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From: Irish Political Review: Editorials
Date: July, 2010
By: Editorial

Coping With The Future We Failed To Prevent

Progressive Governments must not be inward looking.  The principle of Sinn Fein, if it was ever progressive, has long been reactionary and stultifying, and the inaccurate translation of it as "Ourselves Alone" expresses the essential truth about it.  Ireland, in order to be modern, must be open to the world so that the world might be open to it.  Its dynamic must be an integral part of the dynamic of the world market.  

And yet, when the world market goes awry with drastic consequences for Ireland, the Government—which did what was required of it by the progressive forces—is to be held responsible because it did what was required of it.

The Government must do what the people wants.  That's democracy.  But, when what the people wanted leads to disaster, it is the Government that is to blame.  And that's democracy too.

Modern democracy is in large part the land of make-believe—or, in the words of an Ivor Novello song around the time of Britain's Great War, the "land-of-Might-Have-Been".  It might have been that the Government could have let the market rip, as it did, and still have remained in command of the economy.  We cannot see how that could have been.  But the possibility of doing what critics on all sides say should have been done is beside the point.  The belief—or the pretended belief—that the Government could have remained in control of the economy while setting it free in the rapidly globalising world market seems to be an ideological necessity of the democratic process.

There are democratically necessary beliefs, and there are awkward facts, and the Irish Times has long since placed belief above fact in the order of truth.  It has even said so, and therefore it cannot be faulted within its own terms for its mode of reporting the Honohan and Regling/Watson Reports on the crisis.

Its report of June 10th was headlined Home-made Factors To Blame For Financial Crisis, Reports Claim,.  It told its readers that the two reports commissioned by the Government—that of the new Governor of the Central Bank, Patrick Honohan;  and another by two former International Monetary Fund officials, "banking experts Klaus Regling and Max Watson":

"heavily criticised misguided Government economic policies, a weak system of financial regulation and poor bank lending".

It gives the subliminal impression that the two Reports attributed primary responsibility for the economic crisis to the Government.  And the subliminal mode, which conveys meaning by style and headlines rather than by the old fashioned, now virtually obsolete, art of accurate reporting, has been the Irish Times way for a very long time.  It is what the secret society that controls the paper thinks the middle class needs, and the middle-class seems happy to take it.  About a century ago James Connolly described this kind of reporting in a criticism of the Belfast Irish News called Press Poisoners In Ireland.  Today it applies to the Irish Times more than to the Irish News.

On June 10th there were three articles on the subject on a page devoted to the Banking Reports.  The headline on the main article was:  Honohan Blames Government Policy, Banks And Regulation.  The headlines on the other two articles were:  Regulators Showed 'unduly deferential' Approach To Banks, and Senior Management To Blame For Crisis, Says Honohan.  All three were written by the same reporter, Simon Carswell, Finance Correspondent.
The first sentences of the latter two articles were:  

"Neither the Central Bank nor the financial Regulator believed that any institution faced serious difficulties, let alone potential insolvency, in the run-up to the financial insolvency… Patrick Honohan has concluded",


"The major responsibility for the banking crisis lies with the directors and senior management of the financial institutions, the report of… Patrick Honohan concludes".

In the main article, headlined Honohan Blames Government Policy etc., the opening sentence contradicts the order of responsibility suggested by the headline:

"…Dr. Patrick Honohan has sharply criticised the Financial Regulator, the Central Bank, the senior management of the banks and Government budgetary fiscal policy for causing the banking crisis…"

Three articles by the same reporter on the same subject on the same page must be a record.  It suggests that the reporter wrote a pretty accurate report and the Editor had to do some funny business with it in order to get a headline blaming the Government, which was not immediately contradicted by the opening sentence.

Honohan holds the banks and Financial Regulator responsible for the way things went, and throws in a comment that the Government should have controlled them.  That is only the proper thing to do in a democracy in which the people must be presumed to be the masters of their fate, using the Government as their agent.  It is the proper thing to do, even though it is well known that the thing was beyond the control of the Government, once globalist development by use of the trickiest devices of finance capitalism was embarked on under Haughey's leadership twenty years ago.

If capitalist prosperity was what was wanted—and we know of no evidence that it was not what was wanted—then Haughey's new departure was extraordinarily successful.  And everybody with any sense was aware that the high rates of economic expansion could not last indefinitely.  But nobody knew even roughly when it would end.  There was no way of knowing.  And, if the Government somehow had known, it is hard to see what it could have done.

