- Culture
- 03 Jun 11
...It’s broke – and current policies are not going to fix it. So let’s start looking properly at the alternatives, writes Adrienne Murphy.
The doors of a betting casino burst open. Out run a bunch of furious gambling addicts. Their bets have failed and they’ve lost fortunes, heaped upon fortunes. By rights they should accept their losses and go home, with their tails between their legs, their wealth scaled down and some necessary lessons learnt. Instead, they eye up the people on the street, like hunters assessing their prey.
What happens next is, literally, incredible. They round us up. They force their way into our homes. Through agents that they either intimidate or buy off, the gamblers extort our valuables – even the deeds to the houses that we own – from us. And this is not just a once-off rip-off. No siree, these boys have enough muscle to force us collectively into massive long-term debt, to keep paying off the gamblers’ private losses. Our hopes and aspirations for our children may lie in tatters, but we’re so shocked we can barely react.
Well, if there is to be a semblance of justice in this world, then react we must. Because this scenario is not make-believe after all. It reflects the bizarre realpolitik of what has been happening over the past couple of years across the globe, but especially in Europe – and most spectacularly in Ireland.
The Irish public are amongst the many millions across Europe who are currently enduring this assault. And we are being hit more severely than most. It has already cost us €20 billion in savage austerity measures, and is dramatically increasing inequality, as enormous amounts of money are transferred, in effect, from low to very high-earners.
No wonder there’s a growing call that we follow Iceland’s example, and repudiate the private Irish and international banking debts that have been foisted on us and are pushing us towards bankruptcy. An increasing number of leading economists, on both the left and the right, say that defaulting on our debt and ending the bank bailout is our only real hope. Otherwise, Ireland, along with Greece, will remain a ‘ward’ of the EU-IMF for the foreseeable future, losing all economic independence and being forced to persist with brutal impositions of austerity until there is no longer a budget deficit of €18 billion in our economy. Of course, there may be no economy at all...
Not everyone agrees with the strategy. For one, Vincent Browne – who is certainly not in thrall to the current Government or the policies initiated by the last one either – recently shot down the argument for a debt default, claiming that it would result in an inability to borrow, which would in turn create an unacceptably high risk of calamitous suffering for the poor and vulnerable, as savage cuts were made to bring down our deficit.
The problem with Browne’s argument is that these very cuts – debt repudiation or no debt repudiation – are already underway, and are rapidly accelerating. The social calamity that Browne fears would follow-on from debt default has already begun. There is a question, of course, of degrees of harm. But right now, there is so little evidence that Ireland will be able to dig itself out of the European Central Bank-dug hole that telling the ECB that the hole belongs to them is almost certainly be the best option.
Right now, the Fine Gael/Labour Government is continuing with Fianna Fáil’s catastrophic economic policies. It is true that they took over the reins after the horse had bolted and the options had been narrowed by the payments made under the bank guarantee given by Brian Lenihan. But these policies still involve attacking the poorest, the weakest and most needful. Hence, we’re seeing massive cuts in the disability and carers’ sector, with crucial early intervention and educational support for children with special needs being hacked. There is also an all-out assault on the pay and working conditions of low-earners, mainly women, in the retail/hospitality sector. People who can’t find work are getting publicly blamed for being lazy, and are at risk of having their social welfare cut unless they agree to work for very low wages. Meanwhile, community and voluntary groups – and the incredibly important work they do in pushing progressive agendas, and literally holding society together at a time of collapse – are having their funding raided.
There are tough issues to be faced here. Anyone who thinks otherwise is living in a fantasy land. But we have to ask: is this really the way to do things in a civilised society?
OTHER, BETTER, SANER OPTIONS
Much of the mainstream media report on the ‘austerity programme’ with little or no analysis from either a social justice or an economic perspective, let alone offering alternative options. It’s as though the dismantling of public services, wage decreases and ongoing bank bailouts are the only methods we have available to us to deal with the economic crisis. Chronic unemployment and emigration, social disintegration, the lowering of living standards and the infringement of civil rights are seen as unfortunate but inevitable by-products of the need to decrease the budget deficit and service our debt.
Yet when you go looking, you find many other options – both national and trans-European – for coping with the economic crisis and initiating recovery. There are economists, sociologists and politicians offering different and far more compassionate alternatives to the suicidal policies currently being foisted on us. Understanding what these commentators have to say empowers us to resist austerity politics, and demand wiser solutions to our problems.
One such economist is Tom McDonnell of the independent thinktank, TASC. He recommends an accounting trick called “extend and pretend” to default on our banking debt.
“The research shows that countries that engage in extreme austerity of the type that Ireland is engaged in, suffer major falls in the number of jobs and in the level of economic output,” says McDonnell. “So we must be honest, that if this strategy is pursued, things are unlikely to get better soon. But there are other choices and alternatives that are not just better from an equality and redistribution of wealth perspective, but also from the jobs perspective and deficit reduction perspective.
“The Government do not have to cut services to people with special needs, they do not have to cut social welfare rates and anti-discrimination programmes, and public services in general,” asserts McDonnell. “They do have other choices on the taxation side, and choices on the public expenditure side. It is possible to balance the books without attacking the most vulnerable people in society.”
How? McDonnell explains that Ireland, despite myths to the contrary, is actually a very low-tax country. Under the Fianna Fáil regime, the very wealthy in particular were not effectively taxed. This elite group continue to benefit from highly inequitable tax breaks.
“The level of taxation in Ireland in 2008 was three-quarters of the average level in the EU,” explains McDonnell. “If we had actually increased Ireland’s level of taxation to the European average in 2008, we would have increased our revenue by €18 billion, which is the hole that we have at the moment.”
