Sunday 25 January 2009

It's all your Fault!

There is a palpable anger in the Irish air. For many, their standard of living has already gone into decline. Some have suffered wage freezes or wage cuts. Others have been dealt the ultimate economic blow and have lost their jobs. The numbers now are quite stark - there is something like 100,000 more on the dole now than this time last year. That's a doubling of the actual figure.

Numbers for those who have suffered pay cuts or who fear their jobs will be lost soon are impossible to guess, but multiplied across the country it is easy to see why people are annoyed. Then there is the sense of impending doom - huge public sector cuts are about to be announced. And people know where this leads - for public sector workers it affects their standard of living, perhaps very sharply if you happen to be on contract and face the dole cue. The general public know it means longer queues for services and a likely decline in the quality of service when it does get delivered.

So much to be angry about. Yet who should be the object of this anger. It seems that bankers are getting a very hard time. I've heard people curse them. "They should be locked up". Others blame the government. And of course, the builders get it too.

All of these groups deserve a certain amount of opprobrium. The top bankers in particular did us no favours - though they were keen enough to do themselves plenty of favours. The government though - and this essentially means FF and the PDs - bear a far larger share of responsibility. They are ultimately the group who have wielded power. It was even they who failed to create adequate regulation for banking. And of course it was our government, under Ahern, who fueled the train wreck that was the Irish property fantasy.

But as far as I can see, very few people, however angry they are, have been willing to mention the other group who bear responsibility: the electorate. As an electorate, collectively, we chose the FF- PD arrangement. Not only did we choose it in 97 (at that stage perhaps we could be forgiven for taking a chance with a new regime) , but after 5 years we returned them, reinforcing the direction they were taking. Five years later, at a time when we all knew that our property fueled splurge was a fantasy and doomed for a sad end, what did we do? Their leader was mired in an unsavoury mess of unbelievable tales related to uncountable sums of cash. So what did we do? We returned them to power.

True, the opposition was weak. Perhaps they were even pathetic, but the fact that they too offered us the same brand of fantasy is as much a reflection of us as them. We kept buying in to the fantasy that income taxes could keep on being lowered and expenditure keep on growing, because the coffers were flush. Even Pat Rabbit of Labour felt it necessary to satiate our appetite for lower taxes by offering to cut the lower rate. The Unions -- who profress to protect public services -- bought in fully and signed up to over a decade of seemingly endless tax cuts.

So FF-PD and Labour and FG alike, each and all, failed us by not offering us the leadership and courage to tell us we were tying ourselves in to an unsustainable strategy. SO yes, our political class failed us. But they did what the political system to a certain extent guarantees - they gave us what we wanted, even if that meant setting us on a path to destruction.

But we bought it. We kept on clinging to the impossible promise of ever lower taxes and ever more public spending. We heard the phrase that we wanted the public service of Sweden with the taxes of Texas, yes we heard it, and we turned the other way. As a nation we fully bought in - literally and figuratively - to the property and low tax nightmare. It seemed so good - we couldn't make a rationally sound decision to reject it.

In the end we are all to blame. No, not equally, and our elected leaders did us a massive disservice. Bar his extraordinary commitment and achievement in Northern Ireland, Bertie Ahern's legacy has now suddenly gone from questionable to disastrous. His successor, who was at the centre of the Ahern regime, is now struggling to save his own legacy.

But we as a nation failed ourselves too. We walked ourselves into this nightmare. We were either terribly easy to fool, or, no one fooled us, and we were heedless and greedy. Neither answer is particularly glorious.

That we to some extent share the blame is one good reason why we are wrong if we indulge in a further fantasy that one small group of people - the cabinet - can take us out of this. Leaving aside their dubious talent, it is simply not possible for government of fix even most of the economic problem facing the country. It will be fixed by working its way through the system and forcing individuals to take tough decisions -- managers, business leaders, trade unionists, workers private and public. It will be a deeply unedifying way to celebrate the 90th anniversary of our first Dáil if we collapse into a mire of blame and counter blame or retreat into the fantasy that it was all the government's fault so they should fix it. Time to start shouldering a little bit of individual responsibility.

Thursday 15 January 2009

Do your duty - holiday in Ireland!

Even before my good employer cast me mercilessly onto the dole cue last September, I had already decided that if God were to spare me, I would spend my summer holiday in Ireland in 2009. The reason for this was not patriotism, but economic. Bean Thomaltaigh had given up work to return to college (little did we know that I would lose my job within weeks of that). So after a nice stay in the Vendée last summer we decided that we'd spend 2009 at home.

But then today I was thinking about the number of trips abroad the Irish make and the amount they spend. In 2007 for the first time the Irish made more trips abroad than visitors came to the Emerald Isle. And the Irish spent more abroad than tourists spent here. In fact, we spent 4 billion abroad in 2007 on holiday trips (according to the CSO). This excludes business trips which was in the region of 400 million. So the Irish spent over 2% of GDP abroad that year.

Without question overall spending on holidays this year will be down dramatically. Yet a huge chunk of the population will take to the skies this year for foreign lands. Even if spending fell by 50%, it would represent well over 1% of GDP.

That would be in the region of say 2 billion euro. If Irish residents were to turn patriotic and spend this at home, it would be a huge injection into an economy where every billion counts. There will be a massive battle very soon to narrow the gap in the public finances by 2 billion this year. So an extra 1 billion in the overall economy would certainly mean a great deal.

But in the end of course this is purely a mental exercise. If people are cutting the heels of one another to get across the border to hand their taxes to he Crown, they are hardly going to forgo their tans for the sake of the greater good.

The notion I have outlined would have some practical issues, but in theory it is possible. But on reading it, you just wince at its naivety. And the reason of course is that you know that in reality people are willing to sacrifice precious little even if they knew it would make a difference to the overall state of the country. In short, people are governed by very powerful self interest, and there is no doubt we will see that in its rawest form very soon when various groups start screaming about why they are special and shouldn't have to make sacrifices for the greater good. It will be terribly interesting - though I predict unsightly - to watch how this plays out over the coming months and years and how it will reflect on what solidarity means in this country.