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Professor Ray Kinsella in the Examiner on the Crisis May 20, 2013

Posted by WorldbyStorm in Economy, Irish Politics.
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Thanks to Paddy Healy for the following: I think this is the most important article by an establishment professor of Economics since Morgan Kelly warned about the banking crisis.

This article in the Examiner to-day by Professor Ray Kinsella has far more importance than is given to it by the media, including by The Examiner itself.

In the article he lambasts the policies of successive governments and of the Troika. He advocates staying in the EU but leaving the Eurozone. He sees this course as necessary to restore control by Irish citizens of Irish affairs. Crucially he says this is necessary to rescue Ireland from economic disaster.

Prof Ray Kinsella is Professor of Banking and Finance in the Michael Smurfit Graduate School of Business, UCD. He is Visiting Professor at the School of Banking, Accountancy and Finance at the University of Wales Bangor, is on the Faculty of the Management Institute of Paris, and is adjunct Professor at the University of Bryansk.

He has published, researched and broadcast extensively in the fields Banking and Financial Services, including Regulation, Governance and Ethics.

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1. Paddy Healy - May 20, 2013

This is the link to the Examiner Article by Prof Ray Kinsella

http://www.irishexaminer.com/ireland/troikanomics-is-a-form-of-self-harm-231729.html

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Economic Refugee - May 20, 2013

In a world a little braver, a bit more far-seeing and one which was capable of learning — and moving on — Ireland would host a meeting of the peripheral countries. They would hammer out the basis for a managed exit from the eurozone for all or some.

Yes to the first, but I’m very sceptical that leaving the eurozone would not simply lead to a feeding frenzy of financial vultures and the cementing of the power of national banking interests.

Instead I would recommend listening to Varoufakis talk entitled ‘Confessions of an erratic Marxist in which he asserts (while discussing many other issues) that it would take any country months to leave the Euro, during which time capital flight would be even more devastating than the current capital strike.

Instead he recommends that Syriza and other leftist governments should make a short term alliance with the IMF to break the power of local, national banks – the ‘bankruptocracy’ over national politicians.

Varoufakis is also convinced that if this is not done, then the mostly likely course is breakup of the Eurozone and the EU, leading to the implementation of the plan B being cooked up by Weidmann and Asmussen for a northern European super-Deutschmark. Which would lead to a decades long recession (and be a further disaster for the German working class, as Lafontaine and Sarah Wagenknecht should realise – as the ‘working poor’ are turned in the the ‘unemployed poor’) and all that implies, favouring only the extreme racist right because the left is not ready to take power in most regions.

Kinsella and Weidmann may well get their way, however, and we will live with the consequences. If Kinsella thinks that Ireland can continue to operate a corporate tax-evasion based economy in a Europe that has economically exploded, well, words fail me.

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Economic Refugee - May 20, 2013

Sorry the first paragraph is a quotation of Kinsella’s article. No comment editor available, unfortunately.

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WorldbyStorm - May 20, 2013

Some very important points you raise there, not least the sheer lack of power the left has in political terms and the point re corporate tax evasion. It would make me tend to be very cautious too about any such moves, though I agree with Kinsella in a better world there’d be at least some efforts by the smaller states to do something. That said a most interesting piece and thanks btw for the link to Varoufakis.

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WorldbyStorm - May 20, 2013

Re comments editor, I have searched high and low in WordPress for same and cannot find one. May have to shift to Squarespace some day soon..

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Economic Refugee - May 21, 2013

Don’t sweat it WBS.

Some of us should learn to proofread comments written in haste 🙂

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Economic Refugee - May 21, 2013

Oh – you fixed it! Good man yourself.

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Economic Refugee - May 21, 2013

and that “tax-avoidance for MNCs” strategy is starting to look distinctly threadbare.

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2. CL - May 21, 2013

The Irish labour force was ‘adjusting’ for centuries before the arrival of the the Troika.
The austerity policy of the Troika now being implemented by F.G/Lab was first formulated by Fianna Fail, in the interests of the indigenous Irish ruling oligarchy. Blaming the eurozone centre for policies of, by, and for the Irish bourgeoisie, is a convenient populist/nationalist ploy.

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Economic Refugee - May 21, 2013

+1

As in the ‘it was the ECB/Germans/Martians wot made us do it’ excuses for the bank guarantee in 2008 that Donagh Brennan pretty much nails here.

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CL - May 21, 2013

However it should be pointed out that the anti-Keynesianism of Germany is a serious obstacle to eurozone recovery.

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3. Economic Refugee - May 21, 2013

And here’s another thing with Kinsella’s plan.

All the public debt, including the socialised private debt of the bankruptocracy, would still be denominated in yoyos, which themselves would presumably be linked in some way to it’s one true successor – the super-DMark. Paying that lot back with a rapidly devalued national currency sounds like even more fun than the current debt-slavery.

