Learning lessons - States must assert their authority

IT SEEMS that each and every day it becomes more difficult to retain a hope that we may be able to engineer our way out of our difficulties without great upheaval or, dread of dreads, enduring far, far more difficult and miserable times.

Yesterday, the Economic and Social Research Institute (ESRI) added to our foreboding by predicting that recession will cloud our horizons until the end of 2009 at least.

The ESRI also predicted that Gross Domestic Product will contract by 1.3% this year and shrink further by 0.7% next year. If that was not enough to make you white-knuckle the worry beads they also predict that unemployment will rise from 6% to 8% next year. That represents one in 12 of our workforce.

And, as if that was not enough, they attached the dismal caveat that yesterday’s predictions may err on the optimistic side and that “further downward revisions may be applied”.

The ESRI said gloomier predictions were to be expected considering the “unprecedented turmoil” in financial markets, the “disastrous” state of public finances and the “alarming” rise in the numbers claiming unemployment benefits. They also predicted that house values would fall by 30% in the next year.

These grim predictions came just hours after Aer Lingus announced, as part of a plan to save €76 million each year, that it intended to axe 1,500 jobs and outsource more than a quarter of its workforce.

The airline also wants to close cabin-crew bases in Shannon and Heathrow and replace the crews with cheaper American workers on transatlantic routes.

The predictions came just days after workers at Cappoquin Chickens were given the starkest of choices: longer hours for reduced wages barely above the legal minimum or off to the dole queue with you.

Benchmarking in reverse, benchmarking as it is in the private sector — just as is proposed at Aer Lingus — but without the bomb-proof public sector pensions.

The announcements also came within hours of Richard Fuld, chairman and chief executive of the collapsed Lehman’s investment bank, admitting to a US congressional hearing that he was paid nearly $500 million — yes, $500 million — by the bank in the past eight years. Imagine what he would have been paid if the bank had not gone belly up on his watch.

These are the extremes of our difficulties and represent the core issue, the real battleground, of today’s crisis. How do we ensure, when the dust settles that states — societies made up of individuals, families, businesses and communities — are strong enough to face down those who show no compunction in jeopardising all we have built to advance their own interests. How can we ensure that societies are so united and organised that no hedge fund manager would dare speculate on one state’s misfortune?

Next Tuesday’s budget will be grim and for anyone in the workforce for less than a decade may represent the first time that the Government imposes new work-based taxes on them. That will be the medicine but there must be a payoff.

That must be a new set of regulations domestic, European Union wide and international, that gives the Government and groups of governments the real power needed to control the very worst aspects of predatory, brutish capitalism. It we don’t put new regulations in we deserve to lose everything Richard Fuld and his likes can grab from us.