McCreevy's return would only deepen fiscal crisis

 

OPINION:IN APOCALYPTIC times, people start to look towards the Second Coming. Seeing all the signs of the Last Days - plagues of locusts, strange horsemen in the sky, George Lee constantly on the telly - they take refuge in the hope that the Saviour is returning to earth.

Just to show that the Irish still believe that things can be desperate but not serious, the name of our saviour is, apparently, Charlie McCreevy.

Alongside the barmy army of internet discussion board posters and radio phone-in callers, some apparently sane people (Matt Cooper, Richard Aldous) are demanding McCreevy's immediate recall from Brussels and appointment to the Cabinet.

If Charlie McCreevy is the solution, the problem must be far greater than even the most pessimistic of us have imagined. McCreevy, on any objective analysis, was the worst minister for finance in the history of the State. He is one of the reasons why the global financial crisis is hitting us especially hard and why we have so few resources to deal with it. What's alarming about the demands for his return is that they show a profound sense of denial about how we got into this mess.

McCreevy's performance as minister for finance has to be judged against the opportunities he had. He inherited an economy that was beginning to boom and a once-in-a-century alignment of favourable domestic and global conditions. He failed to turn that opportunity into sustainable benefits such as a decent health system, an end to the cycle of poverty, or good public infrastructure. He also turned an economy that was booming because it was internationally competitive into one that was increasingly dependent on a property bubble.

McCreevy's childish mantra - "When I have the money, I spend it, when I don't have it, I don't spend it" - was the economic equivalent of bulimia: binge and purge, binge and purge. Much of the binging was breathtakingly stupid: €1 billion of public money to bail out the religious orders from the consequences of child abuse by their members; tens of millions on pet projects like the Punchestown equestrian centre which delivered no public benefit; about €2.5 billion a year on property-based tax incentives that merely encouraged investment away from real businesses and towards overpriced apartments.

All of this was done in a way that was deliberately socially regressive.

McCreevy made sure that the boom would preserve the deep inequalities in Irish society by using his budgets to redistribute income upwards. His budget for the year 2000, for example, made the incomes of the poorest 20 per cent of the population rise by less than 1 per cent, those of the middle-income groups rise by 2-3 per cent, and those in the top 30 per cent by about 4 per cent.

This, in turn, was typical of the priority McCreevy gave to tax cuts over everything else. The cumulative effect was to create a fantasy land in which taxes could be cut while public spending was rising. We were encouraged to think that we didn't have to make choices - lavishly wasteful public expenditure didn't matter because no one had to pay for it. And the long-term effect of pumping all of this money into the economy through tax cuts and an artificial property boom was a massive rise in inflation which seriously damaged our economic competitiveness.

Inflation under McCreevy rose at twice the rate of our EU partners. Prices here in 2004 were 28 per cent above what they were when McCreevy took office; the corresponding figure for the EU was 14 per cent.

Through all of this, McCreevy retained a baffling reputation for straight talk. He was in fact addicted to the worst kind of stroke politics.

It was he who announced medical cards for all those over 70, on the basis of a back-of-the-envelope calculation that it would cover 39,000 people at a cost of €19 million. In fact, in the first year, it covered 63,000 at a cost of €126 million. It was he who announced, with no costing and no detail, the blithering idiocy of so-called decentralisation. As well as the huge damage it has done to the public service, it has given us, for example, five sites bought at the height of the property boom for €16 million that will now lie idle indefinitely, and a running total of €230 million spent so far. Both of these schemes were straightforward pre-election gimmicks.

It is true, however, that a return of Charlie McCreevy from Brussels would be good for someone. The European Commission would be greatly enhanced by his absence. As the last bastion of "light touch" regulation of the financial system, he has, in the words of three senior Socialist members of the European Parliament, acted in a manner "more appropriate for a paid lobbyist of the finance industry than a European commissioner". By taking him back, we might earn some much-needed goodwill in Europe.

There's no other reason to feed the fantasy that those who caused this crisis are best placed to get us out of it.