Private debt, public pain: lessons for Ireland

Nick Dearden and Tim Jones from Jubilee Debt Campaign on standing up to global finance.

December 20, 2010
6 min read


Nick DeardenNick Dearden is the director of UK campaigning organisation Global Justice Now. He was previously the director of Jubilee Debt Campaign

Barely twenty four hours after Ireland’s parliament voted through the multibillion euro EU and IMF “rescue” package, Ireland’s credit rating had been slashed, after the rating agency Moody’s  expressed concern that Ireland’s severe downturn would continue. Little wonder, given that Ireland’s brutal package of austerity and cuts will devastate the Irish economy and society for perhaps a generation, while new IMF and EU loans will further increase the nation’s indebtedness.

Ireland’s continued punishment by the very financial markets which the IMF and EU package was supposed to please, shows how the lives of Ireland’s people will be, more than ever, subject to the whims of the drive for profit. But it also shows that trying to please creditors will not work; Ireland must stand up against its creditors if things are to improve, and say clearly that those responsible for the crisis must take a hit, rather than transferring the pain onto society at large.

Scores of developing countries have been through what Ireland, Greece and others now face. Even by IMF standards, the Irish package is savage. Ireland’s minimum wage will be cut by €1 and round two of a series of very deep cuts will reduce pensions and pension relief, social protection, public services and much more besides.

Zambia similarly made extreme cuts in government spending through the 1980s and 1990s under pressure from the IMF. Whilst the IMF praised Zambia’s success in making the cuts, the southern African country’s debt doubled in size as the economy shrank.

Ireland’s economy will also be restructured, with ‘vigorous action to remove remaining restrictions on trade and competition’, meaning privatisation and deregulation. The emphasis on the private sector would, in other circumstances, be comical given that the faults of the private sector created this public disaster. Ireland’s private sector debt rose to 600 per cent of national income by 2008 as the unregulated private sector went loan mad in its greed for a quick profit.

The pain now being imposed on the public for private recklessness will be felt by ordinary people, the poorest most of all. Economists are saying more clearly than ever that the refusal to negotiate debts with creditors is a huge mistake. Martin Wolf writing in the Financial Times says: “The Irish state should have saved itself by drastic restructuring of bank liabilities. Bank debt simply cannot be public debt. Surely, creditors must take the hit, instead.”

The beneficiaries of the package are, in the main, European banks and other financial creditors. Insulating these private investors from losses is the whole point of the bail-out. Indeed, the UK’s own loans to Ireland – amounting to just under £7 billion – are essentially an additional bail out to British banks – RBS has lent the Irish government £4 billion, and has a further £38 billion of loans to the Irish private sector, particularly mortgages.

For this price, Ireland, and Greece, are now at risk of years of enslavement to debt, and the only alternative is that those debts be renegotiated and reduced. In an Action from Ireland (Afri), paper released this week, Andy Storey lays out the case for a default on Ireland’s debt, arguing that the market could not punish Ireland any more than it already is doing, and that Ireland would recover from any short-term impacts much faster than it will recover from its austerity package. Storey argues that a debt audit, modelled on those undertaken in Ecuador and elsewhere, would be an essential first step in allowing ordinary people to understand exactly how the crisis arose.

The banks have not always won over the last 30 years, and in 2001 Argentina did exactly what many economists are now urging Ireland and Greece to do. On Christmas Eve 2001, Argentina defaulted on its debt originating from an overvalued currency which had been pushed by the IMF. Along with devaluation and introduction of capital controls to prevent money leaving the country, the economy soon began to grow rapidly. Welfare payments were increased to help the poorest cope, while non-IMF approved taxes on exports and financial transactions were introduced to increase government revenue. In 2005, Argentina reached a deal with its creditors where it paid just 35p for every pound that was owed.

Nobel prize winning economist Paul Krugman has said: “you have to wonder what it will take for serious people to realize that punishing the populace for the bankers’ sins is worse than a crime; it’s a mistake”. It is time to learn the lessons of repeated debt crises – governments must stop forcing their people to pay for the behaviour of the financial sector. Private investors do not have to be bailed out at the expense of public austerity. People do not have to sacrifice their rights, welfare and democracy to please the gods of international finance. Neither governments nor their people are powerless. A mixture of debt audits and partial defaults, progressive taxation and capital controls can help return control and sanity to the world.

Many continue to believe that Greece cannot but default on its massive debt. Rumours abound that Spain will be next to be subjected to the diktats of global finance – an eventuality that would bring Europe to its knees. Standing up to global finance is urgent.


Nick DeardenNick Dearden is the director of UK campaigning organisation Global Justice Now. He was previously the director of Jubilee Debt Campaign


✹ Try our new pay-as-you-feel subscription — you choose how much to pay.

