Tag Archives: economics

Ever since the bank guarantee of September 2008, there have been countless attempts to explain the implosion of the Irish economy. Most of these explanations have taken a moralistic attitude, laying the finger of blame at the greed and recklessness of those at the tops of the financial institutions which laid waste to a decade of prosperity. There may well be some merit in these views, but the roots of the current crisis run much deeper than a handful of people behaving badly.

This week I finished reading what was undoubtedly one of the best accounts of what happened to the Irish economy four years ago. Published last June, Conor McCabe’s Sins of the Father takes a thorough and serious look at the causes of the country’s economic collapse. Although I own a copy signed by the author himself, Sins of the Father had been sitting on my bookshelf for almost a year before I bothered digging into it. Upon finally reading it, I regretted putting it off for so long.

Sins of the Father is much more than a mere chronological description of how the Irish economy imploded; In the book, McCabe charts in an easily accessible manner the deeply flawed and deformed way in which the Irish economy developed since the partition of the country, taking the reader right up through the bank guarantee, the creation of NAMA and the humiliating EU-IMF bailout of November 2010. Although Fianna Fáil was politically butchered by voters in last February’s general election for their role in the crisis, this book shows how successive governments since the state’s foundation laid the foundation for Ireland’s catastrophic economic collapse.

The book, which is less than 300 pages long, is divided into five subject areas, all of equal importance; housing, agriculture, industry, finance and lastly, the Fianna Fáil/Green Party government’s response to the financial crisis.

The chapter on housing, I found, was a particularly fascinating one, which convincingly demolishes the myth of a ‘property-owning’ gene in Irish DNA. McCabe correctly points out that the high rates of private ownership was a direct result of the political decisions taken by successive governments which consistently prioritised private ownership over much-needed decent public housing schemes. The fundraising organisation Taca, set up by Fianna Fáil in the 1960s, brought into light the shameless cronyism that existed between the political class and property developers, speculators and landlords.

Also wonderfully detailed in Sins of the Father is how Irish governments helped to fuel the rampant property speculation and booming house prices which plagued the country for the last number of decades. High prices opened up a new debt market for banks, while Irish people were forced into taking on ruinous mortgages in order to secure a home. A booklet issued by the government in 1967 advising citizens on home ownership told readers that “the amount you borrow should not be more than the 2½ times your annual income”. By 1998, house prices were almost eight times higher than the average industrial wage. At the height of the boom, McCabe found, “Irish property prices were between eleven and fifteen times the median wage”.

Another aspect of the book which I found not only interesting but profoundly relevant is the author’s criticism of Irish governments’ obsession with foreign investment, to the detriment of the state’s own indigenous industry. He points out that the benefit of having multinational companies based in Ireland was much lower than is often portrayed, stating that the “profits are repatriated to their country of origin”. He continues: “Given such a modest effect on the Irish economy – 7% of total employment and approximately €2.8 billion in corporation tax – why is foreign direct investment constantly put forward as the prime objective of the State’s economic policies and strategies?”

Sins of the Father, McCabe’s first book (and hopefully not his last), admirably challenges many of the lazy myths which pass for economic discussion today and should be seen as a vital resource for those seeking to understand why the Great Recession has had such a profound effect on Ireland.

Conor blogs at


A common theme running through much of the world’s history is the prevalence of often bizarre and outrageous ideas that would never be granted any credibility in the modern age. Some of these ideas and doctrines, during certain periods of history, were seen by most people alive at the time as undeniable truths. For much of the last millennium, the divine right of kings was used to justify the perverted reign of Europe’s many monarchs. Those who questioned it were seen as seditious radicals on the fringes of society. Likewise, the doctrine of Manifest Destiny declared that the United States had a God-given right to expand westward on the North American continent, even if it meant the extermination of the native population.

Today’s prevailing delusion is not a peculiar religious dogma or indeed any crazed racist political doctrine; it’s the belief in the necessity of unending economic growth. Championed by almost all politicians and economists, the notion that the world’s economy can grow indefinitely comes up against one huge stumbling block; Earth’s finite resources.

The scientific consensus is that humans are causing our planet’s climate to change. The only thing that is really contested here is the degree to which it is taking place. And our collective obsession with never-ending economic growth, coupled with our addiction to heat-trapping fossil fuels, is a recipe for environmental disaster. Future generations, if there are any, are likely to be bemused at our economic system’s reckless short-termism.

