So Britain has gone back into negative growth, fairly conclusive evidence that budget-cutting your way out of recession is like clearing a path through the forest with a flamethrower.
Yet in the eurozone, we seem determined to repeat the error. The forthcoming Fiscal Compact is a legal undertaking not to go into budget deficit. A good thing in principle; of course a country should, in the good times, be creating budget surpluses that will see it through the bad. That’s just prudent. The thing that appears to be escaping them here though is that these are not the good times. These are, in point of fact, the really, really bad times.
We can sign a treaty to promise to balance the budget, sure. What we cannot do, is balance the budget. Not without the wholesale destruction of not simply welfare and health systems, but everything. Policing, education, investment, the fabric of the state.
So are we signing this treaty with the intention of breaking it? Perhaps it is meant purely as a pro forma sop to the markets, Or indeed to the German taxpayers, who seem to forget that they profited vastly from the eurozone boom and so have to be wheedled and cajoled now that it’s come to payback time. “Yes yes, of course everyone is going to balance their budget.” That doesn’t seem a proper way to go about things.
I don’t mean that a fiscal compact is a wholly bad idea. If we’re going to share a currency there have to be some rules. But remember, we had rules. We had the Stability and Growth Pact, of which this is merely a sterner reiteration. Did we break those rules in the boom? Nope. Right up to the Crash of 2008, we ran a surplus. France and Germany broke them, reckless to the effect that had on other countries. They benefited from the conditions that drove our economy to meltdown, and yet somehow it’s we who have to suffer again. This new treaty is the Big Two’s more rigorous attempt to discipline themselves, but what is merely chastisement to them may beat us to death.
Here in Ireland, our Supreme Court has judged that this compact amounts to a new international treaty with constitutional ramifications, and must be put to the people. This is a great aspect to our Constitution, but it means we’re yet again going to have a fraught and confusing public debate. Highly technical and highly political, the text of the treaty is hardly going to make for clear and balanced discussion. So it’s unlikely to be for the right reasons whichever side wins.
The Yes camp will be monging fiscal fear: If we don’t pass it, we won’t be able to raise the money we desperately need to keep the country afloat. But wait, in order to borrow money we should pass a law against borrowing money? It doesn’t make a lot of sense. The No camp on the other hand will be upholding our economic sovereignty. A brave stand, which has been likened to defending the virginity of sex workers. There is only one economic sovereignty, and it’s called “having money”.
At the moment, it looks like we’ll pass it. The incorrect arguments of the mistaken pragmatists will be more persuasive than the incorrect arguments of the mistaken idealists. But it is not too late to change direction. We have a chance here to make a real and lasting difference.
Sure, the last time we turned down an EU treaty they pretty much gave us another chance to say the right answer. All we really did was delay it. But this time, a delay could make a difference. The cavalry – in the form of Hollande winning the French Presidential election – might just arrive in time. He has announced his intention to reopen the treaty, and at least take some of the emphasis off austerity. (Oh those crazy reckless Socialists.) Meanwhile, the other eurozone countries have a chance to absorb lessons like that coming out of the UK.
So Ireland could play a key role here in saving the EU from a tragic, destructive mistake. Enforcing balanced budgets in the long term is a sensible idea. Enforcing balanced budgets during an already murderous recession is not economics, it’s applied sadomasochism.
Let’s Get Fiscal: Women’s perspectives on the Austerity Treaty
Anyone in Dublin or Galway interested in a public meeting on austerity policies, with particular reference to their impact on women? You can attend the event physically at Feminist Open Forum, Central Hotel, Exchequer St, Dublin, or by live streaming at the One World Centre, 76 Prospect Hill, Galway.
Tonight, THURSDAY 26 April at 7pm.
- Yes, Austerity in Europe is Making a Major Fiscal Crisis Not Less But More Likely. Why Do You Ask? (delong.typepad.com)
- FEMINIST OPEN FORUM Let’s Get Fiscal: Women’s perspectives on the Austerity Treaty (cedarlounge.wordpress.com)
- Paul Krugman: Austerity And Growth, Again (Wonkish) (mgptpt.wordpress.com)