THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Monday, July 20, 2009

Ireland and the Micawber Principle

In Charles Dickens' 1850 novel, David Copperfield, the popular character Wilkins Micawber (irrevocably linked in the minds of many people today with the characterization by W. C. Fields in the 1935 film adaptation) instructs "Young Copperfield" in the basic principle to ensure success and happiness:
"My other piece of advice, Copperfield," said Mr. Micawber, "you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and — and in short you are for ever floored. As I am!"
Obviously what we might call the "Micawber Effect" — the misery that results from overrunning your annual income — is multiplied as the amount increases by which outgoes exceed incomes. This is the situation in which the Republic of Ireland (in common with virtually every other economy in the world) finds itself today.

According to an article in the Irish Independent on Friday, July 17, 2009 ("The €5bn Snip: Decision Time for Cabinet as Borrowing Hits €400m a Week"), "Bord Snip" has presented a report recommending massive across-the-board ("savage") cuts in such previously untouchable programs as government employment, the child benefit, medical cards and free prescriptions, rural schools, Garda (police) stations, social welfare payments, special needs teachers, and agricultural subsidies. It might not be too much of a coincidence that the name in Irish of the agency charged with trying to find items to cut out of the budget suggests in rather sinister fashion the horrifying red-trousered tailor in Der Struwwelpeter who cuts off the thumbs of bad little children who, just as the government can't seem to stop spending money, can't stop sucking their opposed digits.

Not surprisingly, the unions for public sector workers raised the specter of a national strike even before the report was published. Blaming the colossal budget shortfall on "massive waste" instead of the Keynesian myth that you can spend today and produce tomorrow, the situation is expected to grow worse due to rising unemployment and consequent increased demands for support payments. Using the figures provided by the Central Statistics Office of Ireland, the population in 2006 was 4,239,848. Borrowing of €400 million each week works out to just short of €95 each week per man, woman, and child in the Republic, or about €13.50 every day.

Remember: this is borrowing in excess of tax revenues collected, estimated in 2006 as €166 billion, or approximately €39,150 per capita, or nearly €110 per day for every man, woman, and child. (Not all of this is personal income tax, obviously, but, given that such things as corporate taxes and import duties are hidden taxes ultimately paid by the consumer, it is fair to include all tax revenues in the calculation.) Including government borrowing as an additional tax burden (which it is — on future generations) means that the total per capita tax burden is nearly €125 per day for each person, or €45,625 per annum . . . using figures generated at a time when Ireland was still being lauded as the "Celtic Tiger."

€45,625 per capita is a fairly stiff tax burden, but a great many people (relatively speaking) pay much more than that in taxes. What does it mean? On investigation we find that per capita personal income for Ireland during the period was US $63,178. Converting that to Euros at the current exchange rate (July 20, 2009), we get €44,838.80 . . . and the unpleasant realization that the per capita effective tax burden in Ireland exceeds per capita income by €786.20 each year.

True, these figures are only rough approximations, but, in accordance with the Micawber Principle, it doesn't matter whether the amount by which annual expenditures exceed annual income is sixpence or €1,000, the fact remains that "you are for ever floored." Does that mean Ireland is finished? Not necessarily.

Ireland can always take the advice that Mr. Micawber gave to David Copperfield immediately prior to stating the "Micawber Principle" of never spending more than you take in: "Never do tomorrow what you can do today. Procrastination is the thief of time."

If anything is to be done, it must be done quickly, or the opportunity will pass. If the Irish government is waiting for "something to turn up" (of which they are, no doubt, in hourly expectation), it has already turned up, in the form of the Just Third Way and the Capital Homesteading proposal of the Center for Economic and Social Justice. It would be greatly to the advantage of the Irish government (to say nothing of the ordinary people of Ireland who might expect to have some claim to consideration) to study the Capital Homesteading proposal. At this point, they really don't have anything to lose, and everything to gain.