Growth is a central component of the current economic system and is necessary for its normal functioning. It’s generally accepted that capitalism requires the economy to grow by around 3% every year to avoid a crisis, as we now know today. When growth stops, millions of people are thrown onto the scrapheap. However, when growth continues, the environment suffers. It’s an unfortunate fact, but when GDP increases, so do greenhouse gas emissions. This is an enormous obstacle which humanity needs to overcome in the very near future.

Economics is perhaps the most over-mystified field in modern academia. Many people feel intimidated by the figures, strange-sounding financial terms and, ultimately, its sheer dullness. Consequently, most people feel that they should leave major economic decisions to those “who know best”, much to the detriment of the rest of society.

Boiled down to its most simple form, economics is about human beings labouring to produce and exchange things that they want or need. In a sense, “economics” has existed for as long as humans have populated this planet, even if the term wasn’t articulated by our earliest ancestors. However, economics today is a very different beast. The attacks on living standards across the world, carried out on behalf of the powerful, testifies to the fact that people are now seen as objects whose sole purpose is to serve the interests of “the economy”, rather than the other way around. Environmental lawyer Gus Speth highlighted the blindness at the centre of this fanatical money worship when he said: “Economic growth may be the world’s secular religion, but for much of the world it is a god that is failing – underperforming for most of the world’s people and, for those in affluent societies, now creating more problems than it is solving.”

Economic growth, we are told, is the only way to improve our lives and to raise millions of people out of poverty. It’s believed that building and consuming more things makes our lives more fulfilling and enjoyable. But this view, although widely held, does not stand up against the evidence. Although the global economy has grown many times over the last few decades, very little of the wealth created has went towards lifting the world’s poorest people out of poverty. And in western countries, whose populations are the supposed beneficiaries of economic growth, depression and anxiety levels have increased massively as a result of stress and longer working hours.

Economic growth does not necessarily lead to increased life satisfaction. Indeed, most working people saw little benefit from economic growth over the past forty years. Since the 1970s, wages in the western world have stagnated as a result of the demise of effective trade unionism. So, while the economy was growing year-on-year, those who were creating the growth in production and wealth received nothing extra for their labour. To fill the gap in demand left by falling wages, working people were encouraged to obtain credit cards in order to buy things which otherwise could not have been sold. Thus, a growing consumer economy is necessarily built on huge amounts of debt, which clearly brings about its own set of personal and social problems.

The wisdom of promoting western consumer-based economies as models of development for the rest of the world is questionable at best. In their 2006 report, Growth Isn’t Working, the New Economics Foundation pointed out the stark unfeasibility of continuing to grow the global economy indefinitely: “For everyone on Earth to live at the current European average level of consumption, we would need more than double the biocapacity actually available – the equivalent of 2.1 planet Earths – to sustain us. If everyone consumed at the US rate, we would require nearly five.” Aside from the ecological impossibility of using growth to tackle poverty, the actual results have left a lot to be desired. The authors of the report also discovered the following:

“Between 1990 and 2001, for every $100 worth of growth in the world’s income per person, just $0.60 found its target and contributed to reducing poverty below the $1-a-day line. To achieve every single $1 of poverty reduction therefore requires $166 of additional global production and consumption, with all its associated environmental impacts.”

Rather than the wealth “trickling down” to the less well off in society, as Margaret Thatcher infamously believed, the tendency in capitalism is for the wealth to trickle in a most definitely upward fashion.

Beyond a certain point in any society’s development, economic growth ceases to contribute to general public well-being. Once people’s basic requirements are fulfilled, such as health care, a good social and family life, purposeful employment and adequate shelter, the urge for material goods diminishes. This is exceptionally demonstrated in Tim Jackson’s Prosperity Without Growth, which points out that people generally value having a productive role in society more than they value material commodities. Following the initial buzz of buying a new iPad or catching up with the new fashion fad, there’s little to suggest that we are any happier when we consume things. Indeed, the most visible facet of growth-based consumerism, advertising, encourages us to be deeply unsatisfied with our lives and with what we own. Life is never good enough unless you go out and purchase the latest crap the capitalist has to offer.