Or is Kinsella advocating a massive default? If so I would listen to him more carefully.

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Economic Refugee - May 21, 2013

Could edit that to ‘Kinsella’s cunning plan’, Percy?

Joke.

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4. Paddy Healy - May 22, 2013

Dáil Private Members Motion on Future Direction of EU
Thomas Pringle with the support of most Technical Group Deputies has proposed the motion below in the Dáil. The vote will take place this evening, Wednesday.
It advocates a wide public debate on the future direction of the European Union and calls on the government to ensure that planned Treaty changes include a process to allow a Eurozone member state to voluntarily leave the Eurozone. Sinn Féin, Fianna Fáil and the Government have proposed amendments which delete these calls.
“That Dáil Éireann:
Notes statements by leading EU politicians and policy makers that the crisis of the Eurozone provides an opportunity to push ahead towards a fiscal/political union;
Further notes that:
 Eu law making from 2014 will be put on a straight population basis;
 The Presidentof the European Commission, José Manuel barroso,has announcedthat the unelected EU Commission will set out a range of fundamental EU Treaty changes by early next year;
 The Eurozone has developed a hegemonic economic model;
 The plans for enforcing balanced budgets and draconian fiscal rules on the 17 Eurozone countries do nothing to address the sovereign debt and bank solvency crisis; and
 Increasingly the EU is losing legitimacy and authority among ordinary citizens in EU states;

Dail Éireann recognises that:

There has been no proper discussion of the fundamental flaws in the Eurozone from an Irish perspective;

The Eurozone exchange rate is generally unsuitable for Ireland’s unique pattern of export and import trade both inside and outside the Eurozone;and

The Eurozone put us under the control of the European Central Bank;and as a consequence the government has no economic policy beyond “preserving the Euro” and

Calls on the government to:
Initiate a wide ranging public debate through civil society on the future direction of the European Union: and

Ensure that Treaty change includes a process to allow a Eurozone member state to voluntarily leave the Eurozone”

–Thomas Pringle, Seamus Healy, Shane Ross, Joan Collins, John Halligan, Finian McGrath, Clare Daly, Richard Boyd Barrett etc

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5. CL - May 22, 2013

‘The Eurozone put us under the control of the European Central Bank;and as a consequence the government has no economic policy beyond “preserving the Euro” ‘

-If the government is incapable of having an economic policy then there is not much point in the opposition criticizing government economic policy.

It is true that the ECB is Ireland’s central bank being in charge of interest rates, exchange rates and money creation. But all this was known before the eurozone was set up.

Certainly Ireland would be better off if it had never joined the euro. But exiting the euro would not simply be the reverse of the process of joining. Moving from the euro to the punt is a whole different process than moving from the punt to the euro.

True, there are serious flaws in the eurozone construction: a monetary union without fiscal integration is inherently unstable. But fiscal integration requires political integration,-unlikely even in the distant future. So the crisis cannot be solved.

Neither can the crisis be allowed to wreck the EU and the eurozone. Such a development would endanger the whole post-ww2 political settlement which put an end, pretty much, to hundreds of years of internecine European warfare. So anytime there is a serious threat to the eurozone the ruling oligarchy will intervene, with all the considerable resources at its command, to prevent break-up.
So there will be neither a break-up nor a solution, rather an endless crisis. This is the reality facing the Irish government and the opposition.

And barring a revolution in Ireland its difficult to see any government exiting the euro.

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6. Paddy Healy - May 22, 2013

Dáil Debate on Pringle Motion on Future of EU
Full speech and debate is here:
http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2013052100046?opendocument
Deputy Thomas Pringle; I move
It is 40 years since our accession to the European Economic Community, EEC, as it was then, which has now become the European Union. At that time, the EEC was heralded as the great European hope for Ireland. How many times over the last 40 years have we heard politicians extol the virtues of our membership? How many times have they told us about the economic and social backwater we would have been only that those enlightened Europeans took us under their wing and showed us the error of our ways? Does anyone here seriously believe that Ireland would not have progressed except for our membership of the European Union? We are a nation that has always been influenced from the outside. We have always been open to ideas from abroad and have looked to adapt influences to our situation.

