The current legislative proposals permit an employer – subject to certain conditions – to apply to the Labour Court for a derogation from the wage rates set in the sectoral wage agreement on the basis of inability to pay.

The derogation can be granted for between three months and two years – provided an employer has not been granted an exemption within the previous five years for the same workers.

The Labour Court must be satisfied that without the exemption, there would be a substantial risk to jobs or to the sustainability of the employer’s business.

The change is described by a government spokesman as “minor”. They don’t want to be seen to be undermining the wages of the low-paid, but the truth is that this system does no good at all for the people who need the most help, who are just below the bottom rung of the jobs ladder: those who are looking for work.

Involuntary “unemployment” would not exist in the free market; anyone who can work would be hired, if they would only lower their asking price. When market-clearing wage rates are illegal, however, unemployment is inevitable.

Thought experiment: Imagine that the price of a new car was set by government at an artifically high level, as a result of the government having been lobbied by manufacturers of some of the more expensive models. Imagine that you could only negotiate a lower price if you presented your case formally to a special government committee, who would decide whether or not you could afford it. Do you think that more or fewer new cars would be bought?

If parliament was where policies were decided and a technocratic executive arm were directed to execute those policies and be held entirely accountable for doing that, then we might have democratic politics and accountable politics.

I would have thought that we already had a substantial technocracy in the form of the full-time employees of each government department: the ones who remain employed regardless of which government reaches power. It seems that this proposal would like to take things a step further so that the Ministers themselves, the chief executives of each department, were also unelected.

Voters would lose control over these appointments; they may be appointed in a similar fashion to the European Commission. Would this reduce corruption and improve accountability? Something tells me that it would not. Those who reached executive power would undoubtedly be friends and allies of politicians, except one stage further removed from voters. Wouldn’t we rather have the messiness of democracy than surrender to even greater bureacratic control? Even better, we could abandon the notion that government can produce a perfect society. Let’s discuss the alternative.

After a period of inactivity, the Irish Liberty Forum is soon to return better than ever with a new and improved site this Sunday 18th April 2010.

Please sign up and join us at http://irishlibertyforum.org/

Subscribe to our weekly article that we’ll e-mail to your account, keep a keen eye on the blog and watch as we update the various features of this site as we will try to give you the best source of libertarian analysis in Ireland.

Our first article is entitled “Libertarianism: An Introduction” by Prof. Gerard Casey of University College Dublin.

If you are interested in writing for the blog you are free to submit articles as a user which will be reviewed before publishing.

In peace and liberty,

Brian

The Death of the Celtic Tiger
http://mises.org/story/3773

Celtic Circus Tiger: The Irish jump through the hoop for their master

Coincidence?

We can clearly see that there’s a correlation between ice-cream consumption and deaths by drowning. But what can we infer from this? It’s possible that eating ice-cream causes drowning (due to stomach cramps while swimming). It’s also vaguely possible that drowning deaths cause increased ice-cream consumption (mourning relatives might go for an ice-cream to cheer themselves up). However the most sensible explanation is that both ice-cream consumption and drowning deaths increase is due to another factor: the weather. People eat more ice-cream and go swimming more often in summer.

However, such a straightforward explanation is hardly ever seen in economics. The empirical approach often remains unquestioned. Consider this syllogism: in the past, taxes were low. Today, taxes are high. We were poor in the past but now we are rich. Therefore, increasing taxes causes prosperity. Such a view is completely ridiculous, yet almost completely unquestioned.

Or take the suggestion in the graph below. Income inequality sharply increased before two major recessions. Therefore it’s fair to assume that one causes the other.

Why yes, yes it is.

Two possible conclusions one can reach from this graph are:

A) economic boom causes incomes in the top percentiles to rise

B) severe income inequality causes a recssion.

In my view, both are incorrect, or at least incomplete. A more accurate interpretation is:

C) years of easy money policy from a counterfeiting racket cause the economic boom. Rising incomes, and rising income inequality follow from this. This prosperity however is artificial and must eventually come to an end. Incomes, and income inequality fall during the recessionary phase.

There are however some people who argue in favour of proposition B. They are wrong.

Their theory on why income inequality goes something like this. As incomes becomes more and more unequally distributed, a dreadful scenario approaches. Since the rich save a higher proportion of their money than the poor, and since the poor are deprived of income there’s less spending taking place in the economy. The rich have the money but they don’t spend it. The poor don’t have enough money to spend. As a result, the entire economy goes into decline.

The counter to this can be summarised in a few points:

• It’s the job of entrepreneurs to successfully forecast future market conditions. The wealth inequality thesis can’t account for the cluster of errors and an economic crash. If income inequality were the main cause of recession why doesn’t the economy go into a gradual slowdown?
• At any level of income, at least some level of  consumption will continue to occur. It’s also doubtful that the rich do in fact spend proportionately less that the poor.
• Even if the rich save more than the poor, savings constitutes demand for producers’ goods. In effect, to save is to spend, and savings is the most important element of a prosperous economy.
• An economic crisis is usually marked by undersaving not underconsumption.

Thanks, Murray.

We have seen that it’s easy to turn your ideological desires into a relatively plausible science. It’s even easier if you have fancy graphs at your disposal.

Don’t forget the comma before the “and” in the title!

I didn’t have to do that today. My post Trolling For Statism: How Not To Argue With Libertarians was featured on strike-the-root.com. Also featured on that excellent website were the posts Which Party Causes All The Wars? and False and True Connections Between Libertarianism and Conservatism.

I’m also happy to announce that the Irish Liberty Forum passed 20,000 blog views today. Keep it up guys!