The only thing to do was to wait for it to happen and then take emergency measures.  Any serious attempt to anticipate the collapse and take action against it before the event, would only have accelerated its advent—and would have flown in the face of public opinion, which was wanting more of the same.  Within the system of representative politics, only Joe Higgins's Socialist Party demanded something else.

The country was flooded with cheap money.  The setting up of the Euro made the accessing of cheap mortgages and loans on money borrowed by the institutions from Germany easy.  And two British banks that became very active in Ireland (the Royal Bank of Scotland that was, and the Ulster Bank-First Active) began the mayhem by driving the price of money down.

Then there were the new creative financial instruments, of which the CFD has perhaps been the most insidious.  A 1% tax on the purchase of shares, possibly intended to discourage gambling, spawned 'Contracts for Difference'.  A Government Briefing Note on these describes them as follows:

"A contract for difference (CFD) is a form of derivative instrument that enables an investor to take a position on stock and its likely performance, without owning the shares.  Because they don't own the shares they pay no stamp duty.

"The seller of the CFD then is exposed to a risk that the price for the share concerned will move.  To cover this risk, he purchases the share itself.  Institutions relied on the application of either market maker or broker/dealer relief to avoid a stamp duty charge"  (see Dept. of Taoiseach site, 18.2.09).

The CFD was a way of avoiding the 1% tax.  But it  took off in a huge way, bizarrely coming to form about one-third of transactions by value on the small Irish Stock Market.  So much so, that traditional investment in companies via buying shares in them suffered.  It was more profitable to gamble on share-prices rising or falling.  British hedge funds, along with other Irish and international investors, joined in this game.  Tens of billions were gambled on a handful of Irish-listed shares.

When Brian Cowen, as Minister for Finance, made a tentative move in 2006 to treat the CFDs in the same way as shares, the authorities were pulled up sharply.  The London Investment Banking Association, representing over 50 of the top London finance houses—including Cantor Fitzgerald, one of the main CFD players in Ireland—wrote to the Irish tax authorities:

"We are concerned that the authorities may not have fully evaluated the consequences of the announced changes… [which] have the potential to cause serious damage to the reputation of Ireland as providing a stable and well-ordered operational framework for the financial sector" (from a document obtained by the Sunday Business Post, under Freedom of Information provisions, 21.5.2006).

Leaving aside the diplomatic language, the London institutions threatened to boycott Ireland as a financial centre, with catastrophic consequences for the burgeoning Irish financial services sector.  They were not going to tolerate new restriction or curbs on their profit-making operations.  Minister for Finance Cowen had to climb down.  The tax was dropped.

Being wise after the event, the Sunday Tribune remarked three years later, on 1st February 2009:  "Arguably, if the revenue had got its way and imposed the 1% tax on CFDs from St. Patrick's Day in 2006, the worst of the Anglo crisis may not have happened…".   The threatened boycott of Irish financial markets by the City of London is not mentioned. 

Eamon Gilmore raised that climbdown over the CFDs that February 2009:  rather despicably, he implied that Cowen was bowing to Fianna Fail's financial friends.

Finance Minister Charlie McCreevy initiated the "procyclical fiscal policy", mentioned by Patrick Honohan as promoting too expansionist an environment.  McCreevy's philosophy was that 'if you have it, spend it;  if you don't have it, don't spend it'.  (This is the exact opposite of Keynesian wisdom.)  However, McCreevy is on the globalist wing of Fianna Fail, and is not mentioned when blame for the crisis is being thrown around.  On the other hand, Brian Cowen—who attempted to curb the speculators and kept Stamp Duty on property transactions  despite populist pressure from the media and Opposition Parties during the last election campaign—has been made a whipping boy for the financial crisis.  

There has been debate as to whether the crisis is 'home-grown' or imported.  There is no doubt that there was a property building-induced boom, even frenzy.  But property prices were already beginning to come down gradually, 18 months before the collapse of Lehman Brothers signalled the advent of the Western economic crisis.  But for that world financial crunch, it is quite likely that property prices would have continued to come down and Irish markets would then have stabilised at a lower, more realistic, level:  a 'soft landing'.  Instead, world investor confidence has been so shaken that there has been a precipitous drop.  That is not something for which the Irish state can be blamed.  

