What Ireland needs is “a return to economics as skillful means…”

Two related pieces from the Irish Times worth sharing. Both under Mark Hennessey’s byline. First this from his interview with Joe Stiglitz

Politicians today offer meagre fare to voters, he says, despondently: “Most government ministers (throughout the world) are middlemen in ideas. They are looking for packaging for simplistic ideas.”

For the last few years, the simplistic package, in Stiglitz’s view, has been austerity: “It said austerity works. I very strongly believe it doesn’t. And the IMF – which is not a left-wing organisation – says it doesn’t,” he tells The Irish Times.

However, the Nobel Prize winner believes the narrative is changing. “There is a growing recognition that it is a problem. In the US, even the Republicans are beginning to talk about inequality.

“Even they can’t shy away from it because it has become so serious. It has gone to the top of the global debate. The business people at Davos say it is one of the major threats to the global economy,” he says.

And…

Ireland’s current more optimistic air, where it exists, is partly delusionary, argues the Columbia Business School-based academic: “The Irish are a little bit like Americans in terms of optimism.”

Questioned about the impact of spending cuts, Stiglitz refuses to give ground: “Ireland being a small country had the ability to adjust a little bit more than some of the other countries have been able to do.

“They were willing to take some more pain. I don’t know whether this was some sort of Catholic guilt feelings that allowed them to take that that other societies would not have done,” he said.

Now, it’s well worth picking up Mark’s comment here on video. He makes a valid point about the limitations of Stiglitz’s thinking, not least in the face of the successful return of a UK party to government which made austerity almost its only goal.

He’s not wrong to press back on arguments in favour of austerity. But as Hennessey points out, it is an economic insight with very little sense of the embedded social or political contexts of each country.

As my colleague John Kellden puts it

What Stiglitz gets wrong is the foundational assumption: it is no longer about economics writ large. the future need to be about an economics, as if people and narratives – matter. It’s about a return to economics as skillful means.

Quite. Location, location, location. Ireland adjusted, because it can. Greece is struggling, presumably because it can’t. It all comes wrapped in that (nasty) political trilemma that global economists discount that their peril.

That said, Ireland is far from out of the woods yet. But getting out of these particularly woods needs a functional retrenchment to the Irish Demos, however that may be defined.

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  • kensei

    Mark Hennessy says that Stiglitz claimed Ireland would have a lost decade due to austerity, somewhat disparagingly. Ireland’s crisis started in 2007. It’s still not out of it. There has been massive emigration. Are we going to quibble over a couple of years here?

    Secondly, the UK Government did not follow through on it’s austerity plans in the last Parliament. The deficit was to be cleared by the end of the last Parliament. That introduced massive pain and put the country back into recession so it was dialled back so that it was only about half cleared (incidentally, what the last Labour government proposed). The Tories refused to spell out the cuts they were going to make, because they’d have been massively unpopular. They want to try the same trick of front loading the cuts, but there has already cabinet level debates over slowing them: http://www.theguardian.com/politics/2015/jun/11/george-osborne-pressure-slow-welfare-cuts because they will be massively unpopular. Also so much about general elections are about sentiment and the UK economy has been trending up a bit prior to the election, which in US research tends to be the determining factor.

    Have a look at Ireland GDP in Constant Prices, 2007-2015: http://www.tradingeconomics.com/ireland/gdp-constant-prices

    Try unemployment rate as well. Comapre to Iceland or the US for a laugh.

  • mickfealty

    Ken,

    “The Tories refused to spell out the cuts they were going to make, because they’d have been massively unpopular.”

    They absolutely told us they were planning to cut twice what they did in the last five in the next two. The problem with slogans like anti austerity is that without meaningful policy it doesn’t mean anything.

    There were many factors in the last election result in the UK, but one of them was the soporific stupor the Labour party put its own voters into. If you talk balls, you will get a balls result.

    When you look at how populism is displacing the centre left across Europe, these are non trivial matters. This is why I think Kellden nails it with “a return to economics as skillful means”.

    Austerity is a means. Not necessarily a good one, but anti austerity is not means at all…

  • kensei

    The Labour Party would not have got away with saying it was going to cut (or indeed raise taxes) by £12 billion without breaking it down. They’d have been hammered on it being uncosted, irresposnible and all the rest. The Tories got away with it because (1) it was much more about positioning as being the party of economic competence (2) they have the vast majority of the press on side.

    Even with that, they were forced to explicitly rule out a lot of measures yo actually achieve that goal because if they’d said they are going to take an axe to child tax credits they’d have lost votes. Hell, if they’d said they were going to sell off the rest of RBS and the Post Office they’d probably have lost votes. The Tories also said they’d cut the deficit by this Parliament but arrested halfway through because politics. Some of this is people not believing them or it will be that bad. It’s the fundamental dishonesty of modern politics. No one has a programme, just a direction.

    Then there is the stuff that is superficially popular – like Osborne’s surplus plan that descends to a level of stupidity far beyond one I thought possible – but would be catastrophically unpopular if the consequences of it were ever implemented. And probably poisonous to the political environment if US anti-tax measures are anything to go by.

    Austerity is a means to cut growth and extend recessions. It was predicted, the research has backed that up and the most interesting contra indicators like high debt levels impacting growth have been generally been discredited by further research. Keynesian economics is old, well established and has performed well in the crisis. What the hell are you on about?