This is the opportunity to push through reforms and market the entire programme as a necessary exercise in ‘tough love’
A crisis is a great opportunity that is far too valuable to be wasted. Some political genius must have said this — or words to that effect — at some stage. It appears like sound advice for our political top brass at the moment because, if we start with this basic proposition, we can begin to feel confident about the prospects for the country.
A crisis legitimises drastic moves. A crisis allows a leadership to move swiftly and ruthlessly. A crisis reveals where the problems lie. When our back is against the wall, initiatives can be executed on the basis that we have no alternative. This is, therefore, a rare political opportunity, and one that is not presented regularly.
A crisis should be embraced by our political leaders as a carte blanche to make concrete their vision for the economy and, by extension, the country.
The first lesson of political savvy must be to admit the crisis, tell the people it could get worse and crystallise what you are going to do about it.
However, this idea presupposes that our top politicians possess two, sometimes conflicting, attributes: vision and doubt.
Let’s deal with the vision thing first. Employing a crisis to re-engineer the economy assumes our public representatives know where they want to go and how to get there. This presumes that in all their years of fixing windows, running local elections on local issues, climbing their way to the top, making alliances and elbowing out competitors, our political leaders have also thought about what kind of country they would like to create. They have examined what is going on in the rest of the world, where best practice is evident and what we might be good at.
The second attribute is the ability to doubt, to dissent and to think past the slogans of recent years. Once politicians have the ability to doubt, they can question advice and explore new ideas. Arguably, you can’t have vision if you don’t have the capacity to doubt in the first place.
Right now, while there are many reasons, despite the bad news, to be confident about the world economy, we haven’t heard anything from Kildare Street that suggests our top brass know where to position Ireland for a global upswing. Granted, they have been fire-fighting and are probably exhausted. However, by continuing to accuse people of talking us into recession or suggesting malicious rumours have derailed the economy or, worse still, by mouthing platitudes like “Ireland’s fundamentals are strong”, our politicians are exposing themselves as headless chickens.
Quite apart from the fact that the rest of us realise all is not well and can’t have the wool pulled over our eyes economically, the idea that they can’t see a crisis as a political opportunity implies that even from the Machiavellian perspective of power, they are foundering.
The triumvirate of Brian Cowen, Brian Lenihan and Mary Coughlan don’t seem to realise how powerful their position is at the moment. This is the opportunity to push through reforms, obliterate their enemies and market the entire programme as a necessary exercise in ‘tough love’. If they were to come up with a long-term plan, we would go with them. If they decided that they needed to forge ahead with a radical agenda — based on sound economics and the national good — we’d all be relieved.
On every major issue, from taxation, government spending, immigration, relations with Europe, the US and the diaspora, and direct foreign investment, the triumvirate should be advised to seize the chance the downturn has given them.
When viewed from a bit of altitude, they have a political choice: either they can try to dictate events on their own terms or be carried along and, ultimately, drowned by them.
Unfortunately, instead of going it alone with muscular intent, they seem to be singing to someone else’s tune.
For example, in recent days they have trooped out the “fundamentals are sound” slogan again. As tax revenue collapses, unemployment rises and house prices, lending and retail sales slump, it is clear that the fundamentals — whatever they may be, because they change from day to day — are obviously not sound.
Listening to this blather is like hearing the chief executive of a company complain that his share price is falling because of malicious market rumours or the reckless use of short- selling by traders. Complaining won’t solve anything, but results will. The best way to defeat the cynics is by generating profits which is, in the long-term, the only outcome investors are interested in. To do this, the chief executive has to identify the company’s problems and sort them out.
The triumvirate needs to do the same thing and should realise that it is not in their political interest to underplay the crisis or in any way soften the message. At the moment, the group has been seduced by the fundamentalist school of economics.
Like the fundamentalist approach to Islam, the fundamentalist school of economics has always detested dissent. It functions via shibboleths.
The fundamentalist message and its mantra is a smokescreen for the banks, auctioneers and developers. Remember, these people are still trying to sell their outdated concoction of debt and houses. This is the “tent at the Galway races” brigade. They are not the vested interest that the triumvirate should be supporting because they represent yesterday’s tarnished status quo.
