Get Red Pepper's email newsletter. Enter your email address to receive our latest articles, updates and news.

×

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


Tim JonesTim Jones is policy and campaigns officer at Jubilee Debt Campaign


  share     tweet  

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.

Red Pepper is an independent, non-profit magazine that puts left politics and culture at the heart of its stories. We think publications should embrace the values of a movement that is unafraid to take a stand, radical yet not dogmatic, and focus on amplifying the voices of the people and activists that make up our movement. If you think so too, please support Red Pepper in continuing our work by becoming a subscriber today.
Why not try our new pay as you feel subscription? You decide how much to pay.
Share this article  
  share on facebook     share on twitter  

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


Tim JonesTim Jones is policy and campaigns officer at Jubilee Debt Campaign


Labour Party laws are being used to quash dissent
Richard Kuper writes that Labour's authorities are more concerned with suppressing pro-Palestine activism than with actually tackling antisemitism

Catalan independence is not just ‘nationalism’ – it’s a rebellion against nationalism
Ignasi Bernat and David Whyte argue that Catalonia's independence movement is driven by solidarity – and resistance to far-right Spanish nationalists

Tabloids do not represent the working class
The tabloid press claims to be an authentic voice of the working class - but it's run by and for the elites, writes Matt Thompson

As London City Airport turns 30, let’s imagine a world without it
London City Airport has faced resistance for its entire lifetime, writes Ali Tamlit – and some day soon we will win

The first world war sowed the seeds of the Russian revolution
An excerpt from 'October', China Mieville's book revisiting the story of the Russian Revolution

Academies run ‘on the basis of fear’
Wakefield City Academies Trust (WCAT) was described in a damning report as an organisation run 'on the basis of fear'. Jon Trickett MP examines an education system in crisis.

‘There is no turning back to a time when there wasn’t migration to Britain’
David Renton reviews the Migration Museum's latest exhibition

#MeToo is necessary – but I’m sick of having to prove my humanity
Women are expected to reveal personal trauma to be taken seriously, writes Eleanor Penny

Meet the digital feminists
We're building new online tools to create a new feminist community and tackle sexism wherever we find it, writes Franziska Grobke

The Marikana women’s fight for justice, five years on
Marienna Pope-Weidemann meets Sikhala Sonke, a grassroots social justice group led by the women of Marikana

Forget ‘Columbus Day’ – this is the Day of Indigenous Resistance
By Leyli Horna, Marcela Terán and Sebastián Ordonez for Wretched of the Earth

Uber and the corporate capture of e-petitions
Steve Andrews looks at a profit-making petition platform's questionable relationship with the cab company

You might be a centrist if…
What does 'centrist' mean? Tom Walker identifies the key markers to help you spot centrism in the wild

Black Journalism Fund Open Editorial Meeting in Leeds
Friday 13th October, 5pm to 7pm, meeting inside the Laidlaw Library, Leeds University

This leadership contest can transform Scottish Labour
Martyn Cook argues that with a new left-wing leader the Scottish Labour Party can make a comeback

Review: No Is Not Enough
Samir Dathi reviews No Is Not Enough: Defeating the New Shock Politics, by Naomi Klein

Building Corbyn’s Labour from the ground up: How ‘the left’ won in Hackney South
Heather Mendick has gone from phone-banker at Corbyn for Leader to Hackney Momentum organiser to secretary of her local party. Here, she shares her top tips on transforming Labour from the bottom up

Five things to know about the independence movement in Catalonia
James O'Nions looks at the underlying dynamics of the Catalan independence movement

‘This building will be a library!’ From referendum to general strike in Catalonia
Ignasi Bernat and David Whyte report from the Catalan general strike, as the movements prepare to build a new republic

Chlorine chickens are just the start: Liam Fox’s Brexit trade free-for-all
A hard-right free marketer is now in charge of our trade policy. We urgently need to develop an alternative vision, writes Nick Dearden

There is no ‘cult of Corbyn’ – this is a movement preparing for power
The pundits still don’t understand that Labour’s new energy is about ‘we’ not ‘me’, writes Hilary Wainwright

Debt relief for the hurricane-hit islands is the least we should do
As the devastation from recent hurricanes in the Caribbean becomes clearer, the calls for debt relief for affected countries grow stronger, writes Tim Jones

‘Your credit score is not sufficient to enter this location’: the risks of the ‘smart city’
Jathan Sadowski explains techno-political trends of exclusion and enforcement in our cities, and how to overcome this new type of digital oppression

Why I’m standing with pregnant women and resisting NHS passport checks
Dr Joanna Dobbin says the government is making migrant women afraid to seek healthcare, increasing their chances of complications or even death

‘Committees in Defence of the Referendum’: update from Catalonia
Ignasi Bernat and David Whyte on developments as the Catalan people resist the Spanish state's crackdown on their independence referendum