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  • irishtimes.com - Posted: April 29, 2009 @ 11:46 am

    The Mark of Cain

    Harry McGee

    The ESRI’s first forecast pointing to any contraction in the Irish economy was made only at the end of June last year.

    This morning’s reports on the institute’s spring quarterly economic commentary (see story here) makes for ghastly reading. A 9.2 per cent shrinkage this year. A 14 per cent contraction over the next three years. Unemployment to reach almost 17 per cent next year. That’s what it was like at the worst period in the 1980s. It’s even gloomier than that, says the ESRI. The landscape it paints is that of an arid dustbowl somewhere in California in the 1930s.

    Observation 1: How did the ESRI get it so horribly wrong? What’s the point of the ESRI producing quarterly reports if they bear no relation to reality. What was the major flaw in its prediction model that led to it failing to predict anything fundamentally wrong with the Irish economy until ten months ago.

    It’s instructive to look at its summary from the end of June, and the fact that it was still projecting growth in 2009 at that stage.

    “The downward revisions this time are such that we are now forecasting a contraction in the economy in 2008, with both GNP and GDP falling by 0.4 per cent in real terms. Thus Ireland will experience a recession for the first time since 1983. For 2009, we expect an upturn with real GNP expected to grow by 1.9 per cent and real GDP expected to grow by 2 per cent.

    We now expect consumption to grow by just 1 per cent this year and by 2 per cent next year. These figures represent significant downward revisions from our last Commentary. We anticipate a decline in investment of almost 15 per cent in 2008 and of 4.5 per cent in 2009. We expect exports to grow by 4.8 per cent in 2008 and by 4.4 per cent in 2009, well down on the 2007 preliminary growth figure of 8.2 per cent.”

    The gloom is getting gloomer, to reverse the mangled phraseology of our former Taoiseach Bertie Ahern, forever known in the annals of the jammiest Taoiseach of all time. As I write, Valerie Cox of Pat Kenny’s show is doing a piece on hordes of mé-féiners going across the border, some of them going to score cheap booze (not much cutting back on alcohol consumption it seems).

    On days like this, it seems we are caught in a tailspin of desperation from which we can never escape.

    In the Dáil Richard Bruton of Fine Gael is challenging Brian Cowen during Leaders Questons on the lack of a coherent strategy for recovery.

    Politically the Government can be accused of some indecision and of having taking wrong options (there are growing question marks about the advisability of the NAMA approach). But I have argued that its strategies have been at least as sanguine, at least as decisive, as most other governments.

    We have seen all the angry commentators (journalists, economists, business leaders, union representatives) berating the Government for not doing what Gordon or Barack or Angela or Nicholas did. And then a week later we find that the German or British or French of Yankee silver bullet was a dud that shot only blanks. And many of those non-politicians who are angriest now were often the most complacent during the good times, or even the most enthusiastic exponents of the proposition that the good times would last for ever.

    Observation 2: Media culpability in all this has not been adequately analysed.

    Observation 3: The internet makes just about every person who comments publicly accountable for what they have said in the past. Unfortunately, not enough parsing has been done of comments made form 2000 to 2008 that will enlighten us all on where everybody stands.

    Observation 4: The citizens too must bear some of the share of responsibility. In the pie-chart of blame, I have a slice especially reserved for ‘we the people’. Sure, it’s a much smaller slice than those nasty bankers and the Government. But it makes my blood boil when  people assume no personal responsibility for their actions or the civic implicatons of same, and lazily blame others for all the woes. Okay, the Government facilitated it, the banks facilitated it, the media hyped it up, the unions demanded a bigger slice of the cake.  So did estate agents and phone companies and everybody else who jumped onto the gravy train. We all bought into it. We were suckered sure. But we suckered ourselves to some extent, allowing a little bit of greed, a little of denial, creep into our thinking.

    And the Mark of Cain. Yes, I have argued that the Government strategy is flawed but is no more dicky than any other European country.

    And yes, I have sympathy for Cowen. Bertie handed him the keys of the car. He forget to tell him that there was no petrol, the tyres were bald, and the spare had been stolen.  And as Cowen freewheeled it down the hill, he thought he heard a faint shout saying somethign: “Oh, and I forgot to mention that the brakes aren’t working properly.”

    But ultimately, in the court of public opinion, Cowen deserves little sympathy. Sure he was dealt a lousy hand. But it’s not exactly as if he was a newcomer to the table or that he was particularly short-stacked.

    And, politically, the only thing that matters is this: The Fianna Fail-led government was responsible for leading the country into the current mess.

    It’s as simple as that.They’ll pay a heavy price for it.

