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Less dogma, more dialogue needed in economics

By Peter McDermott

In a July 2007 speech to a gathering of trade unionists, Taoiseach Bertie Ahern said: "Sitting on the sidelines, cribbing and moaning is a lost opportunity. I don't know how people who engage in that don't commit suicide because frankly the only thing that motivates me is being able to actively change something."

When I was back in my native place, Dublin, the week before Thanksgiving – entirely coincidentally, advance teams from the IMF and the European Central Bank were also in town looking at the books – a friend pointed to that Ahern quote as indicative of everything that had gone wrong over the past few years. In the subsequent furor, he said, the taoiseach came under fire for his insensitivity about suicide, not the contemptuous way he dismissed alternative views about economic policy. It was just another example, in my friend's view, of the "poverty of thought" that's been endemic in Irish political life for decades.

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But then, the government had it all figured out. This is worth remembering in a time when the European Union, the European Commission and the European Central Bank are thought of the bad guys – with some justification certainly – as they build a firewall between Ireland's troubled banks and the rest of Europe. Nobody in Europe told Fianna Fail to underwrite Anglo Irish Bank two years ago. It was homegrown cronyism (rather than actual outright corruption) that led to that disastrous decision and several others like it recently.

When a decade ago the then Finance Minister Charlie McCreevy was warned repeatedly by EU officials that Ireland's property market was overheating, he told them to get lost. His country was a "special case."

We saw some of this know-it-all mentality in fellow Minister Mary Harney's "Boston or Berlin" speech in 2000. She said: "What really makes Ireland attractive to corporate America is the kind of economy which we have created here. When Americans come here they find a country that believes in the incentive power of low taxation. They find a country that believes in economic liberalization. They find a country that believes in essential regulation but not over-regulation. On looking further afield in Europe they find also that not every European country believes in all of these things.

"The figures speak for themselves. It is a remarkable fact that a country with just 1 percent of Europe's population accounts for 27 percent of U.S. greenfield investment in Europe.

"Political and economic commentators sometimes pose a choice between what they see as the American way and the European way," Harney continued.

"They view the American way as being built on the rugged individualism of the original frontiersmen, an economic model that is heavily based on enterprise and incentive, on individual effort and with limited government intervention," she said, adding that Ireland had "sailed closer to the American shore than the European one."

Well, the Common Agricultural Policy, which so benefited Irish farmers, was hardly an example of limited government. And I don't think Ayn Rand would have approved of the billions of euros in EU structural funds that helped kick-start Ireland's economy in the late 20th century.

And why is it a case of either/or? You can attract foreign capital by all means, but that hardly precludes other things. If, as Harney suggested, the Irish had become such rugged individualists, why didn't the country develop a few strong exporting industries? The reason perhaps is that that rugged individualism has much less to do with such things than planning and policy.

In contrast, the much larger German economy, which free-market ideologues would have seen in 2000 as sluggish and overly socialist, has cleverly found ways of doing well out of the rise of China.

That's one of the problems right now for Ireland. There are still German interests and French interests, which are different from, for instance, Spanish or Irish interests, particularly when we're talking about the euro. This is not how the World War II resistance veterans who proposed the European project hoped it would work out.

The United States of America, which first took shape in the 1770s and '80s, remains the federal model par excellence. The pity is that the increasingly deranged rightwing in this country has hijacked and distorted its founding values. If the Tea Party gang is really interested in a revolution, then it's of the type that George III, rather than George Washington, might have welcomed. For oligarchy is the inevitable outcome of continued reliance on trickle-down economics.

That last statement about free-market dogma might itself be labeled dogmatic. Fair enough, but let's have a discussion about it. The problem is that too much discussion is now considered "elitist." How did it get to this point? That Ireland once had an authoritarian church that promoted the "one true faith" might explain its anti-intellectualism (as well as its well-educated workforce). What's America's excuse? Money, of course - the root of all evil. Undoubtedly, the Tea Party's members are inspired by the Founders' message to an extent, but they're also influenced by the Russian-born Rand and Frédéric Bastiat (1801-1850), a French free-market extremist who saw any form of taxation as theft. Such ideas, though, are arguably against the spirit of the American Revolution, whose leaders promoted the concept of the "general welfare" in the Constitution.

Princeton University historian Sean Wilentz touched on this issue in a recent New Yorker article that discussed right-wing writer W. Cleon Skousen, whose ideas have had a major impact on Glenn Beck. He described Skousen's "The 5,000 Year Leap" (1981) as "calmly, ingratiatingly misleading" about the 18th century patriots.

Wilentz says that the Founders endorsed taxing the wealthy to support the general welfare. He writes: "Thomas Jefferson, for example, wrote approvingly in 1811 of having federal taxes (then limited to tariffs) fall solely on the wealthy, which meant that 'the farmer will see his government supported, his children educated, and the face of his country made a paradise by the contributions of the rich alone, without his being called on to spend a cent from his earnings.'"

A Democratic politician holding such views these days would be denounced as a socialist; a Republican would certainly face a primary challenge.