Bludget brings down the curtain on the economic pantomime

national | miscellaneous | opinion/analysis Thursday April 09, 2009 21:54 by Éanna Dowling eanna.dowling at gmail dot com

years of reduced spending power ahead

Brian Lenihan’s emergency supplementary bludget brings the curtain down on Ireland’s pantomime of excess. The workforce in Ireland willingly accepted twelve years of wage slavery when the goodies compensated for the grind, and the illusion of perpetual growth became the powerful myth underpinning the new consumer religion.

More unreckonable years of wage slavery or welfare dependence await, as the personal and public debts accumulated during the boom must be paid for.

The curtain falls on Ireland’s economic pantomime

Éanna Dowling
April 9, 2009

No golden age
Despite the hype and the triumph of misplaced hope over sense, the Celtic Tiger years were no golden age for Ireland. Money was as cheap as money had ever been and many people willingly increased their personal indebtedness to grab the goodies they felt they deserved.

Lone parents on welfare got loans from their local credit union for sunny holidays in Spanish resorts. Young singletons maxed out a wallet full of credit cards on extravagant grand tours of Asia, South America and Europe. Professionals snorted cocaine from the cleavage of trafficked sex workers in the brothels of provincial towns. Children got more Christmas presents than they could open as their parents stocked up on expensive wines. Middle income wage slaves employed Polish and Lithuanian cleaners to keep their new suburban debt traps spotless and shiny, being too busy earning, shopping and socialising to clean up after themselves and their pampered offspring. Golf club socials aped the Oscars as the petit bourgoisee and the public servants glammed themselves up, preening, strutting and flirting with each other,
high on money,
riddled with money,
tripping on money.

Ireland had a party and the bill has finally arrived. Citizens who stocked up on personal debt will have to readjust their behaviour to pay up.

Not all prospered during the Tiger bubble, and many felt excluded. The working poor and welfare dependent remained ostracised in social housing ghettos where the State reluctantly spent a few sheckles but failed to tackle growing crime, suicide, anti social behaviour, substance dependence, poor mental health and inequality.

Media cheerleaders colluded with the PR manipulations of consumer businesses to promote designer lifestyles, expensive habits and a feckless attitude to paying for it. Banks sent out letters telling customers they had been pre-approved for loans, regardless of their customers’ needs or long-term ability to pay.

Agricultural land and environmentally sensitive areas were eaten into as towns and villages expanded, overpriced roads were laid while illegal quarries and dumps proliferated. State energy, transport and forestry policies were primarily determined by the political donors who had close access to decision makers. The common good was of secondary concern to the profits of the vested interests.

Eat, drink, snort and be merry became the order of the day as restaurants, alcohol and cocaine sales soared, the Irish acting out their own peculiar version of a Hollywood lifestyle fantasy.

Some of this will now stop, thanks be.

The most globalised economy in Euroland
None of this happened in isolation from major global developments. Mary Harney spoke of Ireland being on the Berlin-Boston axis. Ireland became the 7th State of the European Union in 1973 and some would say State 69 of the USA by 2001.

The expansion of the EU and the introduction of the Euro have had a dramatic impact on Ireland. If it were not for the Maastricht criteria and the EU cohesion and structural funds, the Banana Republic could not have become the Celtic Tiger.

By 2000, a third of all US Foreign Direct Investment into Europe came into Ireland. After their President delivered peace in the provinces, US multinational’s affection for Ireland coincided with the cheapest corporation tax in Europe, a population saturated with Americana and a strategic airport. They flooded in, creating jobs in the software, pharmaceutical and electronic sectors.

State assets including Eircom and Aer Lingus were privatised. Jobs have since been slashed at Aer Lingus as Ryanair sets the standards for the aviation industry. Jobs have also been lost at Team Aer Lingus, or SR Technics as it was called after the State airplane maintenance business was sold to a Swiss multinational.

Ireland was hailed as “the most open economy in Europe” which sounded like a good thing when Bertie said it in a continuum of positive growth figures and enormous wage slave activity. At least the wages seemed good, for some. But the most open economy means the most globalised economy, the economy most vulnerable to the changing priorities of the global marketeers.

Irish people perceived themselves as net beneficiaries of globalisation. They cared not too much for concerns about the human rights of the workers in Chinese factories from where many cheap goods came. Nor did they think too much about the workers in Ecuador who were harvesting flowers. Some saw the difficulties in Argentina's economy over recent years as opportunities for investment. Not too much concern expressed in the pubs of Ireland for the Argentine teachers and nurses who had their salaries cut or the farmers who foreclosed on their land. We were doing all right under globalisation, and we were far too busy to do anything much bar earn, watch tv and spend.

The Celtic Tiger bubble was absolutely unsustainable.
It was economically unsustainable.
It was socially unsustainable.
It was environmentally unsustainable.
Now it’s over, thanks be.

