgets, all the unvouched expenses and crazy megapensions for those at the very top of the trough - chop the whole feckin lot of it overnight. End of story. It’s not needed, it doesn’t do anything useful, chop it all in one fell swoop. Only About 40% of the total number of employees on the public payroll are actually front-line staff in hospitals, teachers, Gardai, social welfare offices etc. The other 60% are pure dead weight and could be slashed in the morning with no effect on frontline servicesd whatsoever.
Being seen to take firm decisive action to restore a trading, functioning, non-corrupt and sane economy would do wonders for our international credit rating and we might actually be able to raise the funds we’ll need to stay afloat during the rebalancing.
This is the only way forward. And if the current Cabinet do not have the wit, the ability, the imagination, the cojones, the spine or the determination to implement this plan then they need to have the basic fing decency to resign immediately and make way for somebody - anybody else who might have a glimmer of a clue, because it is as clear as day that the currwent Cabinet haven’t a fing notion what is going on, how we got into this mess, or how to fix it.
Resign now, you blustering spoofing wasters. If you can’t sh1t then get off the damn pot.
For sure the cost of electricity and gas needs to come down sharply. To well below the european average if we are going to compete. The knowledge economy can be energy intensive, just look at Intel. I’m sure big (and small) pharma and biotech uses a hatful too.
Some professions need to come down a substantial amount. In particular law and medical are way over the top. Official rates for construction professional also need a huge cut. In the new low price economy, it must be possible to buy land, build a decent A-rated house, and make a profit on it for 4-4.5 times the average wage (or rather the median wage).
I could go on, but you get the idea!
Insurance costs are a scandal here too.
We need reforms to fix some of our problems. Big changes need to be made. Changes that would
end certain circles.
Pubs. The wholesale & distribution monopoly cough network. Supermarkets, especially the big multiples and their suspiciously-identical prices or the Londis/Centra and their ridiculously over priced markups. All telecoms, especially the mobile operators and broadband providers (SMS messages are twice as dear as anywhere else in Europe because the Irish like to text a lot, FFS how stupid are people anyway). Every insurance sector. All the professions - legal, medical, accounting. SIMI, VRT, the car dealer cartel cough network and the “approved servicing” scam. Bank charges, delays in processing transactions and antiquated technology, crazy interest rates on the likes of credit cards etc. Indirect taxation at insane levels with hundreds of taxes, charges and fees adding to the cost of every single little thing, all to fund quangoes and corrupt useless local councils. As you said, electricity/energy costs are insane, again because of a lunatic FF/PD scam to raise the prices so that the ESB would be attractive to a private buyer. Transport costs - fuel costs, tax again, insurance again, PPP “tolls” and wildly overpriced public transport (that doesn’t go where people need to go anyway i.e. from where people live to where they work, with timetables that are remotely sensible). Rampant gouging by tradesmen, restaurants, retailers taking the piss on Sterling-priced imports. And behind it all, the spectre of deliberately-inflated land and house prices.
And on and on and on.
Look at that list and tell me the general price level for the typical ordinary family spend over the year can’t be shaved by 30% minimum over a couple of years with just a little tiny bit of roll-up-the-sleeves effort by the Gubbermunt.
IMO the biggest deflation needs to occur in expectations!
Average isn’t a word that sits well with your average Irish boomer. They are after all entitled to expect to have two Mercs, Beemers or Audis or combinations of the above and of course change them every 2 or 3 years.
And the 3 foreign holidays a year and a few Euro city breaks for good measure and of course darling the girls are going down to the Monart for the weekend, I hear the massage and body scrub are divine!
OMG dear I couldn’t possible wear the same dress twice anyway BT’s have the new season stock in this weekend.
90% deflation should cover it!
Stating the obvious, but of course such across-the-board deflation would have to be matched by massive pay-cuts.
How impossible would that be to implement, especially in the public service?
You can imagine the refrain from David Beggs et al: public servants didn’t cause the deflation, so why should their pay be targeted? Let those fat cats who’ve benefited most from the deflationary spiral take the hit!
I’m done with spoofery and doublespeak, so I’d simply say to them:
“The country is on the edge of bankruptcy. Accordingly we in Government have over the last 12 months taken a whole range of decisive measures that have reduced the average cost of living in Ireland by 23%. As it is now much cheaper to live in Ireland, the salaries for all grades are being reduced from the 1st of next month by 18%. This is effectively a 5% rise in disposable income from this point last year. Strike and you get an instant 100% pay cut. How’s them apples?”
End. Of. Feckin. Story.
While I sympathize with the sentiment, I don’t think this would fly in reality.
You’d have Florence Nightingale and Mr. Chips out on the street in a heartbeat. And the public would buy their bullshit as they always do. Even where its patently not in the common interest to do so.
When the nurses last went on strike, their own patients were wheeling themselves out on wheelchairs to support the strikers’ claim for a 35 hour week. Even though that would inevitably lead to a decline in the level of patient care. Nobody can stand up to a nursey-nursey, we’ve been programmed to obey since childhood. And few apparently can see through the tactic of using Florrie as a stalking-horse for the less sympathetic pen-pushers who make up the bulk of the public service.
It is actually painfull to be in this country and watch all the shenanigins going on, but thats who you are, that is the true Irish public.
