Hard Lessons from the Decade of Greed
We have seen the full gamut of clever debating techniques employed by politicians and unions in the past couple of weeks.
There is deflection:
Such as: “People are missing the real scandal here. The Government is bailing out the banks while squeezing public services.”
There is transference:
“Public servants aren’t to blame for this miss. The people to blame are the bankers and speculators who brought us to this sorry mess. Yet it’s the public servants who are targeted and victimised.”
There is spotting a tiny flaw in your opponent’s argument and even though it’s not related, using it to bring down the whole edifice. Alastair Campbell was really good at manipulating this argument in his day:
“The Special Purposes Vehicle (51 per cent owned by private interests) was secretly inserted into the NAMA legislation and proves that the Government’s entire motive is to protect its banking and building buddies. It shows that it’s all a con job and we’re going to end up paying.”
(It’s clear that a lot of people who have condemned the SPV device don’t have a clue why it’s there and what it does. And that includes the hapless Minister for Agriculture Brendan Smith, who flailed along on the Week in Politics two week ago, way way out of his depth as you can see for yourself here)
Other techniques too. Biased assimilation for example. That essentially means being totally deaf to any argument that might damage your thesis while grabbing on to any argument that may help your cause.
We can talk until the cows come home about how much the Fianna Fail-Government has messed things up in 12 years of power. But none of that is going to unwind the clock, or magic away the problem. Sure, the craven reliance on property and assets was a journey on a road to perdition. But we were all willing fellow travelers especially when everybody’s house was worth half a million or a million on paper. There is a psychological observation of mass behaviour in the money markets. It has been described as irrational exuberance. Everybody, like starlings, flocks after soaring markets. Rational assessment disappears – everybody gets carried away.
We can blame the political class up and down. But the phenomenon was wider and more complex than that. Complicity extends to the banks, to the construction companies, to business, and yes, to Joe Citizen on the street. Any political party that would have been brave enough to say the emperor has no clothes during the Decade of Greed would have been committing an act of political hari kari. Especially in 2007.
Winning slogans for 2007 General Election:
We all Need to Tighten our Belts
House Prices Need to Come Down
We will increase taxes on income and property.
Are we as citizens entirely blameless in all of us? We voted them in after all. In election after election. It annoys me to see citizens portraying themselves as passive and victimised, as is they were gormless enough to allow politicians to manipulate and dupe them.
And I’m beginning to resent lazy descriptions of politicians as incompetence and corrupt and in it for themselves etc. They didn’t appoint themselves to their positions in Irish society. We did. And by condemning them in that blanket fashion you are saying one of two things.
1. I am also blaming myself.
2. Intellectually, I am above the lumpen proletariat who are too thick to do anything else other than elect a parliament of fools.
Onto the present. To use the cliche from the Northern Peace Process. We are where we are. Well, where we don’t really want to be.
I have some reservations about NAMA. Perhaps nationalisatoin would have been better (the €7 billion premium would not have arisen). The fees and other costs of €2.6 billion over 11 years also seems grotesquely high.
However, I have no doubt in my mind that a rescue package was needed for the banks, no matter how unpalatable from a moral point of view. And that it would necessarily inflict pain on the taxpayer. Nationalisation is not a zero sum game. Neither is letting the banks fail. None of the choices were easy. None would have been cost free.
I also strongly believe that the bank crisis must be separated from the crisis in public finances. To me, it’s obvious, a no-brainer. For this reason. This year, State income has fallen by over €20 billion. That’s 20,000 million for a nation with a population of 4 million. And State outgoings have increased to €54 billion. The mathematics of that is obvious. It’s unsustainable.
And the mathematics of the public services is also relatively straighforward. Roughly a third of all State spending is on salaries. More than a third goes on social welfare. The rest goes on services and adminstration, that has already been cut back. The Government’s €4 billion cut can’t be taken from services alone. In my opinion, there is no choice but to look at wages and at welfare.
Having said that, I don’t agree with the ‘no tax’ strategy. There is some scope for raising the percentage of tax take (capital gains tax, capitals acquistion tax etc) that were slashed during Charlie McCreevy’s time. All shelters should be closed. There is also a case for a third rate of tax, though with no more than a very small increase in the marginal rate.
As for the public versus private debate, I know of very few private sector workers who haven’t taken pay cuts this year. We live in a society where half a million people (13.75 per cent by the end of next year) are unemployed. It’s awful simply awful. And the Government needs to start moving might and main to come up with a decent jobs strategy. And the Minister, Mary Coughlan, needs to show what she has failed to show until now, that she is up for that challenge, and up to that job.
I belive the public service have to pay their share. Of course, that means pain. But the truth of the matter is that they remain in an advantageous position.
Like upward-only rent reviews on Grafton Street, it seems benchmarking is considered by the public service to be a one-way street. NUI Maynooth economist Jim O’Leary told this newspaper last week that benchmarking was a boomtime phenomenon. He has argued (and I know that unions take issue with this) that two ESRI studies from 2003 and 2006 show that public servants had a 10 per cent premium over their private sector counterparts before benchmarking. That rose to 22 per cent after the first round of benchmarking was paid.
It’s not just public versus private who are split. There are tensions within the public service family between those on low wages and those on astronomically high salaries (senior officials on €150,000 plus and hospital consultants who get paid voracious salaries from the public purse).
Then there is the divergence between those on salaries (with few allowances) and those frontline staff whose basic salary is augmented by a blizzard of allowances and overtime payments. Colm Keena’s article on Garda allowances (read it here, it’s really eye-opening) showed the ridiculous practices that had grown up like a weekly boot allowance, even though boots are supplied, and the special premium paid to desk-bound staff to compensate them for the fact that they can’t claim overtime. It’s madness. And costs the taxpayer €215 million each year.
There is fat in the system that can be rid off without hurtling people into the financial void. Public service unions are always good at highlighting the plight of low-paid workers earning €30-40,000 out. But you must remember that over a tenth of public service workers (some 46,000 according to 2007 figures) earned €70,000 a year and more in salary (and as far as I can tell, that’s not taking allowances and extras into account).
And at a time when everybody in the private sector is taking cuts, or worse, it begs one very simple question.
If public servants were benchmarked up during the boom years, why can’t they be benchmarked down now?