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Column: 4 myths about austerity… busted


TOGETHER WITH OTHER civil society organisations – the Spectacle of Defiance and Hope, the Campaign Against Household and Water Taxes, and the Communities Campaign Against the Cuts – the Dublin Council of Trade Unions is organising an Anti-Austerity March on November 24. In advance of the Budget, we believe it is necessary to send a clear message to Government Buildings: not only is austerity damaging to society and individuals – it is resulting in a stagnant economy characterised by high unemployment and low growth.

Since October 26, as part of a 30-day countdown to the march, the DCTU has been issuing daily ‘Reasons to March’. They are all available here – but I would like to focus on four specific issues which contradict the narrative that has dominated political and media discourse during the past few years.

We could call them busted myths. Despite what we are told, the facts are that:

Notwithstanding the EU-IMF deal, the Government has choices

Spending cuts have a worse impact on the economy than tax increases

Low pay is part of the problem – not part of the solution.

Austerity is not cutting the deficit

The Troika has made it quite clear that its primary interest is in the bottom line – that is, reaching the deficit-reduction targets. How we, as a people, choose to do that is a matter of choice. The Government is free to introduce a Budget focused entirely on taxation increases, entirely on spending cuts, or a combination of the two. The only requirement is that the measure in question raises or saves the amount projected.

Unfortunately, the current and previous governments have chosen to focus on spending cuts – and the evidence is that spending cuts do more harm to the economy than other measures such as increasing taxes on wealth and high earners.

Economically inefficient

Both the ESRI and the Nevin Economic Research Institute have examined the relative impacts of spending cuts vs tax increases. The ESRI found that €3 billion in spending cuts will drive down the domestic economy by nearly two per cent.  On the other hand, €3 billion in tax increases will reduce growth by less than o.5 per cent. Because spending cuts are so much more damaging, they are less successful at reducing the deficit.  Again according to the ESRI, a package of €3 billion in spending cuts will reduce the deficit by only €1.8 billion.  €3 billion in tax increases will, however, reduce the deficit by €2.4 billion.

So the evidence shows that spending cuts are not only socially damaging – they are economically inefficient. Every time we cut a public service, or reduce a benefit, or raise taxes on low and middle income earners, we are taking more money out of the economy and out of people’s pockets – people who had very little to start with. That is why we need to focus tax increases on wealth and high income groups – rather than on those who spend everything they have in the economy.

Which brings us to another reason to make our voices heard on November 24: the claim that, four years into the crisis, we are all still ‘paying ourselves too much’.

That myth, too, is busted by the facts.

Low pay remains a major issue, damaging individuals, communities and the economy, in both the private and the public sectors.

Low-pay league

Irish hotel and restaurant workers cost their employers seven per cent below the average of other EU-15 countries.  When compared with the average of core EU-15 countries (excluding peripheral countries), labour costs here fall 16 per cent below average.  Retail and wholesale workers cost their employers even less. During the last two years, the gap between Irish and other EU labour costs has widened further.

Low-paid Irish workers are near the bottom of the European low-pay league. And that includes low-paid public sector workers. Clerical workers in the public sector have pay levels well below that of other countries measured by the OECD.  For instance, Irish clerical workers would need a pay increase of almost 50 percent to reach Dutch pay. And this was before the 2010 pay cuts.

Low pay is not just an issue for the individuals concerned: it reduces the amount of money people have to spend in the economy. And that puts business and jobs at risk.

We know that spending cuts are economically damaging. We know that low pay (and low levels of social protection) are economically damaging.

So it is not surprising that the current economic approach has not worked. It is driving up unemployment, emigration and deprivation while cutting incomes and living standards.

Policy failure

Yet supporters of austerity say this is the price we must pay to get our deficit under control.

But austerity is not even cutting the deficit.

Since the crisis began, depending on the calculation used, there has been between €24 and €25 billion in austerity measures – spending cuts and tax increases.  But the underlying deficit (that is, excluding special bank payments and income) has actually increased since 2008.  And since 2009, when the big austerity measures started, the underlying deficit has only fallen by just €3.5 billion.

Despite this spectacular policy failure, the austerity cheerleaders tell us we need to cut more.  That is because many supporters of austerity are using the crisis for their own political agenda – to cut public services, social protection and public investment. And to cut wages, in the mistaken belief that low wages equate to competitiveness.

