October 26, 2010
Most political societies are divided along lines that are broadly left and right.
We all know that there are oddities in the political system in Ireland.
Politics in Ireland still suffers from a civil war hangover that means our two largest parties are both ‘right-leaning’, the only option today being the now meaningless choice between a ‘pro’ or ‘anti’ treaty government.
The soft left in Ireland, represented by the Labour Party, is making strides in the polls (as it always does in an economic downturn), but it will have difficulty turning good poll results into seats in the DÃ¡il, due to the concentration of its support in urban areas.
None of this should be news to anyone, but to an outside observer, it might seem odd that both of our (current) largest parties are broadly to the right in political terms.
This confusing right/right/left divide in Irish politics hides the true divide in Irish society, which is between the rich and the poor.
This is not a purely political or social point, because the lesson of this global crisis is that the economic performance of more equal countries has been better than those that tolerate large disparities.
Anybody who keeps an eye on economic data (like unemployment numbers or GDP) will know that such figures are always reported as percentages of something else, or percentage changes in the previous level.
For economists, this makes sense, but many of the rest of society percentages are just away of hiding the reality behind some of the figures.
For example, I was talking to a friend the other day. He has been living on social welfare for the past year.
He has two children in school.
As always these days, the conversation quickly moved to the forthcoming budget and the cuts that it would bring.
His view was that a 10 per cent cut to social welfare was coming, and he was genuinely scared about what this would mean for him and his family.
‘‘A 10 per cent cut across the board might sound fair, but a 10 per cent cut for someone on a good civil service income might mean only one holiday a year.
For me, it means running out of money on a Wednesday instead of on a Thursday.”
This statement jolted me from my admittedly cloistered journalistic world. In truth, I haven’t run of out cash in the middle of the week since I was a student, and didn’t need the cash anyway.
But here was an old mate describing the terror of Thursday, when there is absolutely nothing left, when he has to look his children in the eye and they know what that look means.
For my friend who, like many, largely missed the Celtic tiger and the property boom – despite having a decent job which he lost two years ago – the cuts that are coming seem grossly unfair and unequal.
He was nearly in tears as he showed me the front page of last Friday’s newspaper, with the headline saying that the government had paid â‚¬30 million for advice during the banking crisis, which turned out to be useless.
‘‘Tell me how a 10 per cent cut in social welfare is fair, and that â‚¬30million is ‘good value’,” he said.
Of course, I couldn’t tell him, because it certainly isn’t fair or good value.
The â‚¬2.5 billion the NTMA has put aside for the costs of running Nama is not good value either, nor is it fair.
And what about the fact that there are more than 60 solicitors’ firms on the payroll of Nama?
My friend, who has never been a radical, dismissed Nama as a ‘‘class rescue scheme for the professional classes’’.
As he headed off, I asked myself, ‘‘How far is he from taking to the streets?” There are now hundreds of thousands of people like him.
Unemployment, as measured by the live register, has risen from 4 per cent to nearly 14 per cent in the past few years. It can be described clinically as a ten percentage point rise.
Others looking for context might use the line, ‘‘it was worse in the 1980s’’.
As a percentage, the number was higher in the 1980s,but the real story is that the actual number of people on the live register now is at the highest it has ever been.
Each of the approximately 450,000 people on the register has a different story of the misery, but we mostly chose not to listen.
Instead, by hiding behind percentage points and cold statistics that disguise this misery in our society, our politicians are being true to their right-of-centre leanings.
For me, the idea of your own children being ‘‘knowing’’ enough to realise that look on Daddy’s face on a Thursday means that there is no more money is enough.
At what point do these people crack? Will it be when they hear the public sector unions warn about further ‘‘draconian’’ pay cuts?
Will it be when another billion euro goes into the banks? Or will it be when the banks foreclose on yet more houses?
Your guess is as good as mine, but old fashioned political analysis suggests that there is a point where the whole thing blows.
What will that point be? When will formerly chilled-out, well-balanced people like my friend say, ‘‘that’s it’’?
Last Friday, his anger was directed at the average public servant.
Whether this is fair or not (and I don’t happen to think it is) the fact is that, in 2002, average weekly wage public sector earnings were â‚¬704.
They are now â‚¬904 – a rise of â‚¬200 per week, which is about the total dole payment for my unemployed friend. Remember, both the public sector worker and the welfare recipient are dependants of the state.
Against this background, and ahead of huge decisions on taxes and spending, it is interesting how little this government taxes income.
We can see from chart 1 that we have the lowest rate of tax on income in the EU at 24.6 per cent. This will rise substantially in the years ahead. Indeed, chart 2 shows we have the lowest rate of government revenue as a percentage of GDP in Europe.
This will have to rise. We know that tax increases hurt the rich.
We also know that expenditure cuts hurt the poor.
We also know that the number of poor people is rising very rapidly.
My friend wasn’t poor two years ago; he was getting on fine.
Today, he is on the breadline.
There are hundreds of thousands like him.
When will he crack?
Have the gardaÃ considered what the tipping point will be?
Do they have an estimate for this economic tipping point – when they put on the riot gear?
A budget that is biased towards more cuts than tax increases, which thus widens the gap between rich and poor, must surely bring that day a bit closer.