The economic crisis

Some questions and answers


 Why should we repudiate the sovereign debt?

The tens of billions of debt that has tipped this state over the edge, and caused us to be blacklisted by international markets and subjected to the rule of the EU and IMF, is not our debt. It is not debt created by expenditure on schools or hospitals or roads; it is not debt the state amassed for serving its citizens: it is the debt of a tiny number of individual developers, financiers and their political sponsors—the Golden Circle—that has been socialised and imposed on taxpayers and on future generations of our people.
     “Odious debt” is defined as debt amassed by a regime not for the needs of the country but to strengthen the regime, contrary to the interests of the nation. The debt amassed by friends of Fianna Fáil, that was subsequently taken over by the state, is not in the interests of the nation but served to underpin the regime during the so-called “Celtic Tiger” years and so consequently is odious.
     The starting point of building an economy that serves the people, and not private developers and financiers, is repudiating this debt and seeking investment from other sources, including sovereign wealth funds that would lend to a new Ireland free of this crippling burden.

 Has anyone done this before?

To repudiate the debt would not create the Armageddon some so-called experts and politicians would have us believe. Indeed it is not uncommon for sovereign states, and in particular new governments, to repudiate debt that the people believe is illegitimate. Historically it has been done on numerous occasions, in a range of circumstances, without the Doomsday predictions the elite forecast.
  • In 1776 the United States repudiated its debt to England.
  • Mexico repudiated some debt payments and suspended others as a result of political and economic circumstances (1867, 1914–1942).
  • After the American Civil War in the 1870s the US federal government repudiated debt owed to Southern banks.
  • In 1898 Cuba repudiated debt to the Spanish crown that it considered to be odious.
  • In 1912 Turkey, suffering from a severe financial crisis, won a case at the International Court of Arbitration in support of its repudiation of debts to Tsarist Russia.
  • In 1918 the USSR repudiated Tsarist debt, particularly that amassed to fund the First World War.
  • In 1919 a new Costa Rican government considered the debts of the previous regime illegitimate and consequently sought their annulment, which was duly granted in a US court.
  • In 1919 the Treaty of Versailles exonerated the new Polish state of the debt amassed by Germany and loaded on Poland during the First World War.
  • In the 1930s fourteen Latin American countries repudiated particular debts they felt were illegitimate.
  • In 1953 the London Agreement cancelled 51 per cent of German debt amassed during the Second World War, as it was felt that debt servicing that amounted to more than 3½ per cent of export revenue was unserviceable; this cancellation was the key to the growth of the German economy.
  • Following the revolution in 1959 Cuba repudiated the debt of the Batista dictatorship.
  • The post-apartheid South African government cancelled debts owed by Namibia and Mozambique to the former apartheid regime.
  • In 2002, amid a recession and great political turmoil caused by IMF loans and policies, the government of Argentina announced the greatest suspension of payments on debt ever, amounting to $80 billion; over the next few years the Argentine economy grew at 8 and 9 per cent per annum!
  • Under US occupation and with the support of the president of the United States, George Bush, Iraqi national debt—estimated at between $125 and $300 billion—was “renegotiated” down by more than 80 per cent.
      A variety of countries at different stages in development, for a variety of reasons and in differing circumstances, have repudiated all or part of their so-called sovereign debt. Sometimes these were blanket debt, other times specific loans, but all on the grounds that the debts were not legitimate and were not the people’s.
     This is a brave but necessary step that must be taken if Ireland is to build a sustainable democratic economy that we are in control of. When this step has been taken by other countries it has had a direct and positive effect on economic growth.

 Why should we repatriate fiscal powers from the EU?

