In search of alternatives to the status quo in Europe
Friday, June 21, 2013
By Prof Ray Kinsella
Across Europe in recent years, a number of alternatives to the political status quo have developed. It is time that Ireland followed suit, writes Prof Ray Kinsella
OVER the last three years I have set out in these pages an independent economic analysis of the crisis in the eurozone — free from any political perspective.
Here, and elsewhere, I have set out what form this might take — because there are other views — and, also, the urgency in setting about this responsibility.
Beware those saying that there is no alternative; the status quo will always defend itself. Equally beware those who set out ‘projections’ and ‘strategies’, with detailed economic forecasts.
If this crisis has taught us anything it is that forecasts mean less than a damn when the mindset of the status quo is reactive and dependent. Recovery comes not from ‘strategies’ — important as these are in their place — but from leaders who listen, and who are strong enough to think for themselves, guided by the facts and the truth. And it comes from remembering what economics is all about. This is not the kind of economics that is evident in Ireland today.
Across the eurozone the dominant ideology of control and centralisation is now contending with very different political perspectives and movements. These toppled former French president Nicolas Sarkozy. They turned Italian politics on its head. In the peripheral countries, the search to articulate an alternative is being shaped on the streets by those who have been dispossessed by this ideology. From Germany to Greece, there is a search for an alternative. Except in Ireland.
The need for an alternative here is reflected in three fundamental dimensions of the lives of people:
*In the attempt by the Government to legislate for the introduction of abortion — because it is destructive of life;
*In the policies of austerity — because they are destructive of work;
*In the alienation of people from politics — this is destructive of political stability.
Abortion and austerity are both intrinsically negative; they are destructive of the individual. They are being pursued contrary to the facts and to the truth. In both, the facts and the truth are obscured by untruths, half-truths, and spin by an obsolete mainstream political culture.
Senator Fidelma Healy Eames went to the heart of the matter when she set out her decision to vote against the Protection of Life During Pregnancy Bill: “I cannot stand over a bill that will make it legal to intentionally destroy unborn human life when there is not a shred of medical evidence to justify it.
“The reality is that experts from both sides of this debate accepted that abortion was not a treatment for a pregnant woman with suicidal intent... They agreed that the appropriate treatment was to deal with the underlying illness or crisis to help the pregnant woman carry her baby to term. Given this overwhelming evidence, I cannot understand why the Government is still considering voting through this bill,” she said.
There is an alternative to abortion legislation — withdraw the bill, which will be challenged anyway. It could appear to infer that the European Court of Human Rights is requiring Ireland to implement remedies that are contrary to best practice and, also, offensive to what the ECHR itself referred to as “the profound moral views of the Irish people as to the nature of life”.
Then listen to, and respect, the recommendations of the maternal health professions as to how best to bring greater clarity and transparency to the care of mothers and infants.
The same dynamic of denial and control is evident in the economics of austerity. Two weeks ago, in the German constitutional court, the German central bank, the Bundesbank, took legal proceedings against the ECB.
It argues that the ECB policies exceeded its mandate — a point I have repeatedly made over the last year. It argued that the ECB’s actions — actual and prospective — impinge on the integrity of Germany’s constitution.
Shortly before that, the IMF published an internal report on the 2010 Greek bailout. The assumptions underlying the bailout were wrong — in particular the projections for growth and for the sustainability of the debt burden were over optimistic.
A key reason for this was that they underestimated the impact of austerity in depressing growth (the fiscal multiplier) and therefore on the capacity of Greece to service its debt burden. That is precisely what has happened in Ireland, as austerity has crowded-out growth and recovery.
The IMF suggested the European Commission got it wrong. The commission hit back and said it didn’t. Denial and dissent and disagreement are now at the heart of the eurozone.
Two weeks ago I pointed out in these pages how the German finance minister, under whom the euro was launched, recently called for its break-up. He asserted that “the current policy is leading to disaster”. He was referring, in particular, to the impact of eurozone polices on peripheral countries.
In the last week, financial markets have demonstrated that the tsunami of cheap money released by the ECB to the eurozone financial markets deferred, but did not resolve, the crisis.
Debt levels in Italy, Spain, Greece, and Ireland are simply not sustainable in the face of the withdrawal of cheap money, rising interest rates and falling growth.
