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Posts Tagged ‘Economics’

Left/Right Divide

10 January, 2011 Leave a comment

This was published on Tea and Toast, in response to an article by Derwin Brennan

Derwin Brennan last week criticized the description of politics in terms of left and right, celebrating the centrism of Clinton Democrats and New Labour, as well as David Cameron’s compassionate conservatism (a term used before him by George W. Bush). But even if we can concede that the words themselves are limiting, we shouldn’t fear a debate along these lines. Already we are seeing in the support of parties that the divisions in Irish political are shifting more to a left–right division, and this will likely be accentuated in the coming general elections, and this will allow the public to understand more easily how different parties frame their understanding of political difference.

One of the interesting aspects of the reactions to the credit crunch and subsequent recession worldwide was how, broadly speaking, those on either side of the political divide framed a narrative that vindicated their own outlook. Those who had long spoken against the excesses of the market focused on the excesses of the capitalist system, whereas those who saw a problem with unwieldy government intervention focused on the overburdening public deficit and how the history of bailouts had eliminated the risks that should have been part of a capitalist system.

It is true that the use of the terms left and right can be quite reductive. People can be usually sure what is meant by left-wing, but if someone is described as right-wing, it is not as easy to tell where they stand on a range of issues. The crucial division is really whether one believes problems are best served by government or by individuals. It is quite possible to hold that because of the dispersed nature of information throughout society, individuals cooperating freely can handle economic decisions better than government, while respecting people’s decisions in their private lives, allowing all couples celebrate their relationships equally, and being suspicious of clerical influence on politics. Indeed, many liberals would in fact see this as naturally coherent.

The crisis in Ireland has awakened the realization the size of government is a serious question for debate. Our budgetary problem occurred because we did not properly realize that there are choices to be made in politics. The boom years have been characterized as high-point of capitalism, in part because of the stated ideology of some of those in power. But despite the supposed economic liberalism of Charlie McCreevy and Mary Harney, many elements of what happened during their period in government made a mockery of capitalism. Whether it was favours granted to public sector unions through social partnership, or the great offenders in semi-state inefficiency and waste of FÁS and the HSE (incentally, in Mary Harney’s two departments of Enterprise, Trade and Employment, and then Health and Children), or the aim of taking some people out of the tax net entirely, policy suffered from an inconsistent approach to government income and spending.

The debate on the role of government is important. We should not be fooled by vague centrism that we can avoid the choice between low taxes on the one hand and government provision of services on the other. The avoidance of this question led many to assume that taxes could be lowered while spending increased indefinitely. There are points along a scale where this effect is clear, such as the increase in revenue when capital gains tax was halved in 1998. But with spending increasing, the government found itself trapped by its commitments and then found that it could rely on a particular industry. It ignored the model of a free market, which would remain neutral between different industries, and supported the property bubble through incentives such as mortgage interest relief. Neither side of the divide on the political economy could have supported such a system; while one would have argued for lower government spending, the other would have argued for higher taxes. Either one of these would have been less resistant to boom and bust.

Yes, when we consider political positioning of parties, we mustn’t assume that there is a single axis on which we can usefully describe them. And parties do change their positioning over time. But if we decide to move away from thinking in ideological terms, we miss some of the important lessons of the last three years.

Shopping in Newry

1 January, 2010 Leave a comment

Fair play to President Mary McAleese. We needed someone in high office to break the trope that there’s reason to question the patriotism of those who travel up North to go shopping, in some sort of pretence that they are a factor in our continuing economic trouble.

She spoke on RTÉ (Conversations at the Áras at 14m 25s) this morning, praising the choice Irish consumers have about where they shop as members of the European Union.

We did not become successful when we were by having an insular outlook, nor did any country. If no one was to shop up North, the primary effect would be to hurt the household budgets of families here.

Rather than being envious at the custom of business in other jurisdiction, we should take this as a signal to lower costs here. Without that, we won’t become competitive, and can’t expect to recover as we should.

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