    Earlier this year, Cowen told his party that he would get no thanks for any of the ruthless measures he takes to save the economy. How right he is. He was there during the good times. He was Minister for Finance during the good times. He was the selfsame minister who injected addedinflationary heat into the economy in December 2006 to allow FF win the election. He was one of the two Ministers for Finance who refused to close property tax shelters and loopholes. Those incentives made an infinitesimally small percentage of the population rich (back then) and led to an orgy of unnecessary commercial construction around the country.

    I often wonder: Exactly how many spas were built and how many of them were a financial albatross from day one?

    And you look at the Cabinet of 15 and you think Soviet Politburo. Six of the Ministers have been there since 1997 and even the new ministers, Batt O’Keeffe and Brendan Smith, also have the look of being around forever. So have many of the main opposition figures. But the difference is that they have not been in government.

    In fact, if you look at their pre-2007 election manifestos, Fine Gael’s policies were possibly worse than the Government’s in hyping up the property market. The difference was that they weren’t in Government so can’t really be held resonsible for them now.

    Observation 5: Natural successors more often than not disappoint, especially if they have been waiting around for a long time and their predecessor has been successful. They fail to meet expectations. More often than not, too, their leadership coincides with a downturn.

    And so it is with Brian Cowen. He has the mark of Cain. He has disappointed as Taoiseach. He has not been the natural everybody said he would be. And there was more of a grain of truth in all the bile and bitterness in John McGuinness’s criticisms last weeek.

    The first anniversary of Cowen becoming Taoiseach will fall on May 7. The question is: how long more will he last? Albert Reynolds and John Bruton were taoisigh for periods of little over two and half years. My own guess is that Cowen may outlast them, but not by very much.

    • Betterworld Now says:

      Harry,

      The numbers don’t add up. If we are already borrowing 2 out of every 5 Euros the government is currently spending on social security, can we really support 500,000 on the live register?

      That’s is more than double what it is now and tax receipts are still nose-diving.

      Will it take the Quakers to again set up soup kitchens on our streets before our bickering economists stop forecasting “green shoots” of delusion “just around the corner” if we “take the pain”?

      The economic model we are hitched to is heading over a cliff . The promises of its druids are bogus. They promised us we’d “move up the food chain” and “build a knowledge economy”.

      Guess what? It was a lie – we are now in a “race to the bottom”, and our very lives depend on winning it.

      The selfsame druids now promise that if we get wages “low enough” we’ll “attract foreign investment” and the casino can start rolling again. But how low is “low enough”? 2005 levels were mentioned, then 2002. Since then, as the numbers all go downhill, they have stopped mentioning dates.

      Our competitors in India started this recession on 1973 wages and are already slashing them by 20%. At that level we can’t afford potatoes.

      Its time to stop chasing the dragon and wake up to reality.

      We need a new economic model. And it will not be delivered by Cowen, or anyone else in the pocket of crony capitalism.

    • Ray D says:

      I’m afraid that the ESRI forecast is wildly optimistic given what our appalling Government is doing. Government policies are dragging us down further than we need to be.

      I would think that we will reach 1995 levels of wealth this year in an economy where, ridiculously and unnecessarily, the population has been forced by Government policies to grow by a total of about one-tenth since then. So it will feel like ’80s levels of wealth in fact. Government policies (cutting pay rates and raising taxes beyond what was needed) will drive the economy down further so that unemployment will be close to 1 million next year or in other words employment will be back where it was in the Seventies

      What the government should be doing is allowing pay rises but cutting out useless spend. There are many areas where useless spend amounting to billions can be readlly cut. These include the end to decentralisatiion and its reversal, the abolition of all Ministers of State, the abolition of the Senate, the end of all ODA, the end of all national grants to farmers, the immediate end of the early child allowance, the halving of children allowances, and so on.

      Such a policy would boost the economy, tax revenues and jobs. The Government is doing the very opposite to what we need at this time and will reap the whirlwind.

    • ShaneB says:

      To describe people traveling up North to shop as “mé-féiners” is a cheap shot. I couldn’t face the hassle myself, but I understand why my compatriots–trying any ruse to save money–would make the trip. And the snide parenthesis ” (not much cutting back on alcohol consumption it seems)” might be lifted from a Free Presbyterian sermon on temperance.

    • Harry says:

      The remnants of the PDs, plus quite a few Fianna Fáil ministers, still parrot the low taxes, low corporate taxes etc mantra.
      Isn’t it time we gave all that an indecent burial?

