It’s a commonplace that the Celtic Tiger died in the early noughties, when real growth was replaced by false growth based on inappropriately low interest rates, an over-stimulated construction sector, and excessive pay increases for all sectors.  At the same time, the public sector and its various agencies grew stale and bloated.  Proper management skills withered on the vine, as the solution to every problem became the throwing of money at it.  Those who shouted loudest, or who had an inside track, got an even greater share of the spoils.  Welfare benefits began to outstrip those available almost anywhere else.

And now that the tide has gone out, we see that the State’s finances are in ruins because we have an inflated public sector cost base and welfare budget, but our tax revenues have shrunk dramatically (the bank bailout is not the main reason we are bust).  The fiscal gap will have to be closed by higher taxes, lower public sector costs and decreased welfare benefits, and the process has started.  It is a condition of the bailout deal that we travel down this road, but most of what we are going to do would have to have happened even without the bailout.

We need to look back to a time before things went pear-shaped, to a time when tax rates and yields were sensible, when we got reasonable value for money from our public sector, and when welfare benefit levels were appropriate to our real standard of living as a country.

Realistically, this would be sometime around 2002.  At that time, we hadn’t yet experienced a prolonged period of low Euro interest rates which was to prove such a part of our problem; we hadn’t seen the worst of the crazy pro-cyclical property incentives and unnecessary tax cuts; and the three-card-trick of public sector bench-marking lay in the future.

Did we feel poor as a country in 2002?  Were welfare recipients marching in the streets at the low level of benefits available?  Were civil servants and politicians noticeably underpaid?  Were there PAYE marches as there were in the 1970s?

No, no, no and no.

So let us turn back the clock, fiscally speaking, and revert to a position that is acceptably fair and is affordable.  This will involve further big cuts in pay, pensions and benefits, combined with additional tax increases for all taxpayers, including a substantial annual property tax.  Let’s do it, and do it quickly.   While we are at it, we need to get smart with our policy on the statutory minimum wage by re-setting it every 6 or 12 months at the average of the currently prevailing minimum wage in a “basket” of competitor countries.

And let us be prepared to resist the shouts and roars from politicians, the media, NGOs and commentators that we are being savage in our treatment of this sector or that sector.  After all, all we are doing is trying to reconstitute the sort of economic and fiscal conditions that applied in 2002.  We thought we were doing all right then, and we were.  The social fabric was certainly not collapsing then, in fact we had a bright future ahead of us and, in contrast to the present national mood, optimism was the order of the day.

 

 I was reading Simon Blackburn’s review of How to Write a Sentence: And How to Read One and the closing paragraph struck me as noteworthy. Blackburn talks about

…… one of Fish’s favorites, the final sentence of Middlemarch, contrasting Dorothea’s quiet future with the idealistic visions of doing good with which she started life: “But the effect of her being on those around her was incalculably diffusive: for the growing good of the world is partly dependent on unhistoric acts, and that things are not so ill with you and me as they might have been, is half owing to the number who lived faithfully a hidden life, and rest in unvisited tombs.”

I have never been an avid reader of “The Classics”, so I have (so far, anyway) no opinion on George Eliot.  But that sentence from Middlemarch has a weight and a rhythm, and a message that resonates. 

In fact, in times of economic depression and hardship such as we are going to experience in Ireland (I use the future tense because the economic correction has unfortunately only just begun), Dorothea’s behaviour could be a guide for how to conduct ourselves so as to retain our dignity and our sense of self-worth and fulfilment. We may be broke, with the Celtic Tiger lying in ruins, but we can still be nice to each other, and seek no reward for doing so.

Do good by stealth, and blush to find it fame.  ~Alexander Pope, Epilogue to the Satires, 1738

Today’s Irish Times has a vox pop with various people, including a woman whose wedding cost €70,000 in 2008.

As the Budget cuts hit the headlines, shoppers spare a moment to share their feelings …..  [A. M.], who is expecting her second child in January, is taking a rest on a bench in the Jervis shopping centre. “How will the cuts affect me? Where do I begin?” the former chef says wryly.    Two years ago, she had a €70,000 wedding at Carton House in Co Kildare, and [she] and her husband bought a house in Ringsend for €420,000. They remortgaged it soon after “to pay for new doors and windows”, and bought a new jeep, which then got hit with VRT.   Since then, her husband has lost his job as a high-reach crane driver, and neither of them has been working for over a year.

Wow, seventy grand.  That buys a lot of confetti.  I suspect that this barking mad couple will be among the people who will be looking for a debt write-off on their mortgage, to be funded by injecting more of taxpayers’ money into the banks and building societies.  I’ll be happy to play my part, won’t you?