In 2011, the Government forecast:
nThe economy would grow by 2.5% in 2012 — it grew by less than 1%;
nThere would be growth of 3% in 2013 — it will be less than half that;
nThe economy would grow by 3% in 2014 — we’ll see.
This explains the growing air of real concern at the deeply negative effects of austerity in the eurozone and in Ireland.
If we apply ‘optimistic’ growth forecasts to the debt burden that Ireland is carrying, then the official forecasts of the debt/GDP trajectory look unsustainable. The stock of debt is projected to rise from €169bn in 2011 to €208bn in 2014.
That is a crushing burden in a eurozone conflicted by the effects of austerity. When you restate this as the debt/GDP ratio, there is a rise from 106% to 119% of GDP — that is on the basis of ‘optimistic’ growth forecasts, which are not going to happen.
On present projections, the Irish economy will be blighted and the public finances swamped for the foreseeable future, having protected the balance sheets of German and European banks from the consequences of their excessive exposures in lending to peripheral countries, including Ireland.
The response to the still growing crisis has been that “we need more integration” — more and more power and control to the centre. But the policies that are dictated from the centre are what caused the problems.
Talk of exiting the bailout misses the point. The burden of Troikanomics, including onerous debt-servicing costs, stretches into a future that will, in the absence of an alternative, be dominated by the same mindset that preached austerity in the first place. The damage to healthcare and education will take years — and years of growth — to reverse.
So, what are the alternatives? How about Ireland hosting a meeting of the peripheral countries whose capacity for recovery has been corroded by the failure of Troikanomics? They would hammer out the basis for a managed exit — not from the EU but from the eurozone, because that is what it may come to anyway.
The credibility of a country and its currency in financial markets ultimately depends on its resource base and on the credibility of its policies. That includes the use of exchange rate. Regaining control over the exchange rate would ease pressures on the labour market as the sole means of securing competitiveness, which is destructively aligned to that of Germany. Ireland has a different economy and needs a different policy mix.
These alternatives require a political alternative. But democracy in Ireland is in a state of stasis. The values that hold a society together — respect and solidarity — have been undermined. Ireland’s democratic institutions have become enfeebled, just as its economy has become dependent. Vast amounts of legislation have been enacted with little effective debate.
MAINSTREAM political parties have become detached from their foundational values. They no longer reflect either the democratic legacy with which they were entrusted or the aspirations of modern Ireland.
The presumption that ruling parties can control, through the imposition of the party whip, policies that do not convince their own colleagues is out of tune with the times.
Polls suggest widespread disenchantment, on the part of large sections of the electorate, with politics of any kind. This is dangerous territory.
In the 1980s, Poland was caught in an existential crisis with strong similarities to that which now grips the eurozone. What renewed its identity and sense of meaning as a people was solidarity. That was central to the vision behind the great European initiative. It is what has been crowded out of the eurozone.
Respect is to Ireland today what solidarity was to Poland in the 1980s. It is more than the context in which we need to engage to rebuild our economy. Respect is what has been driven out of the engagement between the Government and the people from whom they get legitimacy.
Respect for God, which is affirmed at the very beginning of the Constitution and which has animated the long struggle for national identity. Respect for democracy, which is threatened by the mindset that would abolish the Seanad. Respect for the Dáil which has largely ceded its responsibilities for the welfare and governance of the country. Respect for the health of our country and the education of our children, both of which are being cannibalised when they are most in need of investment. Respect for the medical and nursing staff whose trust has been forfeited by a mindset of control and short-termism. Respect for the country itself, which has lost its sense of meaning on a scale that only massive emigration and disenchantment can engender.
The Irish for respect is meas and the alternative to mainstream politics is a ‘Meas Movement’ which is pro-life, pro-growth, and pro-EU. This will not come from mainstream politics in Ireland — despite the integrity of individuals within each of the parties who have stood firm on respect for the lives of mothers and infants, in the face of pressures from their parties which were once the trustees of such values.
If legislation for abortion — and the perpetuation of austerity — are not the catalysts that impel Ireland towards a new beginning, based on respect/meas — the moment will have passed. It will not come again because the issues — and stakes — will never be as great.
*Prof Ray Kinsella is on the faculty of the UCD Michael Smurfit Business School.
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