    • Dan Sullivan says:

      Harry, iIwonder how long it will take for people to realise that it is not capitalism that is in crisis but consumerism. Straightforward capitalism in the literal sense that a person has existing wealth and invests it in the form of capital in enterprise X for the purpose of getting a reward Y without breaking too much of a sweat on their brow isn’t really going to go away.

      But what has led us willingly to where we are has been consumerism. A form of consumerism whereby the public at large set the priorities for the economy and those priorities were for the most part frippery. With lower taxes and increased take home pay, most people spent money on things they didn’t need (large tellies, big SUVs for urbanites who think MUD is a type of computer game) and made investments with no proper regard to the real value of what they were buying. Was a house 1 or 2 hours each way of a commute from your workplace really worth 300K? 400K? Half a million euro? Irrespective of how much state intervention we will end up with in the economy we need a more rationally directed focus on what the purpose of the economy should be. Consumers are also citizens and taxpayers but all too often they screw themselves over in one role while bemoaning their lot in another. It was people as consumers that set our priority for the last 5/7 years as being service and construction-led while voting and supporting an increased narrowing of the tax base coupled with increasing what they themselves charged for the most basic of services, and then wondering why it was that everything else was becoming unaffordable.

      Watching that Designs for Life programme on RTE seems to just catch that point when the madness was just becoming unmanageable and unsustainable.

    • Peter B says:

      I really hope that the ESRI have got it wrong, but I suspect they haven’t.

      The last decade has seen Ireland go from being a fairly competitive economy, with growing exports, to an extremely uncompetitive one.

      The deficit for this year will be in the region of €30bn and the public sector pay bill plus social welfare in the order of €40bn. It just does not add up. Without any doubt, someone is going to have to tackle the public sector pay bill either through reductions in staff numbers or preferably salary cut and certainly no increments or increases. The Trade Unions wrecked the whole concept of social partnership when they wrangled the ill-fated benchmarking deal that should never, ever, have been.

      Increased salaries, lower income taxes and increased disposable incomes fed massive cost inflation; this must now be reversed. Private sector salaries are already being slashed and people are losing their jobs. The public sector simply cannot continue as is. If it is allowed to do so, there is every chance that the IMF will be brought in to rectify the problem.

      Meanwhile the Government lumbers on without one single initiative to address the spiralling unemployment figures and our Taoiseach doesn’t even know the definition of a republic!

    • Lee says:

      How about if you constantly pointed out the ridiculousness of houses prices and stayed renting. Didn’t ever vote for Fianna Fail, buy an SUV or exploit a foreign worker…must you still share the blame of the Tiger years?

    • Noel Hogan says:

      Sympathy for Cowen? He was the finance minister for the past five years. And now we’re in a financial disaster. Put two and two together!

    • Peter B says:

      Consumerism was just an indicator of abject greed. As the saying goes, “put a beggar on horseback and he’ll ride to hell”…

    • Steve Rawson says:

      And yes, I have sympathy for Cowen. Bertie handed him the keys of the car. He forget to tell him that there was no petrol, the tyres were bald, and the spare had been stolen. And as Cowen freewheeled it down the hill, he thought he heard a faint shout saying something: “Oh, and I forgot to mention that the brakes aren’t working properly.”

      I really don’t know how you could come up with this strange analogy – it does seem rather wide of the mark. Maybe something along the lines of this might be more accurate:

      Cowen demanded the keys of the car having been the envious co-driver who barked instructions to his rally-driver as Bertie raced across the country burning up the tyres and spewing plumes of CO2 ,winning three races in the process. He refuelled along the way with goodie bags for the baying crowd of voters and vested interest propaganda who were ably assisted by an advertising-hungry media along with some willing embedded journalists until Cowen grabbed the wheel and stirred it into the ditch …

    • Betterworld Now says:

      Sorry to inform that Green Party member, but we’re way beyond the capitalism Vs consumerism debate.

      We are patently not consuming, the consumer economy is dead – the Irish people have decided that with their wallets. And, for deepseated structural reasons, it will never be resurrected. On a finite planet, consumerism has been unsustainable for many decades (as you know). Its only now that that penny has finally dropped for the average person.

      With the demise of consumerism, Ireland, as a society, can no longer produce sufficient cash to be able to afford to consume anything more than our basic needs for survival – even that will be a major struggle for most people for the next decade (at least).

      Having dispensed with consumerism, the question now is can we afford to allow the rich elite to outbid the majority for the remaining resources whilst we go about the arduous task of restructuring our economy towards fulfilling human need rather than promoting human greed?

