Category: Government Failure

Can A Nation Still Succeed After Letting The Banks Fail? Yes!

On By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, ethics, Government Failure2 Comments

James Saft
<This is James Saft, a columnist for Reuters.

From Reuters – em>

Iceland’s remarkable return to growth shows once again that in this crisis the best policy is often the one that will make international partners most angry.

Having been reviled and chastised when it refused to make good the outsize debts of its banks, Iceland this week capped a striking turnaround when it announced that its economy expanded by 1.2 percent in real terms in the most recent quarter, its first such rise in two years.

This is in stark contrast to Ireland, whose pliability and inability as a member of the euro zone to act unilaterally leaves it with a still crashing economy which must service ever more debt by making ever deeper cuts to public spending.

Iceland, which sailed into the crisis in 2008 as essentially a small fishing fleet with a massive hedge fund attached, looked its predicament square in the eye and followed a set of policies seemingly designed to tick off both its friends and enemies, doing its small but mighty best to beggar its neighbors by letting its currency crash, imposing capital controls and, crucially, refusing to make whole the global creditors of its three failed international banks.

While an International Monetary Fund and multilateral package was eventually agreed, and a deal with Britain and the Netherlands over debts from Icesave Bank are currently being hammered out, Iceland’s leaders, at least the current ones, seem convinced that making bank creditors share its pain was the right course.

“The difference is that in Iceland we allowed the banks to fail. These were private banks and we didn’t pump money into them in order to keep them going; the state should not shoulder the responsibility,” Iceland’s president, Olafur Grimsson, said last month, tweaking the nose of EU officials who are insisting that Ireland make good all senior creditor calls on its own distended banking system.

“Bondholders should not rely on the government stepping in and bailing them out,” Iceland Central Bank governor Mar Gudmundsson said last week. “They should do their due diligence.”

“I think the Irish are accepting that they were probably too fast in guaranteeing the whole liabilities of banks. Now this is turning out to be a big burden because the assets of these banks turned out to be much worse than they thought.”

Indeed. Though Iceland has a 6.3 percent budget deficit this year, it is on track to soon record a surplus, while Ireland’s deficit this year is 32 percent if the cost of bank bailouts is included. Similarly, Iceland’s unemployment rate has fallen by almost a quarter to 7.3 percent, as against more than 14 percent in Ireland.

Iceland let its banks fail and refused to use public funds to save them. Now, they are making an economic comeback.

They held the shareholders responsible for what their corporate leadership did. Isn’t that bizarre? That you could make people who own banks pay for the losses they incurr? Now we here in the United States suffer with a exceptionally healthy profitable financial sector now sitting on hundreds of billions of dollars it was expected to loan to small businesses and they have paid not one farthing for the terrible crimes they have committed.

James Pilant

Obama To Lower Corporate Tax Rate!

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, President Obama, Teaching

From Reuters –

Democrats and Republicans should begin a conversation next year about a broad overhaul of the tax code that would involve lowering rates while eliminating tax breaks for favored groups, President Barack Obama said in an interview broadcast on Friday.

The Republicans now have a majority in the House. Shouldn’t this have been something done during the first two years?

Obama said any effort to streamline the multilayered U.S. tax code would be challenging but if successful, it could set the stage for more robust growth.

Okay guys, I’ve been around the block a few times and when ever someone talks about simplifying the tax code, the middle class is about to get nailed hard. By the way, “robust growth” is a code word for lower corporate taxed and business benefits like subsidies.

Tax reform is an idea backed by many in the business community who say the current corporate tax structure puts American firms at a competitive disadvantage.

For “many in the business world,” read every corporate lobbyist is salivating like a hungry German Shepherd in front of filet mignon.

“Typically, the idea is, simplifying the system, hopefully lowering rates, broadening the base — that’s something that I think most economists think would help us propel economic growth,” Obama told National Public Radio in an interview. “But it’s a very complicated conversation.”

Verbiage – means nothing.

“So what I believe is, is that we’ve got to start that conversation next year. I think we can get some broad bipartisan agreement that it needs to be done. But it’s going to require a lot of hard work to actually make it happen,” he said.

For “work” read continuous concessions stretched out over months so that the lack of backbone, resolve and political intelligence of the Obama White House will be fully revealed.

“Change You Can Believe In.” Yes, in the same way I believe in post-apocalyptic waste lands.

Explain this to me. For decades large corporations have been directly evading, off shoring their corporate headquarters, sometimes just not paying taxes, and blackmailing every State, county and city humanly possible to cut their taxes, so we reward them with lower rates?

And here I am again trying to teach business ethics to my students who will observe the real life machinations of our President, which means, I get to say, “Okay, do the right thing, everyone from the President on down will reward the other guys, but you still be good.”

Then I get to go into “good for your soul” argument which is pretty much all I got left at that point.

