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What in the world is happening on Wall? Economic indicators. He knows where this is going to end up.


To understand the economy, you have to understand human nature. This podcast is powered by a cost. How are you doing there? It's David, I hope you're kind of getting over the whole American election malarkey, but it's a sustained economic. He's got a long tail. I'll explain that in a minute. John's looking to be very skeptical about long days. Like, what are you talking about, man? More and more of these kind of phrases. He still, you know, the whole the whole thing in this podcast is we're trying to make economics that little bit more comprehensible, but a little bit we haven't said this for a while, that a little bit easier to digest, but ultimately more relevant to all of our lives.


How's your tail? And the tail is good. Thanks very much. It's great. What's on your mind, my friend? Oh, man. I tell you, after all the shenanigans of last week, it's kind of weird. But you know me now. It is. Yeah, yeah, yeah. It really is a double header. It's just get on with it. Let's go. Let's get to work, as they say. Let's get to work now.


It is you know it is. But the problem is, John, your man minus 70 days still in the White House. Anything can happen. You can be removed. Like he doesn't have to leave the Gulf. It's like it's like a really bad you imagine like a really bad tenant who's been given has been given his notice and he says, fuck this game of cowboys, I'm going to wreck the golf. And he places booby traps beyond belief.


Exactly. Exactly that. You're always been good. You've just been glued to Fox and you're like, oh yeah, I love Fox, although I've had enough of it now. I've had enough of it all, to be honest. But actually talking about getting to work, I was reading recently that the unemployment figures are quite shocking. Yeah. I mean, how they're skewed. Well, I think what I want to talk today about unemployment, because actually economics doesn't talk enough about unemployment.


And also number one, number two, unemployment in Ireland has gone from around four percent, which was the lowest ever. Yeah. To 22 percent, which is the highest ever. So you have more people on the dole now looking for a check from the government than any other time in our history. Yeah, and the thing about unemployment, John, is that if you know a family or an individual or somebody close to you who has been made unemployed, who has been told they are redundant, they are no longer relevant, they are no longer productive, what actually happens is much, much greater than a kick to income.


Right. We know that obviously people's incomes, but unemployment destroys people and it destroys them from the inside out. Yeah, absolutely. It brings up all sorts of deep, deep psychological issues and emotional issues about relevance, about fragility, about depression, about self-worth. You know, you're actually destroyed from the inside. But as I say, going to work kind of defines you. Yeah. And what what happens when people are made unemployed and certainly later in their life?


And this is what I want to talk about, because this is a big change in order to get onto this, that a lot of their whole self identity, which, as you say, is not just defined by, but their self-worth is taken away from them. And I know that unemployment I know because my dad lost his job, you know, when when he was in his mid 40s. So that's when you're at a stage in your life where you have your family, you have your house, you think about your things are you're in command, you're in control.


Are you you think you are. Yeah. And if that's taken away from you, I remember my own case knowing I knew that my he explained to me later that my dad, who you knew very well for you, you used to put on a shirt and tie and pretend to go to work so that our neighbors, like your mom and the people beside us didn't know because the stigma of losing your job that this again, was in the late 70s.


Yeah. When. Losing your job in Ireland, then the chances of getting another one were actually very slim because we had this endemic unemployment. In fairness, my father did find another job after about two years. But those two year period alone, two years. Yeah, I mean, I wasn't even 10, John, but I remember it distinctly. Remember the vibe in our house, the whole tone of our house changing. Yeah. Was a cloud.


It's a cloud. And I remember him trying to continue to be the man of the house and him trying to continue to be the dad and all that sort of stuff. But there was there was a lot of thankfully, thankfully, our house was, you know, as you knew, pretty happy house. But and then there were enough strong personalities there to carry the whole thing through. But I do have this deep understanding of what it does because I saw it my own father.


Have you ever been unemployed? I was unemployed. No, I don't. But I knew you'd be fired about a million times. Yeah, yeah, yeah. Well, you know, I see again, maybe know, this is an interesting point you make before we talk about the podcast. My pathological fear of a boss might stem from that. So the reason that I always work for myself, you know, I did do the big banking jobs for a while, but in the last 20 years, I've never, ever wanted to be dependent on anyone.


So I've always preferred to, as you know, plan my own furrow. Now, that may well stem it may well stem from some sort of echo of that. Excuse me, father, but right, yeah, and the last thing I ever want is for some. Stuffed shirt. Middle management Keyzer to say you are not relevant anymore, you're not worth it, you're redundant and that that is something deep inside me and it probably is an echo of of itself.


