The economic debate over the Irish banks has centred around what kind of bail out is best – a bad bank? a good bank? NAMA? or even temporary nationalisation?
All of these solutions run against the grain of the process of capitalism. Irish banks took undue risks with other people’s money and are now bankrupt. Profits were privatised in the good times, but now the banking oligarchs demand that their losses be socialised. For the first time since this crises began, a major Irish economic commentator is calling for the Irish banks to be allowed to fail. In yesterday’s Sunday Business Post David McWilliams outlined arguments for letting Creative Destruction and capitalism run it’s natural course
Lets pose the big question: why are we bailing out insolvent banks? What economic model tells us that we should tax people who are struggling to pay for the mistakes of bankers who are now prevaricating? Could we not just let the banks go – guarantee the depositors and let the rest of the banks creditors experience the market? After all, these investors were very happy to take profits in the good times. This is what they did in South Korea, Thailand and Taiwan in the late 1990s.
The stark reality if we do not
I realise that this sounds radical, but think about the alternative. The alternative is to turn the nation into a large debt servicing machine in order to bail out banks that we dont need and which made basic commercial mistakes. The market will solve the problem, and the banks could work through their debts themselves. They lent the money, after all.
The topsy-turvy political climate today
So the right wing believe that the markets not up to the job and should be supplanted by the state, and the left wing believe that it is right that the poor should subsidise the rich. Either way, we have the same outcome.
Confused? Im not surprised. But when you see Sinn Féin voters in Celtic shirts with Saor Eire tattoos, feeding the British exchequer by popping over the border to evade Irish taxes by shopping in Asda, Strabane, you know we live in a confusing world.