The past five Budgets have been driven by false premises – by myths. We’re in a bailout and have no choices. We can shrink the deficit if we shrink spending. We’re all paying ourselves too much.

And the only reason austerity hasn’t worked is because we haven’t had enough of it.

Now, as we come up to Budget 2013, we need to send a collective message to the Government: austerity cannot work. Rather than continuing to shrink the economy and the living standards of ordinary people, we need to invest in growing the economy, putting people back to work and putting more money in people’s pockets. On November 24, we have a chance to make our voices heard.

Michael O’Reilly is the President of the Dublin Council of Trade Unions, and served on the Administrative Council of the Labour Party for ten years.

via Column: 4 myths about austerity… busted · TheJournal.ie.

via Column: 4 myths about austerity… busted · TheJournal.ie.

30 reasons to march against austerity on 24 November.


Austerity has been an economic failure and a social catastrophe.

Domestic demand has collapsed. Five businesses closed down each day in 2011 – and this year’s figures are likely to be worse. 300,000 are unemployed, and many more are underemployed. Over 1.8 million people are left with less than €100 at the end of each month after paying essential bills. One in ten of us is living in food poverty. One million of our fellow citizens are living in deprivation as measured by the CSO – including over 335,000 children.

And these figures would probably be even starker were it not for emigration: in just one year – between April 2011 and April 2012 – a total of 46,500 Irish people left the country.

Behind each of these figures lie individual stories – and increasingly, those stories are of despair.

Communities throughout Ireland see the economic and social consequences of current economic policy every day. They see that austerity does not work – and they know that continuing the same policy will not produce different results.

But despite the evidence, on 5 December the Government is set to introduce its second austerity budget – and the sixth austerity budget since the onset of the crisis. €3.5 billion more will be sucked out of the economy, on top of the €25 billion already withdrawn since the end of 2008. Once again, all the signs are that low and middle income groups will bear the brunt of increased taxation and reduced expenditure. And that means that domestic demand will continue its downward spiral – putting more businesses under pressure and throwing more people onto the dole queues.

Budgets are about choices – political choices. That is why the Dublin Council of Trade Unions, together with other civil society groups, is asking people to come out on Saturday 24 November and demand that the Government make the right choices: No more cuts in 2013.

Because, even though we’re in a bailout, we do still have choices.

The Troika has made it abundantly clear that its primary interest is in the bottom line: in Ireland reaching its deficit-reduction targets. How we, as a people, choose to do that is a matter of choice. The Government is free to introduce a Budget composed entirely of taxation increases, entirely of spending cuts, or a combination of the two. The only requirement is that the measure in question is robust – i.e. that it raises or saves the amount projected.

They can introduce a wealth tax to raise €400 to €500 million; or they can cut social protection rates by that same amount. They can reduce tax reliefs for higher income groups or they can cut front-line health services. They can continue to give reliefs on property investments (those reliefs that ruined the economy) or they can cut education services.

Research by the Nevin Economic Research Institute has shown that a budget focussed on investment combined with taxing the wealthy and high earners, rather than further cutting public services and the social protection supports on which low income groups depend, would actually shrink the deficit faster than the Government’s approach.

Making the right choices thus makes social and economic sense.

Today marks the start of a 30-day countdown to the march. During this countdown, the Dublin Council of Trade Unions will be publishing ‘30 reasons to march’ – one each day until 24 November. There are, of course, many more and we are inviting individuals and groups to visit our Facebook page and leave their own ‘reasons to march’.

On 24 November, there will be plenty of reasons to march against austerity. The first of our thirty reasons to march is to demand that the Government make the right choices, and ensure that the burden of the crisis is placed on those who can afford to pay.

The Anti-Austerity March will take place on Saturday, 24 November, starting at 1 pm at the Garden of Remembrance. You can follow the ’30 reasons to march’ countdown on Twitter, @NoCuts13

Michael O’Reilly is the President of the Dublin Council of Trade Unions.

via Irish Politics, Current Affairs and Magazine Archive – Politico.ie | 30 reasons to march against austerity on 24 November.

via Irish Politics, Current Affairs and Magazine Archive – Politico.ie | 30 reasons to march against austerity on 24 November.

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