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Why austerity theory is the economist’s atomic bomb


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ON August 6, 1945, America dropped an atomic bomb on Hiroshima, instantly killing 70,000–80,000 people and injuring another 70,000. The atomic bomb changed the world. President Truman promised a ‘rain of ruin’ would fall on America’s enemies if they didn’t surrender.

The chief architect of the atomic bomb project was a physicist, Robert Oppenheimer. Mr Oppenheimer had mixed feelings about his project. Initially, he was delighted that it worked at all.

Looking back, this relief is understandable. This was a world war in which millions had already died. The US leaders were sure Germany, Japan and Russia were also working on a nuclear bomb, so there was intense pressure to get the job done.

But after the bombings, Mr Oppenheimer expressed regret that the bomb had been used, citing a passage from Hindu holy book the ‘Bhagavad Gita’: “Now I am become Death, the Destroyer of Worlds.”

Others involved in the making of the atomic bomb saw it as a problem to solve, a part of the war effort.

While they were saddened by the deaths of tens of thousands of civilians, the scientists were justified in trying to find the answer to the question put to them by the politicians and generals. Their research was, to some extent at least, independent of what the research was used for.

It’s not atomic physics, but economic theories have the potential to alter the lives of millions of people.

The wrong theory, implemented as policy, can reduce the living standards of millions of people over time, and harm the development of generations of workers and their families. Take Zimbabwe, for example, where a hyperinflation has destroyed the nation’s wealth.

Or go back in time to the Meiji Restoration in Japan in 1868 when Japan modernised, opened up to trade, and eventually militarised itself by 1905.

The openness policy championed by the Meiji dynasty led to a huge increase in living standards for the Japanese people, and, not incidentally, led to the militarisation that would one day help push the Japanese into confrontations with other world powers.

Economic theories are powerful things, to be used and misused. Those who write economic theory and do economic policy need to be aware of the consequences of what they are doing.

Read last year’s budget documents. You’ll find Appendix F on the web. Appendix F is a thoughtful, careful analysis of the distributional consequences of austerity policies on the Irish people, showing exactly who has been hit by these policies, and by how much.

But at least those in power in Ireland are aware of the consequences of their actions.

Not so for other proponents of austerity, where their research is of the ‘fire and forget’ type, divorced from the potential impact of their research.

Economists who help satisfy the consensus view are often feted, whether they are right or wrong, and when they are wrong, they walk away unscathed. There is nothing wrong with being wrong: things change, and no one is perfect.

But when you’re wrong – or worse, when your work is being misused – I believe there’s an imperative to shout stop.

Another example: economists Carmen Reinhart and Ken Rogoff wrote a celebrated paper showing increasing government deficits harms growth: a country was likely to stagnate once its government debt-to-national output ratio exceeded 90pc.

Their finding implied deficit spending was bad, and because this fed a conservative need to reduce government spending through austerity, Mr Rogoff and Ms Reinhart’s paper was instantly adopted as gospel by the serious people in dark suits for this reason.

The paper was recently torn apart under serious scrutiny, but from 2010 to 2013, Mr Rogoff and Ms Reinhart made no attempt to modify their analysis or to chasten those who tried to use it for different means. Compare the Rogoff and Reinhart debacle with a recent example from Sweden, where one researcher, Jonas Himmelstrand, argued early childhood programmes increased the chances of mental health problems later on.

He cited a series of studies in his work. The author of one of the main studies was very quick to point out there was no substance whatsoever behind Mr Himmelstrand’s statement that a decline of mental health in young people in Sweden was related to daycare.

Eventually, those promulgating the notion of austerity as the only answer are going to be asked the same questions asked of the scientists on the project that birthed the atomic bomb: are you okay with how people have used your research?

Austerity is forcing millions to suffer needlessly. As unemployment rises and political realities force this to become a serious constraint on policy, austerity policies will be ditched. What will we have then?

Dr Stephen Kinsella is a senior lecturer in economics at the University of Limerick

Irish Independent

via Why austerity theory is the economist’s atomic bomb – Independent.ie.

EuroNanoForum a ‘major’ opportunity for Irish researchers


The sixth biannual EuroNanoForum – which takes place in Dublin this week – is set to “showcase Ireland as a hotbed of nanotechnology research, innovation and investment”, according to Enterprise Ireland’s Dr Liam Brown.

The largest event of the Irish EU presidency, Dr Diarmuid O’Brien, executive director of Ireland’s leading nano-science institute Crann, says the event will be a “major chance for Irish researchers”.

They will seek to attract investment through the European Commission-backed €70 billion Horizon 2020 research and innovation framework which is being launched in January.

