Economics as if People Mattered

The recession gave the Government ample opportunity to reach for their favoured weapon when faced with hard decisions: outsource the advice. To independent consultants. All with serious credibility. Of course, in translation this means nothing less than appointing consultants whose world-view happily coincides with the current order. After all, would you expect the hired help  to jeopardise future lucrative assignments by giving you a result you didn’t expect?

Oh, and we  get to pay for it. So do our kids,and probably our grand-kids too.

So to cover for the fact that there is a total lack of accountability in our civil and public service tradition, a tradition which ensures we have expensive Official Inquiries which fail to point fingers, which can be guaranteed to enrich loads of lawyers whilst failing to  find anyone actually responsible. For anything. Ever.

Of course, the State has form in this area: witness the dreadful treatment of the kids in our State institutions at the hands of vile humans whose actions were concealed for years. Actions connived in by functionaries of the State who had not only lost their humanity, but somehow also managed to mislay their alleged Christianity.

So it is with an Bord Snip Nua. The membership of this group has been selected to examine how the Government spends our money and see where savings can be made. And it is hardly surprising,then, that a bunch of neo-liberal economists come up with a menu of cuts in public services designed to reflect their out-dated and failed economic model. The very model of economics these same gurus support, and the one which got us here.

So this might be a good time to recall just what it was that got us here. After all, we keep being told that ‘we are where we are’.

I seem to recall economic commentators assuring nervous investors that there would be a soft landing when our overheated property market would eventually cool down. These eminent commentators usually worked for newspapers which were doing rather well from the property bubble. The Property Supplements swelled due to the weight of  advertising as we were assured that the influx of ‘New Irish’ was guaranteed to buy or rent all those ugly new housing estates suddenly being built on the edges of villages al over the country. Besides, we had a long waiting list for social homes, and low-interest rates would enable them to buy a property of their own. Now, they too could buy into the dream.

And naturally the banks were there to help us out. With bigger and better loans and mortgages. Mind you, these same banks lent the funds to someone to buy the land. He would then sell to a developer for an inflated price once planning permission was gained, using money borrowed from the bank. In turn the owner could choose to either develop it, or flip it again. So a builder contracts to build and sell the houses, and is in turn financed by his bank. Notice that the bank is making a profit on each  of these loans. The builder uses sub-contractors, who often have to to wait for payment until the punters start buying the houses. On mortgages from the bank. Like a stone thrown into a pond the effect ripples outwards, involving all sorts of people..

So a vast new housing estate springs up in the flood plain on the outskirts of Ballyshocktameela, a village of perhaps 10 houses, a pub and a graveyard,  ‘Only 70 minutes from Dublin by car! River views too! Live the rural life’ say the full-page ads,and curiously enough, there’s an editorial piece with a glowing write-up.

So far the banks managed to take a chunk out of each transaction. But the new development  isn’t going to sell itself, so a bunch of professional ‘experts’ get involved.  This includes a bunch of folk who are talent for hire – here the word talent is loosely defined. So there are a whole load of parasites who profit from the selling of houses in newly-minted estates. This causes some schemes to be totally sold out before a single brick is laid.

Did I say parasites? No, surely I meant to salute all those whose contribution to the dream-selling process was so vital to the enterprise: the photographers, the graphic designers, the copy writers. I salute them since they are usually working to a brief.

The biggest piggy-backers are those monopolists who we have no choice but to use. Solicitors, surveyors, mortgage brokers, many are those with their snouts deep in the trough. Large chunks of the money poured into their banks or simply vanished offshore. The role of journalists too should be examined. Why were we being constantly being badgered and hectored to buy property before it got even more expensive? The media claque and hype drove the market, forcing the biggest redistribution of wealth ever in our society since the days of the Normans.

This was a direct transfer of wealth upwards.

That the increase in property value was inexorably upwards, as we were being constantly told, caused  parents to remortgage the home they had just paid off after 20 years. Having just managed to support their kids through University,they now discover they’re seemingly worth €300000 or more. So in order to get their kids on the lowest rung of the property ladder they take out another loan to finance the deposit. Before long we had 110% mortgages and 40 year loans on the new houses. Both of the young parents in the new houses had to work full-time to pay for childcare and make the repayments,and were constantly being assured that their loss of time with their kids would at least ensure their kids had a nest-egg in their turn. Meantime, the remortgaged grandparents have both to carry on working to pay the new debt, and are back on the treadmill. If the grandparents are ‘lucky’ enough to live anywhere near their offspring, they suddenly find themselves roped in as child-minders, just when they might reasonably have hoped to have had their lives back to themselves, having already looked after the needs of a previous generation. And as grandparent once explained,she liked having kids around.What she liked even better was knowing she  would be giving them back soon.

And now the arse has fallen out of the property market the same economists who constantly reassured us that property was on an inexorable upward curve, the economists working for the banks, these same people have the gall to try to blame the public for buying into the fantasy so successfully sold by all the media. That is what really gets me.

