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.