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Abandoned construction project in Dublin. (photo: infomatique on Flickr)
Poor little Ross Douthat, this analysis gig of his is so hard, especially while the fantasy world of conservatism continues crashing all around him when his primary job is to keep that fantasy alive, at great cost to the real world. Today we find little Ross taking on the crash of the Irish economy. In flailing about for an explanation of what has happened to this former poster-child of Chicago economics run wild, Douthat briefly flirts with an accurate explanation of what went wrong, but then pays proper homage to his overlords by discarding the painfully obvious truth in favor of yet another conservative talking point that is easily demonstrated to be false.
When examining Ireland’s rapid economic growth just prior to the collapse, Douthat of course rushes immediately to tout conservatives’ wet dreams about growth:
Free-market conservatives hailed Ireland’s rapid growth as an example of the miracles that free trade, tax cuts and deregulation can accomplish.
He then goes on to look at social changes as well before getting to a recitation of the actual problems Ireland now faces. This is a very revealing list:
The Celtic housing bubble was more inflated than America’s (a lot of those McMansions are half-finished and abandoned), the Celtic banking industry was more reckless in its bets, and Ireland’s debts, private and public, make our budget woes look manageable by comparison.
Gosh, do you suppose that there might be any connection between deregulation and reckless bets by banks? Or how about a connection between tax cuts and government debt? Nah, little Ross can’t be bothered by those possibilities. He’s found the real problem for Ireland:
But it’s the utopians of European integration who should learn the hardest lessons from the Irish story. The continent-wide ripples from Ireland’s banking crisis have vindicated the Euroskeptics who argued that the E.U. was expanded too hastily, and that a single currency couldn’t accommodate such a wide diversity of nations.
Yup, it’s that nasty move toward “one world government” represented by the EU that is really to blame for Ireland’s woes. Poor little Ross can’t trouble himself with considering that if this explanation were true, all of the EU would be suffering just as badly as Ireland. So where are the staggering government debts in those EU countries that didn’t slash their taxes? Where are the failing banks in the EU countries that maintained more regulation? Maybe Ross can get back to us on those points.
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Douthat is also mistaken about Ireland’s “public” debt. The Irish government ran balanced budgets or surpluses in the years before the crash. The current government deficits are a function of the economic crash — lower tax revenues and higher safety net spending — and from having to bail out its irresponsible banks, which are likely still insolvent, hence the need for even more bailouts via more borrowing from the European Central Bank and IMF, unless they’re prepared to default or force creditors to take a haircut (Merkel’s wish) — which they’re not. The Irish govt now owns about 90% of the largest banks, so if the banks are insolvent and at risk, bond holders see the government as risky too and have been pushing up Irish cost of borrowing.
And Douthat doesn’t get the problem with being on a common currency, but not having a common fiscal/budget framework. So Ireland can’t fix it’s problem itself the way a nation with its own fiat currency might; so it’s become a ward of the stronger Euro nations, or rather, of their central bankers.
That distinction is important, because if you see the problem as Ireland giving up it’s political sovereignty to Europe, you’ve missed the point. This is about economic/monetary policy. This is more like joining the Articles of Confederation, without realizing you need a Constitution that consolidates federal budget and monetary authority that functions in the national interest. But of course, Douthat can’t see or admit that, because to say that would be to undermine the Republican attacks on federal deficit spending during a recession — e.g., we should be helping states get through their own state budget crises — and Sarah Palin’s attacks on the Federal Reserve’s QE. IOW, the Republican policy is to make the US more like Ireland.
Douchehat discards the truth? Say it ain’t so!
The first farmers to settle in the Old West were called “sodbusters.” They plowed up soil that had taken tens of thousands of years to accumulate in the semi-arid landscape. Rainfall was insufficient for farming without irrigation, but due to the stored moisture in the soil that wasn’t obvious for a few years. They even came up with a theory: “Rain follows the plow.”
I think something similar happens when Chicago School economics plows up a mixed economy. It seems to work at first, until a few years down the road people realize the apparent prosperity is really just a one-time bump. If you start from a position of high marginal taxation, the Laffer Curve actually produces results at the outset. Then the law of diminishing returns sets in.
Looks like this is moving quickly. the government may be forced to call new elections, the EU central bankers may force a downsizing of Irish banks, and junior creditors may have to take a haircut. . . . Negotiations ongoing. See, Financial Times coverage.
http://www.ft.com/indepth/ireland-fiscal-crisis
You’re wrong when you say:
Read it again.
This is not touting conservatives’ wet dreams about growth.
Thanks, Scare. That is of course a hallmark of the Shock Doctrine: the changes have to be made very quickly at the very height of the crisis.
