January 25th Evening: The Recession Diaries

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So, the Irish Times is going to treat us to a series of articles from our leading economists over the next few days. They must be serious as they are using Lenin’s ‘What is to be Done’ title. This should be fun. I intend to critique of each of these contributions. By the end of the week we’ll see who are the real Leninists and who are just Kerenskys.

Though the ESRI’s John Fitzgerald is first up, let’s start with the Irish Times intro to the series. For in many respects, the answer you get arises out of the way the question is framed. And the way that the IT has framed this question – well, let’s take a look.

ANALYSIS: After months of unrelenting bad news, no one can be in any doubt as to the depth of the economic crisis facing the country. The issue now is what should be done about it? The Government is seeking savings of €2 billion from public expenditure and has begun outlining a range of options to the social partners. Negotiations have started, if battle has not yet been joined. ‘The Irish Times’ has asked a number of our leading economists to explore how, and where, spending might be cut, and how, beyond cutting, the economy might be turned around. Their ideas will be published throughout next week. Here, in this first article, John Fitzgerald explores . . .

Let’s go through this line-by-line.

. . . ‘no one can be in any doubt as to the depth of the economic crisis facing the country’.

Yes, no disputing how bad it is. The EU Commission has recently projected that Ireland will suffer a decline of -5 percent this year- by far the worst performance in the Eurozone, and below previous home-grown projections. And the year has only just started. Even more worrying, the EU projects that next year only three of the sixteen Eurozone countries will fail to grow. Yes, Ireland is one of them (along with poor Spain and even poorer Portugal).

‘The issue now is what should be done about it?’

Well, er, yes.

‘The Government is seeking savings of €2 billion from public expenditure and has begun outlining a range of options to the social partners.’

This is the only example used to illustrate the ‘crisis’, and it is telling. They could have said that Ireland is facing the worst recession experienced by an EU country in the last 30 years, with the exception of Finland (and we might even give them a run for top spot). They could have pointed out that unemployment is rising to the point that 3,500 people a week are signing on to the Live Register. They could have said that consumer spending is crashing, investment is crashing, our export sector is being hit by a number of whammies: falling international demand, weak sterling, rising non-pay costs, etc. They could have highlighted our banking crisis – it has been making the news lately, and even caused the Dail to be recalled early.

But no, they start out with the Government’s intention to cut public spending – itself, a contestable policy. Is this supposed to be a series of articles on the economic crisis or the fiscal crisis?

‘Negotiations have started, if battle has not yet been joined.’

Battle? Joined? Yes, we need those fight motifs if only to aid newspaper sales. Consensus don’t sell. So imagine David Begg, Turlough O’Sullivan and Brian Lenihan, naked like Greek wrestlers, in arm-holds near the pond on St. Stephen’s Green.

‘The Irish Times’ has asked a number of our leading economists to explore how, and where, spending might be cut, and how, beyond cutting, the economy might be turned around.’

So it is the fiscal crisis: it appears the Irish Times is asking economists to play the role of the Minister for Finance and come up with their own set of cuts. In the Temple of Fiscal Rectitude we must all sacrifice ‘public’ goats to the God of the Balanced Budget.

But the killer line is ‘ . . and how, beyond cutting, the economy might be turned around’. In other words, resolving the economic crisis is secondary. But there is no ‘beyond’. It is here, now, in our faces. People are losing their jobs, shop shutters are locked permanently, businesses are down-sizing, short-timing or just plain closing, no one is investing anything into anything, Main Street is a ghost street, pensions are being flushed down the equity toilet; the only growth industries are receivers, examiners and insolvency practitioners. But for the Irish Times this is all ‘beyond cutting’. Now that’s getting your priorities right.

Back in the 1950s – when commentators and politicians were seriously debating the ‘extinction of the Irish race’ – the Central Bank was obsessed, not by unemployment or emigration or poverty or just plain hopelessness; rather, they fretted about the balance of payments. Back in the 1980s, the Fine Gael-Labour Government did just about everything wrong – increasing taxes, cutting expenditure (especially capital expenditure), ending up with Gardai beating up striking sanitation workers in Dublin’s O’Connell Street.

In those days, the economic crisis took second place, ‘beyond cutting’ if you will. And now, the Irish Times is inviting ‘our leading economists’ to take a walk down memory lane.

Hopefully they will refuse. Hopefully they will use their skills to chart out a different road – one that doesn’t look ‘beyond cutting’ but rather looks to address, directly and urgently, the real dynamics of a real economy with real people that is currently in free fall.

For we’ve been down memory lane.

It is made up of cold, small streets.

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2 Responses

  1. Des Derwin

    January 26, 2009 7:06 pm

    Michael your series, and the responses it has gathered, is a great help in getting to grips with the details of the crisis.

    You offer a very short comment on the part of the Irish Times Intro that goes:

    “The Government is seeking savings of €2 billion from public expenditure and has begun outlining a range of options to the social partners. Negotiations have started, if battle has not yet been joined.”

    For the left this at the core. Why are the unions in these talks at all? The IT Intro above repeats the parameters set by the media and the government all month.

    The issue is cuts, as you point out. Why should that be the issue even in fiscal terms – why not get more revenue from the rich, an option – offered by CORI incidentally – explicitly ruled out by the government already?.

    Why is there general blindness to the resources in one hand that can ‘recapitalise’ the banks by a possible €10 billion, and full focus on ‘the lack of resources’in the other hand that ‘necessitates’ cuts in pay and vital public services?

    What’s to be negotiated or accepted in consensus? €1 billion rather than €2 billion in pay and service cuts?

    Are the inhumane – I used this term consciously – Health cuts to be agreed as part of the consensus?

    Are the unions going to ballot the members for a revision down of the national agreement?

    How can talks take place when one side, the employers, have as much as withdrawn from the deal in place?

    Is the Social and Voluntary ‘pillar’ going to split the difference and say ‘OK then, we’ll settle for half an axe to social and community spending’?

    A Social Solidarity Pact? Is this not alternative terminology for Social Partnership? We are in a ‘social solidarity’ pact and a bust at the same time.

  2. Michael Taft

    January 29, 2009 8:14 am

    Des, the contrasts couldn’t be sharper. In the US, the House of Representatives has passed Obama’s €850 billion stimulus package; in Ireland, the Government wants to cut billions from public spending (a de-stimulation package if you will). In France, public and private sector union are going on strike against the Government’s deflationary policies; in Ireland, the unions have agreed a ‘framework’ to puruse further deflationary policies. It would seem the rest of the world is out of step.

    As to what happens if the ICTU Executive comes to any final agreement – given that trade unionists already have an agreement, any change in that agreement must go back to trade unionists for approval. That’s my read, for what its worth. But, then, I’m an old fashioned democrat.