I mean, could change really happen?
Is change REALLY what paddy wants?
I would argue no. you get the government you deserve. this is what the Republic is.
I’ve been thinking about this for a while. Not how much deflation to regain competitiveness with UK or rest EU, but if it would be technically possible to declare a “national emergency”, and at the stroke of a pen impose all round 30% price cuts, wage reduction, debt reduction (personal and/or public).
Would it be possible to effect an instant deflation without leaving the euro and devaluing? Would it be technically possible to deflate by a one-off-deflation by government decree?
(Leaving the euro wouldn’t be possible imo, other thread tonight thepropertypin.com/viewtopic.php?f=19&t=17470&start=0)
The idea of a government imposed price/wage deflation seems like economic heresy but this occured to me partly because I read a biography of J M Keynes last year and (from memory) he worked in the Price Control Dept during WWI. It was completely against what he believed in but he did it in the national interest. Basically he vetoed price rises to keep prices down. I can’t remember if it worked, I think there was very significant inflation in the War Industries.
Btw, I’m not an economist or finance person.
While a period of deflation, or at least sustained zero price/wage growth is needed, one consequence of this is being ignored. In a deflationary environment the real burden of debt increases. If we were to deflate wages/prices by 20-30% over a period one likely result would be a wave of personal bankruptcy among mortgage holders as income would no longer be sufficient to meet debt repayments.
Common misconception that, but when a lie gets repeated enough folk tend to believe it. The reason for the sudden huge increases and the previous low prices for leccy in Ireland all come down to governmental irresponsibility.
There was no rise in the price of electricty in Ireland between 1986 and 2000ish. The ESB take was even worse than that as the VAT level was increased and ESB absorbed the rise. Now I don’t know what the combined inflation over that period was but in real terms prices went absolutely thru the floor. The reason why? Minister for energy set the price and obvoiusly no-one wanted to be the lad to do the right thing, what with some bad headlines coming your way shortly afterwards. The result? The Irish network was run into the ground, everyone still got paid and the lights were kept on just about, but no upgardes/improvements to cater for increasing demand took place and necessary maintenance ignored. Come 2000ish the whole system was in very very dangerous condition and most regions of the country in a dangerous state with ageing inadequately sized infrastructure. Around this time the CER (energy regulator) was set up, mostly due to the need to comply with EU laws. One of its first new duties to set electricity prices. Now looking at the state of the system and the need to keep the lights on in a safe manner and cater for ever increasing demand the regulator sanctioned huge price increases. Obviously every politico could wash their hands of it and rail against the regulator due to a problem they themselves created. It’s because of all this that €5 billion had to be spent in the past decade on refurbishment.
Yes, Irish prices should be lower but all things being equal our prices have to be dearer than elsewhere due to a small island population (poor economies of scale), the very dispersed nature of Irish houses (need ing more wires to be built and maintained) and the lack of both nuclear and cheap easy to get hydro power compared to some of our neighbours.
Just picked up on this, No. 1 for energy or carbon footprint is Intel and No. 2 is Irelands other giant MNC Wyeth and I think one of their sites is No.2 all on its own! Something half remembered from an industry newsletter long deleted. Remembered only because I had been in both on the days mentioned in the article.
As for deflation 30% to get back to 1999 levels and 50% to get competitive, we were no longer cash competitive in 1999 but we we had the reputation of being competitive and efficient then as well as a national go get’em attitude all now sadly lacking.
No. 1 for both electricity and over all energy consumption (presumably the biggest carbon footprint too) is/was Aughinish. Figures may have gone askew in the past while with production being ramped down everywhere but they used be the largest users by a fair margin.
P.S. Just remembered Aughinish have built their own gas/CHP plant in recent years and it might be diguising their overall energy requirement.
Yep and Irish Steel with their massive arc furnace affecting the stability of the national grid is gone as well. When you think about it the fact that a semi conductor plant and a pharma plant are our biggest users of energy says how fucked we really are.
Are you referring to “Ambulance chasers!”
Electric power here is already among the most expensive for industrial users in Europe (I believe the most in fact). I don’t buy the small island bit, surely labour costs are a major factor?
Even if we do manage wage deflation somehow, how will ESBs Strategic Framework to 2020 affect electricity prices? Is there a cost-benefit study published somewhere? I would dearly love to read that.
Despite the hype, my concern is that financing this massive and questionable investment could cripple consumers. Countries who are less squeamish about nuclear, for example, can lock-in a massive competitive advantage over us.
Likewise, I’m not a finance or economics type.
The way I see it is that you either collapse the currency or you drop the (relative) cost of everything.
The UK or US could let their currency slide, Ireland as part of the Eurizone can’t!
Just deflating the costs of goods & services will leave comsumers in “double jepordy” with their existing debts. some form of “debt relief” (= deflation value) would need the be factored in as well to avoid completely collapsing the spending abilities of many consumers.
One major factor in the cost of distributing electricity is the ratio of urban/rural customers, I don’t have any figures to hand, but in Ireland there are far more rural customers than in many other Eurpoean countries. For example a rural community may easily have 20 km of overhead cables, transformers etc a similar urban community would have one transformer & 200 metres of underground cable.
Overhead cables are open to the elements, storms etc ESB are busy tonight I understand.