The Future is Looking Good

Cassandra 2012 is retiring. He has been here for close to a year now which is about what I expected when I gave birth to him. I am quite proud of the fact that I have managed to keep him alive that long. Certainly the fact that I included 2012 in his name means that he was doomed to breathe his last no later than December 31^st 2012.

I cannot claim that he has been successful, certainly not as measured in page views. He began as an attempt to present an alternative view of Irish and UK politics in the context of collapsing currencies and government imposed austerity. There is a multitude of columnists, bloggers and angry citizens all too ready to tell the world how wrong the coalition governments in both countries are; how much pain they are causing to their populations. Cassandra 2012 came into existence in order to counter this cacophony of protest and to point out that it was not just the bankers who got us into this mess.

Previous governments created the circumstances in which bankers were able to do what they did and the vast majority of ordinary citizens who surely ought to have known better were happy to go along with the erroneous belief that how ever much they or their governments borrowed today they would be able to find the means to repay their creditors in the future. We were all complicit in the deceit – it occurs to me that conceit might be a more appropriate word – and must all now pay the price.

Work is the Only Way

“Why,” you ask, “should the bankers be allowed to get away with it?” And, in truth they shouldn’t. The problem is they did it all with other people’s money, people like you and me, people who believed that they’d get their money back with interest. If we write off those debts it is those ordinary people who will lose their savings. Either way it is us ordinary folk who will suffer, whether through government imposed austerity or through loss of savings. So Cassandra 2012 came about in attempt to remind people that the only way out of the mess is to work our way out of it.

My other objective was to provide a platform from which to market my books to potential readers. That of course depended on the blog reaching that audience, and it hasn’t. So it is time to say farewell and look forward. For if Cassandra 2012 must pass into history on or before 31^st December 2012, something has to take his place in 2013 and beyond.

Important Anniversaries

2013 marks the bi-centenary of the creation of the school that I attended in the 1950’s. It will also see mine and Freda’s golden wedding. Later in the year the 70^th anniversary of my father’s death will pass. He died when the Lancaster bomber of which he was a crew member crashed near Mannheim in Germany.

2013 is also the year in which my home town will host Europe’s largest agricultural event, the Irish National Ploughing championships. One of my neighbours when I was growing up in Herefordshire was English National ploughing champion so there is yet another link of a sort between the county of my birth and the one in which I now reside.

A much more significant link is the historical one concerning Roger Mortimer. Roger once owned a castle near my present home. He was born in Wigmore Castle in Herefordshire and is notorious for having ruled England (and Ireland!) after the suspicious death of the King and having entered an adulterous relationship with the Queen (Isabel).

Plenty of material there for a novel! I shall certainly attempt to mix these ingredients into a continuing on-line presence throughout 2013. The metaphors that spring to mind are clichés but I cannot resist the temptation to use them: “The King is dead; long live the King!” and “Something will rise from the ashes”.

Animal Rights or Human Rights?

In a previous post I deplored the suggestion that a bank, via PayPal, was seeking to censor e-books. I am pleased to be able to report that that threat appears tohave been averted thanks to the campaign that was mounted by concerned organisations and individuals who would have been directly affected by the proposal.

This is an example of a successful campaign by a minority to prevent a change in custom and practice with the potential to affect us all. There are other recent examples that are less welcome. The most recent concerns the use of mice in medical research. Having several years ago harassed breeders in the UK to the point where they gave up, animal rights activists, it is now reported, have succeeded in preventing the importation of the animals into Britain.

This is a disturbing development not just because of the potential impact on the research but because it demonstrates that a small minority working quietly and virtually unnoticed have the power to prevent not one but several large organisations from carrying on a legitimate business. That is very worrying indeed if you believe in democracy. The people concerned claim that they have mounted their campaign out of concern for the animals. On the other side of the argument are the people whose lives might be saved or whose suffering might be relieved by the drugs that need to be tested on the animals.

