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Chutzpah from on high… First we give them the money, now we get the lecture. Chairman of Anglo Irish Bank argues against universal child benefit, State pensions and Medical Cards for the over 70s. October 6, 2008

Posted by WorldbyStorm in Irish Politics.

Let me write this carefully. Actually I’m amazed to be writing it at all, I’m fairly busy at the moment and the opportunity to write more than one post a day is limited. But then I read something that catches my eye and/or I want to get my head around and the fingers start tapping. Anyhow…the Chairman of the Anglo Irish Bank, an institution “close” to the crises of the last week in Irish finance is reported in the Irish Times as having…

….called on the Government to reduce corporation tax and tackle the “sacred cow” of universal child benefit, State pensions and medical cards for the over 70s.

Mr Fitzpartick said the forthcoming budget needed to be bold and “brave” and not revert to a tough budget.

He continues:

Tough budgets were part of the failed economic policies of the 1980s which taxed employment out of existence, he said, adding “let’s not go back”.

Well, we could all echo that sentiment.

Speaking at the annual La Touche Legacy seminar in Co Wicklow at the weekend, Mr Fitzpatrick said there had been talk in political circles of a tough budget. A better option was a clear and honest plan on what measures were needed to stimulate growth.

Which are?

He said a policy to cut corporation tax to 10 per cent if announced now, would mean that people who are already here wouldn’t go, while it would encourage other foreign firms to set up here.

Really? And then what happens when the next crisis of capitalism occurs, do we cut down to nothing, or explain if he can, why it is that other states with higher levels of corporation tax (which let’s be clear is a financial gift by national states to private institutions) manage to get by.

But unpleasant as all that is it is when he proceeds to shift towards the following areas of social policy that his argument demonstrates the ‘take…take…take’ attitude of some.

He said availability of child benefit, the State pension and the medical card for over 70s should be assessed on a “wealth basis”.

This from a man whose chosen profession perhaps probably has a continued existence due to the largesse (or foolishness) of the Irish state and behind that the unconfirmed acquiescence of the Irish taxpayer (unconfirmed since none of us have yet been asked our view). Whose institution could perhaps also be assessed on a similar basis, and perhaps found wanting… at least if it were subject to the cold scrutiny of the market – but curiously isn’t due to the more than proficient lobbying of that sector on government. But then corporate welfare is – naturally to those who propose it – always exempt from the rigours applied to those of us unlucky enough to exist beyond its reach.

Mr Fitzpatrick acknowledged these issues will take courage to tackle. Clear and courageous leadership is needed this week coming up to the budget, he said.

I’ve a strong stomach for rhetoric from business and political establishments, I have to, but I’m pretty revolted by this. In a week where the institutions that he is a representative of have failed comprehensively it is almost beyond belief that he would feel he had any authority to opine on any area relating to said institutions, let alone on areas well beyond his remit. To then talk of courage when the pusillanimity and greed of the financial sector is a matter now of public record… And here’s the thing. To talk of further inflicting the muddle-headed and frankly ignorant policies that we’ve already had quite sufficient of – thanks Mr. Fitzpatrick – over the past number of decades in a bout of further social experimentation to, presumably, get it ‘right’ this time is breath-taking.

Let’s be clear. He is the Chairman of a private enterprise, one in a sector that has demonstrably failed. For him to lecture us in this fashion as if we can take any lessons from that sector, to suggest directions for social policy in this Irish state is – to be blunt – profoundly offensive. Better by far to keep quiet and thank his lucky stars that he lives in a state which would sooner bow to the demands of the banking establishment that failed enterprises be propped up by public guarantee for fear that nationalisation would lead to a run on the banks (as quoted in yesterdays Sunday Business Post).

Better by far.

The intellectual bankruptcy of a financial elite, who appear not merely indifferent to the situation they are directly responsible for creating and exacerbating but actively disdainful of those who assist them when they can turn nowhere else, is a sight to behold. Now, it would cheering to think that Fitzpatrick is the equivalent of a World War Two Japanese soldier emerging years after the war has ended – still fighting the same battles long after the conflict has moved on. That in effect his rhetoric, finely honed after decades of having these pat little answers is merely a reflection of his inability to countenance that the world has changed. But talking of pusillanimity, we have a political establishment which appears to believe that it is also business as usual and that the national economic and the interest of individual financial institutions – including Anglo-Irish bank – are coterminous. And we have a left which while making great play about disagreeing with the ‘solutions’ proposed has, so far, neglected to indicate what alternative there is to the current cant about there ‘being no alternative’ but to underwrite this sector of the economy.

And in that intellectual and activist void one further guarantee can be counted on – that of the job security of those who propelled our economies towards this crisis.


1. ejh - October 6, 2008

Am I right that Irish child benefit is paid on roughly the same basis as UK child benefit, to wit universally, regardless of the income of the parents?

If so, then counter-intuitive though it may seem, it’s extremely efficient. Because while of course lots of people get it who don’t need it, the absence of any need to check and measure income (and the relatively low level of fraud) keep administration costs down to an absolute minimum: almost the entire budget goes on actually paying out benefit. Whereas when I used to work in social security in the UK, something like two-thirds of the budget went on staffing costs.


