I AM sitting outside a lovely bar called De Prins in Amsterdam, looking out over the canal, past the cyclists, toward Anne Frank’s house beyond.
The crowds are lined up again, as they are every day, to bear witness to the most unspeakable crime and the most magnificent courage. We know that the effervescence of a lively young girl was snuffed out by evil, but we also know that Anne Frank’s legacy eclipses those individuals who betrayed her — those cowards who pushed her on to the train; the sadists who shaved her head, starved her and who eventually whimpered like children, implicated each other and sang like canaries when real men came to liberate the camps.
The story of Anne Frank is well known, but what is often overlooked is the attitude of the victors. I don’t mean the attitude to the Nazis, but the attitude to Germany in general.
Having driven through Germany twice this summer, it is not hard to marvel at the wealth, placidity and friendliness of the country. But it could have been so different.
Imagine if the World War Two victors had applied the traditional economic and financial sanctions to defeated Germany. What would have happened if the Allies had penalised Germany with reparations? How soon would the German economy have collapsed again, leading to yet more political chaos?
The far-sighted generation of American public servants and politicians who negotiated the Marshall Plan realised that they were in a new era and that the idea of collective punishment of a nation would not serve any purpose.
Instead, the Americans in 1945 did something no one could have predicted: they rewarded the average German with cash. They subsidised the recovery of Germany and Europe, thus ensuring a recovery and the emergence of the EU as a peaceful political project. Without US money and the US military umbrella, there would be no EU.
Of course, after World War One, it was the Versailles Treaty — rooted in French and British thinking that Germany should remain economically subservient — which catapulted Hitler into power. In fact, his rants about international Jewry being behind Versailles resonated right up to the war.
The only economist who foresaw the disastrous implications of reparations was Keynes. He warned that reparations would force the Germans to become so competitive that far from securing the French and British economies, they would undermine those countries through the mechanism of free trade.
He also twigged that Germany would become a huge debtor because maintaining the German mark on the Gold Standard would mean that Germany would have to borrow from tomorrow in order to pay for yesterday. As a result, Germany would either become a huge borrower or it would leave the Gold Standard. In the intervening period, Keynes predicted that Germany would destabilise the system because the system was destabilising Germany.
It is clear now that reparations led to disaster. The key difference between the Marshall Plan and the Versailles Treaty is forgiveness. The architects of the Marshall Plan did not encumber the Germans with any more financial hardships.
This was the price the Allies were prepared to pay in order to buy stability and loyalty in Europe. The thinking behind the Versailles Treaty was precisely the opposite and ultimately ruinous.
NOW keep the idea of reparations in your head and let us switch to the thinking behind our Government’s banking and economic policy. Consider the bailing out of the banks and encumbering the citizens of the country with a massive bill as a modern-day, peacetime equivalent of reparations.
However, our Irish bank reparations dwarf those of Versailles. The Treaty of Versailles demanded that Germany pay €318bn in today’s money. From a German population at the time of 58 million, this equates to €5,482 per person in today’s money. If bank bailout costs are €50bn, then this will work out at €11,235 per head — or more than twice the cost per head of the Treaty of Versailles to the average German.
Let that sink in a bit. Remember what we know about how reparations destroyed democratic Germany and just imagine what our bank reparations will do to us.
Now consider the other factor, which rankled with the average German after the Treaty of Versailles. One of the most contentious issues was the fact that Germany and the average German had to take sole responsibility for the war (despite the immediate cause of the war being the Austrians declaring war on Serbia).
In a similar sense, the way our Government has given us the bill to bail out foreign creditors is akin to telling the Irish people — many of whom didn’t borrow a farthing and have nothing to do with the banks — that we the people are solely responsible for the Irish banks, rather than the banks’ creditors, who actively lent to them.
Not only is the economic cost too much for any nation to shoulder, but the Irish people are not responsible for the behaviour of private banks licensed in Ireland by the European Central Bank.
