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Dispatches From The Edge
Ireland: The Great Hunger Returns
"The government's "bailout" is specifically designed to fall on
the needy. While 17.5 billion Euros will come out of the National Pension
Reserve Fund, bondholders and banks will go untouched."
(Sound familiar? -Ed)
By Conn Hallinan
Portside: December 3, 2010
Two images came to mind as the International Monetary Fund (IMF) and the
European Union began systematically dismantling what is left of the
shattered Irish economy. One was a photo in the New York Review of Books of
an abandoned, up-scale house in County Leitrim, a casualty of the 2008
housing bubble. The other, a 1886 conversation about the aftermath of the
1845-47 potato famine between Sir Wilfred Blunt and the Bishop of Confert at
Anghrim, the site of Ireland's last stand in the rising of 1688.
"They call it the last battle, but this is not true, for the battle has gone
on ever since," the Bishop told Blunt. "Look at those great grass fields,
empty for miles and miles away. Every one of them contained once its little
house, its potato ground, its patch of oats.and where are they now? Engulfed
in Liverpool, London, New York.and all for making a few English landlords
rich."
Substitute "banker" for "English" and one has to conclude that Karl Marx
didn't have it quite right: in Ireland history repeats itself the second
time as tragedy, not farce.
Historical analogies are tricky, but the potato famine and the current
economic crisis have parallels that are hard to ignore. In both cases the
contagion was foreign born. The 1845 fungus-Phytoph thora infestans- came
from Mexico via Boston and the Netherlands. The 21st century bubble came
from Wall Street and Bonn (German banks are Ireland's largest creditors).
And in both cases the devestation was a result of conscious policy choices
by the powerful.
A little history.
The 1845 fungus pretty much killed every potato in Europe, but only in
Ireland was there mass starvation. Because only in Ireland had there been a
conscious colonial policy to encourage population growth. Ireland in 1845
had about 10.8 million people, more than twice what it has today. Population
density meant a desperate competition for land, which, in turn, kept rents
high.
Places like rural Connaught had a population of 386 persons per square mile
in 1845, considerably denser than England's. The vast bulk of that
population-78 percent to be precise-was dependent solely on the potato for
subsistence.
The other great advantage of a high population was taxes, which were
increased 170 percent from 1800 to 1849. During the same period they fell 11
percent in England. "Over-taxation is not an accident," remarked Marx, "It
is a principle." He had that one right.
When the blight struck, this entire edifice collapsed. No one really
knows the final butcher's bill, but between 1841 and 1851 the population
plummeted from 10.8 million to 6.2 million. About a million of these
emigrated, though many of those died en route to the ship. Avon lost 236 out
of 552; the Virginius, 267 out of 476-or when they arrived. Of the 100,000
Irish that immigrated to Canada in 1847, 40,000 died within the first month.
How many starved at home? Maybe three million? Maybe more.
The exodus today is smaller, but about 65,000 left last year, and the
estimate for 2010 is 120,000. There won't be mass starvation, but the
IMF-imposed austerity package will slice deeply into social services,
battering Ireland's unemployed. Tens of thousands are being evicted
from their homes while more than 300,000 houses stand empty,
like the one in Leitrim. This time around there will no be cottages filled
with corpses as there were 163 years ago, but in the months to come there
will be plenty of homeless and hungry.
Ireland's economy in 1845 may have been unsustainable for the many, but it
was quite profitable for a few. There was even plenty of food produced
during the famine, but it went to the landlords. In 1847 crops worth 45
million pounds sterling were exported, including hundreds of tons of wheat,
barley, and oats, along with cattle, butter and cheese. While the Irish
starved, those responsible for their condition drank, ate and made merry.
Jump ahead to 1990.
As a new and "disadvantaged " member of the European Union, Ireland was
subsidized to the tune of nearly 11 billion Euros. In a small country that's
a lot of money. With its highly educated, English-speaking population,
proximity to Europe, modest wages, and the lowest corporate tax rate in
Europe-12.5 percent-Ireland was the ideal place for multinationals like
Pfizer and Microsoft to take up residence. The country's debt was low-12
percent, one quarter of Germany's-with good social services. Thus was the
"Celtic Tiger" born.