Asshat is a total disgrace. If any further proof is need of what a horrible newspaper the NYT is, he’s the nadir.
It was the first explanation he tried and the only one he didn’t later discard or discredit. How is he not touting it?
I was afraid the wacky right would use Ireland’s woes to further advocate their corporatist utopia.
Gosh, do you suppose that there might be any connection between deregulation and reckless bets by banks? Or how about a connection between tax cuts and government debt? Nah, little Ross can’t be bothered by those possibilities. He’s found the real problem for Ireland . . .
I grew up in a jewish neighborhood, all my friends were jewish, the entire school seemed jewish save for a few kids
I grew up thinking the jewish religion was the majority, it was simply unbelievable when I found out we were a minority, it challenged everything I knew
these idiots actually believe;
1) there is such a thing as “a free market” (there is not, it’s a fantasy promoted by people who don’t want to pay their own bills)
2) that even if it existed or they tried to make it exist that it could possibly work
they are tied to those “truths” and simply will not believe all they were taught, all they invested their rhetoric around, is not only false but rediculous
Yep another country bites the dust and soon will become a Baltic state. I’m sure uncle miltons plan will finally become home to Amerika, how sad. Thanks Jim
Unregulated, jungle law, free market capitalism is almost as dangerous as communism. Whenever you try it, it leads to disaster. That happen with Herbert Hoover in the 1920s; it happen to George Bush in 2000s, and it is happening to poor Ireland.
Left to their own devices, capitalists will destroy any nation that they control. We are going to have to learn that lesson again, the hard way.
What is scary is that the Ross Douthat types who are locked into the conservative fantasy mindset have company….. Obama, who appears to have swallowed this fantasy as well as Chicago economics whole.
there’s the thing wayne, you cannot possibly even have a “free market”
once you use a monetary system you are using regulations, once you have ownership you are using regulations, once you have a court system you are using regulations
when they say “free market” what they really mean is “regulations are fine as long as they help us gather profit, they are not good when they force us into paying our own bills”
that’s what “free market is code for
With a default nod to the fdl team, if Douthat wants to do analysis he should look to the likes of Froomkin. See today’s Two Lies piece at HuffPo [http://www.huffingtonpost.com/2010/11/22/the-two-most-esssential-a_n_786219.html].
Are there no longer link capabilities in FDL or MyFDL?
No. Douthart takes aim at all three explanations, especially the last.
Jon Walker has a fresh cross-post already in progress: Yale Economist: If the Economy Improves, Obama Wins
Is Douthat’s article evidence of how belief systems encourage blindness and incapacitate thought? Is it the sermon of a member of the priestly class delivered to incite the congregation to keep the faith? (Calling the situation in Ireland “Paradise Lost” tells us something.) Or both? As most ideologues tell us, all benefits accrue from adherence to the belief system while all detriments are a result of straying from the One True Path after being tempted by Satan at the crossroads.
I’m trying to work up a simple one sentence explanation of what has happened recently as a rebuttal to the unmitigated good that is supposedly unregulated, free market capitalism, and the nonsense, in this case, that points to Ireland’s previous “growth” as an example of the fruits of that system when properly enacted. Attempt #1: The boom just prior to the current economic collapse was based on only the pretension of growth as a result of speculative investment fraud and funded by money no one really had. Suggestions?
I like the part where he says that wearing condoms led to McBubble. I didn’t even know doubt that ass-hat was catholic. You know you’re in trouble when you’re coining labels like “utopians of secularism.”
I get the feeling Ross Hog wishes he wasn’t supposed to be the new Brooks right when the smoke machine is on the fritz and the mirrors are shattering- seemingly of their own volition.
Do we need any further proofs that lies kill?
I’m sure the right is looking for the Irish equivalent of Barney Frank or the Community Reinvestment Act to explain the Irish real estate bubble.
If you knew any Irish people over the past 10 years you know that the Irish economy was nothing but a real estate bubble with an economy attached.
Nope, try again. For the free-range capitalists, he is merely blaming the bust on the boom while giving the policies that created the boom a free pass. Not so with the other policies, which he attacks directly.
Thanks for the helpful analogy. To add to it a bit in regard to the unilateral application of Chicago School economics and its results, it wasn’t just the benefits of being able to plow new soil that resulted in the initial economic “bump” and subsequent misunderstanding of the sodbusters. An insistence on Eastern farming methods and crops incompatible with the Great Plains as well as the accident of some uncommonly wet years conspired to create the social and economic climate that resulted in the Dust Bowl. Farmers were tapping into a fund (new, wet soil) that couldn’t support the agriculture and economy they planned to build on it.