The Irish bank reparations are financial lunacy and they are politically unacceptable. Anglo’s results yesterday only substantiate this view.
Is there any way that Irish society can cope with the bank reparations?
Ireland’s bank reparations will cost us €26,315 per worker in the economy. Is there any way that social peace and cohesion can be maintained when the average worker — who is entirely blameless — is being asked to cough up €26,315, while every foreign creditor, who is (in large part) to blame, is being subsidised by the average worker?
The financial implications of reparations are straightforward. Countries lumbered with excessive costs will default. This is what eventually happened to Germany. Furthermore, countries with excessive debts tend to leave whatever currency arrangement they are in, as Germany eventually did when it left the Gold Standard.
This is the lesson from financial history when excessive and unfair reparations are imposed on a nation. The endgame doesn’t have to be terrorising schoolchildren in Amsterdam, as it did with Hitler’s Germany — but the negative implications for economic and social stability are blindingly obvious.
My understanding is that Ireland did not claim any benefits from the Marshall Plan eventhough many Irish men fought and died in the battlefields.This is a thought to remember for Marshall Plan II . I was watching the programme ‘who do you think you are ‘ last night and a British black celebrity was doing his family search and it took him to Barbados and Jamaica .He discovered that his great great grandfather was a white slave trader who bred his slaves in captivity and that black mother became a prostitute and one of her issues, his grandfather ,became a… Read more »
@David McWilliams Great article. @John Allen Ireland certainly get some Marshall Aid funds. In his history of the Dept of Finance 1922-58, Ronan Fanning points out that “from 1948, Ireland’s dollar deficit began to be covered by Marshall Aid” (p. 389). If you can find it, it is worth reading what Prof. Fanning account of the European Recovery Programme on p. 411. As an example, I quote “Ireland’s interests were handled exclusively by External Affairs for the first few months and, from the outset, Finance were highly sceptical of the benefits which might accrue to Ireland under the Scheme: ‘we… Read more »
Ok David. So you are saying, like you have said over the past year or more, that we should ‘bring all the “foreign” creditors into a room’ and tell them they will only realise 10% or 5% or 0% of their investment in Anglo? Now I’m no expert but who are these big bad “foreign” investors? I don’t think there are any left. The State owns the bank and through the NTMA it has been firing money in to keep it going. Therefore the state is the major creditor and 100% owner. What is the % of credit outstanding to… Read more »
Great article.
One of the key differences between the Marshall Plan and the Versailles Treaty and our Go(to)morrow Plan is they knew what they were paying for. We don’t.
‘Commercial Sensitivity’, mysterious behemoth NAMA, they have all the paperwork that hides the dirty linen.
I object to paying the bankers’ debts. And I strenuously object to the lack of receipts that itemise everything I’m paying for.
Welcome to the new Socialist Banking Corp of Ireland Inc, previously the democratic Republic of Ireland.
Whatever happened to personal responsibility? There are hugh swathes of Irish society out there with nobody to blame but themselves, so let us balance the arguement a little bit. Public and private sector unions have made it very tough on the wage-payers. Idiots who took out huge loans and mortgages crippled themselves. So maybe Irish society should take a long look in the mirror first before pointing any fingers.
