Troika intimidation no accident

COMMENT

“The decadent Iinternational but individualistic capitalism is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous – and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it”
– John Maynard Keynes.

In 1944 Keynes was heavily involved in the negotiations at the Bretton Woods Conference, which led to the establishment of the International Monitory Fund and the IBRD, which went on to become the World Bank. The IMF envisaged at this conference was not the beast that exists today but in many ways its antithesis. Initially, Keynes was acutely aware of the dangers inherent in the completely unregulated movement of capital across international borders. With this in mind, so-called ‘Capital Controls’ were put in place. Unfortunately, these were dismantled around the world from the 1970s on. The journalist and author, Nicholas Shaxson describes Keynes’ position as follows, “Finance should be societies’ servant, not its master.”
Last week, the Troika visited Dublin. They carried out the equivalent of the old school inspections we all experienced in our childhood. As well as the humiliating aspect of the fact-checking and public examination, there was an element of intimidation in their visit. This cannot be an accident. Their visit was a perfect example of finance being society’s master. We have ongoing controversies around the issues of schools cuts and the pensions-fright-flight from the public sector at the moment with the unknown consequences of both looming down the line and yet by the time this column is published,  €1.25 billion will very likely have been paid by the Irish taxpayers to the unsecured bondholders of Anglo Irish Bank.
Leo Varadker declined to confirm that the Irish Government was directly threatened with punishment if it did not pay the money but the implication of dire consequences was certainly present in the Troika’s statement that failure to pay would be “on your head”.
I am no advocate of markets or the kind of capitalism that caused this mess but it is important to point out yet again that one of the basic facts of the bond market is taking risk and either reaping the rewards or taking a hit.
The unsecured bondholders took a risk and are suffering no consequences. This is not how things work, even in that murky world of international finance. We are only left to wonder how much of the Irish tax payers’ money will be spent on champagne and super cars while services and pensions are slashed and incomes in Ireland continue to bear the brunt of this seemingly never-ending austerity.
In the aftermath of the 2008 financial crisis, there were a number of calls for a Bretton Woods mark 2 to be held. It was suggested that something equally ambitious should be attempted to counteract and reign in the system, which had unleashed such misery on the world. At the time, as now and as at the time he said them, the words of Maynard Keynes rang true. The capitalist system has failed to deliver on the things it promised and ultimately must be judged to be nothing more than a dismal failure.
It did not happen then and it is unlikely to happen any time soon. What does lie ahead is the new EU treaty. It has been cobbled together quickly to try and address the massive holes in the overall plan for the Euro and the union. We are now hearing that it has been tweaked enough and in the right ways to allow it to be enacted in Ireland without having to resort to giving the pesky voters of Ireland a say in the matter.
Certainly, Minister Michael Noonan was unequivocal in his statement of the Government’s preference to avoid anything to do with the population of Ireland with regard to the treaty. His advocacy for the new kind of fiscal discipline which would come with the treaty and the fact it would be less severe than the current punishment sounded like the words of a broken victim of torture or perhaps an example of political Stockholm syndrome.
Given that the Government and their masters in Europe are so intent on denying the people of Ireland their say in this most important aspect of their future, the fate of the nation lies, I believe, in the hands of the attorney general. I stand to be corrected on this but the attorney general is the legal advisor to the government, not a member of the government. The AG website states, “Article 30 of the Constitution establishes the Office and provides that the attorney general shall not be a member of the government.
The principal role of the attorney is as the adviser of the government in matters of law and legal opinion and attend cabinet meetings in that capacity.” It adds that the AG assesses “whether proposed legislation complies with the provisions of the Constitution, acts and treaties of the European Union or other international treaties to which Ireland has acceded.”
The most important thing I could find however, was the line, “The attorney general is representative of the public in all legal proceedings for the enforcement of law and the assertion or protection of public rights.”
I take great hope in the fact that the attorney general will at least be taking a position on the proposed treaty, which is based around the constitution and the protection of the rights of the Irish people contained within it. Politically, Ireland has already lost, as was made clear by Minister Noonan’s honesty.
The right of the Irish people to a referendum on European treaties must be defended tooth and nail and cannot be dismissed simply because the public will not vote the way the Government tells them. If this happens, it will be a death knell for Irish democracy. People have little choice but to endure austerity but in the case of a new EU treaty, their choice must be granted to them.
The Government will employ much sophistry in the run-up to this decision but any victory they claim will be hollow.