      Cowen is determined to try, but a gust of wind is all it would take to topple his government. It is too early to start blowing, the social forces necessary to pick up the pieces are not yet sufficiently developed, but it won’t be long now. People won’t get their new-look pay packet until the end of May and that will signal the start of the fight-back.

      A chain is only as strong as its weakest link and, according to the IMF, Ireland, with by far the biggest bank bail-out headache to deal with, is currently the weakest link in the capitalist chain.

    • dealga says:

      Would the likes of Betterworld Now please articulate how their ‘new economic model’ is supposed to work? Who is anyone to tell anyone else what they ‘need’? Who is anyone to dictate to anyone else where aspiration ends and greed begins?

      “The consumer economy is dead – the Irish people have decided that with their wallets. And, for deepseated structural reasons, it will never be resurrected. On a finite planet, consumerism has been unsustainable for many decades (as you know). It’s only now that that penny has finally dropped for the average person.”

      Really? Do you think that penny has ‘dropped for the average person’? This is nonsense talk, as ludicrous as the talk that had the good times lasting forever.

      People everywhere aspire to better lives – with everything that implies – and have done since the dawn of time. That goes equally for the multi-millions living in shanty towns and the educated middle-classes in the developed western economies.

      This recession might be longer and deeper than any most of us can remember. But as night inevitably followed day, day will inevitably follow night again and people will aspire to earn, aspire to own, and aspire to spend.

      Those that would have us living as self-sufficient vegetarian subsistence farmers, living in mud huts, at one with nature, will be back on the margins where they belong when this recession is but a nasty memory.

    • barratree says:

      Great piece Harry. Question on observation number 2 – will media culpability ever be analysed properly?

    • Kynos says:

      The seeds of this disaster were laid down under the genius and during the tenure of Bertie Ahern. It’s just inertia means they’re bearing fruit now. If you can wink and nod at torture and illegal war being facilitated at Ireland’s ports when sixty odd years ago you so “rejected the values of warring nations” that you insisted on being neutral though it meant fattening a lot of North Atlantic mackerel at the torpedo tubes of unharrassed grey wolves, you can wink at anything. There’s yer mark of Cain. The blood of 1.3 million murdered Iraqis and numberless tortured innocents cries out from the ground.

    • Dan Sullivan says:

      “Sorry to inform that Green Party member, but we’re way beyond the capitalism vs consumerism debate.”

      Betterworld, I presume you’re confused as I’m not a Green Party member.

    • dealga says:

      The only respectable record of Iraqi civilian deaths as a result of the war has the total at approx 100,000 http://www.iraqbodycount.org/

      That’s 100,000 too many, but 1.2 million fewer than Kynos’s hysterical nonsense … unless, of course, he/she would prefer 1.2 million extra people to have died just to make redundant points about the world of four years ago …

      “The remnants of the PDs, plus quite a few Fianna Fáil ministers, still parrot the low taxes, low corporate taxes etc mantra. Isn’t it time we gave all that an indecent burial?”

      Harry, Garret FitzGerald’s column in today’s Irish Times illustrates the real problem, Celtic Tiger 1.0 got old and started to die at the turn of the century. But we didn’t notice because, after the mini-recession of 2002, we had Celtic Tiger 2.0 – the property boom that masked what was really going on.

      The fact remains that producing goods and services that both foreign and domestic consumers want to pay for is the best way to run our economy.

      Low, but reasonable, taxes on those businesses facilitates competitive pricing and protects jobs. Low, but reasonable, taxes on employee incomes SHOULD facilitate wage restraint (further protecting competitiveness) and should facilitate low, controlled inflation.

      Maximising the total tax take is what matters, not maximising what you can take from the individual.

      But the nonsense of the last few years made us forget all that and we ended up in a spiral of rising prices, rampant consumerism and excessive wage demands across all sectors.

      It would be a shame if the genuinely good ideas that kickstarted the economy in the ’90s took the blame for a crash caused almost entirely by the herd’s infatuation with owning property and getting rich easily.

    • Kynos says:

      Dealga, I’m citing the highest survey figure I’ve yet encountered. Here. ORB survey: http://www.opinion.co.uk/Newsroom_details.aspx?NewsId=78Your disdain of “hysterical nonsense” on my part overlooks the fact that less than half a million death certificates were ever issued yet 6-8 million Jew were murdered (murdered? What law?) (slaughtered) by the Nazis. Minimise away pal. Give us mealy-mouthed “isn’t it terribles” while you do so. It doesn’t matter either way. Bunch more people than you or I could ever count on our fingers were murdered and Ireland wasn’t behind the door in helping them to be. Any way you slice it baby it sucks.

