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Recipes for disaster… February 3, 2011

Posted by WorldbyStorm in Economy, Irish Politics.

It’s educative, yeah – that’s the word, reading Shane Coleman in the Tribune [the paper soon to be no more, sadly] at the weekend.

He’s talking about the election and really playing up to bourgeois fears. Look, over there, there’s Sinn Féin and ‘at 14% the party is potentially in play in 20-plus constituencies’!

Feel the fear.

But as entertaining, though actually maybe not, are some other thoughts.

‘But there is a large constituency out there who want to hear what Sinn Féin is telling them, even if it is a recipe for absolute disaster’.

Do go on…

The message the party is selling – unilaterally burn all the bondholders and tear up the EU/IMF bailout deal – is absolutely for the birds. But it’s highly seductive. Unlike Labour, Sinn Féin doesn’t have to worry about being in government after the election, so it doesn’t have to moderate its message.

Two things make me wonder about all this. Firstly if he reads Jon Ihle in the business section of his own paper [p.50] he will find a most useful article on how Irish businesses are ‘feeling the wrath of the capital markets’ because, as noted by Citigroup’s director of credit strategy ‘Investors go through their portfolios and say, ‘What is my exposure to Spain, What is my exposure to Ireland?’ and they cut it from that perspective.’

Even worse King suggests that ‘the austerity required by the EU/IMF bailout could plunge Ireland into a double-dip recession this year, affecting weak and strong companies alike’.

Given that, worth noting as reported this week in the Irish Times, the Central Bank has ‘revised downwards its economic forecasts for 2011, predicting growth in gross domestic product (GDP) of only 1 per cent for the year’.


This is a “significant downward revision” from the 2.4 per cent forecast in October, the bank said. Gross national product, which excludes multinational profits, is expected to be broadly unchanged this year.

One might think that Michael Taft has a point when he looked in the last day or so at the track record of austerity so far and the predictions made for and about it.

The second thing that makes me wonder is that we need only look at the platform for the Democracy Now formation to see that their list of agreed priorities were as follows:

• A referendum on the EU-IMF bailout with a view to negotiating a structured default;
• Reform of political structures; and
• Measures to end cronyism in public life.

Who signed up to this? Why people like Senator Shane Ross, David McWilliams and so on and so forth.

So one presumes by Coleman’s logic that they too are ‘for the birds’ with their own ‘recipe for absolute disaster’ which seeks much the same outcomes albeit the SF rhetoric is more – well – rhetorical. But though Fianna Fáil won’t accept it, and I had to smile just a little at Brian Lenihan’s faux sinister – or perhaps it was just meant to be sinister – warning ‘that the Opposition would move away from his ‘four-year manifesto’ at their ‘peril’, thing is, as Lenihan now knows only too clearly following his leadership bid failure, stuff changes. What was unthinkable – say…er… an IMF/EU intervention, yea, verily right up until the moment the feet of the representatives of those august bodies touched earth at Dublin Airport.. suddenly becomes the norm.

And as can be judged by the way in which the EU is moving towards some pretty fundamental reshaping of the bailouts – 30 year timespans and all, while the SF rhetoric may indeed be populist it is neither nonsense nor so far adrift from what is actually taking place around us.

There’s a fascinating discourse around the ECB/IMF bailout [and the issues relating to the banking bailout too] which goes something like ‘Yes, we know that the terms are impossible to fulfill and that it will demand a considerable extension of the time to repay and/or fundamental change to the interest rate – but, don’t say that in public, don’t give agency to internal players be they SF (or even in a sort of hesitant fashion the Labour Party) place that as a policy goal before the election and as part of their approach subsequent to it because that won’t do us any good and the best we can expect is the largesse of others perhaps if we keep our mouths shut’. You’ll find it well exemplified here by Dan O’Brien who concedes that the bailout is a crock but seems to argue that to actually point out that salient fact, or to try to tackle it on a policy basis, is pointless or counterproductive.

