Those in charge have not learned from their mistakes
The Government is allowing the rich to unload their debt upon the poor, says James Fitzsimons
We cannot get out of the financial crisis until we start using methods that are tailored to our specific need. Bankruptcy laws that are intended to cope with a very small number of financial failures are inappropriate for what we are dealing with. The growing financial burden being placed on the most vulnerable and its failure to restore consumer confidence is testament to this. The rich can unload their debts on to the poor and the Government facilitates it. We are led to believe that those who were in charge when everything fell apart are our best hope of success. Another view is that they blew it, so give someone else a chance. Bailing them out at any cost is not the solution.
Government interference might have stabilised the banks. But they remain ineffective. The Croke Park Agreement may have prevented unrest in the public sector. But who has gained most from this, and at what price? The EU may even claim it has bailed us out. As the EU had the most to lose, what choice did it have? We would always stay loyal, but the price we are paying is too high. If the European banking model provided the best solution, then our sacrifices might be worthwhile. But it's not, and we will pay the price for a long time.
The bankers and developers were let off the hook out of ignorance, and those in charge have learned nothing from their mistakes. Austerity measures are forcing default in our credit unions. The Government may assure depositors their money is safe, but only because the taxpayer will be forced to foot the bill. Developers who amassed massive personal wealth are allowed keep it, while those who got nothing from the Celtic Tiger pay for the mistakes of those we are expected to save.
Sean FitzPatrick and David Drumm of Anglo Irish Bank are still at large, and for over three years we have watched them run rings around the authorities. At least FitzPatrick stayed to face the music. He probably knows the outcome. He may be untouchable. Drumm jumped ship. His life's work isn't finished. Someone else can pay for his mistakes. It's not his problem anymore.
Sean Quinn, having failed to secure bankruptcy protection up North, claims that Anglo is only pursuing him out of vindictiveness. And he is probably right if his assets cannot be touched. It is hard to justify that so many should lose all they have so that one family can retain so much wealth.
The experts say we need Sean Quinn and his like to
create jobs. It is pitiful to think that there might only be a handful of people in the country who can achieve this. Must the rest give up everything so that the elite few can be given another chance?
Quinn's won't be the first great empire to end in ruins, nor will it be the last. Let the winds of change sweep it aside. It will create opportunities for others. We might lose one or two billionaires, but we could gain many more millionaires whose combined efforts would improve things. The system would be more stable and much more productive. There is no shortage of talent, but the system favours the few and it holds back the rest. The system needs to change. While a few can control and manipulate it, everyone else loses out.
David Cameron is credited with finding a better system for bankruptcy resolution in California. But it's too short- sighted. It may allow those who made mistakes off the hook quicker, but is it the best result for society as a whole? If you can be thrown in jail for falling on hard times and you cannot pay a TV licence, those who ruined a nation should pay more -- especially if they can afford to. Their replacements are snapping at their heels and they should be given a chance now.
General bankruptcy rules may provide solutions when only a few need saving. Too many will suffer if we cannot find more equitable solutions. There is no reason why Sean Quinn should not be part of the solution, but he might have to pay a higher price.
The same goes for the millionaire property developers who openly dumped their problems on society while they put their wealth beyond reach. Frank Daly's role at Nama may be more obvious now that developers are asked to produce tax returns to establish their financial position. But it won't be that easy to uncover what they have and what they could pay. And not everyone will co-operate.
The legal system and professional advisers can milk the system too when they protect those who caused the devastation. If their reward was contingent on the success of their clients' cases, they might think twice before offering loopholes that avoid liability. While the Government lacks the training and expertise to cope with this global economic crisis, we appear to be dependent on our EU paymasters.
Reward achievement, but must we venerate it too? Cloud computing is based on sharing resources to increase power. The same principles can apply in business and society in general. The key to resolving our economic problems needs us to rely on more than the few who are now in control. This needs support rather than mere incentives. It's like politics. It's easy to get there, but only then does the real work begin and that is where we are lacking.
Businesses that are encouraged by grants might be good at securing funds but fail at implementation. The few that succeed carry the rest. If they still want to pump funds into development, so be it. But the Irish taxpayer shouldn't foot the bill. We need to be more discerning. Whether in public services or the private sector, we need to get more for our hard-earned money.
The Croke Park Agreement has provided stability. But the price is too high. It protects public servants. The system is overstaffed and over-resourced. Unions ensure that it remains inefficient by controlling productivity. Public service contracts that provide a job for life suppress initiative and fuel inefficiency. Those in charge create unnecessary tiers of management, supervisors and classes in the hope that it might give something to be measured by. And if that doesn't work they are paid increments to avoid the reality of stagnation.
It not only provides job security, but sustains that lifestyle long after work has ended. There was a time when a job in the public sector was no more than secured poverty for those in the lower ranks. At least they benefited from the Celtic Tiger when pay soared. Even so, the average weekly pay in the public service is €906.81, while it is only €617.45 in the private sector. This doesn't take account of the cost of public service pensions.
The Croke Park Agreement may have quelled public sector unrest, but it hasn't tackled the problem of what it is costing. We cannot afford our public services, and they need to be brought in line with the rest of the economy. To sustain what we have will require higher taxes. That only makes sense if they can be justified and rationalised and the only ones left to pay are in the elite one per cent who alone have the resources to pay.
While the average public servant can look forward to valuable pension rights in retirement, paid for by the private sector, the latter might be dependants of the State out of necessity. That is the legacy the last government left us. And the current one makes sure it will continue.
James Fitzsimons is an independent financial adviser specialising in tax and financial planning