I’ve always been struck by the observation of the Jewish philosopher Hannah Arendt when attending at the trials of the nazi perpetrators… she said that one by one they stepped up and professed that they ‘were only doing their duty’, and ‘were only following orders’… When I hear the current incumbents speak, not from the heart, but from the ‘script’ set out by state and other institutional authorities, I think to myself, will we never learn… If the day ever comes that we get these guys on trial, there is not much doubt about what they will say. Loyalty to… Read more »
Yes David on the ball again, we got our Treaty of IBEC which saw the SS officers over at the Dept. of Finance try their best to push our old age pensioners and special needs children etc. onto the train and they continue to spin this even as we speak. We also got our Treaty of ICTU over in Croke Park, more SS union pigs who got it all their time to drag their jowels out of the trough long enough to shore up their own poition with more borrowings. There is’nt a backbone between the lot of them, snivelling… Read more »
The ECB is the root of all the problems we see.The banksters create money out of thin air ,which is then supplied by the ECB printing machine.The ECB is the cause of inflation and deflation ,it controls the price of money and it’s supply, it creates the bubble and becomes the pin that pricks it.A bunch of elites trying to figure out what’s best for 350 million people of different cultural mindsets. God don’t those politician in skid row street love these money printers when syhte hits the fan. We have deflation now but wait until the printers around the… Read more »
@ David McWilliams, we must be careful of historical romanticism, it is one of the true enemies of the historian, looking back with rose tinted glasses. No country acts benevolently just for the sake of it, every country acts on the basis of self-interest, it is one of the most basic truisms of international relations. Firstly the allies probably excessively smashed Europe, including many a French and German town. Historian Howard Zinn spoke several times about an episode when he was a bombadier for the USAF. They were sent on a bombing mission of a French town towards the end… Read more »
Well done on painting a vivid analogy of the situation we’re in. I do wonder if Ireland would break down politically since the Irish people seem incredibly passive in the face of persistent incompetence and corruption from the institutions of power.
FUBAR. That`s what the economy and Ireland is. We will default. No question about it. People like professor Mogan Kelly are now being proved right contrary to all the naysayers and spin from government. There is no end in sight to this bank bailout insanity. That`s the most frightening thing of all. No cap. Just bleed and bleed some more billions, Mr. Taxpayer without an end figure in sight. This is the most incompetent handling of an any economic situation, in the history of the Universe. Even with “competent” new government and a complete re-structure of the incompetent state, across… Read more »
Versailles did indeed spawn Hilter, David, and likening its far-reaching ills to bank bailouts is quite apposite. We do need Marshall Plan thinking if we are to solve financial distress, but no such ideas can be expected to emerge from the Powers-That-Be. Writing off debts would play a positive role in resolving financial collapse, and a catalyst also needs to be found to kick-start world economies. Interesting to note that when Lloyd George suggested a land tax as that mechanism in the UK ‘People’s Budget’ of 1909, the House of Lords broke with convention to vote from their pockets to… Read more »
Watching Conor Lenihan last night on TV3 his defense is always – maintaining stability,security, confidence and when asked about by-elections he says : ‘thats a matter for the cabinet to decide’ .
Have we the electorate lost lost our command of english that we are unable to demand our constitutional rights as deco explained in earlier contributions .
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Another good article. In truth altruism was not the main reason for the Marshall Plan. Countering the possible rapid spread of communism into a ruined Europe also played a large part, however, the idea of reparations is one that is close to my heart. As taxpayers for the last 25 years, initially as employees and latterly self-employed, both myself and my wife have been here during the bad times and the good, and have been happy to do so. We ran two small businesses, employed a few people on a full time and part time basis and paid our VAT,… Read more »
[b]GERMAN MILITARY THINK TANK STUDY ON INSTABILITY 1[/b] Morning, by coincidence, I know this place you were sitting, been there myself. On Instability in a broader sense: Yesterday a document leaked to the german magazine Der Spiegel. Tis document was created within the german Bundeswehr, military think tank future analysis, part of the think tank responsible for the Transformation of the Bundeswehr. The title was significantly chosen as: PEAK OIL – security implications of declining resources The study was not meant to be presented to the public, but has been verified as authentic by government authorities. The editor in chief… Read more »
Its probably worth noting the Americans (or Marshall Plan) werent really forgiving the Germans, they were in fact buying an Ally for their upcoming war against the Soviet Union. They would have pulled out of Europe and left Britain and France to deal with Germany had it not been for the threat off the rise of Communism in Eastern Europe. So calling the American Public Servants “far sighted” may be a little generous….
