The election of Luiz Inácio ‘Lula’ da Silva made for a Red October, and a political comeback for the ages. But, it was a close-run thing, while the second go on the merry-go-round will be far more challenging than the first.
At the fourth time of asking, former trade-union leader Lula was first elected President of Brazil in 2002, and reelected in 2006. Despite initial fears that he may display some of the authoritarian tendencies of Venezuela’s Hugo Chavez, Lula in fact governed successfully from the progressive left, sharing the fruits of economic growth more broadly and lifting 20m Brazilians out of poverty while reducing inflation and government debt. One of his flagship policies, since copied elsewhere, was the conditional cash transfer known as Bolsa Família. This welfare programme channeled cash to poor families on the condition that their children were vaccinated and attended school.
There was consternation in Italy recently with The Economist’s characterisation of the British Tory Ominshambles as ‘Br-italy’, because it played into outdated stereotypes. And, with good reason.
Italy has had 68 governments since World War 2, run up massive public debts and regularly resorted to currency devaluation rather than harder-to-do policy reform to maintain competitiveness. Relatively short-lived governments are still the norm, with Giorgia Meloni having recently become the 7th PM in ten years at the head of a Brothers of Italy party that can trace an authentic neo-fascist lineage.
Fiscal profligacy and currency devaluation, however, were very much 20th century phenomena. Italy has been able to respond appropriately with fiscal stimulus to both the global financial crisis and the Covid-19 pandemic, in line with peer countries. But, Eurozone membership has greatly constrained Italian policymakers since the mid-1990s.
The era of cheap borrowing is over. Households, businesses and governments are all starting to feel the pinch, and things are going to get harder before they get easier.
Having learned the lessons of the global financial crisis, central banks across the world slashed interest rates and flooded financial markets with money as an immediate response to the Covid-19 pandemic in early 2020. Governments spent money like it was going out of fashion in an unprecedented and synchronized global effort to ward off the worst economic effects of the pandemic. On their own terms, these efforts were superbly successful. The Covid recession was mercifully brief and shallow as a result.
*** This article was first published at thejournal.ie on 26 October 2022 ***
On the face of it, Budget 2023 was a giveaway of epic proportions. There was something for everyone. Tax cuts, welfare increases, childcare subsidies, reduced student fees, an end to hospital charges and energy cost supports for businesses and households. These were just some of the plethora of attention-grabbing measures announced.
But, what the government appears to have given with one hand, rising prices will more than take away with the other. According to the government’s own economic projections, consumer prices will have increased by 16% between the beginning of 2022 and the end of 2023. Budget measures will help cushion that blow to purchasing power, but for too many people on the margins it won’t be enough. Everyone will feel the pinch, and more people will be pushed into poverty.
*** This article was first published at thejournal.ie on 28 September 2022 ***
Sometimes good news is bad news. News a month out from your annual budget announcement that the public coffers were brimming with unanticipated largesse was the last thing Paschal Donohue will have wanted to hear. Why?
The natural and understandable inclination of any Irish finance minister, and of the Department at their back, is to be conservative, to guard jealously the public purse strings and to manage downwards the expectations of both colleagues and punters. Someone has to take away the punch bowl before the party gets out of hand. This is an inclination inherited a century ago from His Majesty’s Treasury, the so-called ’Treasury view’.
A year ago, the Irish government was expecting an €8.3bn for 2022. As things stand now, we are on course for the largest annual surplus since at least 2006, largely due to gravity-defying corporation tax receipts.
*** This article was first published at thejournal.ie on 25 September 2022 ***
Reported homelessness is at a record high. Unreported homelessness is rampant. Around 50,000 Ukrainian refugees are in emergency shelter. The shortage of student accommodation seems worse than ever despite all the recent investment in that sector. Demand for rental properties races ahead, but supply is at a record low. Surging rents, sub-standard accommodation and insecure tenure are a huge source of stress, anxiety and frustration, and our still-dysfunctional housing market is largely to blame.
