Given that Ireland is almost a poster boy for ‘before-and-after’ for what liberalising an economy can do, it is a pity that the people who argue for continuing that process have to couch their words in defensive language. Nevertheless, the Progressive Democrats seems to be making a far better case in Ireland for freeing markets than the pointless British Tories are.
Progressive Democrats president, Mr McDowell, last night issued a rallying call to fellow Ministers to hold to the Government’s liberal economic policy agenda, saying tax-cutting and deregulation have helped transform the State.
[…]
He rejected the accusation that supporters of this way believed in the unleashing of unbridled market forces. “It is the essence of the liberal, republican tradition that the market is the servant and not the master of the people. No one I know argues that Ireland is or should be an economy rather than a society.”
“Market is the servant and not the master of the people”… but what does that actually mean? It seems to me that an economy can be social, but only when it is not political… and Ireland can only ‘be an economy, rather than a society’ if politics (i.e, manipulation of the state) has so much control over what is done as to make the economy simply an adjunct of the state and its political processes, wiping out the economic underpinnings of society and the social underpinnings of markets.
So yes, I am all in favour of people in Ireland living in a society, and the only way to do that is to have a free social market rather than a politically regulated economy.
What are you saying, Perry?
Are you paraphrasing or editorialising?
Compared to your usual standards, this is very confusing.
A bit of both, Joe. I think the SD’s do a better job than the Tories of arguing for less of a regulatory state, but I think the broader subject of how state and society are utterly different things (the two are so often conflated) was irresistable after the second quoted paragraph. Just a passing thought.
McDowell is not so bad. His PDs can’t say “sod the welfare state” without damaging the coalition with Fianna Fáil. The PDs with only 3% electoral support have managed to set a liberal agenda for over a decade. They wisely set upon sorting out the supply side first, they have yet to turn their attention to the welfare statism. But look at the relative size of the Irish state in comparison to the UK, US, and Germany
For a quick comparison look at these numbers, Ireland is growing at a hurtling rate, GDP per capita is already higher than the UK. The third figure explains a lot, look at fading Germany, still uber alles in GDP per capita, but the state sector condemns them to slow to no growth. Soon it will be all over for the former European economic powerhouse.
Ireland
GDP growth rate: 6.3%
GDP per capita: $29,792
GDP % consumed by government 13.3%
UK
GDP growth rate: 1.1%
GDP per capita: $22,544
GDP % consumed by government 40.9%
US
GDP growth rate: 2.4%
GDP per capita: $31,830
GDP % consumed by government 35.6%
Germany
GDP growth rate: 0.2%
GDP per capita: $32,814
GDP % consumed by government 48.6%
[source 2004 Index of Economic Freedom]
Let me start by pointing out that i’m something of an opponent of economic liberalism (or the global capitalist project, or whatever the current phrase is). But your post raises a question that i think can be discussed sensibly without a descent into partisanship.
I’ve no wish to get involved in some sort of ideological point-scoring. I’m certain you have an answer to my question. And although i’ll probably disagree with it, that’s not really the point. I’m simply curious as to what that answer is.
You start your piece with the statement:
and i am assuming you mean that Ireland has reaped substantial benefits from economic liberalisation?
My problem with this position is one of timescale. Let us say, for example, that one could demonstrate clearly that the Irish population is currently enjoying a better standard of living now as a result of economic liberalisation. Furthermore, let us also assume that one could show that economic liberalisation has provided measurable social benefits.
Surely one cannot judge the success or failure of so radical a change in society by such short-term standards. As you rightly point out; the project is not yet even complete. How is it possible to declare it a success?
I would argue that it might be as long as generations before one could pass final judgment on such a radical change. So; quite aside from the pros and cons of global capitalism; by what standards are you measuring success? How long before you judge (e.g.) a particular privatisaton to be a success? Do you admit the possibility that whilst liberalising the economy of a nation may have incredible short-term benefits, it could potentially turn out to be a disaster two generations down the line? If not, how would you counter such speculation?
I myself believe that capitalism is fundamentally unsustainable in the long term (and i can provide arguments to that effect). Do you accept that, but believe the short-to-medium term benefits are worth the trade-off? Or do you believe you have evidence / strong arguments that the benefits have no inherent “expiry date”? (for want of a better phrase).
Again, i’m not spoiling for a fight; just seeking information.
The evidence that free (and freer) markets are more effective than state planned economics is so overwhelming that I really do not think it can be usefully debated in other than the crudest terms in a comment section… and that is not even touching the moral issues which are the main reason I support free markets, rather than the utilitarian ones.