It’s time for the triumvirate to cut them loose. It’s time they accepted what the data are telling them: we are on the skids and a new plan has to be formulated based on export-led growth. But, most importantly, it’s time they revealed their political smarts and understand that we are behind them — we all want to see the country back on its feet.
No one expects the triumvirate — a pair of lawyers and a teacher — to have the economic savvy of John Maynard Keynes or Milton Freidman. However, we do expect them to realise that this crisis is far too valuable an opportunity to be wasted.
i think ger should be credited with a lot of this article …
David, From your most recent article it sounds to me like you’ve either been reading “The Shock Doctrine” by Naomi Klein or that you’ve been a long time observer of the (neo) conservatives who see in peoples difficulty an opportunity for huge political and economic change for the advantage of the super-rich. I’m not sure however whether you’re proposing an Adam Smith “Markets are perfect” type approach or what. In many ways you’ve still to put your own views on what is required in terms of policy into the public arena. What exactly do you see as the critical steps… Read more »
You’re dead right Maccer. The tragedy is that FF don’t do the vision thing. This is the consequence of having too many TDs for our population. When compared to other democracies we top the league in elected officials, which anchors their focus on local issues. Our system guarantees that they can’t see the wood for the trees! It would be enormously difficult for our politicians to push through cuts in their own numbers. Just as turkeys will never vote for Christmas I do not expect such bravery from them, but it would be a very positive development if they at… Read more »
The housing bubble crisis is set to continue for many reasons. The refusal to reform stamp duty for purchasers of lower end houses- who are not first time buyers- is one reason. A young couple whom I know are living in an apartment in Dublin for some years and would dearly love to exchange it for a house where they would have the space and opportunity to rear a family. They could muster the second mortgage borrowings to purchase a 3 bedroom S/d (provided of course they found a market for their own property) However, on top of the additional… Read more »
I would love to see proper reform of the public sector, but i don’t see it as a possibility. its a vicious circle created by a reckless group of politicians, the size of the public service is too large and politically powerful to be tackled by the very same groups that created them. also a huge number of politicians in this country (as opposed to USA etc…) have backgrounds in teaching etc and I’m sure they are loyal to their origins. Champions of the business world are rarely patriotic enough to enter the political arena and worryingly if they do… Read more »
Hi David, > This is the opportunity to push through reforms and market the entire programme as a necessary exercise in ‘tough love’ Tough Love wont be accepted by the people nor offerred to them until the vast majority of people are affected by the downturn. It is much too early days in the cycle for that. We are just past the tipping point so it will take some years before things drop off and become tangible for most people. The last place it will become tangible will be the public service as well. Changing the direction of an economy… Read more »
David,
You are absolutely right – and I hope the triumvirate make the most of this opportunity.
I feel however you have ignored some important facts:
The government has been investing heavily in our knowledge economy throughout the celtic tiger years. Look at the SFI investment in basic research, look at the work of Enterprise Ireland and the IDA all over the world on our behalf.
“Tough love” David and crisis intervention the experts know best etc. You mention Milton Freedman the king of the Chicago fundamentalist school of economics. He worked hand in glove with Pinochet to decimate the economy of Chile in their failed attempts to impose a pure free-market ideology. Unfortunately it took a dictatorial regime to implement it and countless dead bodies to fuel it. Jeffrey Sachs, that darling of the liberals camp did a similar hatchet job in Russia in the nineties leading to a collapse of the economy and the rise of the oligarchs, and Putin to boot. The current… Read more »
I think you’ve hit the hail on the head, Cowen et al don’t actually know what to do. Cowen has appointed a UCD economist to advise him but I suspect that’s more about long-term economic thinking.
The Taoiseach should appoint you to the Seanad so that he can appoint someone qualified to be Minister for Finance and start tackling this country’s lack of competitiveness, first up the public sector and it’s waste and high wages.
Sub
I wont deny his savvy, but I think Friedman’s vision was flawed.
The cost of running the Irish branch is part of it. The other part is the shipping element which wastes a lot of food before it gets to the shops and the cost of the ships and trucks plus unnecessarily wastage is passed on to the customer.