David. I read article as a connecting of the dots on the overall reality at play for the *insiders* and the reality at stake for the *outsiders* using history as a frame of reference on the substantive points David is pointing at, which is that, the econ system is rigged and been Kerchinged by the insiders to fill their boots with dosh. If one is in power, and one has ones *fingers in the till* / hand on the money making machine switch and one is part of an insider crony network then of course the stuff outlined in the… Read more »
Very interesting historical analysis David, one that I would largely subscribe to myself, even if we have to ignore America’s treatment of leftists in southern Europe, its distortion of democratic politics in Italy, its destruction (along with the Brits) of democratic politics in Greece and its denial of any democratic politics in Spain/Portgual (all part of the PIGS, not so coincidentally enough). The dangerous politcal vaccuum that will exist with the destruction of the Irish economy could lead to the erosion of our democratic instituions; not that they aren’t rotten for a long time anyway. The existence of the emigration… Read more »
The Yanks were amazed @ the level of wealth gathering dust in Irish banks in 1945 /49.Hence, Irl received lttle aid.Don’t be surprised if FF win most seats @ the next election!
We are already half way through the banking crisis, money spent so far is “sunk” we will never see a penny of the 7 billion we gave to AIB and BOI and the money paid to Anglo and INBS has been written off against our deficit. What David is saying is that we should never have gave any of them a penny….letting them go to the wall. In hindsight that would have been the best solution. Then other banks would have come into the market buying up what remains of the banking infrastructure. In effect David is crying over split… Read more »
Interesting article. Retribution results in revenge. A cycle of militarist folly formally started in the 1600s with the Richelieu doctrine, based losely on Machavelli’s The Prince. (Incidentally Mussolini was so in love with Machavelli’s work that he insisted on writing the preface at one stage). With Richelieu, barbarism became a fine art, a mark of sophistication, and a study in grandeuer. The knightly class were made technologically obsolete by the invention of the musket, and the long pike. It was a serious problem. A means was required to justify the lifestyle requirements of aristocrats, and there were only so many… Read more »
Biffo and Whine are trying to keep their hold on power, and are dismissing any current misgivings from the FF back benches. This is a big problem for the GP. If you want to see embarrasment in the GP, just watch what happens when there is even the slightest chance that FF backbenchers might side with the public with a government minister is making “tough choices”. (“tough choices” is a euphemism for many things – appointing failed GP councillors to state jobs is certainly not one of these tough choices). The result of the current impasse will not be the… Read more »
Total US grants and loans to the world (including the Marshall Plan) for the eight years 1945 – 1953 came to $44.3 billions, much of which was eventually repaid. That sum would be worth about $250 Billions or €200 billion in today’s money.
At the end of 2009 Ireland’s National Debt was running at €75.2 Billions. By now it has probably reached at least half of the Marshall Plan loans to all countries of western Europe, with little or no prospect of repayment.
Devs Eyes – We are at the crossroads now where FF is dancing and the little people are just fodder cheaper than hay.FF is the best party because it has achieved what we never believed possible : 1 We have 15% unemployment ( not including those that have left and never to return again) and rising and it is the policy of that party to allow it to rise until we become like our cousins in North Korea ie skeletal; and 2 This party will continue to support the fat cats and feed them until they forget their names ;… Read more »
If this article was called ‘Paying for our banks, our overpaid public service, our quangos, our thousands of makey-up jobs, our thousands of wasters who’ve never tried to get a job .. is a recipe for disaster’ .. it would be a more accurate title. David consistently avoids alienating his audience, biting the hand that feeds. People don’t like to be told that they are part of the problem. This consistent omission takes away from his message ; in fairness I always learn something from his articles, but at the same time I also come away with a feeling that… Read more »
I have just come to the conclusion that the next decade will be an absolute disaster. At some point in the middle of decade, in the midst of all the social chaos, mass unemployment, substance abuse, community breakdown, suicide epidemnics, ghost towns, abandoned hospitals, and ‘beer and circuses’… jobs will be moving out of Ireland and the prop that is the big assumption in the elites plan of ‘recovery’ will pulled out. There will be an almighty mess. The jobs will go to an economy where everything is not already sewn up by IBEC/ICTU/SIPTU/FF/FG/GP/PFPAI/ILP/SF cronies… The West is in decline.… Read more »
I wish I had Decos command of phrase, just a thought.
