Tuesday, 10 May 2011

Default Now And Throw Off Our Chains

The recent Morgan Kelly article in the Irish Times, “Ireland's future depends on breaking free from bailout[1]  has caused much debate in the Irish media.  In the article, UCD economist Kelly suggests that Ireland should walk away from the EU/IMF deal. In this regard Kelly is totally right, however the solution to the crisis that he proposes is wide of the mark.  More austerity is not the answer.  It is only through the promotion of economic growth through public investment and job creation, progressive taxation and nationalisation of our resources that Ireland will 'start' to emerge from the crisis.
The fact that Ireland now has the debts of the banks on its books means that our national debt will rise to over 250 billion by 2015.  This figure reveals the dream world that establishment politicians in Ireland and Europe are living in when they suggest that a recovery is possible.  To illustrate how deluded these people are, by 2014 Ireland will be paying approximately 10 billion per year in interest payments alone on our borrowings.  This is more than the current total yearly spend on education in this country[2]   According to current figures[3], Ireland is taking in approximately 31 billion per year in taxes.  The fact that by 2014 we will have to pay 10 billion in interest payments on our loans, before we even try to reduce the actual debt, reveals the deluded nature of those who want to ‘ bury their heads in the sand,  keep their fingers crossed’ and hope for an economic recovery. 
By taking on the debts of the banks, the last Irish government has committed economic treason. They have tied a noose around the necks of a generation of young Irish men, women and children.  The only solution is to separate our national sovereign debt from the back debt that was taken on after the bank guarantee in 2008[4].  After this, we must default on the bank debt, because it is not our debt.  The only reason that the Irish working class is being made to pay for the gambling debts of bankers and speculators both here and in Europe is that we have a spineless political class who are afraid to stand up to their European puppet-masters. A quick read of John Bruton’s response to Morgan Kelly’s article reveals this[5].  So what would this all mean for Ireland?
By separating our national sovereign debt from the bank’s debt, we would be removing a huge anchor from our prospects of moving forward.  However, we on the political left must also be realistic; a default would not be without its consequences.  A default on the bank debt would lead to reprisals from the capitalist classes and the financial markets.  It is quite obvious that after a default, the cost of borrowing on the bond markets would be too huge for Ireland to engage in. Also, let us not forget that it has been the rising cost of borrowing on these bond markets that has pushed Ireland and others towards financial Armageddon.  However, by Ireland only having the sovereign debt that we have accumulated, minus the bank debt, the picture of the future would already be brighter.  In his article, Morgan Kelly sticks with the views of the establishment in prescribing more shock doctrine based austerity to reduce our budget deficit. There are other less painful ways to return Ireland to financial stability. 
By not being able to borrow on the international markets, Ireland would need to seek out finance from other sources to balance the books.  Firstly, to bridge the gap between what we are spending as a country and what we are taking in, Ireland would need to seek out friendly states who understand our plight.  To suggest that money would not be available on a bilateral basis is nothing but scaremongering from the capitalist class and the political elites in Ireland and Europe.  Through diplomacy and favourable trading with friendly states, Ireland could gain bilateral loans and bridge a portion of our current deficit. 
Secondly, capital must be made to pay its way in Ireland. For too long, Ireland has been soft on making capitalists pay a decent tax on the profits they make.  In this regard, the corporation rate must be raised to a level that is comparable to other European countries[6]. Also, the tax breaks that financial institutions, developers and multinational corporations have benefited from in recent history must be eliminated.  A progressive capital gains taxation system must also be introduced to fairly redistribute the massive wealth that still exists in private hands in this country.
Thirdly, we must invest to create jobs and indigenous industries in Ireland.  A public works scheme should be initiated to put the 100,000 or so construction workers back into employment, building much needed schools, hospitals, roads, a 21st century broadband system and other infrastructure to move this country forward. Investment must also be made to grow Irish industries. For too long the Irish economy has over relied on foreign direct investment to grow its economy.  This has led to the current situation where the state has been held to ransom over the corporate tax issue, and has been reluctant to take any measures to upset the international capitalist class. Stimulus measures such as these and the knock on effect they would have on all sections of the economy would help grow it towards recovery.
Finally, Ireland must take all its natural resources back into public ownership.    It must also be recognised that all of these measures are only part of a transitional programme. The capitalist class will not make these concessions easily.  The only way to truly solve Ireland’s crisis of capitalism is for Ireland to break away from the chains of the capitalist system and form a democratic socialist Ireland. Ireland could not go on this path alone and would require the backing of other socialist countries.  By taking a lead and showing other countries how to take the path towards socialism, and moving away from the exploitation of capitalism, Ireland would be held up as example to the working class of the world as a way to throw off their chains.  The path to economic freedom starts with an immediate default and Ireland walking away from the shackles of the EU/IMF deal.
Be Moderate? We Only Want The Earth.

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