Ireland and The End of Austerity?

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Respectfully submitted by Lawrence E. Rafferty (rafflaw)- Guest Blogger

Everyday we read about the latest call for drastic cuts in government spending and claims that our national debt is killing us.  Those calling for the cuts claim that austerity is the only way that we can get the economy moving again.  To that end they call for cuts in Social Security, Medicare, SNAP and many other assistance programs, but consistently refuse to cut our immense defense budget.  Where else have these calls for austerity been made into law and what are the results of these programs?

If you look to Ireland, you can see just one example how austerity has brought a country and its people, to their knees.  

“Today, Ireland is under a different sort of tyranny, one imposed by the banks and the troika—the EU, ECB and IMF. The oppressors have demanded austerity and more austerity, forcing the public to pick up the tab for bills incurred by profligate private bankers.

The official unemployment rate is 13.5%—up from 5% in 2006—and this figure does not take into account the mass emigration of Ireland’s young people in search of better opportunities abroad. Job loss and a flood of foreclosures are leading to suicides. A raft of new taxes and charges has been sold as necessary to reduce the deficit, but they are simply a backdoor bailout of the banks.”  Nation of Change

How did Ireland get into this immense cavern of debt?  Irish leaders decided that it was in the best interest of the country to bail out its failing banking system and guaranteed all of their banks deposits, loans and bond liabilities.  Where have I seen that played out before?  Once the Irish made that guarantee, the country’s economic troubles got worse.

It was only a very short time before the results of the bank guarantees came to fruition.  “Within two years, the state bank guarantee had bankrupted Ireland.  The international money markets would no longer lend to the Irish government.

Before the bailout, the Irish budget was in surplus. By 2011, its deficit was 32% of the country’s GDP, the highest by far in the Eurozone. At that rate, bank losses would take every penny of Irish taxes for at least the next three years.” Ellen Brown

The Irish bankruptcy got even worse when it was forced to borrow bailout funds from the European Union and the International Monetary Fund.  The bailout required the Irish government to make drastic spending cuts.

“To avoid collapse, the government had to sign up for an €85 billion bailout from the EU-IMF and enter a four year program of economic austerity, monitored every three months by an EU/IMF team sent to Dublin.

Public assets have also been put on the auction block. Assets currently under consideration include parts of Ireland’s power and gas companies and its 25% stake in the airline Aer Lingus.

At one time, Ireland could have followed the lead of Iceland and refused to bail out its bondholders or to bow to the demands for austerity. But that was before the Irish government used ECB money to pay off the foreign bondholders of Irish banks. Now its debt is to the troika, and the troika are tightening the screws.  In September 2013, they demanded another 3.1 billion euro reduction in spending.”  Nation of Change

The cuts and austerity measures required by the EU-IMF sound familiar to me.   Privatize government assets and bailout the banks who were the original cause of most of the economic hardship and everything will be peachy keen.  It seems clear that these required austerity measure have not restored the Irish economy.

If you research the issue, austerity has never brought any country back from financial collapse.  All it does is reward the bankers who gambled the depositors funds and private corporations who jump in to purchase valuable public infrastructure for a pittance.  One former IMF official confirms that history shows us that an austerity program has never succeeded in rehabilitating an economy.

‘ “The only instrument left to address this in the short term is the fiscal instrument and that requires complete rethinking of how aggressive and how persistent the austerity has to be,” Mr Mody said.

There was “not one single historical instance” where austerity policies have led to an exit from heavy debt burden. Changing policies could possibly lead to growth, reduce debt levels and also prompt a “psychological boost” for the economy, he added.’ ”  Irish Times

Can we learn from the tragedy in Ireland?  Their efforts to cut their way to prosperity have failed miserably and I submit that the calls for austerity in this country are asking for the same result.

A professor at Denison University in Ohio, Dr. Fadhel Kaboub, also suggests that austerity has not worked in Ireland and will not work.  ” Austerity measures are not only incapable of solving the sovereign debt problem, but also a major obstacle to increasing aggregate demand in the eurozone. The Maastricht treaty’s “no bail-out, no exit, no default” clauses essentially amount to a joint economic suicide pact for the eurozone countries.”  Nation of Change

When you read about demands of sequestration cuts and cuts to food stamps and Social Security and Medicare, do not forget that this is all part of an austerity program.  Ask any Irish citizen how that worked out for them.  They are now investigating public banks to aid them in breaking the chains created by austerity.   Can the United State learn a lesson from the austerity programs in Ireland and the rest of the European Union?

What do you think?

56 thoughts on “Ireland and The End of Austerity?”

  1. What’s in a name? Austerity by any other name would be…conquest by default! Or maybe if Obama named it… a “compromise?”

    Economic Coup d’Etat: Debt and Deficit as Shock Therapy
    By Ismael Hossein-zadeh
    Global Research, November 02, 2013

    [Excerpts]
    “When Naomi Klein published her ground-breaking book The Shock Doctrine (2007), which compellingly demonstrated how neoliberal policy makers take advantage of overwhelming crisis times to privatize public property and carry out austerity programs, most economists and media pundits scoffed at her arguments as overstating her case. Real world economic developments have since strongly reinforced her views.
    Using the unnerving 2008 financial crash, the ensuing long recession and the recurring specter of debt default, the financial oligarchy and their proxies in the governments of core capitalist countries have embarked on an unprecedented economic coup d’état against the people.”