I am tempted to ask: do these people ever swat a fly? Do they take steps to prevent the birds that enter their garden from eating slugs, snails and worms? Where do they draw the line between creatures that are to be protected and those that can be left to fend for themselves in face of predators? The mice they are protecting would not exist were they not bred for the intended purpose. Their cousins in the wild lead a far more hazardous life. The purported concern that has led this handful of individuals to take the law into their own hands in defiance of the majority population is totally misguided. It is time for the rest of us to stand up to these ignorant fools and insist that the airlines and ferry companies ignore them and their threats.

There is a second recent example of a minority group seeking to interfere with the democratic process. Leaders of the Roman Catholic Church have become quite vociferous in their condemnation of government proposals to introduce a form of marriage for gay people. When I see these men in frocks pontificating from the pulpit I am apt to start shouting at the TV screen, telling them to mind their own business!

I have no problem with the Church making rules for its members. But it has no right to seek to impose those rules on the rest of us.

Emigration: Lifestyle Choice or Dire Necessity?

I am in regular contact with a number of the people with whom I was in school during the 1950s. All were born and brought up in England but a significant number of them have made their careers and still live in various "foreign parts." One runs a small mineral exploration business in central Africa, a couple live in the Philippines, another in Thailand. At least one is in Canada and another runs a website dedicated to the Norton motorcycle owners club in France. Yet another has lived in Johannesburg for many years.

Of the young men who served their apprenticeship alongside me in a small engineering company in the early 1960s, three emigrated to Canada as soon as they qualified. At that time it was possible to migrate to Australia for £10 and many did. Of my close relatives, a nephew moved his small business to Australia several years ago and has gone from strength to strength.

So there can be nothing intrinsically wrong with Minister Noonan's statement that "emigration is a lifestyle choice," for that is plainly the case in every one of the examples I have just enumerated.  On the other hand, when unemployment is running at 14.3%, it is at best stupid and at worst insensitive to suggest that the recent increase in migration from Ireland is not fuelled by the lack of opportunities here. That fact was confirmed in Will Faulkner's interview with a representative from the Australian immigration service on Thursday morning's Midlands Today programme.

Not a Choice, a Necessity

A young person seeking work in Australia recently had this to say in an anonymous article in the Kerryman: "I wish I could have stayed in Ireland. I wish that I had another option other than to leave, but I didn't." So no, Minister, these days emigration is not so much a lifestyle choice as a regrettable necessity for too many of your citizens.

The Minister is also showing a degree of stupidity when he asserts that Ireland needs to ensure that it is providing the best possible education and training for its young people so that they can take advantage of opportunities overseas. This, it seems to me, is the opposite of what is required. Whilst it is true that the only people able to take advantage of overseas employment opportunities are those with marketable skills, it must also be the case that those are the very people the nation needs to retain if it is to regenerate its failed economy.

What is needed is for the banks to start lending again so that young ambitious entrepreneurial people can start new businesses and generate the jobs the country so desperately needs.

The Arrogance of Believers

I see that the UK government has indicated that it will withhold funding from any "free school" that teaches creationism (Richard Dawkins Celebrates a Victory, Observer, 15 Jan 2012). This is the doctrine that the universe was created more or less as we see it now just a few thousand years ago. This is taught by some organisations as if it were a scientifically sound theory on an equal footing with evolution.

It does seem to me that it is perfectly possible to accept evolution as scientific fact, based as it is on incontrovertible evidence, and at the same time to believe in a creator. Not, of course, a creator who constructed the universe exactly as it currently appears to us, but one who set off the "Big Bang" that science tells us got it all started.

The truth is that we cannot know if there is a creator behind it all. It is difficult for the human mind to conceive of anything that has not been created by an intelligent being, let alone something as vast and complex as the known universe. And then there is that ancient conundrum: if God created the universe, who (or what) created God?

The "Chosen People" Myth

What I do think is the height of arrogance is the belief that the creator, if there is one, did it all for the benefit of the human race. And that is topped only by the belief that it was done solely for the benefit of a small portion of the human race that will at some point see the elimination of all non-believers. I also think that the existence of a creator does not in any way imply the existence of an after-life.