Fred Magdoff and John Bellamy Foster, in their 2010 book, What Every Environmentalist Needs to Know About Capitalism, made an important point when they wrote: “The emphasis on consumption has even brought about a change in everyday use. Instead of talking about the “people”, the “general population”, the “public,” or “humanity,” it is common to use the term consumer.” They continued: “Our humanity is being defined as our connection to commodities instead of to each other and our communities”.

Shopping is central to the workings of capitalism. The powerful need us to buy their junk to keep their system ticking over. That is why, in the days after the 9-11 attacks, US President George Bush urged terrified Americans, who were worried about the prospect of another Al-Qaeda attack, to get out their credit cards and start spending again in a bid to prevent an economic slow down.

Not only does economic growth fail to improve our happiness and wellbeing, it assists in the destruction and cooking of our fragile planet. The fetishisation of growth gets more cult-like by the week. There is no alternative, we are told. Any other system which has been tried out has failed. Capitalism gives people what they want. We must appease the markets. History ended when the Berlin Wall fell in 1989. So goes the mundane mainstream narrative.

The task of this generation is to move the world beyond an economic system which views both people and planet as mere “externalities”. We need to build a system which views these things as more than trivial side issues which warrant only an afterthought. There is nothing to suggest that a non-growth economy, organised in a non-capitalist way, of course, would not prosper. The key is to reorganise the priorities of the economy and to plan production in a way that meets the basic needs of everyone while at the same time not destroying our species’ chances of survival on this planet. Of course, it will require a change in the way we currently live our lives and will present an immense challenge, but it can be done. To continue the way we are going risks disaster.

Kenneth Boulding wonderfully summed up the madness of the current economic paradigm when he quipped: “Anyone who thinks exponential growth can go on forever in a finite world is either a madman or an economist.”

It’s almost inevitable that in any discussion about socialism someone will claim that “humans are simply too selfish”. “We have always been like that and we always will be,” they would say. “That’s just the way things are, and you can’t change it”.

This argument is as hallow as it is predictable. It’s based on the false notion that humans are born inherently evil, selfish and violent. It’s a shallow argument which serves the ruling class well. After all, their system requires selfishness and extreme violence on a mass scale in order to operate effectively, for which the ‘human nature’ argument is intended to provide some sort of justification. Indeed, there were times in the past when slavery, racism and discrimination against women were all justified by the same ‘human nature’ argument.

The proponents of this argument associate ‘human nature’ exclusively with negative things, such as selfishness and greed. But they are far from the only characteristics that define our species. The more positive, and equally as important, ones such as co-operation, solidarity and friendship are generally ignored. If people’s actions were solely motivated by greed and selfishness there would be no such thing as charity; there would have been no money raised for the victims of the 2004 Asian Tsunami or other disasters; there would be no such thing unconditional parental love; there would be no friendship; people would not give up their lives for something they believe in; people would not protest against injustices on the other side of the planet. The list goes on.

The reason many people falsely associate ‘human nature’ with greed and selfishness is because the current mode of production encourages these features. Those who are wicked, ruthless and selfish do well under capitalism. Those who aren’t are usually disadvantaged. Because capitalism is the only system most people have ever experienced, they are lead to believe, wrongly, that greed and selfishness are the only human characteristics we can harness in order to run an economy. Attempts to organise society in a different way are simply “utopian” (Ironically, the people who attack us for being “utopian” also accuse us, at the same time, of wanting to subjugate humanity under some form of Stalinist dictatorship).

The ‘selfish’ argument also presumes that ‘human nature’ is something which is set in stone; that we are genetically programmed to be a certain way and nothing can change the way we are. Of course, this view is not one based on any form of evidence. ‘Human nature’ is not something static; our behaviour is almost entirely influenced by our social surroundings, and is in a state of constant change. That’s why a person alive today would be nothing like someone who lived 5,000 years ago. It’s also why someone brought up in a western society is nothing like a member of an Amazonian tribe. As Harry Magdoff and Fred Magdoff, of Monthly Review, said: “If human nature, values, and relations have changed before, it hardly needs pointing out that they may change again”.