It is very possible that there will be a massive war with debtor states on one side and creditor states on the other, or a proxy war between debtor states and resource rich states. It is not absolutely certain that we will be neutral. The Lisbon Treaty in particular leaves it as a grey area, to enable ‘participation’. And when the time comes IBEC will be wanting participation. War – what is it good for ? absolutely nothing. Of course, like the WMD nonsense, we should expect a big build up to build the moral case for war. Ah yes,… Read more »
@David McWilliams In an attempt to simply understand what should have been the proper solution can someone tell me if this is accurate or over-simplistic: 1)The bank guarantee should only have be placed on the high street banks so protecting Joe Public’s money and preventing a run on the banks. 2)Anglo Irish as a private investors club should have been let collapse without the Irish state having any part in it so saving the public from any financial burden. 3)Some large bank like Bank of Santander would offer peanuts to Anglo’s shareholders and bondholders who would have had no choice… Read more »
You can write/postulate all you want guys…They’ve gotten away with it and we’re left holding our ‘flute’ in our hand.
Not one of the ‘intellectuals’ who are responsible for the predicament in which we find ourselves will suffer any loss…either financially or time served…the ‘four gold mines’ will see to that.
The best part for the ‘perpetrators’ is that WE PAY!
I strongly urge you to vote Number 1 for me in the next election.
NYT August 31st
“This is out of control and the markets see it now,” said Peter Mathews, an independent banking and real estate consultant here, who for the last year has been waging a furious one-man crusade, warning of Anglo Irish’s escalating losses and calling for the bank to be liquidated – with bond holders, not the Irish taxpayer, taking the hit.
http://www.nytimes.com/2010/09/01/business/global/01anglo.html?_r=1&scp=1&sq=Anglo%20Irish%20Bank&st=cse
GERMAN MILITARY THINK TANK STUDY ON INSTABILITY 2 The report concluded with recommendations to the government that I personally find remarkable. In a nutshell, they conclude that due to the increase status quo of oil producing countries, foreign policies and diplomacy should pursue a what I would call softer approach. They even recommend certain sacrifices to be considered in foreign relations. The good relationship with Russia should not be endangered by Germany’s eastern neighbors and potential Russian foreign Interests. The same recommendations were made towards the Middle East politics, where Germany’s position to Israel would need to be re balanced… Read more »
Teaser
Launch of The Irish Energy Co-op
A personal summary of the event:
http://dl.dropbox.com/u/4914840/iecoop_launch.pdf
http://www.nytimes.com/roomfordebate/2010/08/25/does-the-recovery-depend-on-the-housing-market/pierce-the-housing-bubble
This morning before you start to work and before you ask yourself, have you put on fascial moisturiser, think for a moment .Just a moment , because today before you start to believe in your contribution to this state whatever you do something else will happen regardless how you think or what you do.
On stage this morning to day your government will cost you €42,000,000 down the floozie .A throwaway fast junkie food price.Now that is before running costs are even contemplated .Should we just stop for a moment and think again ?
