Wednesday, November 24, 2010

What We Can Learn From Ireland

I got to admit I haven't paid as much attention to international economic news. I barely like paying attention to our own economic crap, but I just read two interesting posts about the crisis in Ireland.

I watched a lot of different videos trying to find one that would succinctly talk about the cause of the crisis and the state Ireland is in, but there wasn't really one that got the job done (in my extensive twenty minute search on youtube I should say). This is the best I could find (though it is quite alarmist):

I don't think he's much of a fan of America do you? Anyway, the reason i think this is so interesting is because Ireland's predicament is a real life scenario of what happens when you think less taxes is the answer for everything.

Also, don't forget neoliberalism is. It might not be what you think.

Solving the Irish Crisis:
What can we learn from Ireland? Lower corporate taxes don't lead to jobs and economic health, they lead to dangerous bubble economies that burst at the slightest threat, and even 100 billion euros isn't enough to bring back stability. Austerity won't help people who need jobs and homes. This is not the time to obsess over deficits, it's time to pull countries back from the brink.
Irish Home Rule?:
In addition to its entertainment value, the Irish debacle is worth paying attention to for the way it vividly illustrates the folly of neo-liberal economics. In case you’ve forgotten, Ireland, with its educated workers, weak unions, business-friendly tax regime and wide-open banking system, was supposed to be a model for the rest of us. Someday maybe someone will put together an anthology of the paeans to the Celtic Tiger—but here’s two examples worth highlighting. In February 2006 George Osborne, now Chancellor of the Exchequer and Britain’s budget-cutter-in chief wrote an article in Rupert Murdoch’s London Times urging his countrymen to “Look and Learn from Across the Irish Sea.” Osborne’s claim that “Ireland stands as a shining example of the art of the possible in long-term economic policymaking” has proved irresistible to any number of pundits in recent weeks, but the article is well worth reading in its entirety as a compendium of the myths that still guide British policy making. But before American readers get too smug, take a look at this essay by Chris Edwards, director of Tax Policy at the CATO institute (and hence a big player in the new Republican-led House of Representatives on budgetary matters). Writing in March 2007 for the National Review on-line, Edwards asks whether Dublin’s boomtown atmosphere was due to “the luck of the Irish?” Not at all, he answers himself: “It resulted from a series of hard-headed decisions that shifted Ireland from big government stagnation to free market growth. After years of high inflation, double-digit unemployment rates, and soaring government debt that topped 100 percent of GDP, Irish policymakers began to cut spending in the late 1980s in a desperate bid to recover financial stability.” Again the whole piece is worth reading—especially if you want to know what kind of shit Congressional Republicans are still smoking.

Now we know that the whole shining green edifice of Irish prosperity was built on a housing and banking bubble even less substantial than the towers of Oz—only here the men behind the curtain weren’t benevolent wizards but greedy and incompetent bankers who thought they were too clever to be governed by the laws of economic gravity. The best brief explanation of what happened can be found in the Financial Times, where columnist Martin Wolf explains that unlike Greece, where the government really had been spending money it didn’t have for years, and counting on endless growth (and rising tax receipts) to defer the day of reckoning, the Irish government had if anything been excessively frugal. Irish public debt in 2007 was just 12 percent of GDP (compared to 50 per cent in Germany and 80 per cent in Greece). As Wolf points out, “It was not the public but the private sector that went haywire in Ireland and in Spain”—a triumph of the free market which allowed Irish banks to rack up massive loan books in a Celtic version of our own sub-prime mortgage crisis. Here, too, the myth of infinitely sustainable growth covered a multitude of corrupt practices—all cruelly exposed to view once the US crisis yanked the cloth off the table.
Interesting to say the least.

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