Monday, April 22, 2013

22/4/2013: Government Latest Hair-brained Idea

Earlier today, RTE has reported that:
"The [Irish] Government has launched a plan to facilitate the creation of 20,000 jobs in the manufacturing sector by 2016." Frankly speaking, I can't be bothered to read much more into the idea. In times of aplenty it is bonkers to allow the state to pick winners in the economics game and then let civil servants lavish 'investment' supports onto them. In times when debt/GDP ratio is up at 120% of GDP marker and private debt is bending the nation into the ground, the very same idea is simply a prescription for massive waste we can't afford. 

But here's what, according to RTE report is even worse: 
  1. "Under the plan fledgling manufacturing companies will get to apply for support from a specific start-up fund." Wait... start-up funds invest in start-ups which, by their definition can't be in existence long enough to become 'fledgling' - unless they are 'fledging from the start-up phase' which is equivalent to being dead-on-arrival. So question for Irish boffins: you will be investing in freshly-dead firms or fledgling ancient 'one-day-were-start-ups'?
  2. "There will also be a support fund for capital investment by manufacturing companies and additional financial support for R&D investment in engineering firms." Aside from capital investment (presumably, having nationalised most of the banking system, our markets-supportive Government now has appetite to take on equity in manufacturing firms too) idea which suffers from the same problem of 'winners-picking', leading to risk-mispricing (which in current fiscal conditions can be labeled 'waste' outright), there is a problem of R&D supports. Targeted tax and sponsorship allocations to R&D supports are not a good policy for stimulating high value-added R&D. Here's one study that found as much. 
  3. "The plan also contains proposals to maintain or reduce company costs for energy, waste, regulation and tax." Wait, how is that going to be achieved, if, per our semi-state behemoths and the Government, there is no ripping-off of consumers/users going on in Irish energy, waste and tax environments? Either things are being priced to rip-off customers today (thus allowing for some price reductions), or there is no room for price reductions, or - as most likely - the Irish Government is planning to increase rip-off of other customers (e.g. households) to subsidise select manufacturing ones.
  4. If Irish Government pumps said subsidies into select manufacturers, how does this square with the equal markets treatment laws within the EU? And how will the Irish Government deal with the pesky problem that you can engage in industrial favouritism while making any serious claims about having a real markets-oriented economy here?
I can go on about this latest idea. It is promised that it will 'create' 20,000 jobs by 2016 - a claim that is, as always is the case with the Irish Government pronouncements, is neither verifiable, nor based on any serious analysis. But, needless to say, there will be loads of PR opportunities involving flowers, ribbons, Ministers and RTE cameras in months to come. Meanwhile, when your taxes go up comes December 2013 once again, don't ask why, think Government 'jobs creation' plans... Think big... Think someone else is getting subsidies so you don't have to...
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