    “What is regrettable, however, is the liberal/Keynesian economists’ and politicians’ glaring misdiagnosis of the plague of austerity economics…

    ….Evidence shows, however, that the transition from Keynesian to neoliberal economics stems from much deeper roots or dynamics than pure ideology [2]; that neoliberal austerity policies are class, not “bad,” policies,…

    …. Indeed, it could be argued that, due to his uniquely misleading status or station in the socio-political structure of the United States, and equally unique Orwellian characteristics or personality, Mr. Obama has served the interests of the powerful financial oligarchy much better or more effectively than any Republican president could do, or has done—including Ronald Reagan. By the same token, he has more skillfully hoodwinked the public and harmed their interests, both in terms of economics and individual/constitutional rights, than any of his predecessors.”

    http://www.globalresearch.ca/economic-coup-detat-debt-and-deficit-as-shock-therapy/5356565
    ——————————————————————————————-
    This is not just Ireland, it is a class domination process of cold war tactics applied to entire domestic economies through the monetary system and financial controls of its supply. George Soros proved that an entire monetary system could be manipulated at massive levels of exploit and in doing so exposed the raw nerve of monetary exploit. Now we are also insidiously seeing the government of the USA continue to deregulate the protections from these threats…particularly in their abstract forms called derivatives (as lottakatz pointed out above: http://dealbook.nytimes.com/2013/10/30/house-passes-bill-on-derivatives/?_r=1, the process of setting up dangerous levels of derivative trading has just taken a turn for the worse.

  2. The Irish made the country very business friendly and lowered taxes for heavy hitters which used the most government services….. Great story. Raff…..

  3. “Can the United State learn a lesson from the austerity programs in Ireland and the rest of the European Union?”

    They can, but the real question is will they?

  4. “Can the United State learn a lesson from the austerity programs in Ireland and the rest of the European Union?”

    The lesson has been long known, but only a structural solution will work, and the PTB will not allow any meaningful change.

    1. What even the IMF has had to admit is that austerity does not lead to business confidence and increased economic activity.

      Austerity leads to decreased economic activity, and overly aggressive attempts to reduce government deficits run the risk of even worse debt to GDP ratios, economic decline and a spiral of decline, deflation, and further economic decline.

      The time to repay government debt is during the boom time not during recession.

  5. Brue, the last time a president had things thrown at them was Bush after being appointed by SCOTUS.

    George W. Bush – Inauguration Day – 2001

  6. rafflaw: Thanks for addressing this economic reality specifically…it seems that we are all getting a bit numb and what should be “up front and personally uncomfortable has become a slow back burner issue. We seem to be spectators at our own demise and passive participants in out of control domination by finance dictators…a totalitarian economy.

    And thanks for the positive support for Clare Daly…she’s my hero too!

    regards:
    Bruce

  7. Bruce,
    Clare Daly is one busy MP! I do remember when my wife and were visiting Ireland in late March of 2003. Right after we started attacking Iraq and the Irish men and women that we talked to were not happy about the US using Galway as a stopping point for our military flights.

  8. bettykath: Clare Daly reaches across the pond too:

    Irish MP: Clare Daly: ‘Obama hypocrite of century’

    http://www.youtube.com/watch?v=jsmcFfvWTCM

    Published on Jul 15, 2013
    Outspoken and not afraid to say things as they are, Irish MP Clare Daly joins Oksana to discuss Ireland’s unprecedented ‘slobbering’ over Barack Obama and his family, her country’s involvement in secret CIA rendition flights and weapons sales to Syrian rebels, and the ongoing Edward Snowden saga.

  9. There you go lotta. Sorry to take so long. I was out in the yard doing errands while the sun was still shining! 🙂

  10. Ireland has used very low tax rates to attract business incorporation there for years. Half of Ireland’s business tax revenue and many jobs rely on keeping the low tax in place even as the spectre of tax increases or reduced social benefits for the citizen is present.

    The fact is that business will go wherever they can get the best deal and there’s always a country and companies willing to take up the slack and provide sweet deals for corporations even if citizens, in the new countries or in the countries being left by corporations are hurt in the long or short run.

    This is a world-wide problem that is class based. It will require a world-wide, government based solution because capitol is stateless, it goes wherever an advantage can be found or engineered then hoards the increase in profit.
    *

    “Tax havens: Super-rich ‘hiding’ at least $21tn”

    “James Henry says his $21tn figure is a conservative estimate

    A global super-rich elite had at least $21 trillion (£13tn) hidden in secret tax havens by the end of 2010, according to a major study.

    The figure is equivalent to the size of the US and Japanese economies combined” continues

    http://www.bbc.co.uk/news/business-18944097

    ***

    “Deloitte promotes Mauritius as tax haven to avoid big payouts to poor African nations”

    “A Deloitte document, “Investing in Africa through Mauritius”, passed on to the Observer, advises on investing in African companies via the island nation, which has a population of 1.3 million. The document provides the example of a foreign company investing in Mozambique, where more than 50% of the population live below the poverty line and average life expectancy is 49 years. Normally, the foreign company could expect to pay a withholding tax on the dividends flowing back to it from Mozambique of 20%. A sale of its Mozambique investment would see the company liable for a capital gains tax bill of up to 32%.

    However, the Deloitte document explains that, if the foreign company made its investment through a holding company in Mauritius, it could limit the withholding tax it would have to pay to just 8%, while capital gains tax would be reduced to zero. The potential value of capital gains tax to developing economies is considerable. An Italian oil company was recently required by the Mozambique government to pay $400m (£250m) in capital gains tax.”

    http://www.rawstory.com/rs/2013/11/02/deloitte-promotes-mauritius-as-tax-haven-to-avoid-big-payouts-to-poor-african-nations/

  11. “I have 2 words for you….. predator drones……..[laughter] ….. you think I’m joking.”

    We need a Clare Daly in our government.

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