OPINION:Claiming the market is undergoing a "temporary adjustment" presupposes that the fundamentals of capitalism are sound, writes FINTAN O'TOOLE
IN JUNE 2006, the monetary policy committee of the Bank of England noted that, while there "was a risk . . . of a more prolonged and pronounced correction",
"most market commentators have suggested it was likely to be a temporary adjustment".
In the same month, a survey of 617 London finance professionals - mostly fund managers from City banks - found that 70 per cent believed the recent market turmoil was "a temporary correction".
In March 2007, Hiroshi Nakaso, director general of the Bank of Japan's financial markets department, told Reuters that "there is no change in global economic fundamentals, and I think the recent adjustment is only temporary".
In August of that year, the bi-monthly research report of auctioneers CB Richard Ellis noted: " 'Negative equity a reality in Ireland'; 'House prices in reverse'; 'Up to 35,000 construction jobs will be lost'; 'Fears for major slowdown in Irish economy' . . . One would be forgiven for assuming that these headlines reflect what has been appearing in the Irish print media in recent weeks. However, all of these headlines have been extracted from our press cuttings files from 2001, when the Irish housing market last went through a temporary correction phase, which we firmly believe the current slowdown represents."
In the world of bankers, stockbrokers, property companies and the analysts who work for them, there is, up to the point of absolute crisis, an endless supply of optimism.
When times are good, they exist in a permanent present tense - the current boom is the natural order of things and there is no reason to imagine that it might not continue.
When the deep structural flaws in the system begin to emerge, they are thus invisible. What is happening must be one of two things - a "temporary adjustment" or a "temporary correction". Whether it is a correction or an adjustment doesn't matter - so long as it is temporary. Fundamental, long-term change is inconceivable.
For bankers, stockbrokers and estate agents, this is hardly surprising. Their businesses depend on the maintenance of confidence. The bad news, though, is that the Taoiseach thinks the same way. Brian Cowen loves the phrase "temporary adjustments" so much that he used it as soon as he became our leader. In May, when he went to Clara to bask in the adulation of his home crowd, he told them not be to be swayed by an "ill-informed commentariat": "I urge people not to be sceptical and cynical about the temporary adjustments that will be required, and I will not be found wanting when it comes to making those adjustments."
At the end of that month, he told the Dáil that "any temporary adjustments to avoid permanent damage to the economy have to be considered and dealt with". He liked the phrase so much that, in June, he told the Dáil that the "correct course" "involves making a temporary adjustment now to avoid permanent damage". In July, he altered it slightly to explain that the current slowdown was a "temporary period of challenge".
Aside from suggesting that the Taoiseach gets his economic analysis, and the language that goes with it, from the people who have done most to create the current crisis, all of this betrays a mindset that should alarm us all. The assumption that underlies the notion of "temporary adjustments" is that nothing big is happening in the global economy. This is the politics of the TV breakdown: "We apologise for this interruption of programmes. Normal service will resume shortly."
The analysis that has come from Cowen and Minister for Finance Brian Lenihan is that we're going through a little blip that will make things a bit tough in 2008 and 2009. "In the immediate future of this year and next year," says the Taoiseach, "there will be challenges to achieve the growth rates that we were previously expecting."
If that's what you believe, the prescription is obvious enough. Batten down the hatches. Cut whatever can be cut - the most vulnerable make the best target because they have least power to fight back. Maintain a stiff upper lip. Turn off Joe Duffy.
And lo, on some fine day in early 2010, we will emerge blinking into the sunlight of a bright new day. The market will have finished adjusting, correcting or whatever else it is doing. Global capitalism will resume as before. All will be well.
At the heart of this belief system is the mantra that "the fundamentals are sound". Free-market global capitalism is the best of all possible systems. Its only natural predators are "big government" (until last week, a very bad thing), high taxes on the wealthy, and the welfare state.
But what if the fundamentals are not sound? What if it is the very ideology of laissez-faire capitalism, with its focus on short-term greed, its lack of interest in social and environmental consequences, and its vulnerability to outright fraud that has created the crisis? What if we're seeing, not a temporary adjustment, but a tectonic shift in the relationship between the market and Government? That would demand a real adjustment in the mindset of leaders whose delusions seem, alas, anything but temporary.