Fiscal Discipline: Who’s Gonna Feed Them Hogs?

I posted this response to Philip Lane’s article in today’s Irish Times titled ‘There are too many downside risks to relax fiscal discipline now’

‘The first thing to note about Philip Lane’s article is that it doesn’t question the legitimacy of any part of Ireland’s current debt burden; it simply proposes actions to be taken in order to pay it off.

In short: more cuts to public spending to pay off private banking debt.

The ‘commitment to fiscal stability’ Lane wishes to see the government maintain involves greater instability for the public, in terms of access to decent health, education and welfare services. It also involves greater instability through diminished wages across the board, via the so-called ‘demonstration effect’ that cuts to public sector wages are intended to produce, and the consequent fear of losing one’s job or not getting one.

The rationale behind Lane’s proposal is to gain the approval of ‘market sources’ and ‘international analysts’, thereby keeping public debt costs down. To simplify: if the government attacks wages and living standards and continues to sell off state assets and ignores pressure from the public, the markets will lend it money. The outworking of this position, however, is that ‘markets’ are sovereign, not the government.

The best the government can do, according to Lane’s position, is force the public to obey the dictates of the markets in such a way that the harm they inflict is minimised. The Federal Reserve Bank of Dallas CEO Richard Fisher referred to financial markets the other day as ‘feral hogs’: Lane’s counsel: obey the hogs!

Fine. But If the government is effectively an agent of the markets, doesn’t that pose a problem for democracy? In nominally democratic societies, a tacit assumption of policy advice in public is that governments carry out the will of the people. Well, what if governments are carrying out the will of the markets? Under such circumstances, to lend the impression that things should carry on as normal, that the budget routine is same as it ever was, that representative democracy’s legitimacy under Troika rule is unquestionable, that the debt must be paid, that no new political institutions are needed, that the public should be ignored, and so on and so forth, is to act, in the final instance, as little more than an advocate for the feral hogs.

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2 Comments

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2 responses to “Fiscal Discipline: Who’s Gonna Feed Them Hogs?

  1. Al

    I take it from this post (and in general) that you would like to see two things:
    1. A state which exists with enough money to pay for social services
    2. A state which, to the greatest extent possible, is free to spend money in whatever ways it wishes.

    It is always possible, *in principal*, for the state to be (2). It could choose to spend its resources as it wishes. But such spending would likely have to come from the state’s own pockets, as markets won’t lend to the state if they think it won’t be able to pay the money back; and it’s a given that they would think this were we to spend the money entirely as the electorate would have us spend it.

    The reasons the state doesn’t choose to be (2), then, is because it cares about, needs to and should pay for vital public services. And it cares about and needs to pay for those services to the extent that it’s willing to give up a little bit of sovereignty, in practice, to achieve this. So it’s striking a balance between having enough money, and having a ‘legitimate’ amount of sovereignty. Committing to fiscal stability means we end up with enough money to be able to keep paying for the things we need.

    This is what Prof. Lane’s article is getting at. It’s a purely pragmatic article, as I’m sure you know. I would agree with you if you were disagreeing with Prof. Lane solely on a principled basis, that it shouldn’t have to be this way, because markets should be better at assessing country’s financial sustainability and less reactionary to lots of things. They absolutely should be, but they’re not (well, yet).

    But you say that “the best the government can do, according to Lane’s position, is force the public to obey the dictates of the markets in such a way that the harm they inflict is minimised.” Are you suggesting that, in practice, the government could do anything different while simultaneously having enough money to pay for public services? What do you think it could do?

    • Thanks for the thoughtful comment.

      Whilst I wouldn’t agree that there is such a thing as ‘pure pragmatism’, since pragmatism in policy terms always entails political judgments about what is and what ought, I do accept that Lane’s article is based on an analysis of the situation in terms of the political institutions that presently exist, and what the range of possibilities are for those institutions, given the constraints imposed by market actors.

      What is more, I’m prepared to accept that given the terms of his own analysis, he may well be right, viz. you want a state with the maximum spending capacity and room for spending on social services, don’t you? Well, do this!

      My concerns however, are a) that the presentation of the analysis in such ‘pragmatic’ terms –as a generalised practice, not just in Lane’s article- in fact aids the pursuit and imposition of a particular political and social model, and it forecloses on the exploration of other possibilities; b) the consequences of such ‘pragmatism’ substantially impact the material constitution of the society, such that what is presented as a desirable and obtainable outcome –greater spending on social services, say- becomes less and less likely the further those policies are pursued.

      What becomes more and more likely, instead, is the replacement of social services with charity, the privatisation of public institutions, and so on. In short, the erosion of the possibilities for a democratic society, whether in terms of how political decisions are made, or in terms of the access to economic resources required for political participation.

      So, I think you are right, that the root of my criticism is the sense that it shouldn’t have to be this way. I think that changing what governments do in practice depends on fundamental political changes to the material constitution of European societies, and that this requires extending politics beyond the immediate ‘pragmatic’ policy concerns of what Boaventura de Sousa Santos calls ‘the politics of the ongoing bailout’. I think it depends to a far greater degree on popular mobilisations, inside and across European states, from the periphery to the centre, and a radical challenge to institutions that treat economic decision-making as beyond the realm of politics. Needless to say, I do not expect Michael Noonan to spearhead this process, under any circumstances. What interests me is how to arrive at a process of democratising states and international infrastructure. It might be a dim possibility, but it strikes me as the only one worth pursuing, since the alternative, as far as I can see, is barbarism.

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