Friday, December 3, 2010

Reagan-Thatcher Supply-Sided (American) Capitalism and Ireland's Fall

You would think that Ireland should have seen its economic disaster coming early. There were plenty of prophetic examples from other parts of the world by the time Ireland adopted American style capitalism. New Zealand may have been one of the earliest examples. It adopted the Reagan-Thatcher conservative economic ideology in the early 1980s, ideology that is cited as the primary cause for New Zealand's economic collapse in this report(pdf). If you read this report, you'll see that New Zealand followed the typical GOP conservative, libertarian approach to economic and fiscal governing. And, it did New Zealand in. Even Britain, just across the Irish Sea, had experienced an economic meltdown in the 1980s because of Thatcher's follow-Reagan economic plan; small government, privatization of government services, low corporate tax, anything-goes market, voodoo economics. And, of course, there is Japan's 1990s economic collapse because it followed American style capitalism, although it didn't adopt the whole hog, but only the hindquarters, such as deep corporate tax cuts. That was enough to do its economy in. It turns out that in every country, including our own, where the American style GOP, libertarian capitalism is adopted, it fails. Here is when I stick my tongue firmly in my cheek and facetiously say, "Imagine that!" Poppy "read my lips - no tax increase" Bush was right. It is voodoo economics.

So, what's happening to Ireland. For one thing, Ireland's workforce is on the move again. I guess we can go all the way back to the Potato Famine to see that when things get to a point where people can't live, they leave where they're living for another, and hopefully, better place. Ireland seems to have that particular situation recur in its history over and over. And, it's a damn shame. It was only a few years ago that everyone, even Thomas Friedman, thought Ireland was the poster-country of prosperity, as in this column. Friedman said Ireland's booming economy in 2005 proved that Germany's more moderate and labor-favoring approach was wrong. In fact, Friedman says that Ireland's Irish-British model is "the way of the future." Some future! Now, in 2010, i.e., "the future," Ireland is nearly bankrupt while Germany is healthy and is one of the countries bailing Ireland out.

My Irish immigrant friend also passed this little blogger gem, "Ireland Then and Now," by Jonathan Chait, which suggests that Ireland's economic and fiscal policies caused the mess, which is true, except the article contradicts itself so much that's it boggles the mind. Chait starts his article saying, "It was not long ago that Ireland was every American conservative's beau ideal of a European state. Low taxes, low regulation, it was the perfect case study in the success of free market policies..." and "How has Ireland become a "Celtic tiger" (a la Hong Kong, Taiwan and Singapore, the earlier "tiger" economies in Asia)? Simple: By clinging for dear life to the coattails of the American economy. The Irish have basically set themselves up as a free enterprise zone for U.S. companies wanting a base in Europe, rolling out a business-friendly red carpet." Yep. That's what Ireland did.

What's really ironic is the references Mr. Chait uses to document "why" Ireland is falling. From 2003 through 2007, Chait cites Cato Institute and The Heritage Foundation reports, both conservative organizations, that gloat about Ireland deregulating and lowering corporate taxes (from 50% to 12.5%), attracting American companies and the "greenback," privatizing government services, and generally releasing the free-market dogs. Ireland, Cato and Heritage said, "was the model free-market state." It all was going along gloriously until Ireland hit the Great Recession wall, and then everything went to hell.

So, what did Ireland do? It did the opposite of what President Obama encouraged at the G-20 Conference in 2009. Obama encouraged "stimulus," but Ireland chose deficit reduction, following the Reagan-Supply-Side economic model of free markets, deregulation, let 'em fail, policies of the GOP Republicans in America. It tightened its belt, laid people off, eliminated government jobs and services. Even then, as late as June 2010, the Cato Institute was bragging about Ireland's 2009-2010 policies at the same time as it was deriding Obama's "stimulus" policies. But, the belt tightening didn't work. It created a worse condition, as most economists predicted when they said that the economy "needed stimulus" to get the economy moving before deficit reduction.

Ireland is now accepting bailouts from its European Union members so it can survive. And, Cato and Heritage are now turning on themselves, since reading on in Chait's blog shows that now that Ireland is deeply in trouble, Cato and Heritage are blaming Ireland's government big-government and big-spending for the problem even when its government followed the fiscal and economic policies that Cato and Heritage were bragging about only a few years before.

But, the EU bailout is not helping Ireland's people NOW. They need work NOW, not next year. They're leaving Ireland, as this Washington Post article notes. So, Ireland, following the grand Republican scheme is broken and broke and evacuating the sinking ship.

After our November 2nd Republican Coup d'etat, we're next. Stand by for heavy rolls. Perhaps Barney Frank's take on the the Republican's perspective on unemployment says it best. Thanks to my Irish buddy, I have this quote:

“The Republicans are joining the Central Bank of China in criticizing [Fed Chairman] Ben Bernanke ” Mr. Frank said Monday during an interview on Bloomberg Television. “This is really distressing to me.” ... Mr. Frank said complaints about currency manipulation from Chinese central bankers “is like being called silly by the Three Stooges. And then to have Republican leaders in Congress agree with those complaints is bizarre,” Mr. Frank said. “The Republicans are arguing that the Fed should not even be concerned about unemployment.”


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