I think it appropriate at this time in our six-month Presidency of the European Union and on the 40th anniversary of our joining the EU that we evaluate where we are and where we are likely to go in the future. We need to move beyond the debate that Europe has been good for us, vote for jobs and follow the money. We all know now that those slogans were a con and are hollow. There is no doubt that there are big changes coming down the line in terms of our relationship with the European Union and what it will mean for us as a nation and indeed whether we will be a nation after those changes.
Full speech and debate is here:
http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2013052100046?opendocument
Thomas Pringle concludes:
The Government has an obligation to outline to the people where the EMU project is leading and what it sees the shape of the Union as being in the years to come as the drive towards a political and financial union continues. The debate should take place away from the heat of a debate on an imminent treaty change and in circumstances in which citizens can hear clearly what is being planned in their name. Alongside this debate, the Government should be mandated to work to ensure an option of withdrawal from EMU is enshrined in the EU treaties. This is the only option that will give the people the opportunity to change policy and the direction our membership of the European Union is taking.

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7. Paddy Healy - May 22, 2013

Dr Nat O’Connor, Director of Tasc has now commented on the Ray Kinsella Article on the TASC blog-Progressive Economy
Here is the Link
http://www.progressive-economy.ie/2013/05/ray-kinsella-on-ireland-and-euro-zone.html

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8. Paddy Healy - May 22, 2013

In Reply to Nat O’Connor, Ray Kinsella said:
Ray kinsella said…
Hi Nat, one of the key points of my article was precisely to argue the case for the Government to convene a meeting with other peripheral countries to set out what I call a ‘New Growth Agenda’. Consider the disregard of Ireland’s case for debt relief in 2011/2012-and the manner in which it was dismissed out of hand by Germany and also Sarkozy. By contrast,when Spain and Italy demanded changes in funding they succeeded. Numbers count.

Just one other point–you set out a number of standard arguments in connection with an exit which were not in the paper but to which I will be returning.

22 May 2013 19:04

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J. A. Hegarty - February 17, 2015

Well said Paddy!
The ECB plus the Irish government have achieved for Germany what Hitler failed to achieve, namely, the total domination of Europe by Germany, with seats of power in Berlin (reviewing budget prior to publication) and Frankfurt (ECB HQ)

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9. CL - May 22, 2013

‘What the peripheral countries need to do is to meet and demand a new monetary policy regime for the whole currency area.’-Nat O’Connor

Perhaps Dr. O’Connor could outline what kind of a new monetary policy regime he thinks the ECB should follow.
Of equal importance is a new fiscal policy regime, but the chances of converting German policy makers to Keynesianism are slim.

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10. Paddy Healy - May 23, 2013

Dail speech of-Seamus Healy TD on future of Eurozone Bill- Altercations with Minister of State Joe Costelloe (Labour)
Deputy Seamus Healy: The European Union’s austerity doctrine imposed the burden of adjustment to the post-2008 economic collapse on the labour market. It is an indefensible misuse of economics that the eurozone authorities should seek stability on the back of tens of millions of unemployed. This month’s eurozone unemployment figures reached yet another record. It is equally indefensible that within an economic epoch categorised by intellectual capital and innovation, youth unemployment should now stand at an average of 25% and more than double that in some of the peripheral countries which are most in need of that intellectual capital and capability.
At this stage in the recessionary cycle there is no sense in what is being done to the economy and what is being planned for forthcoming budgets. After five austerity budgets, this country’s deficit has been reduced at a terrible cost and with much further to go. Austerity policies reflect the self-interest of other, larger EU powers and are leading to the impoverishment of a growing number of countries. The only response to this has been a call for more integration or, to put it another way, a greater accrual of power and control to the centre. It is the policies dictated from the centre that are the cause of the problem and which are now subverting the original purpose of the wider European project.
The eurozone authorities were wrong in their myopic fixation on reducing debt and effectively ignoring what is the key to the whole ratio, growing gross domestic product.
It defies common sense that an Irish Government should still feel obligated to defend such policies and attempt to impose two more years of “fiscal consolidation”. Talk of “exiting the bailout” is wide of the mark. The burden of “troikanomics”, including onerous debt-servicing costs, stretch into a future that is dominated by those who preached the austerity doctrine in the first place. Ireland’s growth capacity has been compromised; the best and brightest — our engineers, architects, doctors, nurses, teachers, entrepreneurs — have left and the morale of those remaining is being destroyed. This is not “adjustment”; it is tantamount to self-harm. The second reason for a managed exit by Ireland is that these same policies are doing enormous damage to two of the most fundamental pillars of a stable and functioning democratic economy… At the micro-level, in schools and local health provision, they are doing damage that will take years to reverse… Austerity has, however, reinforced German hegemony within the eurozone and there is little evidence of the solidarity that was once at the heart of the European project… There is no longer any appetite for the argument that only further integration will solve this crisis. This is a self-serving argument and finds no resonance among national populations. There is always a danger to democracy when the elite — the “authorities” — become semi-detached from the beliefs of the people from whom they get their legitimacy… Those who aspire to national leadership would come out from behind the barricades of “There is no alternative” and would take up again the freedoms and responsibilities of which they are trustees.
These are not my words but those of an established and prominent economist, Professor Ray Kinsella, Professor of Banking and Finance at the Smurfit Post-Graduate Business School of UCD, writing this week in the Irish Examiner. He was arguing for a managed exit from the eurozone but not the EU, effected through a meeting of peripheral countries to plan resistance to the EU central powers. This motion does not go that far. It merely seeks that the option of leaving the eurozone be made available through planned treaty changes and that is a proposal I support.

