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Tag Archives: michael taft

Michael Taft writing in Unite’s Notes From the Front reports favourably on Switzerland’s 1:12 initiative and other moves to reduce inequality of income.* This is really good stuff from Switzerland and it’s the sort of approach the Irish Labour Party and the left generally should be taking: Link top pay to the minimum wage or the pay of low paid staff members. Moreover, every initiative, every policy, every budget should be evaluated with reference to inequality of income. I might add that every cut in public expenditure should be similarly evaluated. Since 2012 this kind of equality audit has been Labour Party policy but it’s a well-kept secret and labour’s critics on the left show not the slightest interest in it.**

The notion of limiting top pay to a multiple of the lowest pay appears in the thinking of even the British Conservative Party.

I put forward an argument that the first cut in the public service pay bill should be a cap on pay and extras of 100k and a 50k ceiling on pensions. It was met with hostility to the extent that I couldn’t get my own branch or constituency Labour Party to put it on the 2012 conference agenda.*** How about now putting it to a plebiscite now?

There were other proposals. One was to call the bluff of those who said that increases in the minimum wage would close businesses especially in the hospitality industry. The suggestion was that the minimum wage would be payable only within companies whose top earning staff member or director had an income of less than, say, three times the minimum wage; all other firms would pay the minimum wage plus, say, three euro per hour. Another was that state contracts would be confined to companies whose top earning staff member or director had an income of less than, say, three times its lowest paid staff member or, say, four times the lowest paid staff member in any of its contractors.

The multiples can be debated and indeed changed periodically. The important point is that inequality of income becomes a matter of public controversy.
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* http://notesonthefront.typepad.com/politicaleconomy/2013/10/a-few-referenda-ideas-that-just-might-succeed.html
** https://colummccaffery.wordpress.com/2012/10/08/inequality-of-income-can-labour-put-it-on-the-public-agenda-and-achieve-some-reduction-while-in-government/
*** https://colummccaffery.wordpress.com/2012/05/08/prioritising-public-spending-and-reducing-income-inequality-in-the-public-sector-a-motion-which-failed-to-make-the-agenda-for-the-labour-party-conference-2012/

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Let’s be clear. This was an Irish scam. Lending companies had access to lots of relatively cheap “international” money. This was “imported” and lent to the relatively poor so that extraordinary property prices could be paid to the rich.

In terms of page-one economics the price of a house was determined by whatever people were prepared to pay. The graph shows that income and costs increased steadily but house prices took off on a bewildering upward trajectory.
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From Michael Taft’s Notes from the Front. http://notesonthefront.typepad.com/politicaleconomy/2013/06/the-hulk-says-crush-household-debt.html

Traditional lending conventions linking income with loan size were dropped in order to maximise borrowing and this made large payments to the rich chancers possible ( https://colummccaffery.wordpress.com/2012/05/27/if-the-banks-and-building-societies-were-giving-crazy-loans-which-could-not-be-repayed-by-how-much-should-we-penalise-both-their-and-their-customers-foolishness/” ). The scam was greased by making some people desperate (“You need to get on the property ladder.”) and by convincing others that they too could be successful speculators (“It’s a no brainer; property prices don’t fall in Ireland.”).

The interesting question is this: How did so many people fall for the scam? Firstly, it needs to be emphasised that not everyone fell for it. Secondly, while citizens correctly expect those of their fellow citizens who are paid to think, manage and comment to warn them of scams, they were sorely let down. I’ve argued elsewhere that these well-paid failures who did not speak out time and again either because they were too stupid to see the scam or so lacking in integrity that they abandoned their jobs to hide within the scam, should now be moved to jobs more suited to their shortcomings. In short a significant portion (perhaps a majority) of Ireland’s professional elite has been exposed as thick or turpid or both. ( https://colummccaffery.wordpress.com/2013/05/12/they-are-known-to-be-useless-and-they-are-all-still-there-a-reminder-from-eddie-hobbs/” )

It is, however, a mistake to view all of the victims of the scam as blameless. No matter how many times managers and media encourage a person to be foolish there remains a personal obligation to be prudent. Of course there are times when a scam is so well done that little or no blame can attach to the victim but that is not the case in relation to the Irish lending scam. Despite the elite chatter and media torrent in support of foolishness, ordinary conversations about the dangers were commonplace and there were many warning voices which could have been heeded. Moreover, as the scam developed there was increasing concrete evidence in plain sight sufficient to warn all but the wilfully blind or the addicted risk-taker.

Young people are particularly vulnerable to scams and are often preyed upon. The property scam was no exception. The pressure to “get on the property ladder” was relentless and in a just world a nasty fate would await anyone who dispensed this advice – especially when it was dispensed as it became more and more clear that the end was approaching.

Mature victims drawn into a reckless gamble were less vulnerable and their fellow citizens should be less forgiving of their stupidity and/or avarice.

The argument that the victims should be bailed out for reasons different to those offered for baling out the banks is untenable. There was no moral or legal reason for baling out banks. Leaving aside young people and cases where no blame could attach, there is no moral or legal reason to bail out victims of the scam either. However, a functioning liberal economy or the view that these people in aggregate qualify as “too big to fail” may be very good reasons why careful, thinking citizens will have to bail out these people as well as the banks.

The essential thing that is particularly annoying citizens right now as “austerity” bites is inequality of income or, rather, hideous levels of income inequality, the very structure of inequality. Now one way that the political right seeks to maintain the structure – with all its relativities – is to talk about inequality between groups. They’ll have a go with age vs. youth, public sector worker vs. private sector worker, rural vs. urban etc. It is a conservative position; the idea is to have no change or very little change in relativities while reducing wages and welfare payments to the poor. Against that, far too many on the left advance an argument whose effect is also conservative. They identify the very rich (the 1%) as opposed to the merely rich (let’s say, the 10%) and argue that if the 1% could be soaked, then all else could remain the same. This is a conservative stance.

Minister of State, Brian Hayes has been targeting pensioners for cuts by pointing out that some pensioners are well-off. [i]  Michael Taft is a socialist economist but in responding to Brian Hayes, even he argues that rather than pursuing pensioners, a “better” target would be the management-and-professional category/interest group. [ii]  Now this comes close to demanding change but the conservative flaw remains. Most of those in this category are rich but not very (1%) rich. However, as Michael concedes, not all are rich. That’s too much like the argument that Brian Hayes makes in relation to pensioners. It diverts attention away from “rich” and towards an interest group and so implicitly supports a view of society made up of competing interest groups, a view which papers over the inequalities of income within many of these groups.

For as long as the democratic left defends or attacks the economic positions of pluralist groups, the structure remains unchallenged and the right wins. Let’s face it there are rich managers, there are rich pensioners, there are rich public sector workers, there are rich farmers etc. All that separates these groups is the proportions of rich within them.

It would be far better to call the right’s bluff on each and every sectoral target. Let’s define rich in income terms (Yes, of course I realise that income is not the only measure!) and say that below that point income will not be touched but above that point, “Go ahead, cut!”[iii]