Banks rang me to try to get me to borrow, to inform me I was pre-approved for a loan I neither asked for, nor needed. My credit limit on my credit card went up five-fold, and the television and press were full of ads urging us to buy,buy,buy. On borrowed money.

Being told that we, the great unwashed, the ‘units of consumption’,as we  are known, are culpable makes my blood boil.

All that advertising had no undue influence, or indeed, any influence at all? The pressitute journalists who hyped the joys of property and mortgage ownership have some responsibility too.

‘Nobody forced anyone to take out a loan or borrow to buy a house’ we are told.We shouldn’t have borrowed more than we could afford we are told by those who are on fat salaries.

Yeah, right. I’ll be back to this.

Corruption in Europe

As always, a really incisive piece

Cunning Hired Knaves

Ireland’s media is full of moral justifications for subjecting poor people in Greece to even harsher deprivation in order that the country pay off its debt, regardless of the consequences of such deprivation, regardless of the capacity to make the payments, and regardless of the legitimacy of the debt. Even if it is conceded that the so-called ‘bailouts’ have been for banks and not the populace, it is still maintained that the latter must pay up, because they are collectively guilty: either of not paying taxes or of “corruption”.

The underlying suggestion is that the populace of Greece is congenitally, endemically corrupt, and that it must be subjected to the purgative of further austerity. But this is scarcely different from the moral justifications used to defend austerity and bank bailouts in Ireland. And so, when they talk about Greece, they are also talking about Ireland, in projective identification with the…

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Ora, Basta!

The mothers of the financial disaster we people find ourselves in, the good old Banks (Trust us with your money!) have suddenly woken up to the realities of life, just as they are forcing the unwashed to do, the small and viable businesses being refused short-term loans, and those whose overpriced houses are being repossessed.

The prospect of having to sell off all those orphan unsold dog boxes on the open market in a liquidation has filled the bankers with terror; clearly such a sell-off would be at fire-sale prices, and bring the price of property down to where the market value would truly obtain. It would also mean that that the banks would face massive write downs on their loan books.

This they do not like one little bit. They, and their friends in the Golden Circle and the lick-arse acolytes in the media and politics, well, they would much rather the taxpayer should pay for their losses.

Remember, the Glorious Leaders who got us here now plan the banks debts should be bought by NAMA, the proposed National Asset Management Agency, being set up to dump their debt on us, at inflated prices, with the slim possibility of us seeing a return within 20 or 30 years. Just like the AIB disaster in 1985 when it got bigger than its boots, and bought a business it did not understand. The Insurance Corporation of Ireland cost all PAYE taxpayers in Ireland which was only recently stopped, after more than 20 years. This is what Wikipedia has to say:

The Can of Worms at ICI was the headline in Business & Finance magazine on 8 November 1984.^[3] Insurance Corporation of Ireland (ICI) was a wholly owned subsidiary of AIB when it collapsed in 1985 with losses of over £200 million that had arisen due to severe under-reserving and poor underwriting performance, particularly in its London office. Reinsurance business accounted for nearly half the company’s income. ICI management were at fault for failing to closely monitor the activities of its London office, to find out what business was being written, whether adequate reserves were being maintained and to monitor the true profitability of the business. When it was discovered in November 1984 that ICI was operating below the statutory reserve ratio, a request for further capital was made to AIB – ICI had returned a profit of £80 million the previous year.

This collapse occurred at a time of deep economic recession in Ireland. The level of Government debt at that time was 116% of GDP. But the Irish taxpayer bailed ICI out of its difficulties. The Irish Government did so to ensure a continuation of the insurance business and to protect policyholders. AIB claimed that it could not resolve the problems of ICI without putting its core banking business in jeopardy. The investment of £85 million by AIB in ICI was written off and the cost to the Irish taxpayer was £400 million^[4].’
The article goes on to remind us the involvement in the tax fraud of the bogus overseas accounts, the deal helping Haughey once he became Taoiseach, the Rusniak losses of $700,000,000, the overcharging issues,and so much more. (Want to guess how many senior heads rolled? Count them on the fingers of your foot.)

Fair play to ACC for sticking to their guns. It is not really that surprising really. Being owned by Rabobank, which is Dutch and so unable to join the NAMA scam, they want their pound of flesh. And they are prepared to bring the whole rotten house of cards down. They are owed €126 million, but Mr Carroll owes more than €1 Billion to Irish banks.
Rabobank directors did not go to school or college with that other happy bunch of the Irish senior elite. They didn’t play rugby for Mary’s, or Blackrock or any of the schools which produce the same self-perpetuating elite.
They are following the logic of the market. Oversupply leads to price reductions, and we are well  oversupplied with unsold apartments.

But the elite who run this country,those who are happy telling us we must slash and burn our social services, the arts,education and healthcare, those who  have spent so much time lecturing us on ‘how the market determines true value’ have suddenly decided that the same inexorable laws should not apply to them.

Instead they attempt to blackmail us yet again. The Italians have an expression for times like this: Ora, basta! It doesn’t carry the same weight in English but translates roughly as an angry, ‘OK,that’s enough!‘