Thursday 21 September 2017

Colm McCarthy: US puts Europe to shame in dealing with recession

Eurozone must be restructured or scrapped if economies are to recover, writes Colm McCarthy

Colm McCarthy

Colm McCarthy

The United States has managed the Great Recession far more successfully than Europe has done. There is no sign of an upturn in Europe generally and much wishful thinking about the position in Ireland. Every release of Irish economic statistics in recent months has been accompanied by an official "spin" to the effect that the figures show early signs of economic recovery. For all we know economic recovery could well be in the offing but the figures do not show that it has begun. The economy is flat as a pancake.

Employment data for the first quarter of 2013 released last week showed a small increase in the total numbers at work, but on closer inspection it transpires that the improvement is coming from rising numbers in part-time jobs. In the last year, full-time jobs fell by about 5,000 while part-time jobs rose 24,000. A part-time job is better than none, but the demand for labour remains severely depressed. Unemployment figures have not risen for quite some time but this reflects emigration as well as a fall in labour force participation. The numbers of retired people, and of adults in full-time education, are both rising rapidly.

Total exports appear to be rising, but the composition tells the real story. Exports of goods are in continuing decline and the apparent overall improvement due entirely to an increase in exports of services. These services exports represent in large part the activities of multinational companies in the digital economy booking worldwide sales as exports through Ireland, offset by imports of intellectual property in the form of royalty payments on patents and the like. The national economic statistics are being distorted. To be blunt, some of the apparent buoyancy in the services figures is due to fake exports with little impact on the real economy here. These reported exports reflect the (perfectly legal) manoeuvres undertaken by the multinationals to minimise their tax liabilities in other jurisdictions. Everyone knows this but each data release is greeted with cheer-leading PR announcements, which is just childish.

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