Leaving Ireland

Irish writers don’t stay in Ireland. Oscar Wilde left home and wrote in London – where he was the toast of the town – and after the scandal with the Marquis of Queensbury’s son and his imprisonment, moved to Paris in 1898, where he lived until his death at a hotel at 13 Rue des Beaux Arts – you can stay in his room if you’d like. Wilde is buried a few miles east in Père Lachaise Cemetery – a strange trajectory, but he’d be no one had he stayed in Ireland. And James Joyce – he of the Dubliners and Ulysses (that surreal odyssey through Dublin) – spent his adult life in continental Europe – Trieste and Zürich, and Paris, where Ulysses was first published, by that American in exile, Sylvia Beach. And Samuel Beckett bailed out – his Waiting for Godot premiered on January 5, 1953, in Paris, where he’d lived since 1932 – and he wrote the thing in French. The English version came later. Ireland was far in his past.

There seems to be a pattern here. George Bernard Shaw’s mother left her Dublin home and followed her voice teacher to London when Shaw was sixteen, and Shaw stuck it out in Dublin with his father for a time, but he too ended up in London. Ireland was dead, or was at least a dead end. And maybe Jonathan Swift started it all – he was in London soon enough, although he eventually returned. Oliver Goldsmith didn’t. William Butler Yeats never left, but the general consensus seemed to be that it was fine to be from Ireland – way cool in some sort of deep-thinking rebellious and oddly romantic way – but it was actually death to be stuck there. There was something about the place. Dreams died there, if you managed to have any dreams at all.

Maybe Dublin was the Pittsburgh of Western Europe. Those of us born and raised in Pittsburgh know why Andy Warhol left. What was happening was always happening elsewhere.

But much of this had to be economic. The potato famine emptied Ireland and filled America with the Irish of course, but the place was never that prosperous. Consider Swift’s Modest Proposal For Preventing the Children of Poor People in Ireland from Being a Burden to Their Parents or Country, and for Making Them Beneficial to the Public – cook ‘em up and eat them. That was published in 1729 – Ireland had always been a visually gorgeous but economically dismal place. There’s a reason the Irish are famous for drinking themselves into a stupor.

And economic conditions are getting worse again, after a brief period of odd prosperity. That might not be worth examining of course – the Irish return to form – but this collapse is all wrapped up in the sort of advice Americans have been getting from the conservative right, the Tea Party folks, and just about every Republican now in office at any level, and in the New York Times, Liz Alderman explains it all with In Ireland, a Picture of the High Cost of Austerity:

As Europe’s major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight.

Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.

That is the message – get rid of debt and everyone will know you’re serious, and responsible, and even if it hurts a whole lot, things will be just fine pretty soon.

But things don’t really work that way:

“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’”

Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.

Joblessness in this country of 4.5 million is above 13 percent and the ranks of the long-term unemployed – those out of work for a year or more – have more than doubled, to 5.3 percent.

Shutting down as much as you can, to manage the debt, resulted in… a general shutdown. Who knew?

Actually many Keynesian economists knew, but such folks are scoffed at as tax and spend liberals who will ruin things with their spend-to-stimulate nonsense that will break the bank. But now the Irish are being warned of much more pain to come:

“The facts are that there is no easy way to cut deficits,” Prime Minister Brian Cowen said in an interview. “Those who claim there’s an easier way or a soft option – that’s not the real world.”

So now Ireland is down there with Portugal, Italy, Greece and Spain. It now pays three percentage points more than Germany on its benchmark bonds – investors seem to have seen that the current austerity program, by retarding growth and also failing to reduce borrowing, will make it harder for Ireland to pay its bills, not easier. Theory and the real world – where real people put their real money down and make bets – met face to face. Theory lost.

But don’t tell anyone:

Other European nations, including Britain and Germany, are following Ireland’s lead, arguing that the only way to restore growth is to convince investors and their own people that government borrowing will shrink.

