October 4, 2010
Last Thursday night, Bill Clinton spoke in UCD. It was a brilliant speech, classic Clinton, full of empathy, humour, self deprecation and hope; above all, it was laden with Clintonesque hope.
Others spoke of optimism and the need to look to the future.
The theme was that we are too pessimistic at the moment and are potentially hampered by our own negativity.
In fact, so much of the chat focused on the need to be optimistic that, by the end of the night, it began to feel like a self-help group for men in tuxedos.
Clinton’s keynote speech was followed by an address by Seamus Heaney.
Heaney made an equally compelling speech and the real friendship between the former US president and Nobel laureate was evident in the natural warmth between them.
However, Heaney said one thing that resonated with me.
He quoted Czech poet and former president Vaclav Havel on the distinction between hope and optimism.
Havel, a man who had plenty of time to think about these things following years of internal exile in Czechoslovakia – made the following distinction: ‘‘Hope is definitely not the same thing as optimism. Hope is not the conviction that something will turn out well, but hope is the certainty that something makes sense, regardless of how it turns out.”
This is a crucial distinction.
As the evening was an Irish-American celebration, there was a lot of talk about Irish-America and how it helped with the peace process.
Time and again, speakers mentioned the bravery of Clinton in giving the visa to Gerry Adams to enter the US in January 1994 as a milestone of political vision over bureaucratic tunnel vision.
This was the triumph of hope over optimism. Clinton didn’t give Adams a visa because he was an optimist but because it made sense irrespective of the outcome.
At the time, Clinton went against all the advice and all the received wisdom of the vested interests of the day.
Everyone, except Republicans and a few IrishAmerican politicians, claimed that the Adams visa would be a horrendous mistake.
The official line was that it would lend credibility to a terrorist and would ‘reward’ bad behaviour and thus embolden others to continue – rather than stop – fighting.
The establishment was wrong, very wrong.
The reason they were wrong is that they couldn’t see that the world had changed.
They were stuck in their thinking.
Today, the establishment is wrong again on Anglo Irish Bank.
The financial markets would reward us for burning the creditors of Anglo, like the world rewarded Clinton for giving Adams a visa.
But the Irish establishment can’t see this probably because so many of them – bankers, brokers, top mandarins and professional law and accounting firms – have their snouts in the trough.
I couldn’t help thinking, as I listened to Clinton, whether our government and the few thousand professionals who will gain from bailing out the banks and Nama know the difference between optimism and hope.
The Cowen/Lenihan government – which has been wrong about everything on the economy – is putting its faith in blind optimism.
The line is that if we pay all the money now, we will be rewarded as good boys; if we buy AIB now, we will make money in the future; this is our ‘line in the sand’ moment; it’s onwards and upwards from here.
And sure by the time we go back to the bond market, the world will have changed, and everyone will have forgotten the mess that Ireland has become and finance us at a lower interest rate.
This is blind and pathetic optimism, because it is based on the same three-card trick, the same bluff and gamble that got us here in the first place. In short, they have learnt nothing at all.
In contrast to optimism, hope is doing that thing which makes sense because, once something makes sense, people look to the future with confidence.
The future can’t be secured by yet another gamble. Consequently, if a bank is bust, let it go bust – don’t bluff.
The taxpayer didn’t cause this and has no business paying for any of it.
The argument given by the establishment, who were in attendance in UCD last Thursday night, is that to allow capitalism to take its course is wrong.
So we have now arrived at the perverse situation in Ireland where we must reward failure because to penalise failure would undermine the credibility of the state. This convoluted logic is the triumph of self-help optimism over rationality.
Look where the ‘we are turning the corner’ self help optimism of this government has got us.
We are now a state with no control over our policy.
This is what the EU Commissioner Olli Rehn stated last Friday: ‘‘Ireland will not continue as a low tax country. But rather it will become a normal tax country in the European context.”
What does this mean for our corporate tax structure? Has the government given away our corporate tax rate to save Anglo?
Is this the price for the European Stability Fund? Is this the price for optimism over action?
Optimism has led to us pulling out of the bond market till next year.
This will provoke an enormous crisis, because the government’s gamble now is that we can go to the market desperately looking for cash at a time when the credit crunch and the massive fiscal contraction will mean the economy is contracting next year, not expanding.
Optimism also has led the government to slip in this nugget about Nama last Thursday: ‘‘The government has decided, having consulted with the Nama Board and the European Commission, that where the total exposure of a debtor is below a â‚¬20 million threshold in AIB and Bank of Ireland, that debtor’s loans will not now be transferred to Nama.
The threshold had previously been set at â‚¬5 million.
‘‘They account for just â‚¬6.6 billion of the aggregate â‚¬80 billion volume of Nama eligible loans. Loans of this size can be efficiently managed by the banks themselves through their network of local representation and relationships.”
So â‚¬6.6 billion of dodgy debt which was supposed to go into Nama will now be left on the balance sheets of the banks, which kind of defeats the purpose of Nama in the first place.
Think about it: Nama exists to remove the bad loans from the banks’ books, but by not doing that, it is acting in direct contravention of its raison d’etre. AIB and Bank of Ireland have already transferred â‚¬9.7 billion to Nama and have â‚¬25.3 billion outstanding.
This number now drops to â‚¬18.7 billion, with AIB and Bank of Ireland having to write down the balance themselves. Which, of course they will not be willing to do, or at least will only be willing to do if they have money available to cover the losses.
Which will lead to the zombification of the banks – which was what Nama was designed to prevent.
But this can all be swept under the carpet by blind optimism, because if you tell yourself that the future will be better without doing anything to make that better future more likely, you can convince yourself of anything.
My money says we will be in the European Stabilisation Fund by St Patrick’s Day and that Mr Commissioner will be running the show. This is where this touchy-feely optimism will get us.
Had the government had the Clintonesque courage revealed by granting the Adams visa to do the right thing – not the respectable thing – we could be back in the market, sovereign and confident.
But no, we will be in contrast, a concubine country, dancing to the commission’s tune.
That’s where optimism gets you.
The banks will be zombies and the economy will continue to contract. There is a difference between hope and optimism, but when – as this government has – you have spoofed yourself and the people for years, you don’t have Vaclav Havel’s clarity, and you can’t distinguish between hope and optimism. But, of course, you couldn’t have that clarity because that type of clarity is the product of integrity, not mendacity.