MEMORIES Light the corners of my mind Misty watercolor memories Of the way we were Scattered pictures Of the smiles we left behind Smiles we gave to one another For the way we were Can it be that it was all so simple then Or has time rewritten every line If we had the chance to do it all again Tell me – Would we? Could we? Memories May be beautiful and yet What’s too painful to remember We simply choose to forget So it’s the laughter We will remember Whenever we remember The way we were So it’s the… Read more »
What has Ireland to offer with such large debts. What is the quid pro quo and what is it worth? The 80s was a source of graduates – the brain drain. The 90s was a source of low cost high skills. The 00s was a source of good craic and loadza money. The 10s looks like we need to come up with a new story. The 80s strategy is now being pursued. But the jobs are not out there abroad either. The Web has dumbed us down a lot I think. We have entertained ourselves to death (a Neil Postmanism)… Read more »
Social Ice Age The income levels for 90% of the US population did not change significantly since 1973. The 1979 average income was at USD 45K, the average income in 2007 was at USD 45K. The top earners income levels tripled. More than 30% of all profits earned in the USA went to 1% of the richest people in 1979. In 2010 more than 60% of profits went to the same 1%. Back in 1950 a CEO earned 30 times of the average industrial worker in the US. Today he earns 300 times that much. The richest 1% now owns… Read more »
Laughingbear – So what binds the top elete to the very top at the expence of the middle class .Somethings come to mind that may need re-defining:
Land Title,
Copyright Title,
Trademark Title,
Sovereign Rights ,
Company Rights
etc endless
Re-defining new definitions new ideas and new dreams .Until then we decimate .
Hi David. There were a couple of excellent comments above on the historical ‘simplifications’ in your article. We realize of course that you are merely providing a parallel for the present self-defeating policies as regards the Irish situation. Just to add my own tuppence worth(!). From my own reading it seems clear that the overriding cause of the excessive reparations demands from Germany on the part of Britain, France and Belgium was the inflexible attitude of the US in relation to the repayment of its war-time loans to its erstwhile Allies: the whole principal plus full commercial interest. Britain and… Read more »
Hudson (Super Imperialism – 1972, new ed. 2003) says it better: “As America entered World War II the idea of economic gain broadened to become more enlightened and long-term — and for that reason, more powerful. America’s overwhelming creditor position enabled it to gain a controlling interest in the International Monetary Fund and World Bank, which it used to transform international finance to serve its interests when it moved into an almost unbroken series of deficits after the Korean War. “By 1971 the United States was virtually daring Europe and Asia to cash in their surplus dollars. Doing so would… Read more »
http://bit.ly/ccarlG
Doesn’t matter very much. The only difference is the time frame. The government deficit is around 20 billion a year excluding the banks http://www.thepost.ie/newsfeatures/the-key-hurdles-now-facing-ireland-51323.html .
They haven’t lowered the deficit at all even with the cutbacks.
No stamp and employment, etc. have scoobied receipts. So why not speed up the default instead of having a long drawn out affair?
The sooner the better, default, INF in & government out!
Where is that guy with the placard saying ‘the end is nigh’ .
Full marks for him .Was he an economist?
Good link.
Anglo must be closed asap, remaining assets transferred out to remaining banks, liabilities dealt with senior bond negotiation under ECB bank bailout umbrella.
Simples. Do it and move on.
Debt for equity swap? 100% of nothing is still nothing problem.
Sovereign debt problem and default?
This is complicated by our euro membership. Then its part of a wider PIIGS problem. ECB when push comes to shove can print its way out of that problem! To make this palatable through austerity they firstly have to make PIIGS squeal!
Ireland is a mess. The government have no idea what they are doing.
Time to get your money out of the Irish government-backed guarantee – they will not be able to cover the guarantee when it all comes crashing down.
I think there’s a good chance of a run on the banks within a year.
Finally FF lives up to its name …..it Falls …we should have known that all the time …it just shows you how much we believed all the crap they fed us.
Now where are the Pigs
So if Ireland’s debt was cleared tomorrow and it received Marshall type funds, do you think the Irish would build a better country. I don’t. Because we never learn. The culture of nepotism and favours for the lads would land us in a mess again. Until the Irish start taking a closer look at themselves (and not just their government) a country with great potential will consistently be brought to its knees.
Just watched Alan Dukes and what went through my mind was ‘did he ever inhale when a student’, cause I thought his tonsils were stuck in his throat through the programme and he was clinging awkwardly to the chair.He does not convince me he knows anything and he lingers into the unknown unknowns as opposed the unknown knowns.I have lost confidence in Logic in general for some years now and only see it as a factor to just do a job and not an end it itself .Were we lucky to have a good leader then a renewal would appear… Read more »