The Group of 20 leaders set that in writing this weekend, vowing to make deficit reduction the top priority despite warnings from President Obama that too much austerity could choke a global recovery and warnings from a few economists about the possibility of a much sharper 1930s style downturn.

Obama, in spite of what Glenn Beck and Sarah Palin say, is no fool. One needs to be careful, and there’s Kenneth Rogoff, the former chief economist at the International Monetary Fund and now a Harvard professor, suggesting there is really no good way out of this – “If you want to escape default, the Irish path is the only way to go. But the Ireland experience points to the profound challenges that the current strategy implies.” Nothing is ever simple.

And nothing is working:

Politicians here have raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent. About 30 billion euros ($37 billion) is being poured into zombie banks like Anglo Irish, which was nationalized after lavishing loans on developers.

The budget went from surpluses in 2006 and 2007 to a staggering deficit of 14.3 percent of gross domestic product last year – worse than Greece. It continues to deteriorate. Drained of cash after an American-style housing boom went bust, Ireland has had to borrow billions; its once ultralow debt could rise to 77 percent of GDP this year.

“Everybody’s feeling quite sick at what happened because things were going so well for Ireland,” said Patrick Honohan, the Irish central bank governor. “But we don’t have the flexibility to do a spending stimulus now. There’s no one who is even arguing for it.”

They are where we are. And all this has spooked consumers into saving, not spending, like here. And that only makes things worse. And of course nothing will be spent on infrastructure – that would incur debt – so, for the next ten or fifteen years, roads and bridges and all the rest will fall apart – making things worse. And there is the political fallout:

A bitter sense of regret punctuates chatter at any Irish bar, where the topic often turns to vilified bankers and politicians, or the latest jobless figures.

While no one is marching in the streets, the Irish do have a tipping point: Prime Minister Cowen, whose popularity has plummeted, agreed last week not to cut public wages again in the next budget. Many voters, having experienced the pain of austerity, are expected to express their anger in the 2012 elections.

“Then,” said Paul Sweeney, economic adviser to the Irish Congress of Trade Unions, “the Irish for once are going to have their revenge served cold.”

It’s a Tea Party, with Irish Tea.

But much of the world – and here, all of the Republican Party – believes the lesson to be learned is that belt-tightening and deficit reduction will work wonders. Isn’t it pretty to think so?

Paul Krugman adds this:

The key thing to bear in mind about calls for harsh austerity in the face of a depressed economy is that such calls depend on two propositions, not one. Not only do you have to believe that the invisible bond vigilantes are about to strike – that you must move to appease markets, even though right now bond buyers are willing to lend money to the United States at very low rates; you must also believe that short-term fiscal cutbacks will in fact appease the markets if they do, in fact, lose confidence.

That’s why the Irish debacle is so important. All that savage austerity was supposed to bring rewards; the conventional wisdom that this would happen is so strong that one often reads news reports claiming that it has, in fact, happened, that Ireland’s resolve has impressed and reassured the financial markets. But the reality is that nothing of the sort has taken place: virtuous, suffering Ireland is gaining nothing.

Of course, I know what will happen next: we’ll hear that the Irish just aren’t doing enough, and must do more. If we’ve been bleeding the patient, and he has nonetheless gotten sicker, well, we clearly need to bleed him some more.

Cue John McCain, and Steve Benen adds this:

Remember, here in the US, Republicans are desperate to do exactly what the Irish have done – respond to an economic downturn by taking money out of the economy, focusing on the deficit, fearing inflation that doesn’t exist, and taking steps to reassure investors – that don’t actually reassure investors.

But you hear that is what we must do. Krugman calls it “the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.” What did Lord Farquaad say in that first Shrek movie? Ah yes – “Some of you may die, but that’s a sacrifice I’m willing to make.”

