IMF arrive to put right Ireland’s special version of crony capitalism

Aoife Carroll is a member of the Irish Labour party

The IMF has arrived in Dublin. Despite Minister for Justice Dermot Ahern dismissing on Sunday any talk of Ireland getting a bailout from the IMF or the Stability Fund as ‘fiction’, the reality could no longer be denied on Tuesday evening as Minister for Finance, Brian Lenihan, was forced to admit that the governement was about to commence “short focused consultation” with the IMF and European Union Officials.

The seeds of Ireland’s economic collpase were sown long ago. Like the rest of the world, our economic and banking systems were affected by the collapse of Lehman Brothers in September 2008 but our problems did not soley arise out of global problems.

Instead they are a product of a decade of disastrous ecnomic policies that emphasised property development and led to a massive property bubble that was always going to burst. This was Ireland’s special version of crony capitalism.

Despite exhortations by the government to pull on the ‘Green Jersey’ to support “the cheapest bank bailout in history”, the Labour party stood alone on 30th September 2008 in opposing the blanket guarantee proposed as a resolution to our banking crisis. Sinn Fein and Fine Gael buckled under extreme pressure from Fianna Fáil and voted with the government that night.

We were told it would be the “cheapest bank bailout in history”. It has turned out to be the most expensive. Irish banks, led by the now nationalised Anglo Irish Bank, have become a black hole money pit which will, at last count, need €34 billion to survive.

As the Irish deficit rises and the bond yields hit 9 per cent, the government announced an austerity plan that would involve cutting €15bn from the budget over a four-year period with €6bn of those cuts being frontloaded in 2010/2011. By way of compairison, taking €6bn out of the Irish economy is the equivilent of the United States abolishing their Department of Defence in one go.

From the start of the crisis the Labour party has proposed an alternative path to recovery that has focused on providing stimulus-led job creation along with cuts in public expentiture. Unlike the government, the Labour party has argued that our banks should not be given a blank cheque to cover their reckelss practices during the boom.

The anger in Ireland is palpable, and can be witnessed in this video. The people feel betrayed and lied to. The government has lost all credibility, exemplified by the fact that it was the Govenor of the Central Bank, Patrick Honohan, who was the person who finally admitted that an IMF/EU bailout was on the way after a weekend of insistant denials from the government.

Ireland has ended this week effectively in receivership with our intertnational credibility in tatters. Fianna Fail brought us to this point through a combination of reckelss economic policies and a failure to properly regulate the banks. Ireland will get out of this mess. There is another way and the time for a fundamental shift in Irish politcs has arrivied.

http://twitter.com/geronimo100/status/5657859287158784 william haymes

RT @leftfootfwd: IMF arrive to put right Ireland’s special version of crony capitalism: http://bit.ly/c9T4Po by @AoifeCarroll in Dublin
janie_s

and the Irish Labour party would have done any better! hindsight is a wonderful thing.

and…”taking €6bn out of the Irish economy is the equivilent of the United States aboolshing their Department of Defence in one go”. no it isn’t. get a grip.
http://oxfordkevin.carbonclimate.org Oxford Kevin

Good luck with expecting the IMF to do something about crony capitalism, the results of their prescriptions usually help to entrench crony capitalism, or at least that is the case outside of the West.
http://twitter.com/frankspring/status/5662038999175168 Frank Spring

RT @leftfootfwd: IMF arrive to put right Ireland’s special version of crony capitalism: http://bit.ly/c9T4Po by @AoifeCarroll in Dublin
http://twitter.com/c_quigley/status/5663238645612544 Christine Quigley

Delighted to see @aoifecarroll blogging on @leftfootfwd – great article on current economic situation in Ireland – http://bit.ly/9TDtGw
http://twitter.com/neilpward/status/5667745815334912 Neil Ward

RT @leftfootfwd: IMF arrive to put right Ireland’s special version of crony capitalism: http://bit.ly/c9T4Po by @AoifeCarroll in Dublin
http://twitter.com/Jolhnsunol John Christopher Sunol

Capitalism is on its way out and socialism is on its way in with the world becoming one. Ireland is following the example of Greece when it went bankrupt, Unless it joings the coming world markets it just can not compete
Whig

The Irish financial crisis essentially reflects the problem of government manipulation of the money suppy – in this case it was EMU and the ECB which enabled vast quantities of cheap money to flood the country and create a huge asset price bubble. However, it’s unlikely that an Irish government controlled central bank would have acted differently. Only a system of denationalised money and full reserve banking would prevent such money-induced booms and busts occurring. The banks were foolish but they acted as might be expected under the circumstances. The financial crisis is a symptom of monetary problems, not a cause.
To attempt to score political points out of this is mendacious of course – the Irish Labour party would have almost certainly acted in the same way, much as the UK Labour Party did. When I read socialists calling for a ‘fundamental shift in politics’ it usually means something bad’s coming.
No party will solve the persistent malinvestment present in an economy where government and fractional banking are able to distort money. The only answer to Ireland’s problems (as with other economies) is sound money – not more government intervention, regulation or inflation of the money supply.
http://twitter.com/mswigsy/status/5736435541868544 Wendy Maddox

RT @leftfootfwd: IMF arrive to put right Ireland’s special version of crony capitalism: http://bit.ly/c9T4Po by @AoifeCarroll in Dublin
Mr. Sensible

I rather think Britain could learn from Ireland about what happens if you cut too soon.

I seem to remember that Ireland started this last year or earlier this and look what’s happened.

And is it right that Ireland remains stubbern on its low rate of Corporation Tax if such puts at risk the chance of sorting the situation out?
Chris

@Whig

“The only answer to Ireland’s problems (as with other economies) is sound money”

Yeh, because that worked out really well when we tried it before…
http://twitter.com/paulstpancras/status/5832215216787456 paulstpancras

IMF arrive to put right Ireland’s special version of crony capitalism | Left Foot Forward
http://bit.ly/9AnFGy
Aoife

@ janie_s – actually the Irish Labour party probably would have done a lot better, particuarly considering we fundamentally opposed the banking guarantee that was introduced by the Government which has been the major factor in the current crisis.

The Dept of Defence comparison comes from the Wall Street Journal and shows the impact of what such a huge amount of cuts will do to a small economy.
http://online.wsj.com/article/SB10001424052748704506404575592360334457040.html

@ Mr. Sensible – Raising our corporation tax would be a bit of a disaster and would probably leave us in a weaker position given the amount of revenue it generates. This is an interesting piece about our Corporation Tax in a European context from Irish economist Ronan Lyons

http://www.ronanlyons.com/2010/11/16/and-its-hard-to-craft-a-budget-when-youre-watched-by-olli-rehn-open-letter-to-soon-to-be-european-overlords/
janie_s

Aoife. I am not an expert in Irish politics, my comment about the Irish Labour party is informed by our experience in the UK.

The Dept of Defence comparison was silly because it implies so much more than some money being taken out of the economy. And how much is it? 5%, 10%? The numbers are so much less dramatic. In any case it was an analogy you borrowed from someone else.

I agree with the Irish position on corporate tax competition, but it may not be sustainable whilst you are having your dinner paid for by the people you are in competition against
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