Because of the many tax breaks that benefit the very wealthy – which are essentially social transfers of wealth from low to high-earners – a sovereign nest-egg of sufficient scale wasn’t accumulated to get us through hard times. This social transfer of wealth continues apace: in 2010, the combined wealth of Ireland’s richest 250 people was €39.26 billion; in 2011, the figure is estimated at €43.6 billion.
“The point is that we have a system,” continues McDonnell, “which is deeply inequitable and advantages those that are most well-off. Yet we can only obtain European-level public services if we put in sufficient money to support those services. So the implication is that if we want a fairer, more progressive society, we’re going to have to pay for it, and that can only happen through higher taxation.
“When Ireland says it has a massive deficit and turns to Europe when it gets into trouble with the markets, Europe will understandably look at us with a degree of puzzlement and point to the fact that we’re very low-taxing, and that perhaps one of the ways of fixing our deficit would be to move from being a low-taxing country to a normal-taxing country.
“But again, we don’t hear about this in the media,” says McDonnell. “Instead we hear that the only way is to borrow money from the IMF and to slash public services. But to say that these are the only options is frankly untrue. The point was made by one of the governing parties that it is more damaging to tax your way out of a recession rather than cut public services. But that’s based on the idea that you’re starting from a point where you have a normal level of taxation; if you’re starting from a point where you’ve a low level of taxation, it doesn’t hold.”
McDonnell is concerned that economic debate may be completely stifled over the next few years as the Government hides behind the EU-IMF deal, saying: “We are in receivership. We have no choice but austerity. We have to do this.” McDonnell maintains that even though our options are constrained, we still have choices around taxation and public spending, even under the EU-IMF deal.
“There are right ways and wrong ways to tax,” McDonnell says. “And the least damaging way is to tax wealth.”
TIME TO SINK OR SWIM
Kieran Allen, a left-wing sociology lecturer in UCD, also has strong views on potential ways out of the crisis.
“Revenue streams to the State are dependent on the wider health of an economy,” he says, explaining why the Government’s policies are flawed. “The Government cannot raise extra taxes from PAYE income or VAT if its economy is sinking deeper into recession. And, unfortunately, the Government’s own actions can contribute to that. The more the Government cuts its spending, the less money there is to go around and so there is less work and less taxes raised. Meanwhile, the Government has been borrowing ever more money to bail out banks.
“The Left favours higher rates of taxes on incomes over €80,000 as a means of re-distribution,” he says. “More broadly, we favour progressive taxes rather than regressive indirect taxes, which hit the poor disproportionately. But why focus solely on income? Why not get to the root of the problem of inequality by also taxing wealth and capital? And why focus just on Irish incomes rather than on wealth generated in Ireland? When we say ‘capital and wealth’ here, we’re referring to the underlying control and ownership of assets and labour-power which generate income.
“So the Left calls for a wealth levy on all assets bar the family home; an increase in taxes on profit; and a financial transaction tax on the estimated €1,800 billion of assets held in the Irish Financial Services Centre.
“However, once you start talking in these terms,” continues Allen, “the rich get seriously angry and invariably engage in blackmail. The threats are fairly familiar: capital will be withdrawn; foreign investment will disappear; more people will be thrown out of work. The great game of globalisation is invoked to claim that ‘we will move elsewhere if you do not comply’. But the same game will be played even if you just talk of taxing incomes of wealthy individuals.
“As an alternative,” argues Allen, “the Left advocates that we get to the root of the issue by increasingly taking control over capital and depriving the wealthy of their ability to sabotage the economy.
“Irish society will not be going back to a Celtic Tiger-style normality,” he adds, “because the economic model of development based on low corporation taxes and de-regulation has run its course. We shall either live in a society that is permanently ravaged by emigration and poverty – or we can re-organise the economy on socialist lines where control over accumulated resources is in the hands of the majority and subject to the needs of society as a whole.”
PEOPLE ON THE STREETS
People Before Profit TD Joan Collins is one of a small group of TDs calling for a fairer way of dealing with the crisis.
“People can’t do much unless they have the right information,” she says. “And there’s been such a campaign of misinformation over the last few years. There needs to be more of us out there letting people know what’s really going on, and that there are alternatives to austerity, even under the capitalist system. We are a small number of voices in the Dáil that raise this continuously, but we can be ignored. What we have to do is bring it onto the streets. As much as we can, we have to create a mood that says we can effectively change things – like in Iceland and other parts of Europe and the world, where people are playing a key role in demanding equality and justice.
“People will only give Fine Gael and Labour the benefit of the doubt for so long,” adds Collins. “We can only listen for so long to Enda Kenny saying it’s all the fault of the last Government. The policies they’re pursuing currently are disastrous. The public urgently needs to put the pressure on, to demand an end to bank bailouts, an end to public services cuts and attacks on the poor and vulnerable. We never benefited from the huge profits of the banks in the past – there is no reason why we should pick up the bill for their mistakes.”
There’s no doubt that the fate of generations will be decided over the next few years in Ireland. And it is impossible to come to any conclusion other than that current policies are hastening us towards disaster. We need to inform ourselves of the alternative. The economic facts are stark. But through discussion and debate, we become empowered, engaged and politically active.
As an optimist, I want to believe that Ireland is in the throes of a massive healing crisis. It’s always darkest and coldest before the dawn. Things are getting worse, but people-power can turn the crisis around and make our society a million times healthier.
It needs to be done. Let’s get going...
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