9 July 2009 Edition
ECONOMIC CRISIS: As far back as 2006, Sinn Féin was pointing out the structural problems in the Irish public finances
Celebrity false economists
BY JOANNE SPAIN
THERE is a particularly annoying side-effect to recessions that doesn’t get as much attention as it should. The growth in celebrity economists, who gleefully appear on everything from RTÉ’s Prime Time and Six One News to sensationalist and tacky TV3 doomsday programmes, is a true stomach-churning accompaniment to any economic downturn. Economists are a strange breed. They do not practice an exact science, so it is rare to find two who agree.
More significantly, the vast majority of economists that pop up on our screens and in our newspapers are either ideologically biased or commercially compromised. They are, at the start and the end of the day, employed by a financial body and obliged to sell that body’s viewpoint.
It wouldn’t matter that a plethora of biased, compromised, inexact ‘experts’ are all over the media with their opinions (let’s face it, that’s most journalists) if it wasn’t for the weight that this group carries in these uncertain times.
When it comes to wages and social welfare being cut, to public services being slashed and to the state incurring billions of debt to bail out financial institutions, it’s important to know just who and what is guiding the Government.
This came to the fore last week when the Dáil discussed the latest IMF report on Ireland, which unveiled a very worrying scenario for the state’s economic future as well as a host of right-wing policies to lift Ireland out of recession.
Sinn Féin’s Arthur Morgan and Caoimhghín Ó Caolain both pointed out the history of this disreputable body. The Sinn Féin TDs were the only ones to point out the ideological agenda of the IMF. Government and opposition alike both pointed to relevant sections of the IMF report to support their economic arguments.
But let’s look for a moment at what the IMF was saying in its 2007 report on Ireland. In that year the IMF estimated that Ireland’s structural budget would end the year IN SURPLUS to the tune of 0.7%. It was among several claiming that there was no bubble and that the Government’s fiscal policy was sensible.
One might assume that, given the precariousness involved in making economic forecasts, the IMF and several other economists could be forgiven for getting theirs so spectacularly wrong.
But wait – who do you think made the following comments in 2006?
“The danger – and the lesson from the economic boom of the 1920s which set the stage for the Great Depression that dominated the 1930s – is that a decline in the property market could result in a domino effect that would precipitate a recession.”
“Around 254,000 people in the 26 Counties work in the construction sector. That’s almost 13% of the overall workforce, or more than one in every eight workers. The construction sector accounts for 23% of the state’s GDP, compared to an EU average of about 12%. The Exchequer is heavily dependent on the construction sector for revenue, including revenue from VAT on building materials.”
Those statements were made by the then economic advisor to Sinn Féin, Caoilfhionn Ní Dhonnabhain, in articles in this very newspaper.
As far back as 2006 – when the vast majority of economists, from the IMF to the OECD and homegrown ‘experts’, as well as the entire Government, were talking up their economic prowess and labelling Sinn Féin as ‘economically illiterate’ – Sinn Féin was pointing out the structural problems in the Irish public finances.
This wasn’t a lucky guess (for in-depth analysis, try an archive search of Caoilfhionn’s or Robbie Smyth’s names on the An Phoblacht website). The Sinn Féin position on the economy was and is simply not based on vested interests and protecting certain wealthy sections of society. The Sinn Féin economic approach is based on a forensic analysis of economic history and the capacity of public finances and a rights-based approach to how economies should service people. The fact that no economy has ever sustained itself on construction and Foreign Direct Investment is something we could see several years ago. It’s something this government have come to very late to and are still denying.
NOT OURSELVES ALONE
We were not alone in our economic predictions but we were in the minority. We were in a minority of one when it came to political parties.
Both Fine Gael and Labour’s 2007 general election manifestos promised 2% cuts in the lower rate of tax. Both promised cuts to stamp duty. Both promised a freeze on the rates of Capital Gains Tax. Labour put forward an extensive public spending plan and followed it with the comment: “These spending commitments represent a modest proportion of the total amount of resources that are likely to be available over the next five years.”
The economist website Finfacts provides a helpful history of what many leading economists were saying in the cheerleading years. Jim O’Leary, Dan McLaughlin, Eoin Fahy and Alan McQuaid are all named in the roll call of shame as they all called for cuts in both the top rate of tax and the standard rate, with Dan McLaughlin calling for income tax rates of 40% and 20% to be replaced with 30% and 10% respectively.
Goodbody’s Colin Hunt, echoing the politicians who would later follow him in their attacks on the economic ‘illiterates’, said:
“Minister, don’t let the doomsayers get you down. Economic policy is on the correct course... Rather than tightening fiscal policy, you should continue with the supply-side approach of recent years with an emphasis on using both taxation changes to enhance the efficiency of the labour market.”
Mary Harney (“Lower taxes brought unprecedented employment and prosperity to this nation”), Charlie McCreevy (“Spend, spend, spend”), Bertie Ahern (why don’t the “cribbers on the sidelines” commit suicide?) and, of course, Brian Cowen (“If my crystal ball had been better than those of the IMF, OECD and ESRI, I would have done more to reduce spending so it would have been easier to deal with this international recession”) all join the honours list of those who talked up the state’s economy while driving it into recession. They are the same politicians now saying that the global crisis is responsible for Ireland’s current scenario.
If you tune in these days to one of the many programmes dissecting our economic crisis, you might spot one or more of these experts on the panel. Note the lack of guilt, culpability or apologies in their contributions. Rather what you will see is an expert lesson in revisionism and a whole new policy agenda designed to make the new economy a lot like the old economy. The mantra then was low taxes, poor public services, privatisation. The mantra now is low taxes, public spending cuts, privatisation.
The golden economist guiding the Government now, Alan Ahern, told the Fianna Fáil party last week that under no circumstances should a stimulus package be introduced for the Irish economy. The slash and burn policy is now the expert advice that all our economic futures are hanging on.
For those who are sick listening to the economic insults thrown at Sinn Féin, take heart from the fact we don’t have to revise our contribution. The sound position we took in 2006 is the same approach we are using today. I’ll leave you with the wise words of the economic forecast from An Phoblacht at that time:
“What could be done to curb our exposure to such an eventuality [a crash]? Implement strategies to reduce dependence on Foreign Direct Investment and to curb the reliance of the economy on construction. Introduce tax changes to reduce investor-led demand in the housing market. Implement polices which ensure a sustainable tax base so that the Exchequer is not at the mercy of fluctuations in consumer spending. So the lesson is – it doesn’t have to end in a crash – but it could.”
ROLL CALL OF SHAME: Jim O’Leary, Dan McLaughlin, Eoin Fahy and Alan McQuaid