So, you know, it's just from the fact that I can hardly hold down a job unemployable. I am unemployable, but it is a deep thing. So we understand. I mean, I went through you had the same as me you've been freelancing for. Yeah, I've kind of jumped in and out of of different jobs. But I have to say, I much prefer looking after myself. Yeah. And I, you know, looking after yourself, it takes a certain type of personality to do that.


But I always remember I remember being like kind of fired high-Profile firings from, you know, kind of public jobs like radio jobs and TV jobs. And I thought, well, what I always love about them is that actually you gain a huge inner strength when, you know you were just on your own. So I remember being and I won't I won't name names. They're still in the business and then they're coming up. But they said, well, it's not you, it's me.


It's like breaking up with somebody saying, a Perriman, fire me. You know, let's let's go to court. Let's let's see this. I like, you know. Yeah, let's have a scrap. But don't give me this corporate speak about the bullshit about revenues and this, that and the other. You know, but that all stems from maybe my childhood experience. However, what it does make me is really alert to the fact that unemployment that economists have this problem, John, is that we have a weakness, what I call for aggregation.


So we put everything we we forget that every statistic is a person, every statistic is a family, and a statistic is a set of relations. Every statistic is not just a person, but it's a damaged person to her person. It's a person who can get angry because of the situation. And, you know, we're great for quoting here. I'm going to quote a bit of Tolstoy, Tolstoy's Me, You, Anna Karenina and the whole thing.


Right. But Tolstoy, Leo Tolstoy said something beautiful about, you know, because I think that unemployment can create profound unhappiness and can destroy relationships and families. And he said about families, he said all happy families are the same, meaning all happy families are more or less the same. But he said each unhappy family is unhappy in a different specific way. And I think that's a beautiful thing that, you know, they all have their own particular issues.


There's there are issues that come up, and I think unemployment can trigger a whole host of other issues that were dormant and are not. And then one night, so when I see as a result of Kove, at the rate of unemployment here, going from five to 20 percent where I'm looking as I'm looking at 500000. So the actual amount of unemployed is gone from about one hundred and eleven thousand people to about 500000. Now I'm looking at those 500000 stories, those 500000 individuals, the families.


And I'm thinking we have to do an audit when this thing passes, right? Yeah. Is put at the absolute center of economic policy. The objective of bringing unemployment rate down to as low as we can be because of the social, emotional and psychological consequences of my naive and thinking, though, that I mean, I've thought throughout this whole covid period is that this is all just temporary and be fine. Once it passes, we'll all be back to where we were.


What are you saying? That it's. No, I'm just thinking, John, you know, I just don't. And I wanted to. I wanted to. And I'm very and even the podcast, whenever I was on TV or, you know, newspaper stuff, I wanted to suggest that we were putting the economy to sleep. Yeah. And that we would spend money with. The problem is that businesses that closed down don't sometimes reopen. The reason they don't sometimes reopen is the individuals who start the businesses.


They run out of steam. They actually run out of you know, it takes a you know, doing what we do, juggling stuff. It takes a huge amount of energy to do that. But so a lot of people, you know, they can't pay the rent, they lose their customers, they lose their suppliers, they lose a credit lines. And they just think, well, as you said before, it's kind of it's not running out of money as such.


It's running out of time. Yeah.


You run out of time. You run out of time. And then you also.


So so my fear is and it is a fear is that the medium term impact of it will be a higher level of unemployment than is necessary. That's the right. And the economics profession will not understand that this is the most urgent thing to fix. Because, you know, what annoys me about economists is that they talk about things that don't matter, but debt ratios and and, you know, rates of inflation that don't exist or no inflation and budget deficits that are eminently financeable and debt ratios that are financeable.


You know, all these things that we can figure out. Yeah, yeah. Economists are concerned about why? Because most economists work for somebody else. Right. The vast majority work in a university or a bank or an institution are this sort of thing. So they don't wake up in the morning thinking, how am I going to figure this stuff off? And the vast majority of economists never made unemployed. So they don't understand what it's like for somebody to say to you on Monday morning.


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There's a good part of the story, John, which is the following, which is that Ireland, amazingly, in the last 10 years has been one of the most spectacularly brilliant job creators in Europe. Right. The question is about, you know, when we were young, there was talk about job creation because unemployment was very, very high. Right? Yeah, but we know that nobody sets up a business to create a job. You set up a business to create a product.