Given that the internal mood of the electorate and political players is of considerable consequence – given that it is said electorate, the workforce component of which is tasked with providing the engine of labour that will see the bailout repaid and the political players who must implement it, such a course smacks of hoping to grab scraps from the table. It also makes no tactical or strategic sense if we place our national interest first.

Indeed if we look back at the attitude that preceded the ECB/IMF intervention and the negotiations that took place during it one can possibly see how counter-productive this has been in placing us in a bizarre position where the very mechanisms supposedly designed to ameliorate our situation are actually intrinsically structured in such a way as to exacerbate it and there’s little or no evidence that the Irish government argued this point in any serious way [there is however some evidence that the IMF took a much less dogmatic approach, recognizing that the mechanisms were not fit for purpose but was overruled by the ECB].

It’s been said that Irish citizens are broadly speaking quite passive in the face of the current crisis, that we’ve not done a Greece. So far, anyhow.

But Vincent Browne’s piece in the IT yesterday points to something else, the remarkable passivity of our political leadership over the past few years. At every point they appear to have been behind the curve and their passivity informed debate here. So that all the supposed absolutes that we labored under suddenly transformed into something else. No question of a ‘bailout’ became the IMF/ECB at the door, and rapidly inside it. No question of a renegotiation has become absolutely a renegotiation. So what was not merely out of the question, but was used as a stick to beat alternative voices is now brought into the orthodoxy, though as evidenced by O’Brien, passivity rules.

And this passivity is something Browne addresses directly:

Brian Cowen’s deficiencies, in my view, were his politics. Not the Fianna Fáil thing but the mindset thing. In that respect, he shares that deficiency (as I see it) with almost all politicians in the establishment parties, among whom, incidentally, I include the Labour Party. The mindset is fixed on the idea that there are certain immutables in our lives and in our societies, certain deferences that are unavoidable.

Among the more pernicious of these immutables are that we cannot afford to defy the might of finance, or the free markets; that the only incentive is financial incentive; that ideas about equality are off the wall because of their unreality; that huge disparities of income and wealth are inevitable and, ultimately, acceptable; that one cannot trust the people with the major decisions of state because the people are uninformed and, for the most part, uninterested; that there are gradations of status in society and properly so.

Worse again, if that were possible, the passivity informs an adherence to orthodoxy even when orthodoxy itself allows some degree of flexibility. And yet why should any of us be surprised. As Browne notes, if you deny agency to states and state actors and reify markets to the point where they become impossible to resist of course there’s nothing a state can do – in terms of the response of those in power who are consumed by the belief that they are impotent. And it goes further. They genuinely believe this is the right way to tackle these issues, not by engaging with them head on but by tinkering at the edges, hence the partial and insufficient crawl away from the original terms of the bailout.

But this brings to mind Nick Cohen’s thoughts long long ago, which still retain a potency…

“…however novel the ability of companies to shift money and jobs around the world, and however restrictive the limits on the autonomy of national governments have become, corporations remain weak. When all is said and done, they are hierarchical associations for the production of profit. They can’t raise armies or levy taxes or enact legislation. Governments can do all three and turn nasty if they have the inclination…”

Putting aside the issue of corporations the central point is that states are much much more powerful in the face of the market that their detractors pretend or their supporters appear willing to admit. That in other words they have much greater flexibility and room for action than is proposed.

But as one is forced to reiterate time and again, that’s the crucial problem with orthodoxy. It all too easily gets locked into the moment and the past and is unable to comprehend, let alone deal with, change.


1. alastair - February 3, 2011

“one presumes by Coleman’s logic that they too are ‘for the birds’ with their own ‘recipe for absolute disaster’ which seeks much the same outcomes albeit the SF rhetoric is more – well – rhetorical.”

I suppose everyone seeks the same outcomes – getting us out of this mess and away from the mass of debt, but that really ignores the point of distinction between the SF platform/rhetoric and that of the other parties (FF included if you read between the lines) – renegotiation of the terms of the bailout/loan is inevitable, if only because any reading of the situation highlights it’s an impossible ask given our economic capacity, but renegotiation is not the same as unilateral withdrawal. They are just about as different to renegotiating the terms of your mortgage, and simply dropping the keys back into the bank. Rather more than a rhetorical twist.


