The Irish elite believes the comforting myth that MacSharry's cuts revived the economy. In truth, we just got lucky, writes FINTAN O'TOOLE
EXPECT THE fashions next spring to be for shoulder pads and big hair. Expect long gloves and fishnet stockings. Expect to see men with designer stubble and the arms of their jackets rolled up. Expect mullets and dangly earrings, scrunchies and bangs. Expect to hear Madonna’s Like a Virgin and Michael Jackson’s Thriller blaring out from the big boomboxes that people will be carrying everywhere.
Why? Because we’re back in the 1980s.
If it seems weird that the people who keep popping up to lecture us about how quickly the deficit must be cut are Ray MacSharry and Colm McCarthy, Peter Sutherland, John Bruton and Michael Noonan, you just haven't realised that we're living in a version of the TV drama Life on Mars, in which the main character suddenly finds himself shunted back a few decades.
It’s not just the externals in which the 1980s vibe is so obvious – mass unemployment, large-scale emigration, the fatalism, the impotent feeling of living in a failed State. More importantly, it’s the narrative that the Irish elite is now telling itself.
The story goes like this. In the 1980s, we let the public finances get out of control, the economy slumped and everyone was in despair. Then, Ray MacSharry started to slash and burn and Alan Dukes gave him support from the opposition. Hospitals were closed, old people were put through hell, kids were crammed into bigger classrooms. But after a few years, everything was all right.
In fact, not only was everything all right, it was bloody marvellous. Far from damaging the economy, the cuts gave it a kick start. Confidence returned. The boom started. The Celtic Tiger was born and the young people who had left in their droves came home. The tough medicine transformed the sickly patient into a strapping hulk.
This is the movie that those who matter are playing in their heads. It is comforting because it has a happy ending. The assumption is that if we replay the movie, the ending will be the same.
Unfortunately, much of this narrative is mythical. The late 1980s was not a period of real reform in the management of the public finances. The authorities (including the Central Bank and the Department of Finance) winked at massive and organised tax evasion by the wealthy while ensuring that the brunt of the cuts would be borne by the poor and vulnerable. Huge amounts of public money were put at the service of beef baron Larry Goodman – hardly an example of “fiscal rectitude”.
Much of the story is based on magical thinking. It rests on the classic logical fallacy, post hoc ergo propter hoc: X happened after Y, therefore X was a result of Y. “We cut the deficit and then we got rich” translates to “we got rich because we cut the deficit”.
Luck had an awful lot to do with it. The EU doubled its structural funds in 1989. This meant that spending could continue on Irish infrastructural projects – all that happened was that someone else was paying for them. We had, in other words, a stimulus package alongside the cuts. At the same time, the lead-up to the Single European Market created a surge of investment from abroad, especially the US. The fall of the Berlin Wall and the opening up of the Chinese economy propelled a whole new phase of economic globalisation. We were heading, though we did not know it in 1987, into the greatest expansion of global trade in history. American companies invested more money abroad in the 1990s than in the previous four decades put together.
How likely are these factors to be repeated now? About as likely as Michael Jackson appearing live at a venue near you. The German taxpayer does not seem to be in the mood to pay for bridges in Bohola and sewerage in Sligo. The process of globalisation is no longer American-led. It is possible that the US economy is on the cusp of a fantastic boom which will massively increase US investments in Ireland, and it is possible that the global economy is just revving up for a spectacular takeoff. It is also possible that Brian Cowen is the greatest orator since Demosthenes.
The point is not that the deficit didn’t have to be cut in the late 1980s, or doesn’t have to be cut now. But the rabid enthusiasm for taking more and more money out of a badly stalled economy – “I’ll see your €4 billion and raise you €3 billion” – is rooted in the delusion that the 1980s story can be retold now.
The only thing that we can learn from the 1980s cuts is the long-term consequence of leaving justice and decency out of the fiscal equation. By choosing to impose the burden on those on middle and lower incomes and letting those with money stash it away safely, the cutters of the 1980s endorsed public amorality and cut the bonds of mutual obligation on which a decent State depends. And everything suggests that they plan to do it all again.
Fintan O'Toole will discuss his new book Enough is Enoughat a public forum in Liberty Hall theatre in Dublin on November 4th