November 10th Afternoon: The Recession Diaries
Finally, a slim ray of light.
‘The problem we have in the public finances is as a result of the fact that the economy is in a recession . . . we have a problem in the economy which has created difficulties in the public finances. It’s not the other way around.’
So said Eamon Gilmore on RTE yesterday. This is the first breach in the consensus dominating the debate - the consensus that prioritises the fiscal imbalance as if it were the cause, and not the result, of our economic decline.
Up to now the Left has been content to oppose the cutbacks and general tax increases contained in the budget. However, it was in danger of being caught in a two-fold trap, best summarised by Shane Coleman. He first, demanded that Labour say what it would do rather than what it opposed (fair enough - if the Left is to go beyond simple oppositionism and, instead, lead a debate, this is exactly what it has to do). But, secondly, Shane demanded to know:
‘What alternative cuts or tax increases would it introduce if it believes that the education cuts are wrong or that all pensioners, rich and poor, should get a medical card?’
This is the Right’s fiscal trap - you can decide which course to take as along as it’s a course we approve of. Any other options are off the table, any other way of looking at the problem is taboo, extremist, a non-starter.
Gilmore opened up a new front. He talked of pump-priming the economy. When asked whether this could be done given our budgetary state, Gilmore replied:
‘The Labour Party has consistently argued that it is legitimate to borrow for capital purposes . . . and, secondly, we should be using the National Pension Reserve Fund to get money invested into our own economy and in our own infrastructure to get things moving.’
So, borrowing and raiding the Pension Fund can now be put on the table -a third option. And if some think this third option is an easy way out of the ‘hard choices’ - as the Right put it such a macho way - Gilmore opened another door which Labour left closed: increased taxes on the wealthy:
‘ . . If the Labour Party were in Government and we were faced with that levy situation (i.e. Fianna Fail’s 1% levy) we would have skewed that much more on higher incomes than on low and middle incomes . . . you would have seen a higher level on those over €100,000 per year certainly and much less on those on low to middle incomes.’
And just to drive this point home, Eamon unequivocally renounced Labour’s general election policy of cutting the standard income tax rate by 2% (it actually wasn’t a party proposal - rather, something thought up at the last minute by Pat Rabbitte’s speechwriters to make a headline for his pre-election conference speech).
So, are we there yet? Have we the weapons to take the fight to the Right? No, not by a long shot. While it would be unrealistic to expect anyone to elaborate a comprehensive alternative in a seven minute interview, it is clear there is much work to do.
First, there is a real danger that Eamon will be isolated. He is the first Left politician to open up this new fiscal option (new for Ireland, anyway). But he needs support, not just from his parliamentary colleagues, but from the broader progressive field: trade unions, Left commentators and bloggers, social organisations, etc. If he’s left on his own making this argument, he will be easily overwhelmed by the Right. A once-off interview is no match for the deluge of fiscal conservative nonsense we get subjected to everyday.
Second, Eamon’s position is still not fully formed. His claim that Labour supports investment for capital borrowing is neither here nor there; parties across the ideological spectrum support this. His proposal to tap into the Pension Reserve Fund begs questions: for what projects, to what extent, on what commercial terms. The fiscal issue goes beyond capital borrowing or using Pension fund for capital projects - it is about borrowing over the length of the downside business cycle for both current and capital expenditure; a necessary breathing space while other policies are put in place to get us on the right path.
In addition, Labour still remains stuck in the ‘bricks and mortar’ argument. No doubt, putting unemployed builders back to work on school and social housing construction, can be helpful but it is by no means anywhere near sufficient. We must ‘pump prime’ the entire economy - in the manufacturing and private and public service areas - not just construction. What does this mean? What are the instruments available to us? Where do we focus our resources to maximum medium-term benefit? How much will this cost (i.e. borrowing cost)? Will we need supplementary tax revenue - not just from the incomes of the wealthy (which, at the end of the day, won’t get us too far), but from their capital assets as well? Is there something profoundly amiss in our enterprise and financial base that will have to be addressed at the same time as we reflate?
A radical rethink of the economic crisis is now on the cards. Internationally, there is a decisive shift to more progressive solutions: China’s economic stimulus package, President-elect Obama’s imminent ‘big bang’, the EU’s 100-day deadline to put financial capital to heel. The Irish economy needs its own radical home-grown package.
But, at root, this is not just an issue of economic policy - it is about an essential reconfiguration of our political choices. Eamon referred to this:
‘There’s a fundamental difference of approach between the Labour Party’s view of this and the view of the conservative parties and of some conservative commentators.’
There’s still a mountain range of work to do to fully elaborate on this ‘fundamental difference’ - not just in terms of fiscal policy but in raising domestic demand and creating new enterprise strategies. But knowing there is a cleavage between the Left and the Right (and not just with the Government), puts another conservative trap in perspective.
For just as Eamon has started to rejected the notion that fiscal policy is limited to ‘cutting spending’ or ‘increasing general taxes’, we can take this consensus-busting to the next level - by rejecting the political consensus that the only choice of government is between one led by Fianna Fail or Fine Gael.
Break that trap and the uphill climb will still be hard and arduous - but at least we can dare to hope to reach the top.
We welcome and encourage lively discussion from the public about articles on Irish Left Review. You can leave a comment using the form at the bottom of the page. Please read through the existing comments before posting your own.