May 19th Lunchtime: The Recession Diaries

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Be under no illusion – the economic debate is now morphing from an obsession with debts and deficits into a full-blown assault on the public realm that has more in common with Thatcherism than it does with mere fiscal prudence. For some time, the more extreme fringes of the Irish Right have been steadily moving centre-stage. Meanwhile, the Left and the trade union movement find themselves slowly being pulled into this maelstrom, at best shoring up defensive arguments that will easily be breached.

The latest assault has been on social welfare rates and the minimum wage. Dan O’Brien of the Economist Intelligence Unit is reported in the Irish Times speaking before ISME:

‘Welfare, he argued, is “the elephant in the room” in the Irish public finances . . “We’ve got to bring expenditure closer to revenue,” said Mr O’Brien. He also said a reduction in the minimum wage from €8.65 was “an open and shut case” because the current rate “hinders” job creation rather than protecting employees.’

Stephen Collins also has the public realm in his sights:

‘Tackling the public service pay bill and the social welfare bill can hardly be avoided and neither can new revenue raising measures like property tax, third level fees or a tax on child benefit.’

Whatever about a property tax (a large part of which will fall upon average income groups who are already getting hit by levy increases, falling wages and job losses), public services and social protection are clearly the target.

Is this a new twist in the debate? No. It was signalled very early on in the influential series of articles in the Irish Times back in January. The ESRI’s John Fitzgerald called for cutting public and private sector wages, along with social welfare rates.

If this wasn’t part of the mainstream yet, then certainly Richard Tol’s contribution was absolutely off the pitch – calling for the slashing of business supports, wages, social welfare, along with privatising ESB, CIE, An Post and anything else that smack of the public realm. He did say that ‘Protecting the vulnerable would be nice . . . ‘ but, hey, what can you do; in the war against the public realm, there is unfortunately collateral damage.

They are not off the pitch anymore. What was once the fringe is now mainstream. Fine Gael has enthusiastically joined in. They want to privatise Bord Gais (great, handing over a natural monopoly to the private sector); cut rent supplements, freeze the minimum wage for two years, slash the public sector payrolls and open up health and training to ‘competition’.

So the attack on the living standards of those on the lowest incomes and the low-paid should come as no surprise. On This Week in Politics, this attack featured in questions put to the candidates in the Dublin South by-election:

RTE: As part of improving competitiveness, would you cut the minimum wage?

George Lee: No, I wouldn’t cut it straight off.

Shay Brennan: Wages across the board have to be reduced in order to allow for competitiveness. (Cutting the minimum wage) should be open to debate.

Alex White: I would not be in favour of cutting the minimum wage. Absolutely not.’

The responses are interesting. Fianna Fail’s Brennan fully buys into the real devaluationist argument. Fine Gael’s Lee is more cagey – ‘not straight off’ (oh, how that will warm the low-paid on those cold economic nights). Only Labour’s White was categorically opposed.

What’s more intriguing, though, is the premise of the question – improve competitiveness = cut wages. And that’s exactly what it is: a premise that requires no elaboration. It just is – like the orbiting of the earth. The hypocrisy is rank.

Finfacts’ Michael Hennigan provides a tour de farce of those that supported the economically criminal policies of Charlie McGreevy in the early part of the decade – when he effectively created the property boom and crippled the state’s tax base. Guess who supported ol’ Charlie:

‘Economists such as Jim O’Leary, Dan McLaughlin, Eoin Fahy, and Alan McQuaid all called for cuts in both the top rate of tax and the standard rate, with Dan McLaughlin (calling for) new medium term targets of 30% and 10% respectively (for top and standard tax rates).’

A few economists and commentators pointed out that this was all come to a bad end. But Goodbody’s Colin Hunt, who later joined Brian Cowen as a special adviser said:”Minister, don’t let the doomsayers get you down. Bertie Ahern put it more quaintly, suggesting that those doomsayers go off and commit suicide.

Many of the same people leading the attack on the public realm were some of the cheerleaders for those very policies that created the burst bubble and hamstrung the State’s fiscal powers to address it. And they are still invited on to current affairs programmes, still write newspaper columns, are still sought out for their wisdom on today’s events.

