Hayes criticises 'faith-based economics'

Minister of State Brian Hayes has criticised devotion to “faith-based economics” and said capitalism and the free market were “a bit like nuclear reactors” at a meeting of Irish-American business representatives today.

Mr Hayes, who is a Minister of State at the Department of Finance, said the Government would continue to battle for a cut in the interest rate charged on the EU-IMF deal.

But he added that Ireland would continue to defend its low corporation tax rate and that countries “lecturing” Ireland on its 12.5 per cent rate should remember that there are huge disparities in their own effective tax rates.

The Fine Gael TD told the spring lunch of the Ireland-US Council that since the 1980s a “type of faith-based economics” had become dominant. “It was characterised by an almost religious belief in the free market. But like all false faiths; eventually it contained within itself the seeds of its own destruction.”

The fallout of free-market policies pursued by former US Federal Reserve chairman Alan Greenspan were now evident, said Mr Hayes.

He added that trust in banks was a bit like a belief in God. “Once lost it is hard to recover.”

However, people could “now be confident their deposits are safe”, Mr Hayes said. The two “pillar banks”, AIB and Bank of Ireland, “now have a big job to do” winning back deposits.

Figures published by the Central Bank today show private sector deposits fell more than 10 per cent over the year to March. This marked an acceleration on February’s rate.

Mr Hayes said there was a risk that “people might be tempted by the escapism of victimhood”. He cited the advice of the Dalai Lama, who suggested on his recent visit to Ireland that “hard work, self-confidence and a positive attitude” were required for Ireland to emerge from recession.

The Ireland-US Council event was attended by representatives of big business in Ireland, including David Hodgkinson, the executive chairman of AIB, which was thanked for being a “staunch supporter” of the council.

US Congressman Richard Neal, who also spoke at the event, said he hoped to put to bed the “theology” that “tax cuts pay for themselves”. The Democrat, who is a member of Washington’s influential Ways and Means tax committee, has a record of voting against tax cuts in the past. He said this was “the responsible path”.

He indicated that laws allowing the deferral by multinationals of US tax liabilities on foreign-sourced income may be adjusted in the future. The current system results in “a patchwork of economic effects, some good, and some bad”, he said.

Congressman Neal thanked the invited guests for attending on a day when another major event had taken place. “By that, I mean the fact we have certified the President of the United States as an American citizen,” he joked.