Insanely enough—and here’s a comparison to the ideology we see in Douthat’s article—most farmers in the Great Plains refused to modify their behavior, even in the face of tangible reality to the contrary. In response to dropping crop prices, many plowed up even more land, precisely one of the things that caused the drop in prices to begin with. But if rain follows the plow, that article of faith says that you must keep plowing. And almost none of them listened to the advice of federal government soil conservationist Hugh Bennett that might have saved them. So the unregulated market helped decide the outcome, to almost everyone’s detriment. Not only did the behaviors and beliefs of farmers result in the destruction that was the Dust Bowl, but since then the Ogallala Aquifer is being drained to reproduce the agricultural environment that never existed to begin with.
You are slipperier than an eel.
First Douthart didn’t “discard or discredit” the capitalist option and then it’s: well, he might have done, but he didn’t attack them directly.
And that gets you to a “tout” and “promote conservative myth.”
**From ‘not attack directly’ to ‘tout’ and ‘promote.’**
Jimbo, you win. I give up. Time to move on.
I agree: Douthart on the wacky right is the soul of evil.
The most amazing part of that column is how Douthat spreads the blame. Irish “progressives,” and any progressive who observed the “Celtic Tiger” phenomenon, were always pretty clear that the growth was totally unsustainable, corruption was rife, and that the money was mostly only going to a narrow slice of the population. And the response was to call leftist critics spoilsports and worrywarts, and anyhow ignorant about how incredibly low corporate tax rates made everyone automatically rich!
And now you have Douthat, who knows nothing about Ireland except having looked out a car window at it, wagging his finger about how “progressives” should have a sad over the waning influence of the Church!
Gobshite.
Yes, I agree that Ireland’s boom and bust is the result of neoliberal economic bubble policies.
However, from what I’ve read in the Irish press, once the Irish government nationalized their TBTF banks–in other words took over their portfolio of rotten assets–the government indeed lost sovereignty to the EU’s European Central Bank.
In other words, the debt of the Irish government is primarily now composed of bank debt which is owed to primarily German and British banks.
The ECB is another IMF type of neoliberal institution, imposing austerity on the Irish population through control of its government’s budget.
So, if Douthat is saying that the loss of sovereignty through EU bankers is a bad thing, I agree.
Hmm, what other economy could be so described? Thinking very hard…The US’?
Thanks for playing, anyway, Don. But no, I will not give in to any attempt to frame Douthat’s “work” as anything approaching an even-handed analysis of the world. He always will be coming from the angle that the corporate overlords can do no harm and progressives are an evil that is spoiling the world. Once you have those starting conditions, all of his “analysis” is clearly just drivel he churns out to cash his paycheck.
Dean Baker suggests the Argentinian solution (commondreams.org) and the BBC is reporting that the Irish opposition is calling for an election. The Irish just might have their Irish up.
Yeah, financial deregulation is the primary culprit.
That’s not to say that the EU’s monetary union is viable. It appears to be more of a banker inspired looting operation. In other words, nothing has gone wrong, everythings working as intended.
The EU project was a good thing back when it was focused on coordinated economic development. It’s been an absolute disaster since Maastricht. They’re turning the clock back 350 years.
What a shame that Obama spent so much time in Chicago… he’s been contaminated by its odious school of economics.
Tweeted & Facebooked!
Interesting! Thanks for the heads up. The UK Guardian also picked up Baker’s story.
http://www.guardian.co.uk/commentisfree/cifamerica/2010/nov/22/ecb-ireland-bailout-argentina
Argentina’s President Kirchner, the man who saved Argentina by saying NO to the IMF, died last month.
http://www.counterpunch.org/weisbrot10282010.html
No kidding. Thomas Ferguson recently pointed out that Obama’s historical gaff regarding FDR is based on that crowds fake history of the FDR era.
http://www.newdeal20.org/2010/11/18/the-story-behind-obamas-remarks-on-fdr-27539/
” But it’s the utopians of European integration who should learn the hardest lessons from the Irish story. The continent-wide ripples from Ireland’s banking crisis have vindicated the Euroskeptics who argued that the E.U. was expanded too hastily, and that a single currency couldn’t accommodate such a wide diversity of nations.”
No EU no bailout World financial markets panic. The day the EU can’t bailout a member country or America can’t bailout its banks then Gold goes through the roof.
Welfare for the rich I admit is not my dream of socialism.
Look at Forbes Magazine Ireland, Estonia, Latvia any country with few regulations and or a flat tax was hailed as business paradise by Steve Forbes.
Today its old Europe with government regulation that is bailing out these countries.
Douthat much like Peter has renounced Jesus/free trade:)
Have you seen “My Man Godfrey”? I think it really captures that era that FDR was trying to cure.
Yep, I love the old films.
FDR did a fantastic job. But it does appear that we have that era to cure once again.