Yeah. Product sales and product sales. And there's demand for that product. Maybe maybe then you say, well, I'll employ somebody else and somebody else. So employment is the end result of a good product. It's not the start. Right. And I think, again, we've got to think in this way. So in order to get the economy going and get the rate of unemployment down, we've got to actually make sure that small businesses are vibrant.


And the reason small businesses are important is that right now, all around the western world is large businesses are destroying jobs and small businesses are creating jobs are not small businesses, the small young businesses, i.e. businesses that are only two or three years. Explain this to me then about the large businesses. So this is a huge, crucial thing in the past. OK, remember, the good job in the bank are the good job and the ESB or the good job and IBM or whatever is doing very well.


I was on pensionable job. He's got a job, he works for IBM or, you know, works in one of those. Okay. Are are in Ireland. It used to be the banks bank. It was almost like being in the bank. Exactly in the old days. That was the way for it. Now the most risky place to be is to be a middle manager in a large corporation. They are destroying jobs. So what you see is they shred jobs all the time.


Where you actually want to be is in a young company that's enthusiastic. That's got an idea of where it's going, that is growing so small and young is what is creating jobs all over the Western world. Right. But so that's one thing to think about. The second thing to think about is those companies have been really flourishing in Ireland in the last ten years. So Irish employment, OK, I think. But employment was in 2010 was one point eight million people working here.


Yeah. Just before covid hit, just before there was two point three million people working here. So that means we created half a million jobs in ten years. Now, we didn't create half a million jobs. We created lots of young companies that employed right now if you contrast. So that's a 27 percent increase in employment, 10 years in this country. Phenomenal performance. Incredible. You contrast that with France and Italy, the Italians, we created 27 percent increase in jobs.


The Italians have created two percent in the last ten years, the French five percent, even the Brits. And they talk about their employment friendly, flexible economy. They created ten percent. So Ireland is a growth freak when it comes to job creation. Yeah, and the reason it is is because. Coming up from the bottom are these young new companies and of course, we have the multinationals that employ disproportionately more here than anywhere else. Right. But they employ young people.


Right. People with certain skills that they need. So what we've seen so the good news is we can do it. The bad news is we're not being urgent enough. But the need to do this, this is my my my fear, right, right. Because as I said, economists who advise the government don't have that role, rawness that hurt that sense of this is important, but there is a huge change going on here, John. So I said to you, the amount of jobs created has been quite phenomenal.


Yeah. Which is should give us cause for optimism. Yeah. Yeah. But there is one thing that is quite. Worrying and it's very worrying, actually, and it's the shift in long term unemployment now I'm looking at figures before covid, so covid is OK. We're hoping to get back to where we were from. Your wife? Yeah. February twenty twenty. Yeah, yeah, yeah. If we get back to February twenty twenty, we have to look at the data and the data is telling us something quite worrying, which is the following June that long term unemployment that's unemployed over one year.


The reason this is important is because the longer you're unemployed, the less likely you are to ever have a job again. Yeah, right. This is really important because if you you always know the old adage, it's easier to get a job from a job. From a job. Right. So you have a gig you go to somewhere else. Right. When you're unemployed for a few months, you know, he or she. That was bad luck.


After six months after and after a year, the person has seen the influence and I wonder what's wrong with this person.


You have this big gap in the CIA. What have you been doing? So the vast majority of people have been fucking desperate, right? That's what they've been doing. Right. They've been trying to hold body and soul together and, you know, friends and we know friends. We all know this. Right. So the reason long term unemployment is important is the thing called sclerosis in economics that doesn't deliver. It isn't delivered, but it's the same idea.


You and I clearly have this right. Okay. But it's it's when you're what they call human capital becomes degraded. Right. So basically, the stuff you are able to do five years ago, you're not able to do anymore. You do. You're not you're not a part of the technology. You're not part of what's going on. That's the thing. There's another thing called hysteresis in economics. These are big words are Capeman. Ceressus is the hysteresis, of course, from the Greeks.


It's it's the permanence of unemployment when it remains a problem. So a country that has long term unemployment just can't get out of it. Yeah, and the reason it can't get out of the employers don't want to employ and the employees lose the skills they had. And this can last for years and years and years. So we've got a profoundly avoid that. Now, if we look at the data and in Ireland, the worrying thing is the long term unemployed used to be young people that has flipped completely in 10 years and they are now older people.