Nor do I believe that praying or offering sacrifices or other forms of obeisance to the creator is at all likely to make that creator change his/its/her plans so as to satisfy our personal preferences. That is not to say that I don't believe in the power of prayer so long as the word "prayer" is a way of describing a period of quiet consideration of ones difficulties, a form of meditation, in which one is enabled to come to some level of understanding of the cause of those difficulties and, thereby, see a way to overcome them.

If you have read this far you will have gathered that, when I am asked about my religion, I tend to describe myself as an atheist or humanist. It is not that I belong to a formal organisation of those who describe themselves thus, just that my beliefs seem to be more closely aligned with atheism and humanism than with any of the multiplicity of belief systems based around the notion of a supreme being.

Are Sales Taxes Fairer Than Income Taxes?

With an increase in VAT taking effect in Ireland today (Jan 1st 2012) it is worth taking a look at the comparative fairness of taxes on sales and those on earnings.

There is a widespread belief that those individuals who receive very high earnings should pay high rates of tax on at least that part of their income that is deemed excessive. There are a number of problems with this concept. First and foremost, who determines what is "excessive" against what criteria? €100k? €500k? and just how punitive should be the tax on the portion of income that exceeds the chosen threshold?

Then there is the effect on incentives; although it is wrong to attach too much importance to this in relation to high incomes. Too often when an individual's earned income is so low that he or she receives support from a variety of social welfare programmes the marginal rate of tax becomes close to - and sometimes even exceeds - 100%. This occurs when the amount of support withdrawn as a result of crossing a particular income threshold exceeds the additional income received. That certainly is a disincentive. No one ought to be placed in the situation of becoming worse off as a result of working harder, working longer or receiving a promotion. So it is not necessary to feel too much sympathy for high earners whose marginal rate of tax exceeds, say, 50%.

More than one tax is levied on incomes

I can remember when the marginal rate of income tax on high earners in the UK was 90%. Executives justified high salary increases on the basis that, in order to give someone a £100 increase in take home pay it was necessary to raise his (and in those days it was nearly always a man) headline salary by £1000. Logically, when marginal rates fell dramatically under a previous Tory government, these individuals should have had their salaries reduced. In fact they just continued to receive big annual increases.

In most jurisdictions the tax that goes by the official title of "income tax" is not the only tax levied directly on incomes. In the UK, for example, there is "National Insurance", originally intended to cover the cost of health and social programmes this tax long since ceased to be so hypothecated and simply went into the general pool of government income. The equivalent in Ireland is PRSI.

Often these levies are applied only to income up to a certain level, thus reducing the effective margin between basic rates of income tax and the next higher band. So, for example, the basic rate might be 20% and the next band 40%, but, if the person on basic rate is also paying an 11% "Social Insurance" levy that cuts off at the same level as that at which the rate of income tax increases to 40%, the margin might look like 20% but is actually only 9%.

It's all so complicated

All this is starting to get complicated and I have only scratched the surface of the many different taxes on incomes and the allowances that can be claimed against them. And that is the other problem with income taxes. The harder you try to make them fair the more complicated they get.

Having taken a portion of an individual's earnings before he or she even gets to see its colour the government next proceeds to take another chunk from every pound, dollar or euro he or she spends. Actually, not everything because certain goods deemed essential to living, typically food and children's clothing, are exempted from sales taxes. And this is where the sales tax as a concept starts to look fairer than income tax. These days it is not possible to survive without purchasing some things that are subjected to sales taxes but it can reasonably be argued that the sales tax levied against big ticket items that only those on high incomes can afford ensure that the rich contribute more to the state's coffers than do the poor.

It is argued that such taxes act as a disincentive to consumption and that is bad for an economy but this surely happens only at the margins. If you can't afford to pay an extra 2% on the price of an item you probably can't afford it anyway. On the other hand, if paying €10k for something is no problem increasing the price by €200 probably won't stop you.

Increase sales tax on luxury goods

I would go much further, as the late Roy Jenkins did back in the days when the UK sales tax was called purchase tax, and levy a higher rate of sales tax on luxury goods. Of course, we are then presented with the problem of defining "luxury goods". One way might be to look at the average price paid for a particular category of item, say motor cars or ladies' wear, and levy the higher tax on those items for which the recommended retail price was more than double the category average. Difficult but not impossible I would argue.

