The Recession Diaries: Revising Towards a New Economic Narrative

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Mark Conroy, who kindly posted my essay ‘Towards a New Economic Narrative’ on Indymedia, noted my comment that it was growing quickly out-of-date and asked:

‘In what way is it “out of date”, and what would an updated version of it look like?’

Fair question. With new projections from Ulster Bank suggesting we are entering into a depression (or, if you don’t like that phrase, then ‘a really, really recessing recession’) the game is definitely changing. For the worse. No one, not even the most pessimistic commentator, was projecting this collapse, not back in November when I wrote the essay, not even last month – with, maybe, the exception of Professor Morgan ‘Apocalypse Now’ Kelly.

There are a number of ways the landscaped has changed. The first, as I said, is the pace and depth of the meltdown. Secondly, we now effectively have ‘dead banks walking’. Okay, we did back then but we didn’t know they were dead, we just thought they were very, very ill. Third, the pace of the decimation of our export and traded-sectors base was not as pronounced. It is now.

That any commentator of whatever ideological stripe has repositioned her or himself is not surprising, such is the economic tsunami that has washed over us. Don’t forget, back in November we were still discussing a small downturn with the most current ESRI projections stating the economy would contract by less than 1 percent. Now, projections over the three year period are ten times that amount.

So let me ‘reposition’ myself on some crucial issues – to answer Mark’s question. If I were rewriting Towards a New Economic Narrative, I would revisit the following.

Public Ownership of Banks

Back in November, while the bank guarantee had alerted us to the fragile state of the Irish banking system, no one could imagine what was laying in wait for us: collapse, fraud, and irresponsibility on a frightening scale. The issue is now not whether the banks should be taken into public ownership; that’s a given. The debate is now what we do with the banks.

I would suggest a radical refiguring of the banking landscape following a flushing out of the bad assets (either through a ‘bad’ bank or ‘good’ bank process) with the creation of:

  • An infrastructural and long-term bank
  • A venture / seed development capital bank
  • Banks dedicated to ofering new credit lines for small and medium enterprises
  • A public enterprise retail bank

Money is utility, banks are instruments: they are (or should be) servants of the real economy. Nationalise them immediately and start making that service happen.


Quaintly, I had thought that increasing borrowing to 55 percent of the GDP would provide considerable resources for a stimulus programme. Our public finances, however, have deteriorated to such a point that 55 percent of GDP would now imply massive cutbacks. So let’s no get hung up on percentages, etc. (even now, we are still well below the Euorzone average).

Since November, we have now discovered that the National Treasury Management Agency has accumulated a cash balance of €20 billion. Let’s not hoard it – use it: start getting people back to work, increasing economic activity, investing and lending and spending.  This is the seed-capital, if you will, for a medium-term stimulus programme.

Fiscal Deficit and Unemployment

Again, such has been the deterioration of our public finances that the orthodoxy has been able to confine the national debate to fiscal measures. They never ask the more fundamental question: why is tax revenue collapsing, why is government expenditure (i.e. social welfare costs) rising? Unemployment is the answer they never come up with. To solve the fiscal crisis is to first solve the unemployment crisis. And to do that requires a stimulus – an expansion of government expenditure, both current and capital.

Save Jobs – Subsidise Businesses

The rate of job losses was not as pronounced in November. Now it’s an avalanche. We should subsidise businesses to stay in business – especially in critical traded sectors. Germany has recently launched a €100 billion enterprise aid package; pro-rata, that would be equivalent to €7 billion here. This aid package would include a range of measures: underwriting loans/overdrafts, temporary sterling stabilisation scheme, avoidance redundancy schemes (e.g. topping up short-timed workers’ pay to avoid redundancies), etc. Of course, this must come with strings attached -enterprises must become high-road companies, granting their workforce the right to collectively bargain being just one of many labour-inclusive strategies at the local level. But, yes, subsidise firms to stay in business. At the end of the day, it will cost less than letting firms go to the wall.

Save Businesses – ‘Nationalise’ Them

Public enterprise – something I will be exploring in later posts – is one of the great weapons in our enterprise arsenal. The last thing we should let happen is to watch firms with key skill-sets and global brands in key economic sectors go down the tubes. In the last instance, they should be brought into public enterprise. This could mean public sector equity, public-private partnerships; public enterprise companies are only one aspect of bringing key companies into the public realm. The modern Irish economy owes much to public enterprise – energy, transport, banking, insurance and finance, natural resources; it is now time to employ this strategy to current economic and social needs.  Better than to let ‘the free interplay of market forces’ destroy our economic base.

Bring Back Telesis

In the early 1980s Telesis caused a storm with its proposal that the state should actively ‘select’ 75 to 100 indigenous companies to become national champions – giving them every aid and support to break into export markets. It was attacked for being ‘statist’ and ‘anti-market’ (even though Telesis was a US consultancy firm). But it was correct.

So use Enterprise Ireland as the vehicle for creating economic champions in our traded sectors. If we don’t have potential champions in key sectors – create them through public enterprise. Whatever, get business up and moving. Export markets may be difficult now but we need to urgently start building the foundations for new state-sponsored and state-driven high-road enterprises whether in the formal private or public sector; to be in a position to take advantage of any recovery in international demand.

* * *

As I look out at the wreckage that the Irish economy has become since last November when I penned that essay, I only see one solution: more and more social democracy, more public realm, more inter-penetration of the private and public spheres to the point that the distinction between the two becomes ever more blurred. To understand that all our economic assets are, first and foremost, social assets is to prepare the ideological ground for creative strategies of growth and expansion. And democracy.

For there is no going back to normal. Normal is dead and gone. This recession must give way to a new order – a progressive order; one that reconciles abilities and needs, economy and society, where profit is instrumental and prosperity for all is no longer an aspiration but an economic and political necessity.

And, if in a few months, if I have to rewrite this again, so be it. But better still, let’s get ahead of the curve rather than trying to catch up.

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