What many people fail to recognise is the fact that capitalism is a relatively new historical phenomenon. Of the 150,000 years humans have populated this planet, industrial capitalism has been around for only 200 of those years. Indeed, capitalism in its modern, neo-liberal, form is only 30 years old. Many people find it difficult to understand that past societies were organised in countless different ways, many of them co-operatively, before the rise of capitalism. Likewise, we can organise ourselves differently after it goes. Throughout most of our history, humans have lived in hunter-gatherer societies, where there were no ruling classes. People who lived during these times would have viewed as totally alien the idea of a small number of individuals controlling a surplus produced by a larger group. Perhaps the most well-known case of a common ownership society (or primitive communism, as Marx described it) is that of the Native Americans. Here’s what Christopher Columbus had to say about them before their culture was destroyed by European settlers:

“Nor have I been able to learn whether they held personal property, for it seemed to me that whatever one had, they all took shares of….They are so ingenuous and free with all they have that no one would believe it who has not seen it; of anything they possess, if it be asked of them, they never say no; on the contrary, they invite you to share it and show as much love as if their hearts went with it.”

Many Native American tribes celebrated a festival known Potlatch. The ceremony involved the wealthiest in a certain area giving possessions away to the less well-off. The more you gave away, the higher your social status. Today’s culture of defining someone’s social standing by the number of flashy cars they own or how big their house is would be unfathomable to most Native Americans. In 1884, Potlatch was banned by the Canadian government after it was deemed to go against the Christian values of ‘civilized’ capitalism.

With the current economic system facing its biggest crisis since the 1930s, the ‘human nature’ argument is being raised now as much as ever. And it’s even more ridiculous at a time when working people are being asked to “tighten their belts” and sacrifice their living standards to pay back the debts of private banks. The fact is, only a relatively tiny number of people actually benefit from capitalism. How does it benefit anyone to work 60 hours a week for minimum wage just to pay their bills? How does it benefit anyone to have a boss? How do you benefit from capitalism when you are constantly threatened with unemployment? How would paying a high rent to a landlord for a run-down, inner city hovel benefit you? In my last article I showed how wages for the vast majority of people have stagnated over the past three decades, with many workers being left more than £10,000 a year worse off. How does capitalism serve the interests of these people?

Even more serious and disturbing is that more than 30,000 children have died over the past 24 hours because of preventable diseases. Another 30,000 died yesterday, and the day before that. They died because the capitalist market could not provide for even their most basic needs. Is dying from starvation or preventable disease in childhood just part of “human nature”?

Contrary to what is popularly believed, most people have a lot to gain from the replacement of capitalism with an economy based on common ownership. They will not have to labour half of their working lives to bankroll a class of idle rich. They will be able to run their own workplaces according to how they see fit and they will not be threatened with the destitution of unemployment.

Socialism is not about charity. It’s about the majority of humans taking control of their own lives. It would provide a massive increase in living standards for the majority of humanity and aims to promote the more positive human traits, rather than selfishness and greed.

Certainly, it would be true to say that socialism is the political self-interest of all working people.

The news that RBS chief Steven Hester has turned down his obscene £1 million bonus has been welcomed by all shades of political opinion. “Banker bashing” has transcended the narrow boundaries of the left and is now part of mainstream discourse, with even millionaire David Cameron spouting populist rhetoric attacking certain behaviour in the City. Mr Hester, however, will have little difficulty getting by on his modest salary of £1.2 million. Perhaps this is the “restraint” that David Cameron is referring to when he harps on about “moral” capitalism.

It might well feel good to attack the activities of “reckless bankers”. However, the problems inherent in the economic system we currently live under run far deeper than that. Certainly, lending huge amounts of money to people who could never afford to pay it back and subsequently selling that debt on to other financial institutions is irresponsible, but this does not address what it is that is wrong at the very core of capitalism.

One glaring absence in most public debates about the economy is the key issue of what actually caused the current crisis. It’s almost taboo to highlight the fact that wages in general have been stagnating since 1980. With the advent of Thatcherism/Reaganism, the assault on organised labour became ever more intense. The defeat of the British miners and American air traffic controllers in the 1980s marked the beginning of the decline of the trade union movement in the two countries. This was mirrored across the world, not least here in Ireland. These anti-union assaults heralded the birth of the most modern form of capitalism; neo-liberalism.