Payback time
Time to pay for it. Time to pay back the personal and public debts. Time to pay for failing to tackle our dependence on importing oil. Time to find out the real cost of buying a 3 bedroom semi fifty miles from your workplace. Time to pay for national policies driven by political donors. Time to pay for the speculators’ bubble and the banks that inflated it. Time to pay for poor town planning. Time to pay for the low tax years.

The high tax years are upon us.

Just about every household in the country will have less to spend this year than last year. And next year there’ll be less than this. And so on. In the infamous words of the late Charles Haughey: “We have been living beyond our means and it’s time for us all to tighten our belts.”

The bailout of the bankers and the speculators – the NAMA strategy – will cost the taxpayers over the next few years. It is currently impossible to calculate the total cost but it will be some percentage of the €90 billion current value of the bad assets. The costs will be borne in subtle increases in direct and stealth taxes over the coming years as the Government will “pay” for it in ten year bonds – i.e. write an IOU and sign the wage slaves' names on it. Once issued by the Government to the bank or the speculator, the bond will then become a tradeable commodity, a further input to the international financial market casino.

Personal income tax will continue to increase over the course of Lenihan’s 5 year plan. He's already announced that further income tax increases next year will yield an additional EUR 2.5 billion in 2010 and EUR 2.1 billion in 2011. The specifics on how it will be levied have not yet been announced. A commission on taxation has been considering the issue for some time and are due to report before the Oireachtas returns from its summer holidays. Property, carbon and "significant further base broadening" are amongst the candidates for additional taxation.

The success of Lenihan's plan is predicated on turning the economy from contraction of 8% this year to growth of 2.5% in 2011, 4% in 2012 and a further 3.8% in 2012. Optimistic assumptions underpin those guesstimates, chief amongst them being a "modest global recovery" in 2010 as a consequence of the multitude of national stimulus programmes underway. But there's absolutely no certainty that such a recovery will occur. Recent history has taught us that Ireland's Department of Finance always get their figures wrong. The Sorcerer’s Apprentice, Mickey Mouse, is Brian Lenihan’s chief advisor.

The way forward
It’s up to each of us how we spend our reduced income. There are plenty of people still working in good businesses trading to high standards and making fair profits. The bosses and the workers will have to readjust their materialistic expectations and come to accept their relative well being compared to their peers in Georgia, Shanghai or Harare. But businesses will continue, some will grow, most people will stay working.

Choices to be made about making do with less. Less shopping. Fewer foreign holidays. Easy on the CDs and magazines. Keep the car going until things pick up. Fewer shopping trips. Ease back on the gambling. Cut out the drugs or the fags. Only 1 night out a month. Spend less on the booze. Campaign to get the club fees down. Less visits to the doctor. Less time on the phone. No lunch money for the kids. No impulse buys in Lidl. Tough choices ahead for many.

For those unprepared for their new dependence on social welfare, the main issue becomes what to do with your time? Lenihan's figures indicate that unemployment will peak at 15.5% by 2011. That's more than 600,000 people under financial pressure and with time on their hands. There's a personal challenge for each one involved, but there is a growing need in Ireland for volunteers to help out with youth clubs, sports clubs, tidy towns groups, transition towns groups, residents’ associations, school management boards, faith communities, choirs, cardiac support groups, credit unions, local charities, meals on wheels, neighbourhood watch, book clubs . . . I could go on, but the point is made. Things need doing, and folk need to be doing things.

Payback time provides an opportunity to build sustainable communities through volunteers using their skills and talents locally. Payback time means most of them will do it for free. The mental health and social capital benefits will be life saving for some. Whatever positive changes are to come, they will come from the communities of Ireland, and from its small businesses – from local people taking positive action to make life better for the people they care about.

While debate on the details and the merits of the April Bludget will continue, it sets out the template for a massive reduction in personal spending options. It may yet spark a summer of discontent. Argentina, France, Greece, Latvia, the Ukraine and Hungary are but a few of the many countries where people have reacted to the economic collapse by demonstrating on the streets. There will be many angry young men in Ireland this summer, some of whom may have to give up their cars, their careers and the homes they made with their families.

The Green Party are keen to go the distance so the Government is likely to remain as it is until mid 2012. The local and European elections will provide a focus for discontent to be expressed as will the rerun of the Lisbon Treaty. But unless the IMF and the international markets say otherwise, Lenihan’s Black Bludget sets out the way forward for the near future. It’s the way forward via cutbacks in health services, cutbacks in education provision, cutbacks in Garda hours, less social welfare, cutbacks in public transport and a significant reduction in take home pay.

The pantomime is over.
The high tax days are nigh.
Payback time.

Éanna Dowling
April 9, 2009
eanna.dowling@gmail.com