2. WorldbyStorm - October 6, 2008

Yes it is, and that’s a very important point you make. But perish the thought that our financial elites might stretch themselves to find that out before they gift us with their wisdom.


3. Dan Sullivan - October 6, 2008

I’ve been given to understand that Mr Fitzpatrick is a supporter of FF of some note, surely he could have made this comments on the qt to the higher ups in FF when he had to go cap in hand for our cash to bail him and his shareholders out. And my understanding is that one of those larger shareholders is also a prominent FF supporter given to lending choppers to the party to help them campaign.


4. Damian O'Broin - October 6, 2008

The continued arrogance still astounds. Here’s someone in charge of a failed entity, one so punished by his beloved markets for it’s reckless and dangerous business practices that it’s existence could only be maintained by a pledge of support to the value of €100,000 from each and every one of us. And he wants to cut child benefit? Butt out, Mr Fitzpatrick.

Here’s a brave and bold proposal for you: You stump up the maybe €2 billion in cash that the state guarantee would cost you on the commercial insurance markets (I’m guesstimating here – better estimates welcome). If you ain’t got the cash, we don’t mind, we’ll take equity or assets. Which would mean handing over your entire company to the government. Ah well.

By the way WbS, at the conference on Saturday, Suzie gave you a great plug and hailed CLR as far and away the best Irish political blog. Can’t argue with her there.


5. WorldbyStorm - October 6, 2008

That’s extremely nice of her and you. It ain’t true though…

As regards your idea, the least he could do. 🙂

Dan, it would be very interesting to unravel the web of interests there… that’s an intriguing pointer.


6. Craig - October 6, 2008

At a time like this, bankers are in absolutely no position to dictate social policy or criticise social welfare – they themselves will be the recipients of massive corporate welfare handouts caused by the crisis that *they* manufactured.


7. WorldbyStorm - October 6, 2008

Absolutely, and never should be…


8. CL - October 6, 2008

The Health Service is about as successful as the Irish banking system. Yet..
“The Health Service Executive (HSE) said today that its senior staff are to receive bonuses worth a total of €1.4 million, in respect of their work during 2007.”
Irish banking executives by their improvident backing of gombeen, property-inflating capitalism have forced the Irish government to violate EU policy with the 400 billion guarantee. And set off a chain of events where the euro has now fallen to a 13-month low against the dollar despite the financial meltdown in the U.S.
‘Chutzpah’ is putting it mildly. Senior banking and HSE executives should be penalized, perhaps fired, for their ineptness. Instead they continue to feed at the public trough-and the Irish left seem missing in action.


9. WorldbyStorm - October 6, 2008

Yep, completely agree. That’s an interesting comparison with the HSE, and very apposite. And I think you’re right about the Irish left MIA. All last week Labour sort of pulled back from giving a serious analysis or suggesting a clear way forward, so they wound up in the worst of both worlds, carping but lacking a tangible strategy. It’s nuts CL, isn’t it?


10. crocodile - October 6, 2008

And of course it’s not just bankers that are offering helpful advice on the budget. The weekend airwaves were full of people opining that what we needed now was certainly not more regulation or the state taking seats on the boards of banks. No, the trouble is, you see, that really free markets haven’t been tried properly – a bit like Christianity or Socialism – and the countries that emerge best from the slump will be those that allow the freebooters of market capitalism most leeway and ‘flexibility’. That twit Constantine Gurdjieff ( sorry if spelling is wrong) was one I heard coming out with this sort of stuff on a Sunday radio show -there were others.


11. CL - October 7, 2008

The mouthpiece of the intelligent rich, the Financial Times, is saying that-
“The European Commission should now be laying the groundwork for a state role in recapitalisation, which looks ever more likely to be necessary.”

The demand from the left should be for a public equity stake in financial institutions and for the system to be run as a publicly-regulated utility. Eamonn Gilmore where are you?

Banking is too important to be left to the bankers.

Fianna Fail gombeenomics is the problem: it cannot be the solution. Those who have profited from this debacle lack any moral, intellectual or political standing: so Fitzpatrick and his ilk should be told to shut the f. up.


12. CL - October 7, 2008

crocodile, you’re right.
Another casualty of this debacle is orthodox economics: its utopian schemata offer no insights into really existing capitalism. And its practitioners, such as the one you mention, seem ignorant of both the history of economics and of economic history. And so they function as the witless mouthpieces for an unjust, unstable system in serious trouble.
But Polanyi is receiving some well-deserved attention:

“how did we get in this mess, and how do we make sure it doesn’t happen again?

Answering these two questions does not require a crash course in City finance and economics, because this crisis is as much about politics and ideology as anything. If you’re pressed for time, the reading list can be very short. Key is Karl Polanyi’s The Great Transformation, published in 1944, an economic history which sets out to explain 1929, the Great Depression and the rise of fascism.”


