Saturday 14 December 2019

Gene Kerrigan: Don't mind me, I've got a moustache

Even those of us who know nothing about economics realise this Government is barmy, writes Gene Kerrigan

IN these perilous times, it's always good when an economics professor comes on the radio. Professors know things. They spend years studying to be a professor.

After that, they keep studying, so there's nothing they don't know about their subject. It's a serious business, the oul' professoring.

This column has never hidden its deep ignorance of economics -- an ignorance shared with probably 95 per cent of the citizenry.

But, these days, politics is buried under the debris of the economic collapse. If we give a damn about where this country is going, then we need to struggle to understand what's happening to the economy -- even if that means reading endless screeds of impenetrable jargon.

Otherwise, politics is meaningless and democracy is redundant.

We citizens depend on independent experts to at least map out the economic terrain, so we can make informed political judgements.

So you can imagine my relief when Professor Alan Barrett turned up on Morning Ireland on Thursday. The good professor and his mates at the Economic and Social Research Institute have done a bit of extra-deep studying on the economy and the figures are startling.

I moved closer to the radio, ears pricked. I got out my pen and jotter, eager to learn. And if his figures were startling, the professor's next comments were astonishing.

The professor and his ESRI mates considered the impact of the Cowen Government's austerity policies.

Austerity is the second of the Government's twin-track strategy. The first track involves pouring billions into the banks. (That's the entirety of the policy. Just keep pouring until the banks say "when".)

There are reasons for this. It will "get credit moving", apparently -- except it didn't and it won't. Not to worry. Mr Lenihan's a nice guy, right?

The second track is to impose austerity policies on the citizens, which will cut everyone's standard of living. It will also destroy the quality of life for many of the old, the sick, the handicapped and the dying.

It will ruin the life chances of bright, determined young people who depend on state supports to climb out of a hole. It will damage the health of many and prematurely kill some -- precisely as austerity policies did in the 1980s.

These are what Mr Cowen calls "tough decisions".

Why do this?

Well, because Mr Lenihan has to "convince the markets" that he's in control of the budget deficit. And because the EU Commission has something called a 'Growth and Stability Pact'. This pact says the budget deficit must be down to 3 per cent by 2014. The 3 per cent and the date are arbitrary.

Germany and France broke the pact when it suited them, but we're not allowed do so.

Professor Barrett and his mates have studied the figures and they concluded that if Mr Lenihan does what the EU wants, it will mean €15bn in cuts over the next four years, not €7bn.

They're worried about the "potential negative impact on the economy of this scale of adjustment over this period of time".

To translate -- cutting billions of euro out of the economy in such a short time will lead to disaster. Mass unemployment and further harsh budgets will persist for maybe 10 years -- or, as some of us fear, indefinitely.

The ESRI people apparently even murmured about driving the economy past the "tipping point", then backpedalled.

Now, there's absolutely nothing new in this. The leftwing website Progressive Economy, for instance, has been saying this for ages. But it's easy to dismiss lefties. After all, what do they know about economics?

Trade union leaders issued similar warnings, but some of them wear beards -- and for rightwingers, this is conclusive proof that they lack intelligence.

Even this economically ignorant column twigged from early on that if you deflate the economy in a recession, you risk sending it into a downward spiral. But the serious people said nothing mattered more than giving billions to the banks and cutting the deficit -- and let the economy look after itself.

So, following the cuts that pushed up unemployment and failed to control the deficit, we're to get even worse cuts. And the ESRI is finally worried about government policy.

And you can't just dismiss the ESRI -- these are all impeccably learned types who share the ideological assumptions of the politicians. (Besides, Professor Barrett is clean shaven.)

He says the ESRI fears that government policy will "damage the potential of the economy to grow its way out of recession". (Translation -- this will screw us for a generation.)

And no one has challenged his figures. It seems we're all agreed that what the Government is about to do risks seriously damaging the economy for at least a decade -- but they're going to do it anyway.

Why? To preserve their alleged "credibility" with the financial markets and the EU.

And here's where it gets truly astonishing.

Having alerted Morning Ireland listeners to the folly of what the Government is doing, the professor hastened to add a few words.

"Let me hasten to add," he hastened to add, "that we've been wrong, our economic forecasts have been wrong on occasions."

Admirable modesty. But this is the first time I've heard such a learned man so quickly undermine his own work. Professor Barrett told Morning Ireland of his "hunch or sense" that government policy will lead to "a prolonged period of subdued growth".

I think "subdued growth" means "10 or 20 years of mass unemployment, forced emigration, widespread poverty and persistent social unrest".

I was completely taken aback at the notion that a professor would reach conclusions based on a "hunch". In fact, we know the professor is a very learned man who reached his conclusions on hard figures and facts. And these figures are unchallenged.

Why the modesty? Some context is needed. The ESRI has been rightly criticised for not warning long before the collapse that the Celtic credit bubble was dangerous. And now, the figures show that government policy is about to make things massively worse -- and the ESRI could not ignore that.

They had to put their concern on the record.

"Yes, we've expressed concern," said Professor Barrett, adding: "I think it's important that we did that".

And, having expressed this concern, the professor hastened to add that we should feel free to downplay his work. Ah, don't mind a word the ESRI says, Taoiseach, sure aren't we always getting things wrong, so we are. Or words to that effect.

The ESRI know the facts and figures, but they're realists. They wrote into their report their belief that "the 2014 deadline is unlikely to be changed".

The professor's backpedalling was a simple acknowledgement of the fact that it doesn't matter what anyone says, it doesn't matter what the facts are, the Government will not be diverted from its lunatic course.

The opposition can hardly point to the ESRI figures and demand changed policies -- because they've on board with the government targets. Likewise the media and the commentariat.

For these elements, the scale of the radical response needed is -- literally -- unthinkable. This foolish policy is apparently as unstoppable as the foolish policies that caused the crash.

The consensus among these people seems to be that we'll cut the guts out of the economy -- depressing demand even further. And by some magical process show that Mr Lenihan is on top of the problem.

Then, when the markets and the EU have patted him on the back, he'll ask if he could maybe stretch the target date out to 2016, please sir, if you could see your way . . .

Seems to me to be the politics of Toytown and the economics of Daftville. But, of course, I hasten to add, I could be wrong.

Sunday Independent

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