Writing a business ethics web blog under this Presidency has all the benefits of being a medieval flagellant.

James Pilant

Unemployment And Suicide

On By southwerkIn business ethics, ethics, Government Failure4 Comments

What some think of the Unemployed.
When my son comes home from school, he tells me how his friends explain unemployment as a matter of laziness and sponging off the government. My son to his credit does not let this go unchallenged. I talk at home about the people who have lost their manufacturing jobs that they have been at for 15 – 20 years trying to find a new career where I teach. They don’t look lazy to me.

I have been unemployed fortunately not recently. It was a terrible experience.

And it seems like it’s a terrible experience for others as well. Read the following –

I was informed about this report by Homophilosophicus.

A report published earlier this year by the National Suicide Research Foundation; ”Suicide and Employment Status during Ireland’s Celtic Tiger Economy,” published in the European Journal of Public Heath, showed overwhelming statistical evidence supporting a direct link between unemployment and suicide. Ella Arensman Ph.D., the foundation’s research director, commented to the Irish Times (June 7th, 2010) that this analysis showed that while unemployed men were at risk of suicide, unemployed women were at significantly greater risk. One explanation for this, heretofore anomalous ratio, is the fact that since the early 1990s women have been increasing represented in the Irish workforce. This study concluded that unemployment was related to a threefold suicide risk increase in men, and double this in women. In 1987 there were 245 registered suicides in the Irish Republic (not including undetermined deaths), a figure which rose to 478 by 1998; representing an one hundred and ten percent increase in the Irish suicide rate in little over a decade. Professor Kevin Malone from University College Dublin’s school of medicine and medical science at Saint Vincent’s University Hospital commented that the 527 recorded deaths by suicide in Ireland in 2009 probably did not reflect the real numbers. In March of this year Jane Walshe, in an article for Irish Central, stated that “Ireland’s property collapse has led to 29 definite suicides.” All of the scientific research is pointing to a firm relationship between Economics and concrete examples of human suffering.

The Irish example is relevant here because similar studies in the United States demonstrate similar numbers and I wanted to talk about the pain of unemployment on a broader scale than the United States.

We often think of ourselves as a special case different in every way from the rest of the world. Certainly there are areas where that’s true. But it’s not always true. We don’t have to be myopic in our view of the world. Their examples especially the Greek and Irish austerity programs may become reality here soon.

I think that the laziness explanation of unemployment is a psychological defense. It implies moral virtue on the part of those still working and an “it can’t happen to me” comfort on the other.

I worked in a homeless shelter for a while. I’ve seen a well dressed middle class family come in and get processed. They didn’t look too confident. But I’ll bet you that in six months when he got employed again, he and his family went right back to the ranks of the righteous. It was just an accident. It won’t happen again. I am hard worker and I’m safe.

There is no safety and the pain of unemployment is real.

As a nation, it might well be more important to get people employed than to make sure the banks are profitable.

James Pilant

An Irish Show of Irish Strength (via homophilosophicus)

On By southwerkIn business ethics, Capitalism, ethics, Government Failure

Our buddy in Ireland has survived the demonstration to bring us an account of it. It was not very successful and there was no violence. (I like the no violence part.) He gives an account of the events of that day in usual modest way. It was a good read for me.

James Pilant

An Irish Show of Irish Strength There once was a time, before the introduction of the blasphemy law (January 1st 2010), when one could find a comic picture postcard in the tourist trap shops of Dublin citing all the reasons why Jesus was Irish. It ran something like this: "Jesus was Irish because he never got married, he was always telling stories, he lived at home until he was thirty three, he was convinced his mother was a virgin, and she was sure he was God." At the best of … Read More

via homophilosophicus

Is The Irish Crisis A Warning For The American Middle Class?

On By southwerkIn business ethics, Capitalism, ethics, Government Failure1 Comment

From the Guardian –

Spending a few days in Dublin last week, I had a chance to sample a little of the vibe close up. The leader of Ireland’s trade union congress, David Begg, summed it up: “There’s a very angry mood in the country. Until recently, if you’d stopped somebody on the street and asked them what they really thought, they’d have said ‘If we keep our heads down for a couple of years, we can get back to where we were before’. That was fed by government fiction about green shoots of recovery. The dawning realisation is that the picture is far worse.”

So far, provisions have been made for €45bn of losses at Ireland’s leading banks – Anglo Irish, AIB, Bank of Ireland and Irish Nationwide, which amounts to €10,000 for every Irish man, woman and child. Using funds from the country’s national pension reserve, a further €10bn will be added to the bill following last month’s international rescue package. That’s not gone down well.

“It’s not a bailout package, it’s a transfer of wealth from the ordinary worker to the banks,” Colm Stephens, a university administration worker, told me. “We’re being asked to rescue the richest people in the world – the people who gambled and lost, who bet on every horse in the race.”

