An Irishman's Diary

 

‘IT’S 3am at Doheny Nesbitt, a favourite watering hole of Dublin’s political and business elite, and the property tycoon Seán Dunne stoops to retrieve a penny from the pub’s grimy floor, writes John Lavelle.

So begins a recent article in The New York Times tracing the fall of the Irish economy.

What image could better capture the depths of our descent? Ireland’s most extravagant tycoon gropes for a single cent on the floor of the pub where, according to legend, Ireland’s elite conceived the economic miracle two decades previously. The symbolism was too much for the NYT to resist.

“I am never, never too proud to pick a penny up from the floor,” Dunne is quoted as saying. “I know the value of money.”

But Seán Dunne is an exception in this respect. For most of us, pride doesn’t come into it. We know the value of a 1 cent coin, and it’s certainly not worth bending our backs for.

This view is shared by many around the world, and efforts to remove small-value coins from circulation are gathering momentum. Pennies are expensive and inconvenient, say their opponents, and aren’t worth the metal they are minted with.

In some cases this is literally true. In the UK, for example, older pennies in circulation each contain 3.5 grams of copper. When world copper prices rose last summer to $9,000 a tonne, the metal in each coin was worth 1.5p. It would have been possible to collect pennies, melt them down and sell the copper on the London Metal Exchange for a 50 per cent profit.

The abolitionists have already prevailed in some countries. New Zealand and Australia stopped producing coins worth less than 5 cent in the 1990s. One and 2 cent coins were never given a chance in Finland, which opted not to bring them into circulation when it switched to the euro in 2002. The Netherlands followed its lead in 2006, requiring all prices to be rounded to the nearest 5 cent.

An anti-penny campaign in the United States led by former Republican congressman Jim Kolbe had less success. Eschewing such unimportant concerns as the quality of intelligence on Iraqi weapons and the effectiveness of financial-sector oversight, in 2002 Kolbe proposed the Legal Tender Modernisation Act in an attempt to stop the minting of 1 cent coins.

Cynics noted that Kolbe’s home state of Arizona was rich in copper, a constituent of the higher-denomination coins whose use would have been boosted by the penny’s demise.

His bill failed and his only consolation was that the initiative featured as a plot line in the third season of The West Wing.

Congressman Kolbe may have drawn inspiration from the 19th-century American industrialist Joseph Wharton, who gave his name and fortune to one of the world’s leading business schools. Wharton – the owner of the US’s only nickel plant – grew rich by persuading Congress to mint 5 cent coins from the metal.

Incidentally, the US nickel offered another commercial opportunity for those with a talent for metallurgy. With high commodity prices and a weak dollar, the market value of the copper and nickel contained in each 5 cent coin peaked in the summer at just over 6 cent. But caveat meltor. Under federal law, anybody caught melting nickels can be fined up to $10,000 and imprisoned for up to five years.

Anti-penny sentiment is on the rise among Europeans. A recent Eurobarometer poll showed a majority in favour of ditching 1 and 2 cent coins completely. Abolititionism was strongest in Belgium, where efforts have begun to have the coins withdrawn.

Given the international trends, it seems only a matter of time before a scrap-the-cent lobby develops in Ireland as well.

Consider the benefits of abolition. The Government would save the cost of manufacturing and distribution. Since so many of them end up in vacuum cleaners or down the side of sofas and have to be replaced, 1, 2 and 5 cents account for 80 percent of the euro coins produced.

In addition, eliminating 1 and 2 cent coins could reduce shopping bills by causing retailers to lower prices below round numbers by 5 cent instead of 1, charging €9.95 instead of €9.99, for instance.

(This strategy, known as “psychological pricing” in marketing circles, serves two purposes: it foils pilfering cashiers by forcing them to process transactions rather than pocketing notes, and it dupes some customers into perceiving prices to be lower than they actually are.)

Getting rid of pennies would also make life easier for retailers, who wouldn’t have the trouble of filling tills with bags of redundant coppers. Bus users would be relieved of the trouble of sifting through the small coppers that had accumulated in their pockets or purses every time they need change for a fare.

On the other hand, the expectation of hard times ahead may make us us more appreciative of our small change – and more likely to stoop in imitation of the thrifty example set by Mr Dunne.