So half of the long term unemployed people in Ireland are over 45. It's not simply due to technology. No. And, you know, kind of more out of touch does a couple of things going on. But I just I'm going to give you all the figures. Yeah. Yeah, go on. So in 2010, right when the last recession hit, six percent of the long term unemployed were over 60. So between 60 and 65. Right.


That figure is now 20 percent. Right. OK, then 20 percent of the long term unemployed will be under the age of 25. Now it's seven percent. So it's been a total flip. So basically what you've seen is if you're young, this is before covid, right? Yeah. If you're young, your chances of being unemployed were very, very small. Yeah. But now if you're old, your chance of being unemployed are very, very high.


Right. And again, what you see is unemployment and people in the 50s is much higher than it was and in the late 40s as much higher than it was. So what we're seeing is a complete shift in unemployment. Why is this the first thing? Is that what we're seeing in old companies, right, is they're laying off expensive stuff. So what used to happen is the person joined those big companies and I'm even smallest companies and companies had loyalty.


And you got to hear what you got. The courage pluck at the age of 65 and off you went. That's not happening anymore, right? It's the first thing. Second thing is during the last 10 years, because interest rates have been very, very low. Right. When interest rates are very, very low, what you tend to see is an explosion, huge explosion in mergers and acquisitions. Right. OK. The reason is the following.


Mergers and acquisitions of companies are always financed by debt. So if debt is inexpensive, eventually it's a low rate. Right. The managers of these companies, the financial officers will say, look, I work at Vodafone, let's say, and I'm looking at er are three or one of these companies. Yeah. And we want their market share. In the past when interest rates were high, it was prohibitive for those companies to borrow loads of money, take over the other company and merge them together.


Yeah. Interest rates are very, very low, which was the case in the last 10 years. You see an explosion in M&A mergers and acquisitions. Right. OK, now this has profound implications for middle management, because when you put two big companies together who are more or less doing the same thing, that's a Tels, for example. Yeah, I'm using this for an example. The sure you're doing the same thing, the same product, the same structures, everything.


The only way that that merger can be made legitimate is if the profits of the new entity are higher than the combined profits of the two of them. Yeah. So how do you do that? You put them together, you cut costs. Well, there's bound to be a certain amount of duplication in roles, so. Yeah, exactly. So you know, to that. So basically you take one team that was a sales team from one mobile phone company and you let them all go.


You make them redundant. So the very act of. M&A mergers and acquisitions has, as its consequence, the unemployment of lots of people, because if you look at a big service firm, yeah, right. By far and away, the biggest cost are people. Yeah. So, um, particularly the more senior thing and the more senior they are, the more expensive they are. So what we're seeing is that the the down side of M&A and by the way, there's only upside for the owners.


This the shareholder capital bullshit that I. Yeah. Can't stand it. But the downside of M&A. Is always shouldered by the workers in these companies because that's how they cut costs, the way in which those financiers justify it is they say, well, the shareholder value has increased. So consequently, the share price has increased. Right. The profit has increased. So therefore, the owners of the company do well. But the owners of the company are only a tiny, tiny minority of everybody who has a stake in the company.


Of course, you know, the consumers, the retailers, whatever. But because of this ideology that was actually largely invented by a fellow I used to work for, Jack Welch. So he just goes from General Electric. Yeah. Who actually does not that long ago. A couple of months ago. Yeah. I got on really, really well with him. I was still in contact with him up until recently. And what happened was I was asked he asked me to emcee his book tour in about 20 years and I was a young fella and yada, yada, yada.


And so I used to go around with him to to to do Q&A in the book. What do you like? You know. Yeah, of course. Because fucking cheap. Why do you think. Exactly. I know gig. They did a gig. Right. Anyway, the point was he came up with this idea of shareholder value, which is that nothing matters for a company as long as it makes profits. Yeah, he was his nickname was Neutron Jack.


The reason was Neutron Jack was do you remember in the 1960s and 70s, the Americans were trying to and the Russians were trying to devise models. When you think about a bomb. Oh, yeah. Killed people, but left the compound. It left the infrastructure standing. Yeah. But it killed all the people. Think of it. My mother was right. So he was called Neutron Jack because after he'd visited a G.E. company, let's say somewhere in America, a branch of GE, yeah, the company would exist, but no people as he fired everyone.


Jesus. And it is crazy idea of the top 10. It was all as long as the shareholders are so. And this would drive up the profit. Yeah, right. Drive up the profit, reduce profoundly the costs and the share price would go up. Now of course, he also was part of a movement that made sure that all the managers and senior decision makers were rewarded by share options. So they had an interest in driving the shareholder the share price up personal interest and consequently their communal sense of custodian responsibility to their workforce was totally compromised.