2. Worldbystorm - February 3, 2011

That’s true, but remember I’m not comparing SF to the other parties but to Ross and the Democracy Now crowd.

The distinction between the latter two seems to be that SF says they’ll got for unilateral full default and DM want/wanted a referendum to go for a ‘negotiated’ but still full default.

Both want a full default whereas the rest with varying degrees of enthusiasm want a partial default, as you rightly note.

So the question still remains given that fundamentally DM and SF whatever their slightly differing approach and factoring in the rhetoric (neither if us I’m sure believe there wouldn’t be an element of negotiation on the part of SF in the blindingly unlikely case it were in power) even just to ensure the keys were given to the right person so to speak, the question still remains would Coleman say that Ross McWilliams were for the birds.

Perhaps he would. Perhaps he would.


3. NollaigO - February 3, 2011

You would be in a better position to renegotiate your mortgage if your bank manager was genuinely fearful that you would throw the keys on his desk.
Regardless of Michaél Martin’s proclamations that the deals negotiated with EU/IMF are sacrosanct,the fact is that the deal is so punitive that a default is inevitable and sooner rather than later. Even Soros concedes this.


4. Crocodile - February 3, 2011

Vincent Browne’s discussion of deference is interesting. Deferential attitudes are everywhere in Ireland and we are kidding ourselves if we think that we haven’t replaced one kind of reflex knee-bending – to church, teacher, politician – with another, to commentator, investor, CEO.
What is the Farmleigh meeting of business aristocrats? The ‘non-negotiability’ of our Corporation Tax rate? The ‘advice’ to our government from the CEO of Intel? The suggestion I’ve just heard from Pat Kenny that if we ‘behave ourselves’we might be granted more favourable interest terms by the ECB? The apparent ability of that superannuated twit Ed Walsh to command half a page of a national newspaper every time he feels like doing another bit of public servant insulting?
They are all symptoms of a deference as pernicious as any to church or state.


5. CL - February 4, 2011

Gilmore is now saying that the election is a referendum on the EU/IMF deal; its not a ‘strait jacket’, and nobody’s ‘hands are tied’.
Its a memorandum of understanding, not even a contract.
The question now becomes what will Labour demand in the re-negotiation?
As David Harvey has pointed out: “it sometimes seems as if the IMF merely takes the responsibility for doing what some internal class forces want to do anyway”. (A Brief History of Neoliberalism,p117)
The IMF/EU deal contains the basic elements of right-wing economic dogma: fiscal austerity, privatisation, and more labour ‘flexibility'(a euphemism for increasing the commodification of labour power). Its a direct attack on workers living standards and on trade unionism.
Is Labour opposed to these regressive policies? If so Gilmore needs to say so. Otherwise the jibe, ‘Vote Labour, get Fine Gael’ stands.
And if he favours a referendum on the IMF/EU deal he should advocate a…referendum.


WorldbyStorm - February 4, 2011

Well, I vastly prefer to hear Gilmore articulate that line rather than the opposite, but late in the day.


CL - February 5, 2011

Sure, but the point is how much of a renegotiation does Labour, and Fine Gael, favour?
It seems fairly certain that the punitive rate of interest on the EU part of the loan will be reduced. And the IMF would clearly favour such a reduction. Is this all that Gilmore is talking about? And there will be surely extra ‘conditions’ attached to any reduction.
And its the conditions attached to the loan,-fiscal austerity, more labour market ‘flexibility’, privatization,-that are typical IMF free market solutions,-so-called solutions that have failed and caused great misery throughout the world.
If Gilmore is in favour of renegotiating these regressive conditions then he is at odds with Fine Gael, who are already advocating privatisation. If he is not in favour of such a fundamental renegotiation he is making very misleading statements.


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