Fear, Loathing & Austerity In Ireland

Before Greece, before Spain, before Germany, France, or even Britain there was Ireland. Just two years ago, the Heritage Foundation placed Ireland in the top ten of its "Index of Economic Freedom." [1] That was two years after the "Celtic Tiger" that was the Irish economy had been effectively neutered. After a bubble-driven boom similar to ours, Ireland became the first Eurozone country to enter a recession in 2008 — its first in 25 years. What Heritage called "sharp economic adjustments" in 2010 turned out to be the first step down Ireland's road to ruin [2], and the beginning of "Disaster Capitalism's" catastrophic success in Europe [3] (also known as "austerity" [4]).

Whether the American conservatives keep referring to to Ireland as a "success" because or in spite of the above, it Ireland may yet join the Eurozone's austerity backlash. Then we'll find out if the "Celtic Tiger" has been declawed as well as neutered, and just how catastrophic austerity's "success" has been for the Irish. 

It looks like the Irish are going to get what the Greeks did not — a say in their own destiny. Serious changes to the constitution in Ireland require a referendum [5], and the Irish are going to get one. 

So far, five countries have ratified the Fiscal Treaty — the agreement pushed by Chancellor Angela Merkel, and given a preliminary nod in December — requiring countries to limit their deficits and debt, or else face heavy penalties.

This week the Irish get to have their say. While the other countries simply need parliamentary approval, in Ireland the decision is being made via a referendum. In February the Attorney General advised the government that a public vote was needed, as any significant changes to the constititution in Ireland require a referendum.

Unlike the votes on the Lisbon and Nice Treaties, both of which the Irish rejected on the first go, there is no veto this time. The Fiscal Treaty comes into force when 12 of the 17 euro zone members ratify it.

The latest polls indicate that the Irish are going to vote in favor of austerity, bucking the recent voting trend in Greece, France and even Germany. But that doesn’t mean that the Irish are enthusiastic adherents of Merkel’s belt-tightening fixation.

As much as anything, the Irish referendum could be described as a battle between fear and anger.

Much like the stages of coping with grief — denial, anger, bargaining, depression, and acceptance — coping with austerity comes with its own stages [6], including desperation [7], despair [8], detachment [9], and indifference [10]. (In fact, today austerity often acts as a catalyst for the kind of life-changing events —sickness, death, divorce, and unemployment — that usually kickstart the cycle of grief. 

As with grief, countries may go through the stages of coping with austerity in random order, linger in some stages, and skip others altogether. In the last month or so, a number of Eurozone countries have entered the "anger" stage [10] of coping with austerity; a stage I like to call "defiance." That anger has found expression in protests and demonstrations that have toppled governments as citizens stand in defiance of what Dr. Adnan Al-Dani calls "The Economics of the Madhouse." [11]

I do not know about you but I am finding myself baffled, irritated and confused by the World Bank, the European Central Bank (ECB), the IMF and a few other acronyms that seem to dominate the news.  I did not vote for any of these organisations, so why do they have such an influence on my life, the lives of the rest of the British public, and the lives of hundreds of millions across the globe.  They seem to be running the world.   How did it come to this?

What sort of a system have we created that gives so much power to these people? How is it that these people, who are entrusted with the money made by working people, end up gobbling up the money for which people have laboured so hard? How were they ever allowed to have such a stranglehold on the lives of millions?

Where were the people we elected to look after us when such a distorted, corrupted form of capitalism was being developed? Were they incompetent, or have they become part of an oligarchy that enriches them as well as the gamblers of the market? Money exists to make it easier for the real wealth creators to serve society: those who labour by brain and brawn to enhance and improve our existence. How is it that such a basically simple operation of distributing our money to wealth creators became so complex? Of course we know why; this complexity is the method through which the public are deliberately hoodwinked for the “moneymen” to siphon off the money for themselves.

The Irish, this week, will choose which stage they will enter next: "anger" or "acceptance." As the Salon article above says, it's an important vote, not just for Ireland, but for the fate or Eurozone austerity itself. Which way Ireland goes will depend on what motivates the Irish more: anger over the devastating impact of austerity, or fear of the consequences of rejecting austerity and losing access to the Eurozone's permanent bailout fund (not to mention the "confidence" of foreign investors.

It's an important vote, because it will indicate whether the "shock" (see Naomi Klein's The Shock Doctrine) has finally taken in Ireland. You see, despite "terrible ugliness" born of austerity in Ireland [12] — 14.5% unemployment, a 3.8% drop in retail sales on basic goods, wage and welfare cuts, growing deficits, an exodus of young people and skilled workers, etc. — Ireland has always played the "good boy role." [13] The initial flare of protest morphed into resignation [14], as the Irish voted out the government that imposed austerity [15] only to go on living with those same austerity policies [16].

If the the "shock" takes in Ireland, if Ireland submits to the "fiscal straightjacket" planned for it [17], it could signal that the country has moved on to "acceptance." That's good news for the austerians [10].

Does the latest wave of uprisings finally sound the death knell for austerity? Not if austerians stay the course, and don't get spooked by protests in the streets and at the ballot box. If their protests have no impact, and austerity happened anyway, people will go home. They'll forget about solidarity, worry more about survival, and arrive at the next phase of austerity's impact on their lives.

Good news for the austerians may be bad news for the Irish. In the stages of coping with austerity, "acceptance" translates into "defeat." If you want to know what that looks like, here's a snapshot of another country on the Heritage Foundation's hit parade [1] in 2010.

If the Irish government wants to know the potential cost of austerity, it need look no further than Lithuania (#29 on the Heritage index) to see what austerity looks like [18].

Faced with rising deficits that threatened to bankrupt the country, Lithuania cut public spending by 30 percent — including slashing public sector wages 20 to 30 percent and reducing pensions by as much as 11 percent. Even the prime minister, Andrius Kubilius, took a pay cut of 45 percent.

...But austerity has exacted its own price, in social and personal pain.

Pensioners, their benefits cut, swamped soup kitchens. Unemployment jumped to a high of 14 percent, from single digits — and an already wobbly economy shrank 15 percent last year.

Remarkably, for the most part, the austerity was imposed with the grudging support of Lithuania’s trade unions and opposition parties, and has yet to elicit the kind of protest expressed by the regular, widespread street demonstrations and strikes seen in Greece, Spain and Britain.

...Indeed, outside of Ireland, no country in Europe has come close to replicating Lithuania’s severe spending cuts without the aid of the International Monetary Fund [19]. Ireland passed the most austere budget in the country’s history, and public sector pay cuts were a centerpiece of the government’s reform effort.

...“From a credit rating perspective, Lithuania has put itself on positive trajectory,” said Kenneth Orchard, a senior credit officer in Moody’s sovereign risk group.

As European nations consider what the social and political costs will be when they take steps to cut public sector spending, Lithuania offers a real-time case study of the societal trade-offs.

If the Lithuanian population has yet to engage in the kind of protests seen in Ireland and elsewhere, perhaps that's because the Lithuanian people have finally been broken sufficiently to simply accept what the government and global market deem their fate should be. Hopelessness has yielded to despair for some, fueling the increase in Lithuania's suicide rate, which was already among the highest in the world [20].

For others despair yields to resignation, summed up by one Lithuanian pensioner:

Mecislovas Zukauskas, 88, a retired electrician, has lived through the devastations of World War II, the Soviet occupation and, most recently, the death of his wife. He is taking his pension cut in stride.

“The government does what it wants to do,” he said. “We can do nothing.”

That's "acceptance" — or defeat. Take your pick.