“It’s an opportunity for Irish industry and academia to put themselves in the shop window,” adds O’Brien, who notes that over the past decade, the global market for nano-enabled materials has grown from “from $420 million to almost $300 billion”.

Further attention

Dr Brown is national delegate for the commission-sponsored Nanosciences, Nanotechnologies, Materials and new Production Technologies programme.

He says the EuroNanoForum 2013 – which begins tomorrow and sees more than 1,400 delegates from across the continent gathering at the Convention Centre for three days of seminars and talks – is important to attract further attention to the opportunities nano-science presents in terms of “computing, health, energy, the environment and many other areas”.

“A lot of that work in those areas is done here. In Ireland we’re ranked sixth in the world per capita in terms of performance in nanotechnology,” Dr Brown tells The Irish Times.

“We have active researchers across all the Dublin universities as well as the Tyndall National Institute in Cork, the University of Limerick and NUI Galway. ”

Among the highlights of the event will be a speech from Tapani Ryhänen, who is head of Nokia’s sensor and material technologies laboratory.

He is set to talk about how graphene – a substance which is said to be harder than a diamond yet also incredibly flexible – can help revolutionise the design of mobile communications.

The event coincides with national Nanoweek, which runs until June 21st, celebrating the contribution of nano-science to the economy.

As part of the event, a gala dinner on Wednesday will feature two Irish-based projects vying for the EuroNanoForum Best Project Award.

Dr Syed A M Tofail, from the Materials and Surface Science Institute in the University of Limerick is being recognised for his BioElectricSurface project.

The NanoInteract project from UCD’s Kenneth Dawson and Iseult Lynch is also among the 11 nominations in total which were gathered from dozens of entries throughout Europe.

Breakthrough

The BioElectricSurface project successfully demonstrated how “nanotechnology could enable new knowledge critically needed for breakthrough medical device technology”, with Dr Syed already developing durable, washable, photosterilisable MRSA resistant textiles which are currently being licensed.

Meanwhile, the aim of Dawson and Lynch’s NanoInteract research is to ensure that nanotechnologies do not cause inadvertent harm to human or environmental health at any stage of their lifecycle.

On Thursday, the Convention Centre will open its doors to the public for the Nanotech Europe 2013 Magical Materials exhibition, from 9am to 2.30pm.

via EuroNanoForum a ‘major’ opportunity for Irish researchers – Technology Industry News | Market & Trends | The Irish Times – Mon, Jun 17, 2013.

Ireland helps multinationals rob billions of euro in tax revenue from world’s poor countries


Some multinational corporations are diverting profits made in developing countries to Ireland to avail of the low corporation tax rate here. By so doing they are robbing the countries in which they made their money of billions of euros in tax revenue.

Written by Dr Sheila Killian of the University of Limerick, the report details how companies use the technique of “transfer pricing” to allow subsidaries of a multinational company to artificially transfer profits made in one jurisdiction to be taxed in another country which has a lower tax rate.

The result is that companies registered in Ireland as having a small office and one or two staff are recording huge profits, which are subject to our low tax rate while the related company in a developing country where the money was actually made reports little to be taxed.

‘Driving the Getaway Car?’ explains how impoverished countries lose billions of euro through weak domestic tax collection capacities and through unjust international tax structures. Transfer pricing abuse is highlighted as a particular area of concern. This is when subsidiaries of the same multi-national company artificially set the prices of goods and services in order to minimise their tax bills, often through the use of secrecy jurisdictions, popularly known as tax havens. This illegal practice is very difficult to monitor and costs impoverished countries billions in lost tax revenue.

Author of the newly published book, Dr Sheila Killian, highlighted the fact that “Ireland’s tax model clearly does not do enough to protect vulnerable countries from tax revenue losses. Specifically, Ireland should adjust its transfer pricing regime to properly protect impoverished countries from losing tax revenue, and close domestic tax loopholes that may facilitate capital flight from impoverished countries“.

The Debt and Development Coalition Ireland was among a group of development organisations who launched this report. The others were.Afri, Christian Aid, Comhlámh, Oxfam Ireland, Trócaire

Social Justice Ireland supports these organisations’ call for action by Government to end this practice.

The full text of the report may be uploaded here.

http://www.socialjustice.ie/sites/default/files/file/Policy%20Issues/2011-03%20-%20Driving%20the%20Getaway%20Car%20-%20Ireland,%20Tax%20and%20development.pdf

via Ireland helps multinationals rob billions of euro in tax revenue from world’s poor countries | Social Justice Ireland.

via Ireland helps multinationals rob billions of euro in tax revenue from world’s poor countries | Social Justice Ireland.

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