But to answer your reasonable question directly but as briefly as I can, no, whilst one should not make economic judgements which are only focused on the short term, I do not think there is a very lengthy time that needs to pass before making such a judgement, though again there is multi-generation evidence to support the view that markets are vastly more effective in the long run than force based resource allocation.
The very essence of why markets are sustainable and it is centrally planned politically derived economics are not in the long run, is that only markets can adapt quickly (and often at all) to real world changes because only markets can act on information which cannot ever be available to a central planner or a political process. Systems based on force based resource allocation are very good at short term ‘project building’ (such as “we need to build more tanks than the enemy”): resources are forcibly pooled and directed to a limited number of goals, which means only limited information is needed by the people controlling the system to do a few things… but such systems are terrible at dealing with the dynamic needs of a complex society because vital dispersed (i.e. social) information regarding supply and demand is simply destroyed by the very political process involved in de-socialising the economy. By politicising (and thereby also reducing the number) of economic decisions being made, economic decisions will increasingly reflect political priorities which inevitable have less and less relation to reality.
It is all in Hayek’s ‘The Fatal Conceit’
Let me add that markets allocate how the means of production are used in a better way because information is not free. Simple resources, stuff dug out of the ground, are not actual wealth, they are just things used to create wealth. Wealth is what is produced by using resources and turning it into things people can use for their needs. Because needs are so complex and because command systems not only destroy information (as the remark above points out) but also involves less people (who are also more remote from the need they are trying to satisfy) making decisions on how the means of production are used, politically driven ecenomics can never be either as effective at producing wealth for more people. All forms of statism, be they crony ‘capitalism’ in which big business uses the state to keep out competitors or squash small businesses under a mountain of red tape and regulation that only a vast company can afford to deal with, or just plain old socialism which just does the same in a more direct manner, cannot do what free markets do because they cannot by their very nature know what people actually need and how that can be satisfied. Markets are not perfect because we do not live in a perfectable world… but that is exactly why markets are better than politics for creating wealth.
What is depressing for this particular Irish person is that the PDs are the only party who understand the market and classic liberalism and it is only by a fluke of our proportional representation system that they have had the chance (as the nuts in the chocolate) to implement classic liberal policies. The “root causes” of our recent prosperity are almost certainly due to PD influence – our Fianna Fail Finance minister, McCreevy is really a PD in disguise – in particular the low rate of corporation tax. Yet nobody seems to understand this, the PDs are blamed for almost everything that goes wrong here, as if it wasn’t the fault of our still outrageously unreformed massive public sector but instead “unbridled capitalism”
McDowell made that speech in response to another government minister (who belongs to the other party in the Irish government) who complained about the policies of ‘unbridled capitalism’, in an attempt to shift the blame for the poor government performance in the local and Euro elections onto their smaller partner.
Yes, the Irish economy has outperformed most of its EU neighbours in mainland Europe, but there is a perception that because of very poor/inefficient infrastructure and services, people are much poorer than their continental neighbours in the areas of education, health and transport (i.e. GErmany takes more in tax, but provides more back in infrastructure and services). That is the perception…
As an article by David Smith in the Sunday Times last week pointed out per capita gross domestic product in the UK is higher at £30,000 ((£16,440), than Germany $29,200 or France $28,500. The UK growth rate in 2003 was 2.1% and is predicted to stay ahead of the OECD and G8 average. [Source Capita Economics 2004]
$30,000
“It seems to me that an economy can be social, but only when it is not political…”
How can an economy not be political? The “free” market is not a state of nature; its parameters are set by governments. No matter how limited is direct government intervention, how the market works depends upon company law, employment law etc – all of which result from a political process. Economics is politics in disguise.
Although that’s true today, it wasn’t always the case. Lex Mercatoria(Link) was a body of rules relating to commerce in the Middle Ages, and evolved mostly without intervention from the state.
My wife and I visited Ireland two years ago and were astonished out how fresh and vibrant much of the country was.
It seemed like the whole placed had received a fresh coat of paint.
A local man explained how the economic surge of the last decade had led to a huge improvement in the quality of life.
Another Irishman told me his was the first generation in his family who thought things were actually going to get better for them and for Ireland.
However, time and and again we met young Irish professionals (many in the media) and academics who seemed almost embarrased by the country’s capitalist resurgence. It was as if they would rather have been mired in the socialist muck of previous decades.
Strange … and sad.