Coherent vision not populist policies needed from opposition parties

Tapping into voter anger is a good election strategy, but the consequences of mere populist policies for the economy could be very serious, writes Business Editor John Walsh.

‘THERE is no alternative” is the much quoted and often derided phrase coined by former British prime minister Margaret Thatcher in the 1980s.

The Iron Lady’s injunction was intended to copper-fasten deregulation and an unconditional faith in the free markets as the only system of governance that could deliver prosperity.

It is easy to trace a linear sequence of events between the economic and market reforms introduced by Thatcher and US president Ronald Reagan and the meltdown over recent years.

Now, western democracy faces an existential crisis. Mainstream parties across the EU look set to take a pummelling at the hands of extreme left and right-wing parties.

But to paraphrase the former Tory leader, “what is the alternative?”

Every country across the EU heads to the polls this weekend for European Parliament elections. Populist, anti-EU parties, such as UKIP in Britain, Le Front National in France, and the Dutch freedom party, look set to make considerable gains. They all share nationalist, anti-immigrant, and in some cases xenophobic views.

In Ireland, there has been a lurch to the left. There has been a welcome absence of the unsavoury elements of the debate found elsewhere in the EU, particularly about immigration.

Sinn Féin and independents have been the main beneficiaries of the backlash against the government parties. But whether this is just a mid-term kicking or whether it is part of a longer-term shift in the political landscape has enormous implications for the economy and the country’s relationship with the European Union.

Sinn Féin is a case in point. Despite the claims of Gerry Adams and co that they represent a new form of responsible, citizen-based politics, their policies have a very populist hue.

In the run-up to the 2011 general election, Mr Adams said repeatedly he “would send the troika packing”. Given the level of anger and humiliation about the EU/IMF bailout, it was a statement that resonated well with large tracts of the population.

But it was in effect a meaningless soundbite. The budget deficit was €15bn and the country was locked out of the international markets. If Sinn Féin had been in government and had followed through on its leader’s advice, it would have had to implement the most painful budgetary adjustment in the history of any western democracy practically overnight.

While in opposition, Sinn Féin has opposed the property tax and water charge, as well as every spending cut and tax increase needed to bridge the budget deficit. The party campaigns large on an anti-austerity platform.

But there is a warning from the recent past about this strategy. The 2002-2007 Fianna Fáil-Progressive Democrat government was implacably opposed to any form of austerity. Bertie Ahern ramped up spending and cut taxes in an effort to buy electoral advantage.

Sinn Féin says it would introduce a wealth tax to balance the books. But it is not clear how exactly this wealth tax would work, and even more uncertain how much extra revenue — if any — it would raise. A quick perusal of The Sunday Times’ rich list reveals that the vast bulk of Irish entrants do not live here. It is hard to know what legislation could be introduced to get even 1c from these.

Also, the economy has come through one of the biggest busts in history. There is a huge volume of personal debt. If a wealth tax is aimed that the professional classes such as barristers, doctors, and accountants it could trigger a wave of personal bankruptcies as the once fortunate but now hard-pressed buckle under unsustainable repayments.

Moreover, money is mobile. Look at France when it introduced a tax rate of 75% at the top end. There was a mass exodus of the wealthy to London.

People before Profit, the Socialist Party, and a number of anti-austerity candidates are running on platforms of burning bondholders, cancelling the debt and ending austerity. But the bondholders have already been repaid. Cancelling the debt would mean an immediate debt default and with it exit from the euro. There is no accompanying roadmap on how this could be done without disastrous consequences for the economy.

On a wider level, popular discontent will have enormous implications for the eurozone. As British chancellor of the exchequer George Osborne said, the remorseless logic of this crisis is that there has to be more European integration among eurozone member states to save the single currency. But is this possible with nationalism on the rise?

It is hard to discern Sinn Féin’s attitude to Europe. It claims to be pro-EU but opposes every EU treaty.

If the next coalition government consisted of a Sinn Féin and independents including People before Profit and the Socialist Party, it is hard to see how the country could remain in the eurozone. All of these parties have promised to undo the spending cuts implemented over the past few years.

But following the ratification of the fiscal stability treaty, Ireland is bound by rules that have a balanced budget as the core objective of every country.

As long as the economy is feeling the effects of the crisis, Fianna Fáil’s electoral prospects appear bleak. Labour is suffering the most of the two government parties for the response to the crisis. That is not to say that mistakes have not been made by the Coalition. Some of the most marginalised in society and least able to defend themselves have been made to suffer disproportionately.

It is a hoary old cliché, but anger is not a policy. However, whipping up anger for electoral advantage is a very effective strategy. But unless this is accompanied by some coherent vision, then the consequences for the economy over the longer term could be very damaging indeed.