The hypocrisy is not just past tense. Even when their arguments are caught out, many are unrepentant and indifferent. Emblematic of this is Sarah Carey of the Irish Times; she claimed we had the most generous social welfare payments in the EU. When challenged on this, when asked to substantiate her claim, when presented with the facts – not only on Irish Left Review but also from John Downes of the Sunday Tribune – she couldn’t pull up one piece of evidence in support of her position. All she could say was:

‘Let’s say I acknowledge that perhaps we are not the MOST generous.’

But she didn’t say. She didn’t acknowledge in a subsequent column that she was wrong or misled. Instead, Carey goes on her merry ideological way, indifferent to evidence or facts or substantiations. Within a few weeks she complained that bank nationalisation would spread the contagion of the public sector.

‘I accept that there are talented people in the public sector, but the inertia of government is more than they can usually bear. Worse, it’s contagious. Turn bank employees into public servants and I guarantee the malaise will seep in.’

Inertia? Malaise? What would Carey say when confronted with the study highlighted by the National Competitiveness Council – that the Irish public sector is the fourth most productive public sector in the EU, a ranking supported by the EU KLEMS database? She wouldn’t. She doesn’t have to. She has her platform. And informed debate isn’t part of it.

Carey isn’t an exception. Peter Connell exposed Ed Walsh’s limp arguments. Cathal O’Loghlin, likewise, was challenged and found wanting. But don’t expect these people to drop off the radar. They will be with us. Their premises will go unchallenged, their conclusions taken as read.

This is not some vast conspiracy.  It’s merely a logical working out of basic right-wing premises.  It started with calls for public expenditure controls, then moved on to the ‘bloated’ public sector and ‘overpaid’ public sector workers, proceeding to private sector wage cuts – and so on until it cascaded into a full blown attack on the public realm, making those on the lowest incomes scapegoats for the failed policies of past right-wing governments.

What has been the progressive response to this evolving debate? With a few exceptions, timid at best. After an initial burst of expansionary arguments, progressives have to a large extent been drawn into the premises of this desultory debate. ICTU, in agreeing the Framework Document back in January, signed up to the following:

‘The Government and Social Partners are agreed on the necessity to reduce . . . Exchequer borrowing over the next five years in order to reduce the General Government Deficit to below 3% by 2013 . . . The Government and Social Partners agree that a credible response to the fiscal situation requires a further adjustment at this stage of the order of €2 billion in 2009.’

ICTU didn’t get an agreement, being forced out of the talks by the Government. But they got the €2 billion ‘adjustment’ – in the form of the public sector pension levy. And the leading party of the next government has called for more of the same – more public sector payroll cuts, more public sector job losses. The debate has moved a long ways away from where ICTU wanted it.

Similarly, with the Labour Party. Calling for a major stimulus late last year, they reversed this position and accepted the need for fiscal contraction in their pre-April budget submission. And now, while rejecting any engagement with other Left parties and individuals who might help bolster the case for stimulus, Labour has stated its intention of agreeing a programme for government with Fine Gael– the party of privatisation, public sector cuts and wage freezes for the low-paid.

One could get despondent but what’s the point of that? We must continue putting forward the progressive case on the economy and highlighting the limited policy differences between the two major parties of the Right. We have to give both policy and strategic substance to the argument that Senator Alex White made on that same This Week in Politics programme:

‘There’s no question the Labour party propping up . . into what is essentially now a corpse (Fianna Fail). Nor does it follow that we are in the business of propping up either the two parties . . . . there is a high measure of agreement between Fianna Fail and Fine Gael . . frankly, I do not believe that either Brian Cowen of Fianna Fail or Enda Kenny, leader of Fine Gael, is providing that vision.’

We must start, from a ruthless acknowledgment that progressives are not only losing the economic debate – in many senses, we are not even at the debate. We must acknowledge our lack of political and industrial strategy.  If we pretend that ‘we are making a difference’, whether it be in social partnership talks or, in the future tense of coalition negotiations with Fine Gael, we will only be fooling ourselves and find ourselves co-opted into policies which fly in the face of our values and principles.

But just as importantly, we must become passionate. Clear-headed and incisive, but passionate all the same. For the battle is not just about graphs or projected growth percentages or debt levels. The Right is drawing the battle line and their target is nothing less than the public realm – that vast social space through which people participate in determining their own future, participate in the economy and the society.

Are we up for it? Or are we too busy washing the white flags?

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