To build an economy in a direction determined by the people’s need and the potential and strengths of our country it is vital the state has sovereign control over fiscal policy.
     Taxation policy is essential to building a fair and equitable society. Control over it is essential to undoing the unjust and unpatriotic policies that favoured the wealthy that we have suffered for decades and that have greatly contributed to the very weak revenue flow the state now has. It is also the key to controlling inflation.
     It is vital that we regain control over our own currency and end our subjugation to the European Central Bank. The ECB favoured low interest rates to facilitate the export of capital from the German economy, which was accumulating massive surpluses. Peripheral countries, such as Ireland, Portugal, and Greece, were flooded with cheap capital, which fuelled the property bubble to the detriment of a sustainable economy. The European Central Bank continues to act in the interests of the German and French economies and to the detriment of smaller countries.
     The ability of a state to determine its own tax and expenditure policies is the key to influencing and orienting both production and demand and consequently the construction of a sustainable economy.

 Why should we nationalise our oil and gas?

The Irish state has estimated a potential €560 billion worth of oil and gas in Ireland’s seas. Only this is not owned by the Irish state.
     Our resources and this massive sum of money—even by today’s standards—are in private hands. So, while on the one hand the state takes over private debt, on the other hand it gives away our resources and our future.
     Oil companies own 100 per cent of the oil and gas they find in Irish waters. They pay no royalties to the Irish state. They can write off 100 per cent of their costs against tax. Their profits are taxed at the rate of 25 per cent, compared with an international average of 68 per cent. The Norwegian state receives more money from our oil and gas than we do.
     The money that could be secured through the nationalisation of these resources could be invested back in the economy in developing sustainable and renewable energy sources, creating jobs, and addressing the state’s “legitimate” debt. It could also be used to build useful and mutually beneficial trading relations globally.

 Why should we nationalise marine resources?

The opening up of Irish seas under European fisheries policies has cost the Irish state billions in revenue and denies us billions in much-needed revenue today.
     The original regulations were purposely designed to extract a valuable resource and revenue from peripheral countries to the core countries, such as Germany, Belgium, and France. And the more recently introduced fishing quotas left Ireland with one of the smallest shares, despite the value of our resources.
     It has been estimated that Ireland’s subjection to this robbery has cost the state more than €200 billion, and continues to cost the state at a time when all revenue is needed to rebuild the economy. Rather than being a net beneficiary of EU funds, as is claimed, we have given up far more than we have gained.
     EU policy is wasteful and environmentally unsustainable. Hundreds of thousands of tonnes of marine life are thrown back into the sea to rot, and many species of fish are being overfished.
     It is vital that we nationalise our seas and their marine life to develop an environmental and sustainable industry that would raise billions in essential capital and create much-needed jobs.

 Why should we establish an All-Ireland Development Corporation?

The Irish economy is structurally very weak. It has come to rely on foreign direct investment, a bloated finance sector with accompanying speculative bubbles, and the giveaway of our national resources, both natural and structural.
     However, huge potential exists. Ireland’s natural resources should be utilised by the state. The state should invest in and develop renewable energy sources and technology, such as wind and wave power, for domestic use and for export. The state should capitalise on the growing expertise in pharmaceuticals to develop a state-owned company.
     This is just some of the potential; but to develop this needs planning. It cannot be left to the volatile and irresponsible forms of private investment we have just suffered under. Reports show that during the bubble years public investment was far more productive than private. Private investment was largely wasteful and speculative.
     An All-Ireland Development Corporation should be created to research and plan the most efficient and productive investment areas for capital. In linking it to universities, the state would then be able to utilise the talent and ideas of our educated population, as opposed to the corporate sector profiting, as it does at present. It should seek to develop areas of cross-border co-operation to develop both economies in a sustainable way for the people throughout this island.

 Why should we establish a State Development Bank?