And it could have another benefit: many such items are imported. Ireland and the UK could both do with reducing their level of expenditure on imported goods so a tax that acted as a disincentive would be beneficial. And, because the tax was determined against the value of the item rather than its origin it ought not to be outlawed by trade agreements as being overly protectionist.

So, on balance I tend to favour sales taxes over taxes on income when it comes to assessing their relative fairness. Of course, the elephant in the room is the size of the overall tax burden. And that depends very much on what you believe should be included on the list of things best provided by the state. Views on that vary widely across the political spectrum and between this side of the Atlantic and the USA. But that is a whole different argument.

Are Pensioners Over-indulged?

My last post dealt with child allowances and my belief that, in Ireland, they are excessive. This time I am looking at the other end of the age scale: old age pensioners; and especially those, like myself, of foreign origin residing here in Ireland. And, no, I am not complaining that we don't get enough; rather, that we are another group whose treatment by the state is more generous than it ought to be.

I recently turned 70 which means that I am eligible for something called "The Household Benefits Package". This consists of a free TV licence, assistance with telephone costs and a contribution towards fuel costs. The latter is in addition to the heating allowance to which every UK citizen over 60 is entitled. And the whole package, which amounts to about €700 per annum, is in addition to the far more generous tax allowances received by senior citizens in Ireland. My wife and I are jointly able to receive up to €36k per annum before we become liable for income tax. This age related exemption is, however, being phased out over 4 years from 2011 when it was reduced from €40k.

Free Medical Treatment

A further way in which I and other overseas pensioners resident in Ireland receive preferential treatment is with regard to the Medical Card which entitles certain groups to free medical treatment. In general it is not available to Irish citizens until they turn 70 and, even then, is subject to a means test. In the case of anyone in receipt of a social welfare benefit from any state within the European Union no means test is applied so that anyone receiving, for example, the UK state old age pension is entitled to a medical card. I have been happy to take advantage of this over the past number of years because I assumed that there was in place some kind of agreement whereby medical costs that I and my wife incurred would be reimbursed by the UK government.

In short, I have all the benefits of a UK citizen plus the advantages of living in Ireland. I thank the Irish for their generosity but can't help feeling that in this, as in so many other things, the Irish are too kind for their own good. The only downside from my point of view is the exchange rate. When we arrived we were receiving €1.50 for every £1 we transferred from our UK accounts. That changed quite dramatically within little more than a year since when it has been fluctuating at around €1.15. I can't wait for the long forecast collapse of the Euro which should mean I can once again get more €s for my £s and more to spend here in Ireland, helping local businesses to stay afloat.

Stop Blaming the Germans

Some people have started saying the Germans want to take over Europe. But since they are the principle source of our largesse, they have a right to tell us how it’s spent.

Recently I have heard people knocking Germany for her insistence that nations receiving bail-outs from the European Union adopt prudent economic policies. “They failed in two world wars; now they are trying a different way of taking us over” is the gist of what some are saying on both sides of the Irish Sea.

It seems to me that this betrays a complete lack of understanding of recent history. Those nations that now have to make difficult and unpopular decisions are the same nations that for the last couple of decades have been milking the EU for all it was worth. When I first arrived in Ireland towards the end of 2006 I encountered a forest of signs pointing out that this sewerage scheme or that motorway or the other new railway rolling stock was financed “with assistance from the European Regional Development Fund” or some other EU scheme.

When I did some work on a voluntary basis for a local development agency many of the projects the agency facilitated were part funded under one or more European “Directives” aimed at increasing social inclusion and helping reduce the disparity between the relative wealth of the more successful members of the European community of nations.

The CAP Boosts Farmers’ Incomes

As I cycle around the Irish countryside I marvel at the huge number of abandoned houses and cottages each with one or more smart modern houses built alongside and evidence of the success of the Common Agricultural Policy in boosting the incomes of farmers.