And the ironic thing is that the Irish got into this by trying to be just like us, or like Reagan and the others said we should be, as Henry Farrell explains in Reading Milton Friedman in Dublin:

This rhetoric of free-market empowerment reinforced long-standing problems of the Irish government. State institutions, while mostly non-corrupt, were prone to inaction, especially when active regulation might have discommoded powerful interests. Oversight of the banking sector was particularly problematic. Ireland’s Central Bank proved consistently unwilling to exercise any independent role on politically ticklish issues. When the Central Bank discovered that the Ansbacher Bank was breaking the law by running a major tax evasion scam for the benefit of a small group of individuals (which included Charles Haughey, a longtime Irish prime minister noted both for his personal vindictiveness and his lavish lifestyle), it declined to discipline the bank for abusing its license, or indeed to inform the taxation authorities. This minimalist approach to oversight was later to wreak havoc, as the bank turned a deliberate blind eye to the problematic accounting practices of well-connected banks.

Gee, that sounds like the Bush years, as does this:

Electoral politics were little better. The dominant party, Fianna Fáil, was notorious both for its flexibility on matters of legal ethics and its ties to agribusiness and the construction industry. At the height of the boom, it went into coalition with the Progressive Democrats, who advocated the slashing of taxes, the minimization of regulation, and the liberalization of social mores. The coalition’s pro-business agenda allowed Fianna Fáil to look after its clients as they swapped their mohair suits for Mediterranean yachts. But it also allowed the Progressive Democrats to try to remake Ireland along broadly libertarian lines. Neither party exhibited any very great enthusiasm for beefing up the power of regulators to keep pace with the ever-more-aggressive lending practices of the nation’s banks. Nor was either party able to control government spending. The Progressive Democrats killed off the “Bertie Bowl,” a horrendously expensive proposed sports stadium, but failed significantly to stop the state sector from expanding, even as business and income taxes fell. The fiscal shortfall was made up by transaction taxes on a booming property market.

Cool – and Farrell states the obvious:

Yet is American politics so very different? Irish politics is profoundly shaped by perceptions regarding the difference between those who have influence within the system and those who are relegated to the periphery. … For those who see themselves as insiders, it generates a sense of being untouchable. And for those who see themselves as outsiders, it creates a sense of fear. They never feel that they quite know what’s going on.

Who does? And Farrell says this is as plausible a description of the United States as of Ireland:

In the U.S. system, too, the broad imperatives of globalization are marshaled by well-connected and “untouchable” business interests to defeat regulatory oversight, of the financial system and elsewhere. The American version of these interests is less roughly spoken than its Irish equivalents, and wears better suits, but otherwise it is not very different from the forces that brought Ireland to near collapse. If Ireland once seemed like a miniature America, America looks increasingly like an oversized Ireland. A comparison that was once all too self-congratulatory now has disturbing implications.

But who has the edge in any debate about such matters? It seems those imposing suffering on other people to show real tough-love leadership in tough times have the nation’s attention. And one of those would be House Minority Leader John Boehner, who was interviewed by the Pittsburgh Tribune-Review – owned by the far right Richard Mellon Scaife – and said his side was winning this debate:

House Minority Leader John Boehner, the Ohio Republican with his eye on Speaker Nancy Pelosi’s gavel, said the tide is turning the GOP’s way. “The American people have written off the Democrats,” Boehner said Monday in an interview with Tribune-Review editors and reporters. “They’re willing to look at us again.”

Steve Benen suggests this is a little excessive – as more Americans consider themselves Democrats than Republicans and more Americans have a favorable opinion of Democrats than Republicans, and more Americans trust Democrats to handle the biggest issues of the day than Republicans and so on. Except for the facts, Boehner may be onto something.

And there’s Boehner saying any Tea Party protests are emblematic of deep voter anger against Washington’s leaders:

“They’re snuffing out the America that I grew up in,” Boehner said. “Right now, we’ve got more Americans engaged in their government than at any time in our history. There’s a political rebellion brewing, and I don’t think we’ve seen anything like it since 1776.”

Is that irresponsible language? “Snuffing out” and rebellion to overthrow the elected government – he must be being metaphoric. But he says the health care law passed in March “pushed most Americans over the edge.” What edge?

Benen adds this:

Well, no, not really. Public attitudes towards the health care law have improved in recent months, and opposition has fallen. The Affordable Care Act may have pushing most Republican members of Congress over the edge, but not “most Americans.”