Professor Garvin published his popular Preventing The Future not long before that 'prevented future' (which arrived about twenty years ago) collapsed.  The implication of the kind of criticism of the Government there has been since the collapse is that it should have carried on preventing that future under the aegis of De Valera's ideal for Ireland.  But this must remain a mere implication. It dare not be made explicit.  That is why there must be Utopian belief that all the wild, economically fundamentalist, consumer prosperity of the past 20 years, that was achieved by surfing the waves of globalism, could have been achieved while securing the national economy against the globalist dynamic.

Fianna Fail launched the Irish economy on this development  twenty years ago, and it was fortunate that it was in Government again when things began to fall apart.  So thought the Irish Times, whose mission in life for a generation has been to subvert Fianna Fail.  When the crisis struck, it advised the Opposition that Fianna Fail's difficulty was not really its opportunity, because it would not be adequate to the crisis.  Fianna Fail had to be allowed to cope with the emergency so that a situation might be restored in which an inadequate Opposition might pass muster as a Government.

Labour was particularly disabled for profiting from the crisis as it was in the course of modernising itself into a globalist business party, under Stickie leadership, when the crisis struck.  As we write it is topping the Opinion Polls for the first time ever, but that is only because Fianna Fail is handling the emergency well, and the democracy is not pleased with the medicine it has to swallow as a cure for the situation it brought about through its eagerness for globalist prosperity.

We recall when Desmond Greaves, originator of the Stickies, used to say that Ireland was the most socialist country in Western Europe, because it had the highest rate of state participation in the economy.  Well, if it was socialist then, it must be Communist now!  What Fianna Fail has set up in order to ward off catastrophe is what used to be called 'state capitalism'—a form of capitalism dependent for its continuation on a framework set for it by the state.  It is the kind of thing that Lenin introduced as an emergency in Soviet Russia in 1921, and that Bukharin wanted for a permanent system.

If Fianna Fail had been on one of its periods of recuperation when the crisis struck, we doubt that Labour would have had either the daring or the ability to do such a thing.

Fianna Fail has the market on life-support in the Emergency Ward.  If we could see any significant political or economic force that was seriously intent on availing of the crisis to abolish the market, we would condemn Fianna Fail for that.


Coping With The Future We Failed To Prevent.  Editorial
The gEUru Returns.  Jack Lane
Turmoil In The Opposition, Mayo And Galway.  Editorial
Readers' Letters:  Cork's Sacrifice - Loretta Lane-Maloney; Rebel Cork And Democratic Mandates - Manus O'Riordan.  A 'Timorous Beastie'! - Stephen Richards
Bloody Sunday:  Saville's Unasked Questions.  Conor Lynch
Staring Debt In The Face.  Tim O'Sullivan
Lord Trimble Will Investigate:  "Netanyahu Says Inquiry Will Vindicate Israel".  Editorial
Biteback:  Israel's 'Botchers'?  Eamon Dyas;   
Israel:  An Unpublished Correction.  Philip O'Connor (Sadaka)
Dr. Mansergh And The Irish Times.    Manus O'Riordan
Editorial Digest.  (Israel & Lord Trimble;  Dawn Purvis;  Ballymurphy Massacre; Minimum Wage;  Housing;  A Phantom Authority;  Harassment;  Water Charges;  Tom Clarke)
Poems:  How A Girl Became A Ship.  Better Gardening, Or Else  
Wilson John Haire
Barking Up the Wrong Tree.  Jack Lane replies to Desmond Fennell
Nuclear Iran:  where's the evidence of threat?  David Morrison (report)
Shorts from the Long Fellow (Fintan, Street Radical;  Jack O'Connor;  More Song And Dance;  Rwanda's Genocide;  Central Bank Report;  Irish Times Poll; Sea Change In Irish Politics?)
DIB Blues.  Sean Moylan.  Jack Lane  (Dictionary Of Irish Biography series)
The 1974 Bombings Of Dublin And Monaghan.  John Martin  (review)
Es Ahora.  Julianne Herlihy (BPplc & Politicians;  Hitchens;  Lost Booker;  Military Matters In Ireland;  Military Memorials In UK)
Dunkirk And 'The Huns Of 1940'.  Pat Walsh
Perversion Of Archbishop Of Canterbury's Son.  Manus O'Riordan
Jack Jones Vindicated.  Manus O'Riordan  (Part One)
Political Historians Of Ancient Ireland.  Pat Muldowney (review)
Does It Stack Up?  Michael Stack (Greenpeace;  BPplc;  Palestine & Gaza;  Maths Teaching)
Labour Comment, edited by Pat Maloney:  Private Vultures Eye E.S.B.    (back page)