Luck of the Irish

Learn from Mistakes; Hopefully!

Brian Cowen and his gullible team of  boom-delusion lackeys can be held accountable for the mess we are in today (Not forgetting Bertie Ahern of course, who cleverly bailed just in time, and left Cowen to take the sole brunt of public anger). It may be stating the obvious, but to look at figures from 2006 back, revenue increased hugely over the boom years, and the government, with gusto, pursued a pro-cyclical fiscal policy, matching the increased revenue with equally increased spending, and pumping money into all areas of the economy, convinced the good times would never end. It was in 2008, with the world market collapsing and Ireland, being the small open economy we are suffered big time, that revenue plummeted and spending was left at a ridiculously high unsustainable level, the cracks began to appear. Ireland had been sustained on the property bubble, and when it burst, all that was left in the country was a high wage rate, to which Ireland lost many Multi-National Companies to more labour competitive countries. A comparison can be made between the Famine and this recession, in both instances, the country relied heavily on one factor (potato, construction industry), and the troubles prolonged by a lack of decisive and efficient action by the government.

Possible Solutions

My solution would be to cut the minimum wage to €6 an hour for new employees hired, in an attempt to alleviate some of the pressure on social welfare, and increase disposable income into the economy. This shouldn’t affect unions or public opinion, as it is not wage cuts. However, failing that, another method could be for companies to decrease workers wages to €6.50 an hour, on the condition that these cuts must be subsidised by increased employment. The Government has lowered the minimum wage, a vital step in regaining international competitiveness, and has also introduced a scheme by which unemployed teachers and graduates can be hired for free. It is a beneficial plan for both parties, student/teacher ratio is resolved, and new graduates get valuable experience, as well as a viable chance at employment as time goes on. There has been a lot of criticism of the IMF/EU Bailout at the high interest rate of 5.8%. The payback of this loan is going to affect the next generation of labour hugely, and indeed is a result of corruption in the banks, another detrimental fault by the Government.

Conclusion

I’m not anti-Fianna Fail on any degree; however, there can be no dispute as to the lack-lustre performance of the Government. Even though external forces helped cause the downturn, the recession’s prolonged success has been contributed to by the Governments poor policy making over the past 10 years. Instead of trying to stabilise the economy by introducing incentives to save and withdraw money from the economy, they did the opposite, resulting in a possible boom bust cycle, instead of even steady GDP growth. Ireland lost its monetary policy tools when it joined the EMU, and as such there is no easy way out of this recession, such as devaluing the currency. No matter who is in Government, the road ahead is littered with harsh fiscal policy’s, such as wage and benefit cuts. To default on our debt would cause untold hardship in the future, there is no easy way out of this mess, and with the looming influence of the IMF, the question remains, where has the luck of the Irish gone?