Then came the blight.
Bankers and moguls, allied with Irish politicians, saw a chance to make a
killing in real estate. From 1999 to 2007, bank loans for real estate and
construction rose 1,730 percent, from 5 million Euros to 96.2 million Euros,
more than half the GDP of the island. "It was not the public but the private
sector that went haywire in Ireland," says Financial Times columnist Martin
Wolf.
House prices doubled and mortgage holders routinely paid out a third of
their income to service loans. The politicians manipulated the tax structure
to make it easier for developers to avoid taxes and fees, all the while
subsidizing speculators with billions of Euros. "The lines between thievery
and patriotism, between the private advantage and the national interest,
became impossibly blurred," says Fintan O'Toole in "Ship of Fools: How
Stupidity and Corruption sank the Celtic Tiger."
Ireland went from a small but dynamic economy to one dominated by an
enormous bubble, its banks laden down with bad debts, its financial
institutions vastly over-extended.
When Wall Street melted down, sparking off a worldwide recession, the bubble
popped, the edifice collapsed, and Ireland's debt rocketed to 32 percent of
GDP. And, like in 1845, it was the little people who took the hit. O'Toole
estimates that Irish taxpayers shelled out $30 billion Euros to rescue the
Anglo-Irish Bank, essentially the entire tax revenue for 2009. While the
banks got a bailout, the Irish got savage austerity.
Joblessness is at 14.5 percent, 24 percent for young people. Personal income
has declined more than 20 percent. Welfare benefits are due to shrink
between 4 and 10 percent, and public sector wages from 5 to 15 percent. The
Irish will be looking at a decade of lower wages, fewer services, regressive
taxes, and record joblessness in an economy burdened with repaying an 85
billion Euro ($113 billion) IMF/European Union "bailout" at an onerous 5.83
percent interest rate. Of course "bailout" is a misnomer: The package is
little more than a slight of hand that shifts private debt onto the
shoulders of the public.
But the Irish are not famous for being quiet. Workers in Waterford seized
their factory last year. In early November 25,000 students wearing t-shirts
proclaiming "Education not Emigration" descended on the Dail, Ireland's
parliament, to oppose increases in student fees. And tens of thousands
of trade unionists, led by pipe and drum bands, marched up historic
O'Connell Street late last month carrying slogans reading, "It's not our
fault, we must default," "Eire not for sale," and "IMF out!" In a recent
by-election in Donegal, the leftist Sinn Fein Party shellacked a government
candidate.
The government, says Sinn Fein President Jerry Adams, "Has no mandate
to negotiate such terms and impose such a burden on the ordinary taxpayer."
It will not be the last defeat for the Fianna Fail/Green Party governing
coalition. The government's "bailout" is specifically designed to fall on
the needy. While 17.5 billion Euros will come out of the National Pension
Reserve Fund, bondholders and banks will go untouched. Even the
Financial Times was moved to condemn the "ongoing transfusion of
wealth to those who recklessly financed the country's real estate bubble."
Fianna Fail and the Greens will pay come the next election. But that may
be too late if the government rams the "bailout" through, thus setting the
plan in stone.
Like the 1845 blight, the financial contagion is spreading. Spain and
Portugal are on the ropes, and Italy is in deep trouble. This time around
the Irish will have plenty of company in their misery.
However, there is a way out that doesn't involve inflicting enormous pain on
millions of people who had nothing to do with causing the crisis:
1) Reject the pact or, if it is approved, repudiate it following a
general election.
2) Dump the Euro and go back to a currency under Irish control. The
Euro's days are likely numbered in any case.
3) Suspend home evictions and put through a jobs bill.
4) Renegotiate the debt with the "Argentina option" in the wings:
Argentina was caught in a debt crisis in 2001 and subjected to a barbaric
IMF-imposed austerity plan. The Argentines told the IMF to lump it, declared
bankruptcy, and successfully rebuilt their economy.
Of course the bankers and the IMF will scream like the banshees, but that
would be music to Irish ears.
For other writings by Conn Hallinan go to
www.dispatchsfromtheedgeblog.wordpress.com
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