Debt and the middle (classes). August 15, 2013Posted by WorldbyStorm in Economy, Irish Politics.
There’s a curious piece in the SBP last weekend. It’s by Connall O Morain, presenter of the Sunday Business Show on Today FM and in it he laments the lack of ‘relief from selfish banks for middle-class predicament’.
It’s a fascinating, not just for that thesis, but also for a deeply strange implicit comparison between the plight of the middle class and the…er… London Blitz in 1940 and the Great Famine. Now many of us, including myself, are very aware of how bad it is out there in this society for many many people. Friends, relations and acquaintances struggle with debt.
But that comparison seems, a stretch.
When I write the word ‘debt’ I know I’m in danger of having many readers close over this page now because they cannot bear to see that word. For many typical readers of The Sunday Business Post that word makes them sick to the pit of their stomachs. That’s because, for the first time in their lives, they cannot make their repayments. Not for strategic reasons, not for selfish reasons, not for any other reason but that they just don’t have the money.
And there’s an hierarchy here.
Debt has been part of the wallpaper for Ireland’s poor forever. This is a bad thing and economic mismanagement has a whole lot to answer for. But middle class debt, on the grand scale, is new and is already changing Irish society. It has brought with it shame; people are not willing to talk about, acknowledge it and face up to it.
It’s a bad thing for the ‘poor’? But it’s an existential catastrophe - on a par with the Great Famine for the middle class?
That’s a muddled way of looking at things, to put it at it’s kindest. And how about this?
Forget about strategic defaulters and other populist terms. There’s no mystery. People who aren’t paying their debts have, in the vast majority of cases, no money. Like swans serenely sailing along on the water what is hidden below is the furious paddling. The travails of Ireland’s coping classes are well aired on Joe Duffy. But the middle-classes tend not to air their desperation on such forums.
I’m a bit puzzled by this. Surely the comping classes are the middle classes according to the orthodoxy? And if not what is the distinction?
Perhaps the following will help. For in addition to the ‘poor’, the middle class, the coping class, a fourth category appears.
A light can only be shone on an issue if those affected are willing to talk about it. But shame has driven these people into the shadows and this issue, as it affects what I will call the entrepreneurial class, hasn’t been heard, yet is likely to be a major drag on the economy for a generation.
Is this a sub-set of the middle class? Who knows? But note that the self-employed are also the entrepreneurial class… and wait.. they’re ‘professionals’ too (though reading the list below I’m not sure how entrepreneurial some of those ‘professions’ are)!
There’s no ‘boo hoo’ about this. These are the facts. The self-employed, in the main, rely on themselves to make provision for retirement. Encouraged by the best and most expensive financial advice (how ironic) many, many self-employed, who are or were apparently successful and prosperous professionals – doctors, lawyers, dentists, engineers, architects, accountants – borrowed money, or used cash reserves, to invest in property and bank shares. Of course, some people thought they were being smart riding the property bubble, but in the main these investments were to support their future retirement. But, as we know, those investments are bust and these ‘lucky’ self-employed professionals will now work until their deaths.
Well, perhaps (and he might reflect upon the situation with rising age limits for those on the state pension). Though the idea that investment was simply for retirement… hmmm. Having seen business from non-executive director level in the 2000s I’m not convinced about that.
And another thought strikes, what precisely would he suggest should be done about this?
Meanwhile here’s a dig at the public sector…
For those who haven’t copped it, this is why the issue of public sector pensions so vexes the self-employed. Others can retire, but many, many of the self-employed can’t, ever. And yet those who can’t afford to retire are asked to pay extra taxes to pay for the early retirement of others. This is a real sickener.
As it happens I’ve always felt the treatment of self-employed in relation to benefits was inequitable, and the so far relatively small movement in that respect of altering that situation are to be welcomed. But… there’s some way distant between that and saying that public sector pensions pensions per se are wrong. And note, as always, rather than arguing for a universal high level of public pension available to all citizens the instinct is simply to complain about PS pensions rather than offering a genuinely equitable alternative.
Anyhow, next up:
So here we are, the fully-capitalised banks asking those who can’t pay back their loans to do so while choking off whatever chance there is of an economic recovery because of their refusal to lend. No recovery will come from the government. Thankfully, Minister for Jobs, Enterprise and Innovation Richard Bruton has a new mantra that government doesn’t create jobs, that entrepreneurs do – a welcome convert to the true role of government in the economy. And yet, wholly contradictorily, the government intends spending the last billions in the state’s coffers on ‘A Big Plan’. You can smell the future waste of money already.
Well, good luck with that. In truth entrepreneurial endeavour in Ireland has been marked mostly by its absence across the history of the state. It’s not for nothing that the state – avowedly pro-capital from the off – had to step in across numerous areas to, yes – despite R. Bruton’s statement, create jobs and industries where private capital was simply unwilling to do so (and continues to be in many areas).
If he is seriously suggesting that it is the only way forward we might as well give up now given the time it takes for such activity to produce results, the churn and number of business failures that actually occur and so on. The stats on this are depressing if you are prepared to hang your hat on that hook.
According to the 2012 GEM report on entrepreneurship last year 66,000 people became ‘New Business owners’ while 36,000 entrepreneurs discontinued businesses. And while the numbers overall of entrepreneurs in the state are seemingly impressive, with well over 350,000 people either nascent entrepreneurs, new business owners or early stage entrepreneurs, it’s only fair to point out that has remarkably elastic – not to say generous – definitions of just who and what are entrepreneurs, incorporating in nascent entrepreneurial activity actions as minimal as making out a business plan.
And returning to the above, the confusion, or perhaps elision, of categories in the piece overall makes it difficult to determine precisely what is being said.
There is only one way to excise the shame of the tens of thousands who cannot pay their debts. That is to give them the tools to start paying. Not one story about this issue has ever suggested that those who can’t pay are shirkers or spongers. They are willing to work; they just need the capital, and a re-energised economy to do so. What appears to be a concerted ad campaign by the major banks is cynical in the extreme. They are not open for lending. They are on a mission to rebuild themselves, attract in fresh investment, and most likely start the cycle of self-interest again.
In a way this seems a bit like a check list of complaints. Bank lending? Check. Public Sector? Oh yes… check check check. Bad state investment? Check! But what, really, does shirking or sponging have to do with it? The banks may not be lending as they were, but… it is true that they are seeking to rebuild themselves. Now, from a left perspective this may be deeply problematic, and he may indeed be correct about the cycle of self-interest. But when was it ever otherwise?
But most notable in the above is that there’s no concrete proposal put forward. Is he suggesting that public monies go to defray private debt? It isn’t clear. But given his only other option is ‘that the Spanish, the French or some other country’s banks will come ashore to our rescue’ and the situation is – as he paints it – analogous to the Great Famine what else can he be proposing?
All very strange.