I think we are wasting time talking about vision. And not to be hard on Cowen and the lads, I think the rest of the world is no different. All countries in the developed world have in one way or the other the same rubbish to deal with in perhaps slightly different guises and there’s the David Macs there is throw the lens where it’s needed. As someone said above – Vision and Politics is oxymoronic and grasping the nettle from the current manure pile of the public sector sector, banks, developers is not something the triumvirate will be doing… Read more »
Thanks Paddy. I eagerly await the royalty checks. :-) Now why do all the Irish builders go on holiday at the same time and clog up all the transportation systems? (Could one call Dublin Airport a “transportation system” I wonder?) Is this “Builders Holiday” some “fundamentalist” issue as well? Or is it just “mental”. Personally I think it is just mental. I agree with David that the “triumvirate” (great word by the way) just dont get it. They have been thinking that things are a bit bad but by the end of the year or at the latest middle of… Read more »
I find the use of a slogan remedy ‘tough love’ as a substitute for any solution which may come out of any economic analysis very disturbing. The idea of doing something, anything, as long as it is drastic is really not a good idea. Proposing such an idea is at best irresponsible and at worst dangerous and is reminiscent of the good old “hang’em, ban’em” culture.
“fundamentals are sound” – if you have ‘doubt’ could you help work this out ?
For starteres, where is the Irish economy getting the ‘cash’ to pay 2 million workers approx. €70 billion in pay ?
GDP (€180 bn) = consumption (€50 bn) + investment (€50 bn) + government spending (€50 bn) + exports (€90 bn) − imports (€60 bn)
These numbers are indicative – I’m sure someone can fill in the ‘right stats’?
Why don’t the “triumvirate” call it as it is and focus all efforts on ‘sustainable’ exports? If not, the alternative is a lot more borrowings…..
Uuh, global upswing?
How? Where? When?
The fundamentals they speak of are the small to medium sector.
This sector the government piss all over at each and every opportunity.
They could not find the fundamentals with a map and a neon sign pointing at them.
“The triumvirate of Brian Cowen, Brian Lenihan and Mary Coughlan … – a pair of lawyers and a teacher”
That would be a pair of lawyers and a social worker. The other Mary (Hanafin) is the teacher.
Is there anyone in the cabinet or even the dail who is not a public servant or from the closed shop professions?
Biffo and Dermot Ahern were solicitors. Micheál Martin, Mary Harney, Mary Hanafin and Noel Dempsey were secondary school teachers. Mary Coughlan was a social worker. Brian Lenihan is a qualified barrister. Willie O’Dea is a qualified barrister and accountant. Bat O’Keeffe was a lecturer in Cork IT Brendan Smith was a handler for John Wilson before succeeding him as TD. Eamon O Cuiv was a manager of a local Co-op in the Galway Gaeltacht before entering politics. Martin Cullen was a wine salesman. According to Wiki, John Gormley “ran an academy of European languages”, presumably TEFL courses. Eamon Ryan’s departmental… Read more »
Reality is that many MNCs and big companies globally are run by an upper echelon which have people of a similar profile. Law, Accountancy etc. Is it any wonder the whole world is in deep doo doo. The “grunt” of an economy are actually too busy running or working in real businesses. The “grunt” of public service are the ignored low to middle management doing most of the work. Makes you wonder why we have a government. As I said, you can forget about vision and woe betide us if these guys actually do anything drastic. Let events take their… Read more »
I think that they are pretty good at getting their own pet projects done though.
Hanifin spent 40k sending a revised biography of Dev to every school. Hopefully the paper will light well and get the school fires going because the government certainly aren’t going to help the schools in any meaningful way.
Speaking of meaningless the Greens abandoned any principles they had on entering the Dail. Gormless has decreed that everything is non toxic.
Thanks Gerald, I’m sure they are all bright enough but their background is in working within boundaries given to them from on high (laws, school curriculum’s etc), not in actually creating anything; the exception being Eamon Ryan. That mix explains a lot of the petty bureaucracy thats been created in the last 10 years, none of them actually have to deal with it. I don’t think you have to be an entrepreneur or even a senior manager to be a minister but there really should be more of a mix there; someone with experience in exports; in the multinational sector;… Read more »
Ruari Quinn was an architect , Prof James Dooge was a civil engineer, Garrett was an economist (and they are completely useless :)). Any more? To be fair, not a bad bunch.