    • Kynos says:

      There’s nothing “redundant” about the world of four years ago, nor about my points which are that the West, those countries (including Ireland) who de facto and de jure are guilty of launching and participating in an illegal war of aggression qua crime against the peace – resulting in as many as 1.3 million excess deaths of innocent Iraqis who offered us no harm – in so doing opened a Pandora’s Box of financial, moral and karmic catastrophe. You can disdain the latter two elements I cite as mystic drivel, but there’s no getting away from the financial consequences, the trillion dollars wiped out in BUSHCO’s War On Terror, the opportunity cost of those monies being spent on war, not peace and advancement nor the fact that the world is now in more danger than it has been since 1939. All resultant from the horrendous obscene crimes initiated by the US, UK, Ireland and other participants in what I style the Coalition of the Shilling. The moral vacuum that BUSHCO and its evil philosophies and deeds brought about is what has the world where we are today. Nothing “redundant” about that whatsoever. Half a million death certs issued by the Nazis in respect to the Jews they slaughtered.

      By your logic Dealga we should be paying respect to the memory of half a million murdered Jews today, and to talk about 6-8 million murdered Jews is just “hysterical nonsense.” By your logic Dealga there was no Holocaust.

    • Brian Cowen high king of Ireland says:

      Kynos, you are a ranting semi-literate crank who responds to polls as well with this hysterical rubbish, why? Do you not have a life? At least go to evening classes and learn to write.

    • dealga says:

      Yes Kynos, I cited factual figures from a respected NGO, who you have now likened to the Nazis, then you cited “the highest survey figure [you]’ve yet encountered” – a British market research organisation.

      I think that speaks for itself despite your absolutely ludicrous leap to accusing me of holocaust denial.

      Keep jumping that shark dude. You’re quite hilarious.

    • Kynos says:

      We “draw lines under the past” and those who are responsible walk away. Thus a moral hazard is created and thus it all happens again and again and again and again. See Mr Obama has no apparent plans to reverse this trend, talking about how it is now a time for reflection not retribution. Would seem to be a bit of a departure from his constitutional obligation to ensure that the laws are faithfully executed. But he’s not a lawyer now. He’s a politician.

    • Kynos says:

      Being a ranting semi-literate crank (apparently) hasn’t stopped me getting every prediction of the present disaster which I’ve made on this site bang on in the past 7 years. Funny that. I thought getting it right in the Mystic Meg department was the job of journalists and politicians and those who “know better than us.” Apparently not.

    • Kynos says:

      I’ve now likened Iraq Body Count to the Nazis?? I don’t think so. What I’ve drawn is a comparison between the various anonymites on this site and in the media in general who have since 2003 been ear-splitting in their attempts to minimise and even deny the carnage, the total excess deaths arising as a result of the illegal immoral and unjust US war of aggression, and those who have in ages past attempted to minimise other holocausts of humanity. This is always done so as to rehabilitate and even justify the perpetrators if not to mock the survivors. If you’re going to chuck slurs Dealga do try and at least be accurate and truthful.

    • Kynos says:

      Didn’t know what jumping the shark meant til just now. always appreciate the oppo to increase the store of useless trivia. Helpful in pub quizzes. So dealga how exactly has my message on here veered from the sublime to the ridic? Been saying seven years that the moral vacuum in the West spawned by BUSHCO would have its consequences. Now they’re here I should shut up about it? But what about the next time, thirty to fifty years from now, when our descendants (such as survive the present catastrophe) go on to repeat the same ol’ same ol’ and once more prove the ancient Greek correct? That every few generations must relearn the horrors of war for themselves? There will always be those who start wars because they think they can win them. But as Gandhi said it matters not to the orphaned, the widowed, the armless the legless the blind the insane whether the mad destruction is wrought under totalitarian tyranny or in the holy names of liberty and democracy. They’re the ones we ignore in the aftermath, when we turn our attention to “peace studies” and ignore the lessons of war, and indeed its very Reality. How easy it is to facilitate a million armed men’s journey to the heart of darkness when we see them only in neatly pressed BDUs as they pass like Banquo’s ghost through the shiny aisles of duty-free. How easy it is to nod and wink at aircraft strongly indicated as being nothing more than flying racks, on which innocents are stretched with the essential assistance of our silence and wilful blindness. How easy it is to say Ireland is too small a country to stand up for any just cause but Her own and just take the aggressor’s thirty pieces of silver. Had others taken that view the few of us Irish still remaining here today would be speaking German as we served ice-cold beers to Gauleiters and senior SS men taking R&R and doing a little wander-vogling in der Irisch Urlaubsort.


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