Every man, woman and child in Ireland is going to suffer raised taxes and cut benefits when the major beneficiaries of the boom are untaxed and unaffected by the crisis. That’s right. The banking industry is not going to be paying for the bailout, not even part of the bailout. The weight falls on the regular citizens of Ireland, their lamented and unprotected middle class.

Is that what’s going to happen here? Are we going to have cuts in Social Security benefits, Medicare and social services while the enormous financial industry pays nothing?

It is easy to see that a transaction tax or Robin Hood tax could raise hundreds of billions of dollars. Why are they who have reaped every conceivable benefit from the American taxpayer not paying a fair share?

Is the middle class the only part of the economy where taxes can be raised and benefits cut?

James Pilant

Budget Day 2010 (via homophilosophicus)

On By southwerkIn Capitalism, ethics, Government Failure

Today, our friend is getting ready to go back out in the streets. There is a demonstration today against the government loan and the austerity measures that go with it. You can get hurt doing this kind of thing. I’ve never had the opportunity to march in the street in the face of well prepared police with horses and dogs. I’m not looking forward to having such an opportunity. I’m afraid of horses when they are just standing docile. I can only imagine what they can do in the wrong hands. As for dogs, well, I’ll let your imaginations work.

Say something appropriate to your deity, your universal force, your philosophical ideas, for today is a demonstration in the face of a hostile police.

James Pilant

Budget Day 2010 Dear diary, Readers please forgive the histrionics and the self-indulgent personal nature of this entry. Having begun what was intended to be an articulation of theology, this weblog has fast become the diary of the ruin of the New Ireland. Hitherto it has been the objective of these articles to avoid the irritating use of the first person singular, but tonight; well tonight is different. I am in a somber and confessional mood. Of consequence the … Read More

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A Spectre is Haunting Ireland – the Spectre of Fascism (via homophilosophicus) [8]

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

This is Homophilosophicus take on the Authoritarian in Irish History and the last in today’s series. I hope you’ve enjoyed reading this as much as I have.

He has a thoughtful mind in a difficult place in a terrible time. The combination is painful but often results in very fine writing.

James Pilant

A Spectre is Haunting Ireland - the Spectre of Fascism One cannot help but be wryly amused by the accusation that the government and police authorities are fascists during this time of social discontent and upheaval. It sounds vaguely reminiscent of the language of the European student revolutionary movements of the 1970s à la John Sullivan’s Citizen Smith. No matter how often the term is used to describe the present régime it creates an involuntary smile across so many faces. No sensible person wish … Read More

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Revolutions are the Locomotives of History (via homophilosophicus) [7]

On By southwerkIn business ethics, Capitalism, ethics, Government Failure2 Comments

Homophilosophicus is angry. Big Time Rage. So, keep your computer away from combustibles and read.

James Pilant

Revolutions are the Locomotives of History Ireland has betrayed her children. No more can the republican rhetoric of the young state name the Saxon as the cause of all Irish woes; the current crisis was the cause of an wholly Irish government elected by the people of Ireland. The community of Ireland has been stripped and shamed by powerful and corrupt Irish men and women. However much this employment of famine economics may be reduced and subjected to a post-colonialist analysis, and a c … Read More

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Garda Special Branch Agents Provocateurs (via homophilosophicus) [6]

On By southwerkIn business ethics, Capitalism, ethics, Government Failure

We’re back discussing the demonstrations against the government. This is fascinating. Once again, I want to assure my good readers that I asked permission to publish all these blog posts. Single blog posts, sometimes I ask about, sometimes I don’t. But to use this many is in my mind a misuse of reblogging when done without permission.

James Pilant

Garda Special Branch Agents Provocateurs Earlier this afternoon, Friday 3rd December 2010, two uniformed members of An Garda Síochána from the Bridewell Garda Station, were observed and overheard whilst clothes shopping in Penney’s department store on O’Connell Street, Dublin. Both were male officers and were purchasing hooded sweatshirts and sweatpants, carelessly discussing their undercover work at the upcoming budget day protest (Tuesday 7th December) at Leinster House, the seat of D … Read More

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Living for Less in the City of Dublin (via homophilosophicus) [5]

On By southwerkIn business ethics, Capitalism, ethics, Government Failure

The long term social effects of the crisis on the individual are discussed here.

(I received direct permission to reblog all of these posts from the period of the crisis.)

James Pilant

Living for Less in the City of Dublin It is important now more than ever that we discover ways of living for less. Primarily due to the scarcity of money in Ireland at the moment, and secondarily because we must do everything in our power to pay less tax to a government which is stealing from us. As things stand at the present we are tied by law into a social contract which demands that we pay our taxes to the state; taxes which enable this government to overpay its members whilst en … Read More

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