I am amazed that both Sinn Féin and Fianna Fáil seek to delete this call from the motion. The achievement of such an option would be only the start. The central EU powers should be told that Ireland’s bank-related debt must be mutualised across the eurozone in proportion to GDP, otherwise Ireland will unilaterally default and encourage other peripheral countries to do likewise and that Ireland would have to consider exiting the euro irrespective of treaties. Without such a stance there will of course be no re-negotiation, just continued capitulation to the austerity policies of Germany and its allies. Today vulture finance companies are buying half the country for a song and international investors are raping the country like the British landlords of old. Davitt organised a plan of campaign and Connolly set about the re-conquest of Ireland. We are faced with a similar task today but where are the Davitts and the Connollys? Soon we will commemorate the centenary of the 1916 Rising and like Pearse, I am convinced that this generation will rediscover new leaders who will push aside the current ones on their way to the re-conquest of Ireland. I support the motion

Minister Joe Costelloe (Labour)
James Connolly who was referred to by a Member opposite was actually an internationalist. He would have been the first person who would have wanted to see a cross-border union, with member states united in solidarity. He would have welcomed this approach towards peace in the European Union, with solidarity between peoples and communities.
Deputy John Halligan: I am not sure about that.
Deputy Thomas Pringle: He opposed empires though.
Deputy Richard Boyd Barrett: He would not think much of the ECB.
Deputy Joe Costello: We serve neither king nor kaiser – that is what James Connolly always said.
Acting Chairman (Deputy Joe O’Reilly): The Minister of State to continue, without interruption.
Deputy Joe Costello: I remind those practical capitalists on the benches opposite that, under the international human development index, the rating of country wealth, Ireland ranks seventh out of 187 countries.
Deputy Seamus Healy: The Minister of State is absolutely right. That is why we should tax the wealthy in this country.
Deputy Joe Costello: That is the case, even in the middle of a bailout programme.
Deputy Seamus Healy: The richest 300 only pay 25% tax. We need to start taxing the superwealthy.
Deputy Joe Costello: The rant about Ireland going down the tubes, with the paucity of ideas from Members opposite, is not credible.

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CL - May 23, 2013

‘At this stage in the recessionary cycle’-Deputy Healy, above.

it is erroneous to describe capitalism’s current crisis as a ‘recessionary cycle’

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11. Paddy Healy - May 23, 2013

Cl is probably right-the crisis is much more fundamental than that.
But Seamus was merely quoting Ray Kinsella on that matter, as he said further down

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12. Gerry - March 29, 2014

Professor Ray Kinsella spoke at the Feasta Irish debt crisis conference, on Friday September 23 2011.

He said the following on the banking system and the future of banking in Ireland.
Professor Ray Kinsella – Sept 2011
“Our capacity to drive this model of growth is crucially dependent on the robustness, flexibility and sustainability of our Banking System and on our ability to re-imagine a very different type of financial system to the one which is being re-created:
That is one which is not driven by short term shareholder value or by a culture of statism but one which is responsive to all of its stakeholders whose ethos and operations are benchmarked against the general good: Not unlike Islamic Banking.”

“But there is a more fundamental issue which is:
Why are we recreating under a different ideology a system that has failed? Ultimately a financial system is only as strong as the economy that it serves. This means that the re-creation of a sustainable banking system is inextricably bound up with an equally sustainable strategy for growth: that is the detonator in the debt GDP ratio. This is not the case at the moment. There is no alignment between the financial system and the real economy.”

We at the Public Banking Forum of Ireland are working to introduce A Public Savings Banking System to Ireland. Similar to the German System where they have 64% Public Banks. These Public Banks increased their lending to SMEs by 17% between 2008 & 2011. Vital to Germany surviving the recession so well and its continued success.

Public banks that are mandated to support SMEs.
Banks that lend only its customers savings and whose aim is sustainable lending rather than maximising profits.
Banks that return all interest & profits to the Public Savings Bank & community and are banned from financial speculation.

Visit our Website, learn more and help make it happen.
wwww.RepublicIrelandBank.com

Regards Gerry – The Public banking Forum of Ireland.

Link to Video of Professor Ray Kinsella – Feasta: http://www.feasta.org/2011/10/17/professor-ray-kinsella-ireland-should-pre-empt-a-break-up-of-the-euro-zone-and-leave-on-its-own-terms/

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