Joyce Fegan: Reject the fallacies, fearmongering, and scolding of Ireland's austerity fans

The dismal doctrine has been thoroughly debunked in Portugal and elsewhere, so it's time to embrace a positive alternative

Speaking to Pat Kenny on Newstalk in 2020, President Michael D Higgins advocated 'universal basic services ... a floor of basic services that will be there to protect us in the future'. File photo: Leah Farrell/RollingNews

WE have just endured the worst time of our lives.

People have died alone. Women have laboured in car parks in the dead of night, just so they wouldn’t have to leave their partners. Cancer patients were dropped off at hospital doors, to be picked up at the same spot after treatment.

People’s businesses have been shut for months; they wait to see if their customers will return. Health check-ups have been delayed and treatments postponed. Incidences of domestic abuse have risen, with people stuck at home with their abuser. 

Carers and parents have had to do it all on their own, with no ‘village’ available to help. Older people have had to live alone and younger people have lost out on key years, which they can never get back.

Fear and scolding

Said another way: The people of Ireland will be in no form for fearmongering, scolding, or economic patronising.

Pascal and Leo and Micheál will soon start to tell us that we have a bill to pay.

But austerity is not the way.

Thanks to Europe’s austerity years, from 2008 on, many, many world-leading economists did lots of research, debunking the claims of austerity.

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But before we go near any of that, we need to armour up and get economically literate first.

Terms such as ‘the troika’, ‘bailout’, ‘fiscal squeeze’, and ‘austerity’ have formed part of our common parlance and public debate over the last decade. And what happens when new words start popping in is that we use them, or hear of them, without knowing what they mean. We know they’re a bit scary and that things are bad and we couple that with our accidental ignorance and we just switch off.

Weaponised austerity

What happens, too, is that politicians and contributors to the media weaponise concepts such as austerity, telling us we have to tighten our belts if we want to make it through alive. The fear is so great that we roll over, submit, and do not question the prevailing rhetoric.

‘We must tighten our belts’ becomes the unconscious national motto, while we wait for the storm to pass and the headlines to perk up.

World-leading economist Mariana Mazzucato says austerity is, “a reduction in government spending to stimulate private investment through reductions in the interest rate.”

The household fallacy

Said another way, a government will bring in all these cuts: Think cuts to your carer’s allowance or maternity benefit, or big cuts to public things like that much-needed hospital upgrade, or that much-needed extra primary school, or public service workers’ pay. And, alongside that, they also take money off you by introducing new taxes, such as the universal social charge.

And they’ll always use the ‘household’ analogy, or fallacy. Just like Charlie Haughey said — the idea that ‘we’, the Lidl worker or nurse whose rent nearly matches their salary, must tighten our belts — will be repeated and repeated.

But the household budget is nothing like a government’s budget.

If a household is scared into not spending, they might save 5% to 10% of their annual income. Their local hairdresser, coffee shop, and Chinese takeaway — all low-paid jobs — will likely feel the pinch. But will their non-spending save the economy from collapse? It might do the opposite.

A healthy economy 

A healthy economy is one where money flows freely and consumer confidence is high, knowing future income will replace the spend.

But what happens when a government reduces its spend by 10% in a year? Public workers have less to spend in the economy. Schools aren’t built. Hospitals remain unfit for purpose. Carers struggle without adequate support. Parents can’t get early intervention for their child’s pressing health needs, thereby turning it into a much more expensive social problem down the line. There are no grants available for someone wanting to return to adult education. Lone parents remain without the support they need to be able to get into paid employment.

A household tightening its belt and a government tightening its belt are not even in the same gene pool. The analogy is a fallacy.

Confidence and growth 

But what about media pundits and politicians who shout down the progressives? 

They ask: ‘Well, where do you propose we get the money from?’ It sounds like a reasonable question, doesn’t it? It sounds almost as reasonable as that ‘household budget’ fallacy.  Black-and-white language and simple, unambiguous sentences always seem to make the most sense, don’t they?

However, back to Mariana Mazzucato, the highly-regarded economist: 

Investment is strongly affected, instead, by expectations of future growth opportunities, which are positively related to expansionary fiscal policies. 

So the investment the government expects from cuts can actually be brought about by a different approach? If a government expands its own investment rather than contracting it, and there is consumer confidence, and the future looks bright, that, too, can bring about private investment.

Portugal 1.0

If we look at the case of Portugal in 2017, all of this rings true.

Just like Ireland, Portugal got bailed out by the troika. In order to repay the bailout, the country was forced to employ austerity: Public sector pay and pensions were cut, public utilities were privatised, Vat was raised, a surtax was imposed on incomes, benefits were cut, the working day was extended, and — wait for it — four of the country’s public holidays were rescinded.

And how did all that help the economy?

In two years, education spending suffered a 23% cut; in 2012, there was a 41% jump in company bankruptcies; unemployment rose to 17.5% in 2013, and poverty increased — never mind the very real, human consequences behind all these statistics.

Portugal 2.0

Then, at the end of 2015, a new government came in, a more socialist one. The new prime minister said he would “turn the page on austerity”. His opponents predicted an apocalyptic disaster.

This is what the new Portuguese government did: The minimum wage was increased; public sector wages and pensions were returned to their pre-crisis levels; social security for poorer families was increased, and a luxury charge was put on homes valued at more than €600,000.

By the autumn of 2016, after less than a year in government, economic growth had kept steady and there was a 13% increase in corporate investment. And, by 2017, the country’s deficit had more than halved, to 2.1% — the lowest since Portugal returned to democracy in the 1970s.

Don't insult us

In 2021, we have lived through the most challenging of times: A pandemic that shrank our lives down to a 5km radius, coupled with a climate emergency. We are in a totally different position, with lots of new information, than we were in 2007-2008.

Please do not insult us with austerity, fearmongering, fallacies, and scolding.

Our own President, Michael D Higgins, has marked the card for a socialist recovery, based on what we have lived through, what became apparent, and the measures our Government and Europe were able to put in place overnight.

Universal basic services

“What is going to emerge, globally, is the unanswerable case now, both globally and regionally in the European Union, of having universal basic services,” President Higgins said. “That is, a floor of basic services that will be there to protect us in the future, but also from which we can depart to be able to enable people to have a sufficiency for what they need." 

This is one crisis we can’t afford to waste.