When detailed results of the 2021 Census are published, well over half a million households are likely to be in rented accommodation, about a third of the total and rising. While these are concentrated in younger age cohorts, around 1 in 4 householders in their 40’s are in rented accommodation, and this share is also likely to rise as ‘generation rent’ ages. About 1 in 7 renters are estimated to be renting by choice, but the vast majority would rather be owners.
*** This article was first published at thejournal.ie on 19 September 2022 ***
Wholesale gas prices are off the charts in Europe, leading to surging costs to light and heat our homes. Urgent policy action is needed, both in Brussels and in Dublin, if we are to avoid social chaos this Winter. Recent murmurings from leaders in both cities suggest they appreciate the urgency, and that help is on the way. EU energy ministers hold an emergency meeting this Thursday to discuss while preparations continue ahead of Ireland’s budget day on 27 September. Consumers need a break before energy prices break their backs.
Even before the latest round of prices rises, a record 29% of Irish families were already facing energy poverty. That number is now nearing half, and rising. For people already forced to tighten their belts, calls to turn down the heating or wear another jumper aren’t likely to land well. Certainly, steps can be taken to conserve energy but there are limits to what is reasonable in the short-term.
How did it come to this?
It’s all about gas. Russia was the source of 45% of EU gas imports in 2021. But, retaliation for Europe’s support of Ukraine in repelling Russian invaders has seen these supplies reduced to a trickle, causing prices to sky-rocket.
*** This article was first published at thejournal.ie on 6 September 2022 ***
In mid-February, I wrote here that inflation was widely expected to peak in the early months of the year “before falling back over the following 18 months or so towards the levels around 2% that we had become accustomed to.” Highlighting geopolitical threats, I did note that “risks appear to be skewed towards inflation staying higher for longer than is currently anticipated.”
The game changed when Vladimir Putin invaded Ukraine on 24th February. Oil prices initially surged by about 50% while gas prices nearly tripled. Although both have come off their March highs, they remain much higher than pre-war prices. Ominously, there is a growing consensus the war is Ukraine will be prolonged, and growing speculation that Putin could shut off European gas this winter. Meanwhile, international food prices have hit historic highs, even before the impact of Russia’s Black Sea blockade fully feeds through to grain markets. High prices and scarce supply of food and energy will likely get worse before they get better.
Irish consumer prices kept accelerating through May, annual inflation reaching 7.8%. A combination of momentum in prices and the subdued monthly inflation seen in June and July 2021 suggest the annual rate hasn’t peaked yet. Surging inflation is a global phenomenon, and it has everywhere come to dominate political debate around domestic issues. Whether inadvertently or more cynically, this debate has been characterized by much pedaling of myths. So, let’s knock some of those on the head:
*** This article was first published at thejournal.ie on 3rd July 2022 ***
There was much Western hubris when the Soviet Union collapsed three decades ago. Political scientist Francis Fukuyama made his name heralding the ‘End of History’. The Cold War gave way to unipolar Pax Americana. The peaceful rise of China was to be accommodated within the architecture of neoliberal globalization. The onward march of social and economic liberalism seemed assured.
In 2022, however, revanchist Russia seeks to turn back the clock while China flexes its military muscles. Universal liberal democracy looks increasingly utopian while even some of its supposed exemplars in the West have flirted with an authoritarian turn. So, has Liberalism failed? Two new books address different aspects of this question.
*** A version of this book review was first published in The Irish Times on 19 March 2022 ***
In normal times, January sales for things like clothing and air fares are enough to bring down the price of an average consumer’s monthly shopping basket. January 2021 was very far from normal, of course, and prices ticked up slightly that month.
With the Omicron wave of the pandemic beginning to ebb, this year we are seeing a return to normality. Consumer prices fell -0.4% last month. This brought the annual inflation rate down to 5.0%, from the 5.5% registered in December. The last time inflation was that high, in April 2001, we were still using old money, punts and pence.
So, are we past the worst?
The good news is that, so far, rising inflation in Ireland has not been broad-based. Although supply issues have impacted on home rentals, and on some goods like cars and furniture, price rises have been largely confined to oil, gas and the sectors that depend on these energy inputs (transport, electricity).
*** This article was first published at thejournal.ie on 18 February 2022 ***