With each of theses examples I am struck by the fact that all of this European money comes from the taxes that French, British and German citizens contribute to the EU budget. Believe it or not I do not resent, in principle, any of it. I support the general idea that wealth should be redistributed from rich to poor both on a personal basis and between nations. But what I certainly do find disturbing is the extent to which the corruption in Irish politics ensured that much of this money ended up in places and pockets that did not deserve to receive it.

Parish Pump Politics Ruined Ireland

It was not just that developers were enabled to pocket vast sums of public money. The tradition in Ireland of “Parish Pump Politics” ensured that developments happened in places where local representatives could point to them as achievements that would not have taken place without their intervention rather than in the most appropriate and cost effective situation.

Whilst the banks were busy lending vast multiples of the money deposited in their vaults on the assumption that this gravy train would go on for ever, politicians were busy lining the pockets of their constituents, including public servants and the recipients of social welfare, on the basis of an identical assumption. Now, having received billions of Euros in grants and loans those banks and politicians are looking for yet more loans to keep things ticking over. Is it really too much for the lenders to ask that they dictate how those loans are distributed?

The True Meaning of Austerity

Do the people who protest about “austerity measures” being introduced by the governments of Europe really know the meaning of the word “austerity”?

Governments around Europe are responding to the economic crisis of 2009 to 2012 by introducing so called austerity measures. I believe that neither the governments nor the people who are protesting so loudly really understand the meaning of the expression.

I am of a generation that grew up during World War 2 and the decade that followed. People like me remember a time when working for 48 hours a week was the minimum, not the maximum ordained by statute; when most workers had only two weeks annual leave and that often unpaid. When 95% of young people left school at fifteen or earlier and not only worked 48 hours but, if they sought advancement, went to night school two or three evenings a week.

This was a time when very few homes were centrally heated and none had adequate insulation; you woke up on a winter morning to scrape ice from the inside of your bedroom window. The majority of families did not have access to a motor car so had to rely on public transport. Most did not have a land-line telephone; mobiles were the stuff of science fiction.

Bathing Once a Week

Only a lucky few had one of the new fangled television sets in their home; those sets broadcast a single channel of programming for four hours or less each evening. The images were in barely discernable black and white. Many homes still did not have access to mains electricity, water or sewage disposal. Baths were taken once a week and often the whole family shared the bath water.

Homelessness really did mean that whole families had lost their homes, destroyed by bombs or shells. Their only recourse was to share with relatives in over-crowded houses or apartments or, as many did in the years immediately after the war, establish squats in abandoned military buildings.

Food was still rationed well into the 1950s and the fruit and vegetables on display in greengrocers’ shops were only those available in season. You only had salad in summer and it consisted of lettuce, cucumber and tomatoes. In Britain olive oil was sold in tiny bottles in chemist’s shops, used for medicinal purposes only.

Restaurant Menus Restricted

People dined out in restaurants only on special occasions and the menus in such establishments were extremely limited thanks in part to the rationing already referred to and the non-availability of unseasonal produce. At home only the wealthy could afford to drink wine and eat steak. Most ordinary folk were happy to take whatever cheap cuts of meat and offal they could obtain.

I have pointed out in a previous blog that much of the affluence enjoyed in Europe in recent years was obtained on the backs of abject poverty in the developing world. Now the tables are turning, countries in what used to be called “the third world” are achieving new levels of affluence themselves. We have nothing to offer them and must fall back on our own resources. That need not mean a return to post war austerity but it does mean that in the future we will have to meet the real cost of everything we consume.

A word about Cassandra

In ancient Greece Cassandra was the person who told the unpalatable truth, the things the politicians of the day would rather the general populace did not know. Much later, in the 1950s a man whose real name was Connolly but who was a brilliant writer had a regular column in the Daily Mirror where he wrote under the name "Cassandra". Back then I was a great admirer and aspired to immitate him. This is my attempt to do just that. I welcome comments, especially those that come from people who are willing to use their expertise to expose errors in my statements about economic theory and history. We live in worrying times and it is incumbent on us all to try to understand what the problem is and how to solve it.