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  • irishtimes.com - Posted: March 31, 2009 @ 10:02 am

    Democracy and Economics

    Deaglán de Bréadún

    The reason Ireland’s credit-rating has gone down is largely to do with the guarantee to the banks and the fact that we really couldn’t meet the debt if they all collapsed at once. That’s my reading of what the analyst from the Standard & Poor’s ratings agency said on radio this morning.

    The analyst, Frank Gill, also made the controversial suggestion that there was a need for “new faces in government”. Many would agreed but it was hardly his place to do that.

    Meanwhile on Questions & Answers, accountant Des Peelo, well-known to followers of the political scene, said he believed the Government’s banking policy had worked. Could this be right?

     The programme also featured a somewhat-inconclusive discussion on quasi-national government – that’s what I’m calling a situation where the opposition and government agree on budgetary/economic stringency measures. Simon Coveney exuded frustration over what he alleged was the Government’s lack of openness; Mary Hanafin was adamant that the Government had ultimate responsibility. Not much scope there.

    The problems facing this government and many others were reflected also in an interview Barack Obama gave to the Financial Times yesterday. There are some quotes in it that would surely ring a bell with Brian Cowen, Gordon Brown and others.

    “He concedes there is a gulf between what is politically possible and what may prove to be economically necessary.”

     ”In all countries there is an understandable tension between the steps that are needed to kick-start the economy and the fact that many of these steps are very expensive.”

    “What is also difficult is the fact that the policies we initiate all take time to take effect and by its very nature politics looks for more instantaneous gratification.”

    All this reinforces the argument that, without cooperation between government and opposition (or in the US case, Democrats and Republicans) it may be impossible to set the economy to rights. The fact is that, in a democracy, there are so many interest groups who make so much noise that it is extremely difficult for one side of the political fence to do the job all on its own. We probably need a second Tallaght Strategy a la 1987 but it doesn’t seem to be on the cards.

    • Colm Doyle says:

      “We probably need a second Tallaght Strategy a la 1987 but it doesn’t seem to be on the cards.”

      The key difference between today and Alan Dukes’s Tallaght Strategy was that, back then, Haughey didn’t have the votes to simply ram through legislation. Cowen’s government does.

      If FF are truly interested in a “National Government”, then it needs to offer cabinet positions to Labour/FG, which is politically unlikely.

    • Liam says:

      There is a logical problem, Ireland is in this mess because of too much debt, not because people don’t want to spend. Any attempt to prop up the activities that led to this mess will fail.
      In the 1980′s the Government could fudge these issues with inflation but they don’t have this option now (thank God).
      The market is doing its job and confusing planners, any borrow and spend policies will be punished by the bond market.
      It would appear that the sensible policy here is to allow taxpayers to rebuild their balance sheets, by not raising taxes or running up large external debts

    • Dan Sullivan says:

      I think one of the reasons that many of the necessary steps are still politically not feasible at the moment is that no-one (and I mean no-one) is prepared to go so far as a ‘nudge, nudge, wink, wink, know what I mean’ at the general population, not mind any degree of finger-pointing.

      Look, the banks went mad with money and they are to blame for that. Yet for the most part, the majority of the people took advantage of that craziness instead of stopping and thinking, This is crazy stuff, it can’t last. At the moment most people are still convinced that the number of people who are in any way culpable for the state of the country is less than the number of the active participants in the 1916 rising. When in truth it’s the other way around, 90% of the Irish people had some hand, act or part in this process.

      It’s a bit like only blaming the fast-food outlets for increased obesity. Sure there are people who are overweight for genuine medical reasons, but when it comes to most of us though (and I’m including myself in that grouping) we’re adults and in a world of free will the choice is ours and ours alone. And that choice is there every day: do we ban such foods or tell ourselves to shape up and exercise some self-control?

      People, governments, everyone, spent money they didn’t have, in a lot of cases on things they didn’t need, and now it has to be paid for.

    • Peter B says:

      On a personal level I sense that there is an enormous amount of pride or ego at play within Fianna Fáil and in particular with the Taoiseach. If the Taoiseach was to look honestly at the current economic mess, then he would realise that his decisions while Minister for Finance were key factors. I would imagine that such a realisation would make it very difficult for him to face the public and to carry on. This is the reason for his so-called reluctance to face the public or to communicate clearly.

