by Frank Schnittger
Thu Sep 17th, 2009 at 09:01:16 AM EST
I want to present a perhaps controversial thesis that Brian Cowen and Brian Lenihan (Taoiseach and Finance Minister, respectively) are not only basically honest but perhaps also the two most capable men in Irish politics (there is not much competition, and there are few high profile women); that they are neither corrupt nor hell bent on political suicide; and that they genuinely believe they are doing their best for their country at very considerable personal cost in terms of popularity and political survival chances.
One is an accountant, and the other a lawyer. Both are experts in how those professions construct the world around them; particularly the legal and accounting fictions and assumptions that are required to construct legal arguments and balance sheets. Both are blessed with considerable social and emotional intelligence which allow them to relate well to most people, and neither are impervious to the hugely conflicting views and emotions which surround them. I would imagine they have faced their current political dilemmas with considerable personal anguish.
As I have argued in several posts now, they are also in the process of making perhaps the single most serious mistake in Ireland's political history as an independent state. I refer, of course, to the Nama proposal to hugely overpay banks for distressed assets as a way of avoiding either nationalising them or allowing the banks to go bankrupt and then reconstituting them as "good banks".
So how can both propositions be true? How can they be both able and stupid? The answer lies, I believe in the power of ideology in mediating how people see reality; how they come to understand the choices open to them; and how they evaluate the consequences of those choices.
So what are the key parameters of the ideology which has guided their world view and choices to date? I am not an expert in the axioms of neo-liberal economics, so here I need to tap into ET's considerable reservoirs of talent in ideological demystification and narrative de-construction. Please follow me below the fold if you think you can make a contribution to understanding this phenomenon...
The neo-liberal axioms which have guided their actions, can, I think be summarised as follows:
- Despite occasional dysfunctions, markets remain the best and most efficient ways of allocating resources and maximising productive efficiency in a modern economy.
- It is the role of Governments to regulate those markets as lightly as possible so as not to be at a competitive disadvantage to other, less regulated markets.
- The last thing any Government wants to do is get involved in the messy business of calling in loans, foreclosing on people's houses, and making employees redundant.
- If there are residual social problems not addressed by market mechanisms, these can legitimately be addressed by Governments, but ideally in ways which "distort" market mechanisms as little as possible.
- In Ireland's case we are critically dependent on international financial markets despite having, until very recently, one of the lowest debt/GDP ratios of any advanced western economy.
- This is because we are a small, very open, peripheral economy which has grown rapidly precisely when and because we offered lower tax rates and regulatory hurdles than competing jurisdictions.
- The key requirement now, therefore, is to keep foreign investors and bond markets sweet, by leveraging our ability as a state and as a member of the EU/Eurozone to borrow in bulk at a large discount to what private investors could do.
- We are thus, to some extent, externalising the consequences of the bankers/developers profligacy onto the Eurozone/ECB/EU who are effectively guaranteeing our currency and our bonds and onto the collective bargaining power of Irish taxpayers as represented by the state.
- Bankers/developers behaved badly, to be sure, and we will have to fix the structural incentives they sought to maximise sometime; but the overweening issue now is that we must retain/regain the trust of precisely the sort of predatory investors/financiers who got us into trouble the first time around. This is the real politique of the world we live in.
- All going well, Irish property markets and the economy generally will recover, and then the taxpayer, too, could be "quids in". Whether we like it or not, we are all investors/speculators now. This is the real world, and we may as well get used to it and be part of the action...
Is this an adequate description of the neo-liberal political world-view and just where does it fly in the face reality?