Friday 28 October 2016

Obama sees not Ireland's loss but America's gain

Published 21/10/2012 | 05:00

The facile caricature of Obama as hero and Romney as demon is beyond childish, writes Marc Coleman

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'What are little girls made of? Sugar and spice and all things nice. What are little boys made of? Slugs and snails and puppy dogs' tails." Hands up if you remember this old nursery rhyme. Like all childish simplicities, it had its place in our childhood. But some people never grow up.

Some weeks ago Noel Whelan correctly and bravely identified the slant in the Irish media towards Obama and the Democrats in coverage of the US election. And towards their main economist cheerleader Paul Krugman.

In fact, just substitute the word "Democrats" for "girls" and "Republicans" for "boys" in the rhyme and you have neatly summed up how one of the most important and complex elections in this crisis is being distorted by a warped mentality towards American politics in Ireland that borders on neurotic.

The Democrats -- who gave America segregation, corrupt Tammany Hall politics and the Vietnam War -- are, according to this narrative, nice, enlightened and competent. The Republicans -- who created jobs for our emigrants in the Eighties, facilitated foreign investment in Ireland and freed the world from totalitarian rule -- are greedy, backward and stupid.

Seeking an exit from the discredited creed of Montrose Marxism, it seems that RTE has decided to be pro-American, but only pro the half of America that is Democrat. This is dangerous and damaging to our economy and future. To see why, we must look east.

Last week I was in Latvia, a country that has proven Krugman spectacularly wrong. Our Eastern twin, Latvia in the last century suffered a similar loss of population and language -- due to Marxist and Nazi genocide -- that we did a century before. It gained its independence at about the same time and, like Ireland, suffered isolation after the Second World War. But, under an Irish presidency of the EU, it came into the light of EU membership.

Like Ireland, it allowed credit growth to skyrocket and was hit by a severe banking crisis in 2008. One of its banks, Parex -- very like Anglo Irish Bank -- was taken into state control and wound up. But unlike Ireland, taxpayers were not forced to bear bondholder losses, even though the country is pegged to the euro although not formally a member of the currency.

It also avoided two other big Irish mistakes: our agonised drawn-out austerity -- Latvia did everything in one fell swoop -- and our Croke Park deal. In fact, in Latvia public pay cuts -- of 30 per cent -- arguably went too far.

The results? Latvia grew by 5.5 per cent last year and, from a peak of 20 per cent, unemployment has fallen rapidly to 11 per cent and is still going down. Where Ireland dragged austerity out over an agonised period, Latvia practised the growthsterity of the MacSharry era: a sweeping decisive cut of 10 per cent of GDP implemented in under two years.

In December 2008, Krugman wrote that "Latvia is the new Argentina" and urged the country to devalue its currency. A brilliant trade economist, Krugman shows how dangerous it can be when economists use their status to comment on things they don't understand. With balanced budgets, very low deficit, flexible labour markets, an open economy and a credible history of pegging to the euro, the Latvian economy could not be more different from Argentina's. Its political system, with responsible voters (not populist Peronists), a transparent democracy and a unitary government (unlike Argentina's dysfunctional federalism), makes Latvia also politically the opposite of Argentina. Much more like Ireland, but without our success in FDI or exports (although with more decisive governments and flexible markets than us).

That any economist can get away describing either Ireland or Latvia as being like Argentina and be taken seriously is an indictment of just how shallow and herd-driven our commentariat is.

I am reliably informed that Paul Krugman requested a €120,000 fee for giving advice to an Irish company recently (no wonder he doesn't believe in austerity!). But had Latvia taken his advice, the cost of doing so would have added several zeros to that figure: Latvia's banking crisis would have been far worse, with pensions, savings and confidence in its economy wiped out, and a new wave of defaults would have dragged down the entire Baltic region.

Luckily, having seen off the Soviets, the Latvians were tough enough to see off quack advice. Last week I was helping them to emulate our success in generating FDI, growing exports and developing their diaspora, and in tackling problems of rural isolation and poverty.

But back to Obama. Like the Krugman groupies in the media, the groupies of Obama groupthink ignore how Democrats used their control of the Senate since 2006 to double US debt (resulting in a derisory growth spurt). The nightmare of sub-prime mortgages is also a creation of the Democrats.

The Republicans aren't blameless either.

But the facile caricature by our media of Obama as the hero and Romney as the demon is beyond childish. Obama's shallowness toward us -- he only came here for votes -- was shown by his Haughey-like ambiguity over his origins: in Ireland, he had his Moneygall ancestor. But when he spoke to the Westminster parliament, that ancestor became English.

But the really serious point is this: Ireland supports 70,000 jobs in the US. But Obama sees only the 135,000 jobs created by American companies here. And he wants to bring them back to the US. But for an economy of just 4.6 million people, we create far more jobs per capita in the US than vice versa.

Obama and his cheerleaders live in an economically illiterate world where Ireland's loss is America's gain. This idiocy plunged Europe into darkness in the Thirties. Because they suffered so much from that darkness, Latvians are rightly sceptical of siren voices and simplistic nonsense. We should be too.

'Coleman at Large' is aired each Tuesday and Wednesday from 10pm on Newstalk 106-108fm; @marcpcoleman

Sunday Independent

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