      What is politically possible in Ireland will never become a reality while the current Government remains in place. What is economically necessary is more likely to become a reality, particularly if it keeps Fianna Fáil in power and supports their many vested interests – it’s as simple as that. Economics is one facet of politics, but it seems to be the only facet presently at play in an Irish context. There are a myriad social and public service issues, the most serious of which is the rapidly-rising unemployment rate. Politically the Goverment needs to take real steps and put real initiatives in place to get unemployed people back to work and to keep employed people employed. The Minister with specific responsibility for this is Mary Coughlan and it is also part of the remits of Social, Family and Community Affairs and Education. I have not heard a single initiative, proposed or otherwise, from any of these Ministers or their Departments.

      I do not think that a national Government is the answer. I think that a Government minus Fianna Fáil and whatever is left of the PDs may provide some degree of relief. I certainly believe that a party such as Labour or FG, will be far more concerned about the social aspects of our country. We need a Government that is unencumbered by guilt about the current economic failure and which will have the courage to take brave and innovative decisions to restore a sense of balance to our economy and our society.

    • Deaglán says:

      I was around at the time but my memory of the 83-87 FG-Labour coalition is a little hazy. Someone who has studied the period says John Bruton wanted to take the hard decisions but Labour wouldn’t go along with him and Garret as Taoiseach sided with Labour. That’s why it was left to Haughey and MacSharry.

    • Betterworld Now says:

      Hey, it’s not all doom and gloom – communist China will deliver 6% growth in 2009. They own the US national debt and will not be happy if the US tries to devalue its way out of its responsibilities.

      Who knows, maybe Ireland’s AA+ credit rating will begin to look very attractive to them when the US starts to default on its 12 trillion debt?

      Maybe our dear leader could leave one of his friends off a state board long enough to appoint a Chinese speaker to the National Debt Management Agency? After all, if you need a loan you should only ask someone who has cash to lend. And if you can speak their language, you’re more likely to get it.

      The Chinese government has suggested creating a new global reserve currency that is not susceptible to manipulation by a handful of white economists with blue eyes who want to make the rest of the world pay for their free lunches.

      That sounds like the first concrete proposal I have heard to rid ourselves of the globalised casino economy we all didn’t know we were gambling our childrens’ futures on.

      Something tells me that the Chinese will be heard … sooner or later.

      It’s beginning to look like what happens in Monopoly at about 3/4 of the way through the game. The Chinese have the real-life equivalent of rows of hotels on all the high asset value streets on the board.

      “Your throw Mr Obama …”

    • Deaglán says:

      Good to hear from you again BWN. I met a former senior government minister who told me at the start of all this bother that he would solve it by borrowing the necessary number of billions from the Chinese at a favourable interest rate. “They’d all complaint about me here, but it would work,” he said.

    • Ray D says:

      The S&P downgrade is rich coming from a private institution in a bankrupt country that is trying to print its way out of recession – print money that is. The US is too big an economy to do that I’m afraid. But we could – and the Chinese option seems like a good way to do that.

    • Peter B says:

      Deaglán, that Minister was on the right track as far as I’m concerned.

      We were tied into a period of low interest rates because of the euro – these did not suit Ireland but they suited Germany and France at the time. While this was a key contributing factor, it in no way mitigates the abject mismanagement of the economy by FF and the PDs, and we should be knocking loudly on the ‘euro door’ demanding to borrow billions at the same rate of interest as other eurozone countries. The reason this is not happening is because the current government would have to do the ‘knocking’ and there would be too many awkward questions for them to answer.

      We need a new government who can claim they have to’ fix’ this mess and who can garner support from the eurozone to do so. We need to invest in the future of this country and we need funding to do this. If the Government had faith in the long-term viability of this country, this is what they would do, in the knowledge that recovery would afford the revenues to repay the borrowings.

      To learn today that Bank of Ireland actually ‘drew down’ €3.5bn of taxpayers’ money, much-needed money, makes me angry indeed.

      Something is rotten in the State of Ireland.

