Last night in the (darkened, of course for the books and not very conducive to photography on the hoof) confines of the TCD Library Long Room Senator Sean Barrett launched “What if Ireland Defaults”, the book of essays previously noted on the irish debt and economic position. Having entered into TCD ESS (now BESS) in October 1981 I had an idea of economics as a possible route. I was still deciding when the first lecture I had in my second year was in a course which I was thinking maybe/mabe not. It was “public sector economics” and was taught by Sean. Immediatly I was captured, as Sean outlined in 20m a course that would give us a helicopter tour d’horizon (that turned out to be a tour de force) of the then myriad ills afflicting the Irish economy. And yes, dear children, they were arguably as bad as here and now.
Sean, along with such luminaries Louden Ryan, John Bristow, Alan Mathews and John O’Hagan inspired a desire in me to work in this area and I have been honoured to have worked with Sean in particular as a student and latter as a colleague and constituent. Archaic and sclerotic as the Seanad can be at times, the reality is that the university senators have a large and diverse voting base to serve and they serve it well. Any changes in voting for Seanad Eireann should try to capture more of the essence of the university senators of all hues over the years.
Sean very kindly launched the book last night and his speech is reproduced, with permission, below.
My first duty is to congratulate the three editors, twenty-one authors and the Orpen Press on the publication of this excellent volume. It deserves to be widely read as Ireland faces a continuing crisis in which unemployment has risen over three fold and our debt has risen from 28% of gross national income in 2005 to 114% in 2011 as noted by Stephen Kinsella and the combined debt burden of the state, household and corporate sectors is almost five times GDP as noted by Peter Matthews.
In the words of a great TCD man, Oscar Wilde, Miss Prism tells Cecily to read her political economy in the absence of her tutor. “The chapter on the fall of the rouble you may omit. These monetary problems have their melodramatic side.”
Ireland’s economic policy unfortunately followed Miss Prism’s advice. We sleepwalked into the euro currency and the regulatory body played lots of golf with bankers through an unsustainable property boom. Stephen Kinsella notes that we doubled the national debt in 2008 by bailing out the banks. Relative to GNP this was a gold medal in regulatory capture by world standards. Regulatory capture of governments by national airlines or sheltered sector professions pales into insignificance compared to the Irish bank capture of the exchequer.
Kinsella states on p.85 that “we don’t need to default on our debt but we may need some further assistance from the EU/IMF.” Default, austerity and restructuring of debt are all reviewed by the various authors in this fine volume. Nobel prizewinner Joseph Stiglitz warns that “financial integration raises the overall risk of large negative shocks” and that “capital market integration could increase, instead of lower , the likelihood of a financial crisis in a given economy.” (p.40). As we survey the lack of an exit mechanism from the euro, the large differences in the sizes of the Eurozone member states, the one size fits all interest rate, the lack of fiscal transfers and labour market mobility between the members, and the lax entry requirements to the currency we see the urgent need for a look again at the optimal design of international financial architecture. This requires from Brussels and Frankfurt the words of explorer Tom Crean. “I heard something I never heard before in service- I made a mistake!”
“How to Survive on the Titanic- Ireland’s Relationship with Europe” is therefore an apt title for Megan Greene’s chapter 6 in the book. She states that bringing back the drachma would be a much faster way than austerity to revive the Greek economy. She notes Ireland’s five austerity budgets in a row and high unemployment. She sees the fiscal compact as a surefire recipe for recession in the peripheral countries. A compact is defined in the Oxford English dictionary as a small vanity case.
My Fiscal Responsibility Bill was introduced in the Senate last December. The competing versions from the Fiscal Council and the Department of Finance have yet to appear and are overdue. Ireland urgently needs to reform its governance. Far too many of those who caused this crisis have been exempted from its cost. Far too many institutions remain unreformed.
Elaine Byrne and Huginn Porsteinsson point out that Iceland was lucky. Their banks at ten times GDP were impossible to save. Irish banks at five times GDP were thought possible to save and we will take far longer to recover. A totally ludicrous project is thus shown to be a better protection for the citizens than a scarcely plausible one. The decision to save Anglo Irish Bank becomes ever more difficult to understand or defend. The continuing decision to defend a bank that has been shut is impossible to support.
Making private debt public is a naked transfer of wealth away from taxpayers as noted by Tony Philips. Karl Deeter echoes many fears about our monopolistic pillar bank strategy designed to eliminate competition. These are just some points that caught my attention. In fact on every page of this book there are interesting and stimulating ideas. I commend it warmly And again congratulate all those involved in an excellent venture.