Boehner proceeded to threaten to repeal health care reform, voiced his opposition to Wall Street reform, defended offshore coastal oil drilling and said Obama overreacted to the BP spill crisis, and voiced support for increasing the Social Security retirement age to 70 for people who have at least 20 years until retirement – in order to get enough money to pay for the wars in the Middle East.

Actually the money is for the Bush tax cuts – he does not want them to expire. The way to create jobs for everyone is make sure the extremely wealthy don’t have to pay taxes, or something.

But there was also this:

Boehner criticized the financial regulatory overhaul compromise reached last week between House and Senate negotiators as an overreaction to the financial crisis that triggered the recession. The bill would tighten restrictions on lending, create a consumer protection agency with broad oversight power and give the government an orderly way to dissolve the largest financial institutions if they run out of money.

“This is killing an ant with a nuclear weapon,” Boehner said. What’s most needed is more transparency and better enforcement by regulators, he said.

He sounds Irish, but the America he grew up in was Cincinnati, Ohio. Still Steve Benen adds this – “Just to be clear here, what Boehner considers an ‘ant’ was a severe economic crash that nearly collapsed the global financial system.”

And there’s Jon Chait here – “Republicans have tried not to admit this, but Boehner pretty much spelled out what they think. The underlying problems in the financial system are minor (‘an ant’) and the main solution is just to hope regulators do a better job than they did before.”

And Benen goes on:

This, like a variety of other candid Republican moments of late, seems like the kind of quote that might matter to voters. Indeed, it’s something of a bookend to John McCain’s “fundamentals of the economy are strong” line from 2008 – the GOP sees an economic crisis, the likes of which we haven’t seen in generations, and Republicans just don’t think it’s that big a deal.

This was a crisis that led to 8 million U.S. job losses and $17 trillion in lost retirement savings and net worth. What’s more, it was a crisis that could have been prevented had safeguards and accountability measures been in place to regulate Wall Street.

And now that Democrats want to approve such safeguards, Boehner’s not only against the effort, he thinks the whole endeavor is unnecessary, since the crisis was just “an ant.”

And this man wants to be Speaker of the House.

Of course Boehner tried to walk this back, and Kevin Drum cites Boehner’s spokesman “explaining” what he meant:

It is clear Boehner is not minimizing the crisis America faced – he is pointing out that Washington Democrats have produced a bill that will actually kill more jobs and make the situation worse.

Drum isn’t buying it:

So here’s a question: do the standards of journalism require us to take this explanation at face value? I mean, it’s obvious to a fourth grader what Boehner meant: he thinks there were only minor problems with the financial system before the crash, and we just don’t need anything more than a few tweaks here and there to fix things up. He decidedly was minimizing the problems on Wall Street during the years that led up to the crisis.

But do we now have to pretend that’s not what he meant simply because his press flack says that’s not what he meant? Or can we act like adults and interpret his remark in the obvious way?

That depends. They needed a two-thirds majority and didn’t get it – “The House of Representatives failed Tuesday to pass a bill that would extend long-term unemployment benefits through the end of November.” And the American people will thank them for it. Big John says so.

And thus we finally turn Irish. But that River Dance stuff is still stupid. And all the good people leave.

Addendum:

A friend mentions this:

I’m surprised you didn’t mention the “Irish Miracle” touted by the American right-wing noise machine of a few years back, with them all pointing out that, since Ireland cut or eliminated (I forget which) taxes, particularly its capital gains tax, businesses were flocking there, including I guess from the U.S., causing their economy to have a growth rate of I think something like 12%? I would think the lesson here would be it blowing up in conservative faces, not giving them enough tax revenue for stimulus during rainy days such as these.

Well, that is what happened, as for a time Ireland was the Celtic Tiger. And then it wasn’t.

About these ads

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
This entry was posted in Deficit Spending, Economic Theory, Ireland's Economic Collapse, Restoring Growth through Austerity and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s