    • ROBERT BROWNE says:

      Standard and Poor may hint that we need a general election but unfortunately they have not seen the paucity of the opposition. There is not one policy difference between FF and FG and as far as Labour is concerned I hate to remind people of a guy called Dick Spring! Labour and all the feigned shock-horror of Eamon Gilmore will be damn-all different to the other parties.
      We have a huge crisis of democracy in this country of ours! It has come about because the political parties have become unbelievably smug and arrogant in their contempt for the ordinary citizen. There has been a litany of abuse of the electorate and absolutely nobody resigns.
      In other words, nobody is responsible for gross mismanagement of the economy or health service or education. It is only an illusion that hospitals are crammed with trollies or that schools have leaking buildings and prefabs for classrooms. I disagree, it is the government that is delusional and Harney should be gone long ago and Cowen instead of supporting her should go also. The debt-rating agencies smell something which just might be cordite. The fuse has been lit and it may take another month or two before we get the general election, but general election it will be. Mr, Gormley should be very careful about the “bragging greens” and how well they have performed in a government, the likes of which, hopefully will never be seen again in this country. The Irish government’s ratings score in managing our economy: BBminus!

    • anger o haughney says:

      In response to the comment by Dan Sullivan.The present government has decided to shift its share of the responsibility for the present debacle onto two things: the international factor and it uses Dan’s argument to explain the rest.T he first excuse holds water to a certan extent, the second is based on the notion of 90 per cent of Irish people asking for it . Not me and all others who didn’t vote for Bertie and saw the bust coming a long way off. Yes it’s a personal choice to eat at the junk-food counter, but if the powers that be give grants to construct such structures and by their lead encouraged such lack of governance, it is their fault. It is too easy to say, “Oh we did it to ourselves”. Let’s see, Quangos, cronies, buckets of cash for builders, pork-barrel poltics, etc, etc, all FIANNA FÁIL brands and nothing to do with international factors and against the votes of all those who voted against them.

    • Ray D says:

      Anger, the really first pork barrel was the coalition’s 14 point plan in 1973. We have never recovered from being ruled by chancers and useless politicians since.

    • Patrick Hennessy says:

      Yes the world is in recession but Ireland is in the worst fix of the lot.

      So why are Singapore (same style and size of economy as Ireland), Norway, Denmark, etc. not in as bad a fix as we are.

      Because our politicians were clueless. Any idiot in 2001 knew there was a housing bubble getting worse by the day. Experts (eg Economic and Social Research Institute) said it loud and clear. Did the politicians not see it? If not they should be fired. Did they see it but ignore it?. If so they should be fired.

      The FF policies from 2003 to 2008 sold the Irish people a pain far worse than was necessary. Yes we would be in trouble today with the world recession. But no way to this level.

      Is there any alternative Government in the Dail?. Not that I can see. Not only have they ruined the economy beyond what a world recession would bring but they have destroyed the rise of a newly required class of politician who is above parish pump politics, dig-outs, and tents at the races.

      We urgently need to clean out the Dail and start again. We did it at Independence and we can do it again. Bring in a whole new class of politician and tie them to the highest level of integrity and transparency. Consign the current lot to the dustbin of history.


    • Dan Sullivan says:

      Anger O Haughney, it’s my fault if you think I’m even for a moment trying to give a free pass to the government on this. (me, defending a FF government.. with my reputation?)

      What I’m trying to get across is that very few people are completely blameless, though there are some who are considerably more blameworthy than others. We do not need nor should we be trying to find a means for everyone to share in the burden equally as people didn’t benefit from the boom equally. What we need is to ensure that people contribute in proportion, as far it is possible, to the extent that they saw the upside of the boom.

      So when I’m saying, everyone, picture this http://www.youtube.com/watch?v=cyfbRz4ObFY and once we’ve started from there we’ll work backwards to see who really had no hand, act or part in this. I’m including you and myself in those who have some blame. I never voted for FF but I hold myself at a minimum responsible for not doing more or being more convincing that the course they were on was wrong.

    • Deaglán says:

      Like the YouTube clip, Dan! The buzz in Leinster House yesterday concerned a difficult technical question on the economy put to Fine Gael leader Enda Kenny by a journalist. But Richard Bruton came to the rescue!

    • Dan, I didn’t do it! Didn’t vote for them; don’t support their policies, never supported them and never will. I am not responsible, Dan Sullivan, for the mess, so count me out of your guilt-trip and patronise someone else

    • Dan Sullivan says:

      And you didn’t benefit in any form either Anger?

    • vikas says:

      The field of finance refers to the concepts of time, money and risk and how they are interrelated. Banks are the main facilitators of funding through the provision of credit, although private equity, mutual funds, hedge funds, and other organizations have become important.

      Vikas Singhania


      foreclosed homes-foreclosed homes

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