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A missive from the orthodoxy and some thoughts on Labour and Fine Gael… June 16, 2015

Posted by WorldbyStorm in Economy, Irish Politics.
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Fascinating to see Brendan Howlin pushing back against the strong version of the orthodoxy as represented by the Fiscal Advisory Council and the Central Bank, as against his own and that of the government, marginally weaker version of said orthodoxy. So he offers this novel argument in the IT yesterday:

One of the less discussed impacts of the recession may well be its long term effect on the economics profession. As John FitzGerald indicated when he retired from the ESRI, it remains a regret that the profession wasn’t sufficiently attuned to the dangers facing the Irish economy in the run-up to the crash.
I wonder whether this failing is now contributing to the profession’s view of the future.

Amazing too to read his rationale of Labour’s participation in the government. Well, actually his and Michael Noonan’s efforts on the economic front:

Michael Noonan and I share two core goals and we intend to make good on both.
We were elected to fix the economy and the public finances. We are well on the way to doing so.
But generously he doesn’t forget the rest of the crew…

Politically, I don’t believe that would have been possible without the two parties acting in concert. As a Government all decisions have been taken together, good and bad. Labour’s contribution has been significant.
Our recovery has been remarkable for the fact that industrial peace and social cohesion have been maintained. Industrial peace, in particular, in both private and public sectors has been a critical signal to investors that Ireland remained open for business and was serious about recovery.
Our second shared goal is to ensure that the Irish economy is not put at risk again. Having gone through the difficult task of getting things back on track, we have no intention of allowing the recovery to be derailed.

And it’s slaps on the back and cheers all around:

The scale of our progress is remarkable. In 2014 we returned the economy to primary surplus. In 2016 we will meet the “golden rule” – we will only be borrowing for capital purposes, because we will be able to meet day to day spending from the income we raise.
In the spring economic statement we commit to adherence to Europe’s fiscal rules.
The only question that has arisen here is the pace at which we move toward budget balance in structural terms, after allowing for the impact of the ups and downs of the business cycle. However, in the European Commission’s assessment of 2016, Ireland meets that target comfortably.

But you know, put aside the self-congratulatory rhetoric and it seems to me the rationale would double for something quite different. We’ve heard a lot of stuff in recent times about how Fine Gael and Fianna Fáil should bite the bullet and go into government together. That may indeed be the only option. And beyond that that Fine Gael and Fianna Fáil should merge. That is so unlikely short the economic apocalypse that I’d put good money on it not happening short to very medium term.

But really, reading Howlin’s contribution a different thought comes to mind, which is why all this bother with two political parties when one would do? Why don’t the LP and FG coalesce? What logical impediment is there if they work so well together, if all the decisions are taken together, if they act in concert? Why retain the distinctions between them?

And if the argument is that this is a crucial point, an emergency, well, what possible difference does that make? Is mild to no social democracy only for the good times? Is that what they believe?

Of course I don’t expect any such merger, though there are those in the LP ranks who have struck me over the years as being eminently suitable for joining FG. But really, as always the question becomes – what is the point?

Comments»

1. FergusD - June 16, 2015

So Irish Labour’s role was to ensure industrial peace while austerity was implemented. From the horse’s mouth.

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Alibaba - June 16, 2015

In the past, and in better times, they told us to trade industrial peace for piss poor wage increases, pegged to percentages not flat rates (various programmes for national recovery). Now they demand industrial peace and self-congratulate themselves for saying that we must bear the brunt of austerity measures to ensure ‘we have no intention of allowing the recovery to be derailed’. How congenial!

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2. Ed - June 16, 2015

You might remember, immediately before the water charges campaign erupted, the IT was relentlessly pushing the line of a conflict between the Fiscal Advisory Goons (the guys who have it written into their contract that they can only be photographed striking tough guy poses while leaning against walls) and the government about how much cutting there should be, with the IT ardently shilling for McHale’s goon squad and presenting them as the epitome of scientific rigour. That was all swept away by the protests. Now they’re desperately trying to force the debate back into that hideous frame. Let’s pray there’s another eruption soon to blow this nonsense out of the water.

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3. 6to5against - June 16, 2015

The part that infuriates me is the conflation of the deficit with the economy. They may be linked, but they are in no way the same thing.

By reducing the deficit, the gov’t were, knowingly, taking money out of the economy. Any economic growth now occurring could have occurred over the last few years, if it weren’t for ideologically driven austerity policies. People could have had more money, services could have been better and more people could have been in work. That this was not so was the direct and deliberate affect of gov’t policy. So how was ‘fixing’ the economy the gov’ts focus in that time?

And to have reduced the deficit ahead of schedule means that we created unnecessary unemployment, and reduced public services, to an extent that not even the ideological hawks in the EU and the IMF considered desirable. But Howlin is boasting of that?

Any increase in public spending either this year or next is in fact money that not even most right wing governments would have ever sucked out of the economy in the first place.

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4. Ian - June 16, 2015

A lot of wishful thinking going on in the comments section here. I don’t think the Labour Party instinctively believes in austerity in the way that Fine Gael does.

The sad fact was that by 2011 an extensive fiscal retrenchment was necessary because the simple ability of the state to run a deficit stimulus programme was completely unavailable. The state couldn’t finance itself due to the fear generated by both the appalling costs of the bank bailout and the collapse in tax revenues from the economic nose dive.

It may be trite to say it but the funding basis for every public sector service salary and welfare payment was in jeopardy only a few years ago. Given that backdrop I think Howlin’s point is that the government has managed to pull the country back from the edge. I just don’t see how an extended stimulus could have gotten us to where we are now even though I would have been instinctively in favour of such an approach.

FF’s “something for everybody in the audience” approach prior to the crash meant that the wriggle room that should have been there was gone by the time the current coalition was formed.

I think the mistake Labour made was that it wasn’t sufficiently honest enough with people in 2011 about this grim reality. The ongoing issue of broken promises arises from this mistake in communication rather than the merits of the policy formula on offer. But don’t confuse the desperate economic circumstances of the last few years with an ideological preference for austerity within the Labour Party.

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Ed - June 16, 2015

Yawn. The ‘ideological preference’ has been expressed time and time again by Labour politicians with unmistakable glee. Unemployment is a ‘lifestyle choice’ for young working-class people, remember? And now we have Burton and co spitting on the people of Greece and hoping that Merkel and Schauble will stamp their heads into the ground so that Irish citizens don’t get any dangerous ideas about there being some kind of alternative. In the article linked to above Howlin identifies tax cuts as the priority for his government when there’s any room to spare; given the way the issue has already been framed by his colleagues, that means tax cuts for upper-class households (mendaciously pitched as relief for the non-existent ‘squeezed middle’). Labour has done what it’s done because it’s just another right-wing party, end of story. Anyone in the party who didn’t see things that way has left by now, and there weren’t many of them.

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Ed - June 16, 2015

Not to mention, of course, having children arrested before dawn so that Burton’s lies about the protest in Jobstown can be given some spurious legitimacy. You don’t get to vilify people who challenge you as ‘fascists’ and still expect to be treated as part of some broad left.

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lcox - June 16, 2015

+1

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Tawdy - June 16, 2015

Your apology is too late! Ian. Or is that Brendan hisself?

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6/5against - June 16, 2015

The mess created by 2008 was never going to be easy to solve. And the reality is that a stimulus at that point would have been hard to finance. But that does not even begin to explain why the cuts were so extreme, why they were accelerated beyond any norm and why they were so regressive.

And a short period of weak economic growth at this stage does nothing to justify the policies that were followed.

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