Yeah, and I believe it's just it's one of the most. Disastrous policies that the corporate world has followed in the last 30 years. It's always amazed me how, you know, companies operating under the tyranny of margins. So if costs are rising, get rid of the costs as long as you keep those margins.


Absolutely. Well, John, I mean, the whole thing about economics and it's called the business cycle, it's called a cycle for a reason. Right? Things go up. They go down. They go up. Go down. Right. If you keep a constant margin, what you will find is that when revenues dovetail in a downturn, when they start to decline, your margin will decrease. Yeah, if you respond to this by firing people, what you will find is a natural tendency to gut the institution, to gut the organization of people right now.


The problem is those guys go into the long term unemployed. Yeah. If they get a job after a few months, great. But if they're on the live register for too long, they become unemployable. So this is the whole point. So that at the core of capitalism is this inconsistency and it's been driven for a long, long time by this shareholder value. So luckily, in a country like Ireland. Right. We didn't have that many big companies, thankfully, and we've had this vibrancy of small companies, thankfully, which has basically allowed the labor market to work, but that's what we thought we were just looking at the aggregate level of unemployment.


Yeah, but now that I've dug deeper into the data, what we see is that the people who are shouldering the burden of adjustment, the people who are actually paying for all this are the middle aged and the old. Right. And that has huge ramifications for the society. Well, I was going to say so. Apart from the individual itself, what are the long term effects of long term unemployment, particularly in that age? Well, you know, John, you quite like the Fox News.


I did. Exactly. If you remember, you were talking the other day about Fox News and the ads and Fox News. Yes. All directed at elderly people. Yeah. So what happens in a society if the long term rate of unemployment skews towards the older the middle age and the older? Naturally, they get very angry that very often it's it's a thing we know in psychology, in all human psychology, that you're much more likely to be angry if you had something and you lose it than if you never.


Of course. Yeah. So the difference between a 20 year old on the dole and a 55 year on the dole is profound. Right? The 55 year old who lost her job has lost their stake. That makes you very angry. And you kick out and you hit out at who you think is responsible. Right. Where is the 20 year old? There is a sense of, well, you know, I've got another 50 years to fix this.


Right. So but they never had it in the first place as well. Don't miss it.


Yeah. So so what happens is and I think that this is the important message, an interesting message. Right. We talked about Trump and we talked about the right wing in America and this sort of make America great again. I think about Magga. Think about the idea. It's an evocative, nostalgic idea that there was a time when America was OK. So it's appealing to a certain type of person who's lost something that they had. Right. We know that America is usually about ten years ahead of Europe in economic and business trends.


So what happens over there kind of is repeated here. But about five or 10 years that's in the post. It it's you're absolutely right. It's in the post. So what I'm saying is that what has happened in America is, though, mergers and acquisitions, all those huge, huge company and conglomerations coming together, left this extraordinary amount of unemployed, middle aged, middle management people. Yet also technological change is affecting their ability to both work, but it's also affecting the older company's ability to fight the new companies.


Yes. Right. So you see there's a gradual, gradual tendency for the old companies. This is the the idea of the Gayl of relentless creative destruction. The showboater. Exactly. But the political cost of that. Is the Trump rallies, is the disenfranchised, is the white, middle aged, middle class, angry man, but his fear, his fears are real. Now, if you look at the data in Ireland, it looks to me that we are just starting this process and that's the thing.


So we will have the data. Don't lie. We will have this constituency here and four or five years time who are angry, middle class, formerly middle class, middle aged men in the main. Who find themselves being told that they are redundant, so who's going to be the Trump we have apart from yourself? John, I'm not too sure I can see it. But what I'm saying is the Trump constituency doesn't come from nowhere. It comes from somewhere.


It is the political fallout of an economic choice made by capitalism. That's something we've got to appreciate. Right. And we're seeing the same trends play out here. Nobody's talking about it because nobody does the nerdy thing I do, which is to look at the data and dig deeper. That's the sort of stuff I like. But unless we see a flourishing of entrepreneurial. Initiative in the middle aged, which has seen some parts of America OK, that we start.


Companies as we get older. OK, right, we are going to see a very fertile constituency for anger here from those people. I mean, again, we'll come back. Half the people who are long term unemployed in this country are over 45. So between 45 and 65. And there the people watching Fox will let us come back to it. But I'm just put you on warning that what we saw in America is happening right here, right now in front of our eyes.


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