Tuesday, 29 May 2012

Our problem is not the EU - our problem is ourselves

Colm O'Doherty: Earlier this year, in Davos, Enda Kenny spoke about moral failure and its responsibility for our economic crash. He said that easy access to credit had spawned greed to a point where it just went out of control completely and ended with a spectacular crash. There was an immediate outcry in Ireland on foot of his comments and he was accused of playing the blame game. However, with the referendum on the fiscal treaty now being debated across the country, it is timely to ask some hard questions about ourselves – can we be trusted run our own affairs in a fair, just and moral way? If we are not externally regulated, do we run the risk of handing over our country to greedy business people and greedy politicians as we have repeatedly done over the past thirty years? Greedy capitalism and the inequalities it rests on, triggered the economic crash.

As Finnish academic Antti Kauppinen points out the sub-prime loans given out in the US to poor people, who because of historical injustices were unable to access mainstream credit, triggered the world wide crash. Inequality lit the fuse which started the meltdown in the US. Inequality in Ireland has been well documented by Combat Poverty, the Irish Anti-Poverty Network and the OECD. Our fiscal policies are the core problem here. The policies which spawned our economic crisis have their origins in Leinster House rather than Brussels. Regressive taxation policies which re-distributed income from the least well off to the middle and upper classes through tax breaks encouraged reckless property speculation. These policies have been repeatedly endorsed by the electorate over the past twenty years. The tax base has been narrowed to a point where we have an extremely low tax-to-GDP ratio. At 28.2% in 2009, the total tax-to-GDP ratio here was the third lowest in the EU and the second lowest in the euro area. The ratio in Denmark for the same period stood at 48.1%. It is no wonder that we are reliant on bail-outs from the EU to fund public services. Clearly the State cannot fund essential education, social protection, activation and health services on an income which is lower than that achieved in Slovakia and Bulgaria. While this ratio was on an upward trend between 2002 and 2006, it has decreased by four percentage points from 2006 to 2009.

As Antti Kauppinen, commenting on the layers of greed capitalism which were enshrined in our tax system, said in a recent address to the Policy Unit in TCD:

In Ireland, we know the ethos of greed reached the highest offices in the land . From an outsider’s perspective, the number of former Taoisceachs and ministers hauled in front of tribunals is comical. If the elected representatives of people use their position for personal enrichment at the expense of ordinary people, why would businessmen hold themselves to higher standards? As if personal example wasn’t enough, Ireland as a country has pursued its self-interest at the expense of others with its now sacrosanct low corporate tax rate.

So rather than scapegoating the EU for the inequalities which have been key to the inflation of our home-grown economic bubble, we now need their assistance in protecting us from ourselves. We need to raise our corporation tax to pay for our public services. We need to widen our tax base so that the high earners and wealthy members of Irish society pay their fair share. The path to follow is greater austerity for the rich. At present a person earning over 32,800 Euro enters the 41% top tax rate and is paying the same rate of tax as an individual earning multiples of their income. Structural inequalities in Irish society are patterned by the differential opportunities available to individuals to gain economic, social and cultural capital. In simple terms, the dice are loaded in favour of the well- off promoting their class interests through a tax system which takes no account of their favoured position in an unequal society. Their social contract is more important and is afforded a superior status - they cannot be required to shoulder a greater share of the financial burden resulting from our economic crash because this would cause them to flee abroad.

By increasing the tax revenues available to the State we can reduce our level of borrowing from the EU and the IMF. At the very least, if taxing the rich is not an option, then they should have to pay more for services and receive less in state support so that funds can be directed at the most vulnerable and disadvantaged in society. These are direct actions which can be taken here and now by Irish citizens. It should be obvious to everybody that a myth that was used as a fig leaf for our Irish model of greedy capitalism - that American levels of tax (low) can produce Scandinavian levels of public services (high quality and expensive) - was just a myth. What is hard to understand is why anti-treaty voices on the left have decided that the enemy is the EU, when it is clearly our own brand of greedy capitalism which has forced austerity on the less well-off citizens of our state. It is not hard to understand why the 'no' campaigners on the right want to blame the EU and cut us loose from fiscal regulation. Libertas and other neo-liberal voices supporting unfettered and de regulated capitalism are opposed to the managed capitalism promoted by the EU. Sinn Fein’s implicit view that everything native is good and that everything foreign is bad is consistent but doesn’t square with the facts.

Citizens voting on the treaty need to seriously think about the damage caused to our society by home-grown taxation policies which have clearly favoured the well-off and re-distributed funding from public services to speculators. They need then to make links between our fiscal insolvency, the ongoing need for financial support from the EU and these inequitable and unsustainable taxation policies.


Paul Hunt said...

"Citizens voting on the treaty.... need ... to make links between our fiscal insolvency, the ongoing need for financial support from the EU and these inequitable and unsustainable taxation policies."

So, assuming they have reflected and made these links (without, of course, taking any account of the serious structural and political dysfunction that contributed to this mess and retards recovery), how should they vote? Yes or No?

Anonymous said...

"Sinn Fein’s implicit view that everything native is good and that everything foreign is bad is consistent but doesn’t square with the facts."

As a Sinn Fein voter I dont recognise that at all. Sinn Fein gets a lot of stick for its internationalist positions but you see the flip side.

Think you've left personal politics infect the article