To catch up on recent events concerning the banking collapse in Ireland, I decided to watch Questions and Answers, a current affairs program of RTE. Fintan O’Toole, a columnist and assistant editor of the Irish Times, stood out for his pragmatic criticism of government policy. Also participating, among others, was Martin Cullen, Minister for Arts, Sport and Tourism, representing the government.

In a sharp exchange, O’Toole accused the government of not pursuing the 1% top of earners who, more than likely, have their wealth hidden in off-shore tax havens. He also highlighted the injust tax system which effectively subsidises landlords (on top of the feeble tenancy rights in Ireland). While this kind of thing is going on, I can understand why public sector workers are not willing to accept the pension levy that the government is pushing through parliament. At a time when the government should be leading by example, they are protecting hidden billions of the rich, the landlords, and possibly themselves too.

The response by Cullen, consious of his audience of thousands of TV viewers, was typical  of the manner in which aloof politicians use free market economic theory, completely out of context, to scare ordinary people into submission. His argument is one that deserves a prize for practically mocking his audience for not having a degree in economics -

“You can’t at one swoop of a pen, remove all incentives that disaffect mobile investment out of this country. You have to compete in a global market for mobile investment.”

O’Toole, of course, made the point that landlords and rent is not derived from mobile investment. I would imagine that the problems associated with tax havens could be addressed with some sensible legislation requiring financial organisations to disclose more information, allowing government departments to share more data, and by encouraging the tax authorities improve their administrative and investigative processes. A bit of background is useful, however, to understand the impact of this statement on an Irish audience….

In the 1980’s, as today, the country was in a financial crisis. The difference was that, at the time, the crisis was due to economic stagnation and lack of developement – unlike the imploding credit and asset price bubble that is taking down the country today. Reforms were put in place to create an attractive corporate environment, the centrepiece of which was a sharp reduction in corporation tax, and an agressive promotion policy to attract foreign direct investment from the United States. Ireland enjoyed an economic boom (which was sustainable until the early 2000’s) thanks largely to low tax. The Irish people understand the power of using the tax system as an economic tool and have accepted this as unquestionable economic doctrine.

In Ireland, politics tend to be rather right wing with the result that the “centre” of Irish politics is comparable to the Democratic Party in the United States, and far to the right of centrist politics in other Western European states. Incumbent politicians in Ireland, having seen how effective George Bush’s “War on Terror” has been in controlling the people of the US, have invented their very own War on Economic Terror based on the right wing, free-market policies of the dominant Irish political parties. This was made possible by exploiting people’s ignorance of the mechanics of the free market and their firm belief in liberating the free market and preventing state intervention. The abuse of economic theory includes invoking fear of a demand-led collapse if spending were to be cut on a public or private level – thus realising a Keynesian Paradox of Thrift. On the contrary – the collapse is due to de-leveraging of the credit bubble and cannot be stopped. It can only be managed, to moderate its worse effects.

As a rational person, I am not in favour of terrorism in a democratic society. I strongly disagree, however, with the way politicians label any person having a suggestion that involves sustainability, economic prudence, tax reform and sensible regulation, as practically being an economic terrorist. There are people that have rather extreme left wing ideologies that would be rather damaging to implement, however, even middle ground – the centre of the economic spectrum – is choked. Until only a few months ago, it was taboo to utter any remark in public that suggested that the house price boom was a bubble and was unsustainable – they were “talking down the market”. Anyone hinting at sensible regulation or sustainable economic policy was branded a socialist or worse. Victims of this treatment included Morgan Kelly (“Dr Doom”), an economist from University College Dublin, and RTE’s Economics Editor, George Lee.

To refer to the quote of Bertie Ahern, Taoiseach (Prime Minister) of Ireland from 1997 until 2008, when he famously complained about people who warned about the consequences of the government’s consumption-based bubble economics:

“Sitting on the sidelines, cribbing and moaning is a lost opportunity. I don’t know how people who engage in that don’t commit suicide“.

I rest my case.