The bail-out of insolvent financial institutions and developers is increasing in cost every day. When we add the recapitalisation of guaranteed banks, the increasing cost of NAMA, and the debts being amassed by these nationalised institutions to the European Central Bank, the figure has been estimated as closer to half a trillion. And it is entirely unpayable.
     The money that has already been pumped into these failed institutions has left through the back door to German, French and British banks. It did nothing to increase lending or stimulate the economy.
     We need to established a well-capitalised State Development Bank, under the sovereign control of the state, with a mixture of stakeholder (government, worker, small business and community) representatives and qualified professionals making up its board. There is money available in this country, and if people are to take some pain surely it is better to do so in the knowledge that we are building an economy for the people. The pension reserve fund could be used, family savings and mortgages could be transferred, personal accounts could be moved into it, and capital could be sought from sources other than the EU and IMF, which do exist.
     The purpose of the state bank would be to provide credit to sustainable and productive businesses and to families and individuals as a service to the economy, rather than as an industry in and of itself, as it has become today.
     It would act as the creditor to the democratically determined economic priorities and growth areas. It would work in conjunction with the development corporation to fund the potential and to grow the economy.

 Why should we oppose the privatisation of state-sponsored companies?

The Government has sponsored the infamous economist Colm McCarthy to produce a report that recommends the sale of state assets that include critical—and profitable—infrastructure providers, such as the ESB, CIE, An Post, An Bord Gáis, Iarnród Éireann, Dublin Bus, three airport authorities, ten port companies, two national television stations, and more.
     Altogether the review will consider the potential sale of twenty-eight functioning companies. In addition it will review a number of intangible assets, such as radio spectrums, carbon emissions, and licences issued by the state, and consider them for disposal.
     The review now under way is not an objective review of how to make it more efficient or maximise revenue for the state: it is a review for selling sell these essential assets, as its mandate clearly states: “To consider the potential for asset disposals in the public sector, including commercial state bodies, in view of the indebtedness of the State.”
     This fire-sale approach to the disposal of national assets is not only a short-term one, in the sense that these are profitable state-sponsored enterprises, bringing in consistent revenue for the state and providing crucial infrastructural services to people: it is even more so as the dollars received will increasingly depreciate in value.
     We must hold on to such businesses and seek to develop and grow this sector as an essential and profitable part of the economy.

 Why do trade unions need to change course?

Trade unions are “firefighting” job losses, pay cuts, attacks on pensions, and a general assault on terms and conditions of employment within their industries and employments. Trade unions, and trade union members, need to fight the cause of the fire.
     Unions, and the broader labour and community movement, must begin to co-operate, mobilise and campaign on the political and economic causes of the job losses and cuts. Unions need to tackle the national questions of control over our economy and the direction needed for creating a healthy and sustainable economy for trade union members and society.
     Union leaders have an obligation to lead, but members must also challenge, mobilise and drive the unions forward. It is only a combination of leadership and mobilisation that is capable of confronting the causes of the assault upon workers.
     Unions are political and must express this politics. The question is, Which side are they on? Are they seeking to keep their heads down, hang on to members, and rebuild on the back of a global upturn, or do they wish to lead a movement capable of challenging the establishment and building a progressive society for their members?

 Why should we build a people’s alternative politics?

We cannot build a sustainable and long-term economy under the rule of the EU and IMF. Nor can we do this by tweaking a few taxes here and there, or cutting some expenditure, or extending the period by which we “breach“ the Growth and Stability Pact. It takes control to build an economy, and that is a political question.
     The recommendations made here are needed, together, for building a people’s economy—a nationally controlled economy. But they will be resisted by the Government, by the EU and IMF, by big business, by the mass media, and by establishment academics and economists.
     To overcome this opposition we require a people’s politics and a political movement. It is time for people to stand up and be counted. It is time for people to make the effort to build a movement to campaign and fight for their principles.
     The European Union has for some time, in its external economic relations, acted in a bullying and predatory manner towards the poorer countries, dictating unequal trade agreements in the interests of its transnational corporations. The recent developments have exposed the exploitative, neo-colonial relationship between the stronger and weaker countries in the European Union. This is clear now in relation to the former socialist countries of eastern Europe, and for Ireland also, now that the Celtic Bubble has burst. The decision of the EU Commission to move on Ireland was preceded by a private meeting between the British, French and German governments, showing who is in charge of the European Union.

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