13. Graham - October 7, 2008

Interesting point about corporate welfare being exempt from the rigours applied to other types of welfare – some people do think that business subsidies are the most acceptable form of intervention. I noticed that IBEC has called for the public sector to be reduced AND for capital investment in the form of the National Development Plan to go ahead as agreed. So many private firms engage in government contracting to such an extent that they are barely “private” at all. But then this is just an example of how deep and wide-ranging the reach of the government throughout the economy really is.


14. Graham - October 7, 2008

CL: Orthodox economics has been hugely embarassed by this crisis but Hayek was no orthodox economist. The article you link to does not mention Hayek’s background in the Austrian school which defends, among other things, sound money and market-determined interest rates. Hayek did groundbreaking work on the business cycle and showed how central bank manipulation caused the misallocations during the boom which eventually led to the crash.

If people had listened to Austrian and libertarian commentators like Jim Rogers, Peter Schiff, Ron Paul, Lew Rockwell, etc. over the past couple of years they would have been known that a crash was coming and why. Mainstreamers like Ben Bernanke, Treasury Secretary Hank Paulson and their equivalents in Ireland and Europe clearly know nothing about Hayek, Mises, Rothbard, et al, or they wouldn’t be defending or executing Western monetary policies.


15. ejh - October 7, 2008

Hayek did groundbreaking work on the business cycle and showed how central bank manipulation caused the misallocations during the boom

I think we can insert “claimed” for “showed” in that passage.

In fact, Hayek was a dogmatist who would always claim that it was intervention that caused the problems, because there always would be interventions – which is, of course, because everybody wants there to be, especially the markets themselves. Anybody can comfortably claim that these interventions cause the problem and that the markets, left to themselves, would magically right themselves, because they know very well that this will never be put in practice and so they can claim it without ever having to put their ideas to the test.

Hayek: dogmatic, extremist, unable to distinguish different ideas when they have something in common. Deeply unpleasant man with deeply unpleasant admirers.


16. Graham - October 7, 2008

A deeply unpleasant man with deeply unpleasant admirers? I could explain his methodology to you but if you are happy to make accusations like that then my efforts would surely be wasted.


17. ejh - October 7, 2008

Graham, I could explain his methodology to you. It would be simple. That’s kind of the point.


18. Graham - October 7, 2008

I guess that was your chance to withdraw the attack on Hayek and his admirers. Since you chose not to, that’s the end of my participation in this thread.


19. WorldbyStorm - October 7, 2008

That’s a pity Graham, but there are issues about Hayek which at the least deserve debate and discussion…


20. ejh - October 7, 2008
21. CL - October 9, 2008

Hayek was the principal ideological influence on the revival of conservatism in the U.S which found its political expression in Reaganism.
Hayek would, I think, have opposed epistemologically the utopian thrust of economic orthodoxy, -if by orthodoxy one means neo-classical economics.
But no one can deny the influence of the Austrian school on the Chicago school. And the profound influence of the Friedmanites in promoting the ‘outmoded market mentality’ (Polanyi) which has dominated economic policy over the last few decades is common knowledge.
Gordon Brown’s part socialization of the City marks the end of that era.
Really existing capitalism has dealt a body blow to its own ideology. The opportunity for social democracy is clear.
The debunking of what should never have been ‘re-bunked’,-the outmoded market mentality,- must now proceed apace. All efforts and spurious theories which promote the commodification of land, labour and finance must be ruthlessly deconstructed.
Politically, in Ireland the immediate demand must be for a public stake in financial institutions, and their operation as publicly-regulated utilities. This is a reasonable and politically feasible demand.
But Gilmore seems to need a cojones transplant. Now is not a time for timidity.


22. CL - October 9, 2008

And if banking is too important to be left to the bankers, so too is economic policy.-
>” $300 bn of public works is more effective and productive than spending $700 bn to buy toxic assets.”-Roubini


23. WorldbyStorm - October 9, 2008

I hope you’re right about Gilmore… I just wish it were more directed. I agree with your thoughts though. Who’d have predicted it? The old demand for nationalisation of the banks almost realisable..?


24. ejh - October 9, 2008

My link above doesn’t seem to work (posibly the r in href was omitted?) so let’s try again


25. CL - October 13, 2008

Nationalisation alone does not achieve much. In whose interest? Who controls the government and for what purpose? But the ideological tide has certainly turned and thats a beginning.
Krugman, on the same day he wins the Nobel prize in economics writes,
” But policy is, finally, being driven by a clear view of what needs to be done. Which raises the question, why did that clear view have to come from London rather than Washington?

It’s hard to avoid the sense that Mr. Paulson’s initial response was distorted by ideology. Remember, he works for an administration whose philosophy of government can be summed up as “private good, public bad,” which must have made it hard to face up to the need for partial government ownership of the financial sector.”


26. CL - October 13, 2008

And a protege of Milton Friedman loses out:
“The favourite in the pre-awards betting was Eugene Fama, an economist at the University of Chicago. Fama developed the efficient market hypothesis, which argued that all traded assets – from bonds to mortgage-backed securities – are already accurately valued based on the information available to investors.

Perhaps the Nobel committee felt that this wasn’t really Fama’s year, as the fear and panic following the credit crunch threatens the collapse of the entire financial system.”


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