Trade union membership in the UK peaked in 1979, with just over 12 million members. This number has fallen year on year since the beginning of Margaret Thatcher’s deliberate destruction of the British manufacturing industry. Today, just over 6 million UK workers are unionised. The picture in Ireland shows a similar trend. Irish trade union membership peaked in 1980, claiming 62% of the country’s workforce. In 2010, just before the Troika’s “bailout”, less than 25% of Irish workers were in a union. Young people, especially, are less likely to even know what a union is, let alone join one.

The effect decreasing union membership has had on society was entirely predictable; wages fell in real terms and working conditions deteriorated. Last week, a TUC report revealed a number of startling findings. The main one was this; had wages grown at the same rate that the economy was growing over the past three decades, workers in the UK would be collectively earning £60 billion more than they are earning today. The TUC’s Touchstone Blog has a very useful tool on its site called the ‘Incomes Tracker’, which all workers might want to have a look at. It helps put this great robbery into perspective. Say you are earning £21,000 per year. Had your wage risen at the same rate the economy was growing (and remember, workers create all wealth in any economy) you would be taking home a handsome annual salary of more than £32,000. Or, if you are taking home a modest wage of £14,000; you would actually be on a wage of £24,000 had your wages grown in line with the wider economy.

When the economy was growing, the rich were increasing their income accordingly. However, those who were actually working and producing things to make the economy grow received nothing extra for their labour. Despite becoming more productive, workers’ income stayed the same. In many cases, wages actually decreased in real terms. In the US, this reached extraordinary levels. Between 1979 and 2007, the richest 1% of Americans increased their income by 275%. In contrast, the bottom 20% increased their income over the same period by a mere 20%. While some union activists were preaching class war, the ruling class were busy practicing it.

And don’t think for a minute that the pain is now being shared out proportionally just because there is a recession; far from it. Last year the income of the directors of the top 100 companies in the UK increased by 43%. The thousand richest people in the UK fared even better. According to the Times Rich List the total wealth owned by this group of people has increased by 53% since 2009. They now own a combined wealth of more than £400 billion.

It’s increasingly likely that this deep inequality will lead to social catastrophe. There has been only one other period in modern history when inequality was as great as it is now; the decade immediately before the Great Depression.

The race to attack the incomes of workers highlights the sheer irrationality of capitalism. When wages are repressed, demand collapses, as the working class as a whole are unable to buy back to goods it collectively produces. This leads to millions of useful products rotting unsold in warehouses and factories. This is known as a crisis of overproduction. The solution of the capitalist class to overcome this problem is an inherently unstable one; pumping out credit. Instead of raising the income of those who create the products they want to sell, the capitalist class encourage workers to obtain credit cards and stack up mountains of personal debt. Rather than actually overcoming it, the best capitalism can offer is the postponement of a crisis. With personal, commercial and public debt all spiralling upwards over the past three decades, it was only a matter of time before this system collapsed.

However, things are likely to get worse. A lot worse. The internationally coordinated attacks on wages and working conditions, coupled with the destruction of the old social democratic welfare states, will cause consumer demand to collapse. This will lead to a vicious cycle of ever more job losses and company closures, which will collapse demand still further. Even Mervyn King, the Governor of the Bank Of England, has warned of the coming depression being worse than the 1930s. The coming years will see thousands defaulting on personal debts. House repossessions will become more common as people struggle to meet ruinous mortgage payments. The Euro is also on the verge of collapse, with some countries veering towards default. The fact is, the crisis of 2008 was merely a forerunner of a larger crisis about to come.

Tumultuous historical periods such as the current one often witness great calamity. In times like these, the stupidity of those in power should not be underestimated. Just look at the political response to the crisis. Almost all commentators are calling on governments to “get the economy growing again”, regardless of the impact perpetual growth will have on this planet’s fragile environment. We also hear politicians urging the banks to “start lending again” without questioning why we need to run an economy built upon colossal amounts of debt. And the best our geniuses in Stormont can come up with is a proposal to reduce corporation tax.

Despite the frantic efforts of the world’s leaders, no solution will be found to this crisis within the current economic structures. A radical reorganisation of society is the very least that is required to guarantee a decent standard of living for every human being on this planet. Anything less will bring us back to the conditions of the 1930s.