Tuesday, November 2, 2010

Countries with Death Wishes. David McWilliams questions austerity machismo

David McWilliams wrote a very good piece which effectively demonstrates why the neo-liberal reaganite model is such a failure. Such a model assumes that the interests of business and state are always aligned and the state benefits incidentally as long as business is booming. The more business booms the more the state will boom. Unfortunately it does not work like that does it. The interests of the state (and more accurately the nation) are frequently similar to those of business but most definitely superior to them. Thats where Linehan and company have gotten so lost. They still think that as long as you are slavishly acting in the interests of businesses, property holders or debt holders then somehow that raises the state's boat as well (with a few bob won on the horses as well of course) . Naive men and women blinded by ideology (and personal greed) who are incapable of performing the jobs they hold and as a result need men like Suds and Seanie to tell them how to proceed.
David McWilliams:
I am writing this article from a ''ghost hotel'' in Leinster. Rumour has it that the business was recently sold for €1, but the hotel itself is probably in Nama.

It will never be worth what it was built for. Today, as well as owning a small part of this hotel, I am the only guest in it. The reason I know this is that, when I asked about the lack of hot water, the very charming hotel manager said that I'd have to run the water for a bit as there was no other hot water being used in the whole hotel.

There were no other guests. The hotel has more than 90 rooms. This is reality in Ireland, and this reality needs to be defined and accepted. The reality is that bank lending is falling, prices in most sectors are falling, lending to residential housing is falling and the economy is in the grips of a credit crunch. People have too much debt and don't want to borrow, and the banks have too much bad debt and don't want to lend.

Against this background, the people who run the country make announcements about ''front loading'' budget cuts as if budget cuts are some sort of clean arithmetic, which has no impact on the economics. This is not arithmetic, it is economics and, in economics, everything is related.

On paper, arithmetic can look clean and incisive, but in reality it affects jobs and people's decisions to spend. It means nights in a ghost hotel and wages for hotel managers, it means Christmas parties and Christmas presents, it means investments in machinery and the difference between some hope and no hope.

Those who best understand the difference between simple arithmetic and complex economics are the financial markets.

Investors want to invest in an economy which has the prospect of growth. If they see that a country is being turned into a large debt-servicing machine, they will pass. If they see that the people who run the state on behalf of the citizens are little more than despised debt collectors for owners of capital, the financial markets will take flight.
Read the full article: Death Wish Economics

No comments:

Post a Comment