As ever the disaffected half of the nation will be forced to emigrate and this will reduce the amount of money spent on social welfare and allow taxes and consequently the standard of living of the remainder of the population to be highly agreeable.FF Off the hook again.Normal service resumed!.
I don’t think that installing “senior” managers anywhere achieves very much. Most can’t dress themselves in the morning and it is a national emergency when they get a paper jam. I find that managers tend to mess up things more than they solve things. They are great at looking good but any deviation from their little plans knocks them offline. They are also as likely as a unicorn to be in or have ever been where the work happens. How I get things done when I have the misfortune to come up against management incompetence/interference is to find a smart,… Read more »
Let’s broaden the sample – Hank Paulson was a master of the universe, now US treasury secretary.
Please look at this and say what you think of him (2:09):
http://www.youtube.com/watch?v=BFDlOzJGriI&feature=related
OMG!
“I don’t think that installing “senior” managers anywhere achieves very much. Most can’t dress themselves in the morning and it is a national emergency when they get a paper jam. I find that managers tend to mess up things more than they solve things. They are great at looking good but any deviation from their little plans knocks them offline. They are also as likely as a unicorn to be in or have ever been where the work happens.” Hahaha it is funny because its true, I know managers who were put in top positions (I wont name the company),… Read more »
Hi again David, Here’s more food for thought. One of the ideas that you regularly put out is that Ireland should replicate to some degree what they do in Silicon Valley. However, even if we had a succesful economy with export sectors doing well, etc, it still wouldnt prevent property/asset bubbles from occuring. Indeed, Silicon Valley is not immune to the human-fraility that is the tulip bubble, the south sea shares bubble, US Market 1930’s bubble and the litany of property bubbles from Japan 1989 to Ireland 2007. There are a high number of foreclosures in the San Fran area… Read more »
The ‘Democracy’ model is now tarnished throughout the world. Even George W Bush, in one of the few sensible statements he ever made, said something to the effect that ‘Democracy only works for ‘white, Anglo-Saxon Methodists’. This bears thinking about, as that species is as scarce as hen’s teeth in this country. In actuality Ireland has always been a tribal society with its thoughts centered on local issues. Thus the politicians we get reflect those concerns. As Jim Henley said, David tends to shy away from offering his own solutions. He says that something radical is required, then leaves it… Read more »
We should recognise that anarchy is at play here – that in my opinion is good for a society in general. As a culture (and this probably applies to a lot of the developed world as well) we really do not need governmental structures running our day to day lives. Nanny societies/ PC/ Totalitarianism etc are to be avoided along with all their Visions (aka Delusions). The Dail’s purpose is to put dangerous people in high office under the straitjacket of the public service. Recognise that and stand back. It may be that what we have actually does work. The… Read more »
The absolute, number one, fundamental thing here is that we NEVER learn. We do the same thing over and over and expect to get a new answer. We tolerate politicians and graft like lambs are resigned to the slaughter. If you are enslaved by debt you can say jack shit about anything. We believe we can do nothing (try not voting for the loser) and we just do what we always do by going around it. If you want better service in a shop you walk out and find somewhere else. Tesco have had many an abandoned basket from me… Read more »
“However, on top of the additional mortgage (150,000 Euros) they would need to purchase a modestly priced house in on the northside of the city (525,000 Euros) the serious whammy for this couple people trying to survive on the average income (40,000 Euros P/A), is the extra borrowings they would need to pay the stamp duty. This would amount to a whopping 30,000 Euros.!!” Not sure why it is considered sensible, or possible, for a couple on 40K to buy a house for 525K, or why the (supposed) 30K makes any difference. That is crazy money, and boom type talk.… Read more »
Ah Tough Love policies , we are all getting worked up over nothing ( I blame the weather !). If there was a crisis and folk having to take pay cuts while other un knowledgeable workers ( builders ) are been laid off , would our elected representative’s have taken their eleven week Holiday ? . .. Of Course they wouldn’t , Biffo and his merry gang will be back at their seats , when our Indian Summer lands here ! And sure aren’t lidl doing great deals on power tools too, so if you have no job next week… Read more »