Another generation of Irish youth is facing a tough decision, to stay and attempt to reform a failing state or succumb to the crony capitalist clique and accept emigration or unemployment. Below Conor McCabe examines the economic lunacy which puts the interests of bank bondholders before a country’s young people.
There are three main elements to the Irish Government’s decision to slash welfare support for under-25s. It is trying to appease the international credit rating agencies, who are demanding that the Republic undertakes severe cuts in public spending if it wants to avoid a junk rating. It is trying to stimulate emigration, the traditional ‘solution’ to economic problems in the South. And it is trying to push down on wages, and by extension the minimum wage rate, in an economy where 30 per cent of income earners receive less than €15,000 a year.
The cuts are designed to shift the burden of the economic crisis away from its instigators – the all-too-familiar bankers and property developers – and firmly onto the shoulders of ordinary households. The Government’s strategy shows that class still remains at the heart of Irish economic and social life. It also tells us that, in cutting public spending and praying for emigration, this Government doesn’t know its economics from its elbow. In a country the size of the Republic, emigration does not save the state money: all it does is shrink the economy even further.
There is a long tradition in Ireland not only of emigration but of governments actively encouraging emigration as an economic policy. In October 1987, the then Minister for Foreign Affairs, Brian Lenihan, was asked by Newsweek whether emigration was a defeat for the Irish republic. “We shouldn’t be pessimistic or defeatist about it,” replied Lenihan, “we should be proud of it. After all, we can’t all live on a small island.”
These sentiments were echoed in February of this year when the Tánaiste and Minister for Enterprise, Mary Coughlin, told the BBC programme, HardTalk: “The type of people who have left, some of them find they want to enjoy themselves and that’s what young people are entitled to do.”
The same month Coughlan’s personal trainer, 53-year-old Eddie Coyle from Donegal, announced that he was emigrating to Spain as the recession had caused a serious downturn in his business.
The lack of touch with reality on the part of the Minister was stunning, and as one Irish emigrant said in the Irish Times: “Emigration… is as much an instrument of Government policy now as (in the 1960s), and as in the 19th century. Those of us who leave provide the safety-valve that allows the rotten shower in power to avoid having to create a more just and fair society. Emigration does not help to balance the books, but it may keep the edge off protest. When the Government talks of emigration as a safety-valve, this is what it means.”
In March 2010 there were 84,991 people under 25 on the live register. If every one of them was to up and leave the country tonight, the economic activity generated by 85,000 people would also disappear. The “savings” to the live register would be slowly wiped out by depressed demand for goods and services. It took nearly 40 years but the realisation that emigration merely serves to shrink your economy became the cornerstone of the 1958 Programme for Economic Development, overturning Free State mantra and instigating the first real economic growth since partition.
Those lessons have been completely lost. Today, the Fianna Fáil/Green coalition believes that the economy is essentially a pot of money, into which the Government dips to pay for services. It is a view which is repeated constantly by virtually all the mainstream media. We are bombarded with unsubstantiated opinions that to cut back on public services is a “no-brainer”, and that we cannot afford the social services we require.
Indeed, in the recent run-up to the British general election, the idea that Northern Ireland’s economy needed to cut back on public spending in order to be “competitive” was thrown about with as much gusto as rice at a Whitsun wedding. In the times of recession, our national pot of money shrinks, the argument goes, and as a result the Government needs to either cut back on spending or increase its borrowing. This is, after all, the way we manage our households. When there is less money coming in, we learn to do without. We tighten our belts, economize, and stop living beyond our means. Then, when the crisis passes, and money starts flowing again, we can let the buckle out and breathe a little more easily.
But the income and expenditure of a single household has little in common with the complex relationships and interactions of the millions of buyers, sellers, producers, consumers, lenders, borrowers, importers and exporters which make up a national economy.
First of all, the Government does not receive a wage for doing a job. Rather, its funds are based on the level of economic activity taking place within its jurisdiction. It takes a percentage from all sales, wages, profits and interest via taxation, and then uses that income as the bedrock of its yearly budget. The health, or otherwise, of that economic activity is taken into account when the Government goes in search of additional funding via the international finance markets.
Let’s say my income is based on my weekly wage. It matters little to my individual pay packet if my neighbours are unemployed or earning €100,000 a year. My income comes from my employer. However, if my income is based on taxing my neighbours’ earnings, then whether they are working or not greatly affects my income.
In other words, if my income is dependent on the income of others, then I cannot ‘sit out’ a recession. It is in my interest to do what I can to get my neighbours back to work, as an increase in their economic activity benefits my situation.
This is the polar opposite of everything the Irish Government has done since the bank guarantee fiasco of September 2008. Instead it was launched what can only be described as a class war on the vast majority of the working (and non-working) population. In 2006, the most recent figures available, the top four per cent of those eligible for tax earned between them more than the bottom 54 per cent put together. In other words, the 83,000 people in the Republic who each earned €100,000 or more that year had a collective income greater than that of the 1.2 million people who each earned €27,000 or less the same year. Those who earned €200,000 or more that year – 0.8 per cent of those with taxable incomes – ended up collectively with more money after tax than the 654,000 people at the bottom of the income league who each ended up with €15,000 or less.
The burden to carry the present crisis, however, has bypassed the top earners who dodged a tax hike in the December budget, in lieu of public sector workers who have seen a collective 15 per cent cut in wages, the unemployed who received a five per cent cut in allowance, and young unemployed adults who have seen their allowances cut by up to 50 per cent.
There’s part of a joke I’ve heard which summarizes the Russian Military Handbook for Generals as containing simply one line: ‘retreat to your capital and wait for the winter snow to arrive.’ In many ways, this is the response of a banker to an economic crisis. Sit on the money, use it to buy up your competitors, then start lending again but on your terms. In contrast, merchants and industrialists need not only money to make things, they need consumers with money to buy the stuff they make and have. They can’t afford the banker’s waiting and consolidation game.
A lot of Irish businesses have gone under in the past two years, and more are going to go under over the next few years – businesses that with the right stimulus packages could have kept at least ticking over. What is truly amazing at this time is that even though this crisis is the result of finance capital, it’s finance capital that’s getting to dictate terms to the rest of us. The Irish Government could side with producers and retailers, stop the haemorrhaging of jobs, but instead it’s going with finance and land speculators and to such an extent that it has handed them the keys of the country via NAMA and handed us reduced services, a slashed safety-net, and emigration for our children. But the policies to sustain NAMA will damage the possibilities of significant job creation. The insanity of the path that Fianna Fáil and the Greens have sent us down is matched only by the insanity that got us here in the first place. Youth emigration won’t save us. Draconian cuts in public expenditure won’t save us. And appeasing the volatile and schizophrenic international financial markets, I’m afraid, won’t save us. There are ways out of this. One thing is certain, though: we need change. And fast.