Greece’s heavy load
While the UK left is divided over how to respond to Brexit, the people of Greece continue to groan under the burden of EU-backed austerity. Jane Shallice reports

On the narcissism of small differences
In an interview with the TNI's Nick Buxton, social scientist and activist Susan George reflects on the French Presidential Elections.

Why Corbyn’s ‘unpopularity’ is exaggerated: Polls show he’s more popular than most other parties’ leaders – and on the up
Headlines about Jeremy Corbyn’s poor approval ratings in polls don’t tell the whole story, writes Alex Nunns

The media wants to demoralise Corbyn’s supporters – don’t let them succeed
Michael Calderbank looks at the results of yesterday's local elections

In light of Dunkirk: What have we learned from the (lack of) response in Calais?
Amy Corcoran and Sam Walton ask who helps refugees when it matters – and who stands on the sidelines

Osborne’s first day at work – activists to pulp Evening Standards for renewable energy
This isn’t just a stunt. A new worker’s cooperative is set to employ people on a real living wage in a recycling scheme that is heavily trolling George Osborne. Jenny Nelson writes

Red Pepper’s race section: open editorial meeting 24 May
On May 24th, we’ll be holding the third of Red Pepper’s Race Section Open Editorial Meetings.

Our activism will be intersectional, or it will be bullshit…
Reflecting on a year in the environmental and anti-racist movements, Plane Stupid activist, Ali Tamlit, calls for a renewed focus on the dangers of power and privilege and the means to overcome them.

West Yorkshire calls for devolution of politics
When communities feel that power is exercised by a remote elite, anger and alienation will grow. But genuine regional democracy offers a positive alternative, argue the Same Skies Collective

How to resist the exploitation of digital gig workers
For the first time in history, we have a mass migration of labour without an actual migration of workers. Mark Graham and Alex Wood explore the consequences

The Digital Liberties cross-party campaign
Access to the internet should be considered as vital as access to power and water writes Sophia Drakopoulou

#AndABlackWomanAtThat – part III: a discussion of power and privilege
In the final article of a three-part series, Sheri Carr gives a few pointers on how to be a good ally

Event: Take Back Control Croydon
Ken Loach, Dawn Foster & Soweto Kinch to speak in Croydon at the first event of a UK-wide series organised by The World Transformed and local activists

Red Pepper’s race section: open editorial meeting 19 April
On April 19th, we’ll be holding the second of Red Pepper’s Race Section Open Editorial Meetings.

Changing our attitude to Climate Change
Paul Allen of the Centre for Alternative Technology spells out what we need to do to break through the inaction over climate change

Introducing Trump’s Inner Circle
Donald Trump’s key allies are as alarming as the man himself

#AndABlackWomanAtThat – part II: a discussion of power and privilege
In the second article of a three-part series, Sheri Carr reflects on the silencing of black women and the flaws in safe spaces

Joint statement on George Osborne’s appointment to the Evening Standard
'We have come together to denounce this brazen conflict of interest and to champion the growing need for independent, truthful and representative media'

Confronting Brexit
Paul O’Connell and Michael Calderbank consider the conditions that led to the Brexit vote, and how the left in Britain should respond

On the right side of history: an interview with Mijente
Marienna Pope-Weidemann speaks to Reyna Wences, co-founder of Mijente, a radical Latinx and Chincanx organising network

Disrupting the City of London Corporation elections
The City of London Corporation is one of the most secretive and least understood institutions in the world, writes Luke Walter

#AndABlackWomanAtThat: a discussion of power and privilege
In the first article of a three-part series, Sheri Carr reflects on the oppression of her early life and how we must fight it, even in our own movement

Corbyn understands the needs of our communities
Ian Hodson reflects on the Copeland by-election and explains why Corbyn has the full support of The Bakers Food and Allied Workers Union

Red Pepper’s race section: open editorial meeting 15 March
On 15 March, we’ll be holding the first of Red Pepper’s Race Section open editorial meetings.

Social Workers Without Borders
Jenny Nelson speaks to Lauren Wroe about a group combining activism and social work with refugees

Growing up married
Laura Nicholson interviews Dr Eylem Atakav about her new film, Growing Up Married, which tells the stories of Turkey’s child brides

The Migrant Connections Festival: solidarity needs meaningful relationships
On March 4 & 5 Bethnal Green will host a migrant-led festival fostering community and solidarity for people of all backgrounds, writes Sohail Jannesari

Reclaiming Holloway Homes
The government is closing old, inner-city jails. Rebecca Roberts looks at what happens next

Intensification of state violence in the Kurdish provinces of Turkey
Oppression increases in the run up to Turkey’s constitutional referendum, writes Mehmet Ugur from Academics for Peace

Pass the domestic violence bill
Emma Snaith reports on the significance of the new anti-domestic violence bill


26