June 4, 2006
Government throwing petrol on our have-it-now obsessionPosted in Celtic Tiger · 6 comments ·
Have you heard the ad for food poisoning?
Well, itï¿½s not actually for food poisoning, rather how to avoid food poisoning. One sunny weekend and there we are, the Paddies pretending to be Afrikaaners, up to our gills in gas-fired barbecues on our new varnished decks – poisoning each other.
Only in modern Ireland would the state have to pay for a radio ad instructing us to incinerate our sausages, lest we spark an epidemic of nausea over the June bank holiday. It is the culinary equivalent of telling an aspirant nation that barbecued chicken wings donï¿½t come medium rare.
Oh, the mortification!
But then again, only in Ireland would the state top up peopleï¿½s savings with a scheme like the SSIAs which will have the effect of kicking us into top spending gear for the next 12 months – when itï¿½s the last thing the economy and society needs.
So what are you going to spend your SSIAs on? What about a new plasma screen for the World Cup? Or maybe a Neff double-doored fridge, or a Viking barbecue for the season, or possibly a new hardwood deck for the back garden?
Maybe you will tackle the bathroom, rip out that cheap shower and replace it with a wall-to-wall wet slate room with double headed shower? Or possibly that 06 Kompressor with ice blue headlights, which would put that smug account manager down the road with the 3 series in his place?
The SSIAs are further lubricating the consumer neurosis that has gripped the nation in the past few years. One of the problems with economic analysis these days is that it is difficult to know where economics stops and mass psychology begins.
When it comes to spending the SSIAs, it is psychology that predominates – because to rate in the New Irish Dream, to achieve parity of esteem, you have to have it all and have it now. No one can overshadow you, and if they do, it canï¿½t be permanent. If it is permanent, you are a loser and therefore not worthy. So the collective psychology of the nation is one of anxiety: where everything one person does, buys, wears, learns or accomplishes, sparks a reaction in others.
Not only because these things look, feel and smell better, but because they confer status. This psychology impacts on the economy in a simple way.
The economy – of which consuming accounts for 68 per cent of the total, or more than ï¿½75 billion this year – operates like a large consumerist version of one-upmanship.
Every purchasing decision you make affects the buying behaviour of your neighbour. It might be prompted by a fleeting glance at a BTs bag, a lip-gloss, a suggestion in a magazine or a yearning to be somewhere else, but the process of wanting to acquire things is both definite and real.
Increasingly, Irish people are beginning to group into small tribes defined by the type of people they believe they are and the type of products they believe represent that tribe. So the simple urge to spend, which used to be defined by the instant shopping moment of: ï¿½ï¿½Oh, I like that,ï¿½ has been replaced by the more complex: ï¿½ï¿½Oh, I am like that.ï¿½
This process – half-psychological, half old-fashioned snobbery – is contagious.
Hierarchical shopping is like a chickenpox virus in a creche: when one kid gets spots, they all do. It is into this inferno that this government has decided to chuck in a few jerry-cans of petrol in the guise of the SSIAs.
This week the first of the ï¿½free moneyï¿½ hits the streets. Given the psychology of the nation, never in the history of modern economics has there been amore harebrained, half-baked, dumb-assed initiative.
The SSIAs are straight out of the Eva Peron school of economics. In the late 1950s, when Evita and her Peronist party had their backs to the electoral wall, she devised a novel way of enhancing her popularity in the slums of Buenos Aries. She hovered over the shanty towns in a helicopter and showered the inhabitants below with pesos.
ï¿½Helicopter moneyï¿½, as it was known, was a favourite Peronist trick, and it worked in the short-term. In the longer term, however, it was a clear indication that Argentina – a global tiger economy for the first half of the 20th century – was going down the tubes.
Beginning with the populist Peronist regime, Argentina went from being one of the top 20 richest countries in the world, to the sad basket-case it is today, characterised by recurring economic crises.
While not as evocative as Bertie hovering above Dublin in a helicopter, the SSIAs serve the same purpose. Over the course of the next year, an estimated ï¿½18 billion will rain down on an already overheating economy. Of this cash, ï¿½4.5 billion will be the ï¿½freeï¿½ money element.
Now letï¿½s think about this for a minute.
This yearï¿½s increase in government spending for all health, education and social services was less than ï¿½4.5 billion. So the government is giving us more money for free to spend in an orgy on ï¿½frivolousï¿½ spending than it targeted for ï¿½worthwhileï¿½ expenditure in the budget.
Iï¿½ll let someone else argue on the merits of this type of behaviour, but what concerns me more is the idea that the extra money is ï¿½freeï¿½.
Many commentators and financial advisers have constantly repeated the mantra that youï¿½d be mad not to take up the SSIAs as the money was giving you ï¿½1 for every ï¿½4 that you saved.
In fact, the words ï¿½SSIAï¿½ and ï¿½windfallï¿½ seem to go together. But when I looked up the definition of windfall in the dictionary it tells me that the word means either (a) an apple or other fruit blown from a tree by the wind or (b) a piece of unexpected good fortune, especially a legacy.
But there was nothing fortunate about the SSIAs – they were planned. Neither is there an old national maiden-aunt who has just croaked, bequeathing this extra cash to us.
On the contrary, the SSIA is a tax. It should be called the SSIA ï¿½taxï¿½, not windfall.
Where do you think the money is coming from? Do you think that someone simply printed the extra euros at no cost?
No; the cash has to come from somewhere.
Somebody paid for your SSIA – there is no such thing as a free lunch, or a windfall for that matter. And when people glibly say that ï¿½ï¿½the government is giving you 20 per cent of your savings for freeï¿½ï¿½, stop and think about that statement for a second. The government does not have any money of its own. It does not generate wealth. So it is our money and the state only acts as a conduit.
The state, therefore, is little more than a large recycling machine. Every four years we go to the polls to determine (a) how much of our money is recycled and (b) to whom it is recycled. The SSIAs are part of this recycling process, and the payment doled out this week is the beginning of a monumental transfer of wealth from one section of society to another.
So who is paying? First and obviously, those one million workers who did not take out SSIAs are paying those who did.
It is impossible to tell exactly which half of the electorate took out SSIAs.
Were they taken up by the wealthy at the expense of the poor? As there is no hard data, we can have no real idea, but common sense would suggest that those on the breadline do not save, period. So maybe we are seeing a transfer of wealth from the poor to the reasonably well-off.
One thing is clear: the ï¿½4.5 billion ï¿½windfallï¿½ is government spending, and because it has been spent on SSIAs, something else will be foregone.
In a country where 31 per cent of the native workforce left school with only a Junior Cert and where Irish workers are falling back educationally, relative to our immigrant population, isnï¿½t it ironic that the governmentï¿½s single biggest item of expenditure in this election year will lead to more plasma screens and fewer blackboards?