Monday 23 April 2018

Brendan Keenan: Eamon, look up the meaning of deja-vu then think again

Brendan Keenan

Brendan Keenan

LET'S face it, Karl Marx isn't easy. What, for instance, did he mean by his famous comment that history repeats itself; first as tragedy, second as farce? One can easily think of examples of history repeating itself -- it's the bit about tragedy and farce which puzzles. Most repetitions consist of two tragedies or two farces.

There would, I suppose, be a certain aptness if the recent history of the Irish Labour Party turns out to be one of the cases which proves the old boy right. One would have to stretch the meaning of "tragedy" and "farce" a bit -- but not that much if one is a member or supporter of the party.

Besides, we are talking politics, not war or pestilence. On that basis, Labour's performance in the 1997 election most certainly had tragic elements. The party had achieved a record share of votes and seats -- 20pc of the votes and 32 TDs. Both were halved in the 1997 poll.

The result was all the more bitter because the party was in government. Uniquely, the fall of the Fianna Fail/Labour administration led to the formation of a new coalition without a general election. The brief "Rainbow" of Fine Gael, Labour and Workers' Party had performed well.

There was certainly no Fianna Fail resurgence. Fine Gael in fact gained seven seats to 54. The big change was the Labour collapse. Now do you see where Karl Marx comes in?

If not, have a look at the opinion polls, as well as the fact that Labour did so well in the last election. The possibility for history to repeat itself is clear. It would indeed have elements of farce if it all happens again.

It is, however, far too early to say. I was once sampled in an opinion poll. The experience convinced me that, while they may be accurate enough in how the electorate as a whole would answer the questions, they are of little, if any, value in predicting in how they will vote in a distant general election.

It hardly helps that the political questions may be part of a general survey which includes things like preferences in spreadable butter.

That would always be true midway through a parliamentary term. It must be true in spades in circumstances where the traditional political landscape has been transformed and living standards have suffered the biggest wrench in at least two generations. Assuming a general election is at least two years away, most people can have no idea what they will do in the voting booth, especially when one considers what might happen in those two years.

There might, for instance, be a clear sustained recovery. The Exchequer returns for November finally began to point to the upturn indicated by employment and management surveys. Even construction is growing and the sharp turn in property asking prices -- at least in Dublin -- may stir some further activity.

A cyclical recovery is not such a surprise five years after a financial crash. It might well have taken longer, given the severity of the Irish collapse. The Swedes and Finns saw growth return three years after their banking crises -- aided, however, by favourable external conditions. We will have reason to be well satisfied should 2013 turn out to be the bottom of the trough.

It will be a matter for celebration if history repeats itself in terms of recovery. Historical experience, including that of Ireland in 1987, points to steady -- even rapid -- expansion after the turning point is reached.

At this stage, there must still be grave doubts about such a desirable outcome. As the Central Bank warned last week, both market sentiment and the new eurozone rules will severely limit the scope for government stimulus, while high levels of private debt will constrain consumption and investment.

As for history, two reasons are regularly cited for Labour's poor showing in 1997. One is Dick Spring's decision that a coalition with Fianna Fail was the only prospect of stable government, despite his effective campaign against the excesses of that party in the previous Dail. There are uncomfortable reminders of Eamon Gilmore's railing against Frankfurt's way in the election campaign, followed by another dose of hard realities.

The second reason, often cited by Labour people, is the editorial in the Irish Independent, carried, unusually, on the front page. With all due respect to the power of the press, if it did have such an effect, the editorial must have struck a chord with the voters.

Its theme was tax cuts. The tax structure in 1997 was very similar to the one we now endure, with high "marginal" rates of over 50pc on income above three-quarters of average earnings. And for very similar reasons -- that this was the preferred way of governments in the 1980s to deal with the budgetary crisis.

By 1997, there was no need for emergency levels of tax and Labour's reluctance to commit to reducing them probably did contribute to their poor showing. So it was hard not to do some Marxist analysis when Mr Gilmore specifically mentioned tax cuts as one of the first fruits of recovery.

I would not blame him if he is afraid of history repeating itself, and I would not be at all surprised if the Irish Independent and other media support him if he advocates taking that road. But I think they would be wrong this time.

We are not in the same situation in 2013. What became a world-famous Irish recovery began around 1987. The period of rapid growth christened the Celtic Tiger dates from 1993. Some even trace the bubble to 1997, although 2003 seems more plausible. On that basis, this is 1986.

I am particularly wary of the beguiling notion that tax cuts will boost domestic consumption and therefore aid recovery. The level of private debt may just see the money saved.

Even if it does not, the country's external balance is too weak for the increased imports which consumption would engender. The fiscal position, with no surplus on the basic national finances as yet, is not good enough.

Despite all the increases, tax revenues are still not enough to support the level of public spending -- a figure which Labour of all parties is unlikely to cut.

The tax system does need reform. Disgracefully, the failed old machine of the 1980s was cranked up to deal with the new crisis and we are back where we were a quarter century ago. Whether such reform could ever be popular is an open question, but it might help prevent yet another economic tragedy.

Irish Independent

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