Piketty is Wrong About German War Debt

Colette Browne quotes economist Thomas Piketty in her column in today's Irish Independent as saying that Germany had sixty per cent of its war debt written off after the Second World War. This is not true.

It's not true for this reason: there wasn't a Germany after the Second World War to pay any debts. Germany was gone, and there were two states, East and West Germany, in its place.

Britain, France and the USA were in charge of West Germany and the Union of Soviet Socialist Republics was in charge of East Germany. The NATO powers quickly began to cut West Germany a break, as they had made a deal with the devil in the form of Josef Stalin to win the war in the first place, and now needed a strong Germany to protect Western Europe from the Soviets.

No such luck for the East Germans, which the Soviets already had in their mitts. Anne Applebaum has written an excellent book about rise of the Iron Curtain in the first ten years after the end of the war. From that we learn that the Soviets carried off everything in the occupied territories that wasn't nailed down, and would have continued to do so if Stalin hadn't kicked the bucket in 1953. East Germany remained a slave state, of course, but the Soviets went easy on populating the concentration camps left behind by the Nazis with people who didn't toe the state line.

Germany paid for her sins after the war, and now Germany is the main reason why there hasn't been a European war since – the longest period of European history without a war since Alaric and the Visgoths sacked Rome fifteen hundred years ago.

Beware, beware the celebrity economist. There's always a bottle of snake-oil that needs selling.

Scotland and the Call of Freedom

First published in the Western People on Monday.

A Scotchman, yesterday.

It’s all fun and games until somebody loses a country. The sage parental advice sounded ne’er so true as when the British political establishment suddenly woke to the prospect that, for all their blather, the perfidious Scots might just go and vote for independence after all.

It’s not just the rest of the United Kingdom who are suddenly transfixed by events north of Hadrian’s Wall. An independent Scotland would be something of a floating joker in the European context. Its proponents say everything will be fine and an independent Scotland will be welcomed with open arms in Brussels, while opponents grimly remark that one does not simply walk into the European Union and leave it at that.

For Ireland too, an independent Scotland would be more hassle than we need right now. Ireland’s great selling point for direct foreign investment, apart from our corporation tax, is that we are an English-speaking gateway to Europe. But they speak English in Scotland too – what happens if Scotland becomes a more attractive place to locate than Ireland? Nothing good.

Ireland certainly can’t come around and plead with the Scots to stay in the UK, given our own history, but the last thing we want is having our eye wiped by a free Scotland that’s also claiming to be the best small country in the world to do business. Therefore, the Irish keep schtum, and hope for the best.

But an independent Scotland might be too busy fighting for its very survival to even think about raining on the Irish parade. An independent Scotland will face two big questions. The biggest question of all is: what will they use for money?

The proponents of independence say that the money will be fine. They can use the pound sterling, just like always. But we in Ireland don’t have our own currency, and look how we got rolled around in a barrel because of it over the past few years.

Money, in itself, isn’t valuable. Money is a measure of value. That value is set by governments. If Scotland uses the pound sterling as its currency, it doesn’t get to set the value of that currency.

Scotland currently has a say in the value of the pound sterling, as part of the United Kingdom. But a vote for independence means the Scots get no say at all. So if Scottish interest rates are rising while English interest rates are falling – well, it won’t be pretty.

And then there is the EU conundrum. There are plenty of European countries that have regions that dream of independence. A smooth Scottish ascension to the EU would have the same effect on such Catalans, Basques, Silesians and others who hear the call of freedom as spinach had on Popeye the Sailor Man. If the Scots want in to the EU, they will have to sing for their supper. The door won’t just swing open for them.

There is also the peculiar thing about the EU being a union of like-minded peoples, sharing values and cultures. People like those in the United Kingdom, whose values are now at such odds with Scottish values that the Scots have no option but to strike out on their own. So the Scots are like everyone else in the EU, from Westport to Warsaw, except the British, from whom the Scots are so different that they need to be independent. Whatever way you slice it, that never adds up.

And so we return to the crux of the question: why on Earth do the Scots want to be independent in the first place? What Scottish values exist that aren’t also British values? What freedom will the Scots gain through independence that they haven’t got now? What currently existing Scottish oppression will end through independence?

There is a romantic inclination to connect the notion of Scottish independence with Irish independence. That Scotland, like Ireland, is entitled to independence in the name of the dead generations from whom she derives her long tradition of nationhood.

But that’s not the case with the Scots at all. Whatever strain of that long tradition existed heretofore was well and truly wiped out at Culloden’s Moor on April 16th, 1745, by His Grace Prince William Augustus, Duke of Cumberland. Scotland has been, to echo a phrase from our own past, as British as Finchley ever since.

So how have they now got it into their heads they’re not as British as Finchley? How is Scottish independence so close that the British Establishment has been love-bombing Scotland for all its worth for the past week, and promising the devil and all if only the Scots won’t walk out the door?

It is simply the appeal of the patriot game that’s caused the Scots to short-circuit the notoriously severe common sense of the man in the street in Auchtermuchty, and go chasing a hopeless dream? If it is, they won’t be the first people to be so short-circuited, for whom some woman’s yellow hair has maddened every mother’s son.

Of course, Ireland and the Irish experience isn’t a factor in the Scottish referendum at all, which is a little hurtful. However hurtful it may be, it’s not at all difficult to understand. A lot of people in Scotland despise the Irish. Ibrox is filled to the rafters every week, with the Billy Boys gustily sung every time.

But one thing the Scots can learn from the Irish is that there is a big difference between being able to revolt and being able to govern. It’s hard not to look back on the early years of the Irish Free State and see men slightly lost in the corridors of power, wondering what in God’s name are we meant to do now?

We all throw back the shoulders when we look up and see the flag fluttering in the breeze. But what does the notion of a nation state really mean in the globalised world of the early 21st Century? We were talking about being able to set your own currency earlier but even that is limited by the size and resources of your own country. Things like sovereignty and independence are ephemeral things in the modern world, especially when compared to the solid reality of economic prosperity and political stability. It would be a pity if the Scots, that most practical of people, were to lose all that now in chasing a will-o-the-wisp.

Irish Politics - Leaning Left, or Keeling Over?

First published in the Western People on Monday.

There’s nothing like seeing ourselves as others see us to find out who we really are. As such, the New York Times’ report on Saturday evening about our elections is particularly interesting.

“Ireland has taken a decisive step to the left in local and European elections,” reported the New York Times, going on to say “early returns on Saturday showed that the big winners were Sinn Féin, formerly the political wing of the Irish Republican Army, and Socialist independent candidates.”

And when you read that you have to suddenly stop and say: is that what we’ve just done? Is that what’s going on here? Is Ireland, nearly one hundred years after independence, going to have its first-ever left-wing Government come the next general election? Has the wheel turned full circle for Sinn Féin?

Certainly, the fact that Sinn Féin is less and less toxic to the electorate with each passing election is clear as a bell. But it does not necessarily then follow that Leo Varadkar is correct when he suggested on Saturday that the next general election will be a two-horse race between Fine Gael and Sinn Féin. There are more tea-leaves swirling around than that.

Equally, the rise of the socialist independents isn’t entirely robust as a theory. Catherine Murphy and John Halligan, both late of the Workers’ Party and both current Technical Group TDs, welcomed the rise of the independents on RTÉ as if it had something to do with them. But does it have something to do with them? Is there a red tide rising in Ireland, or is something else going on?

The success of Murphy and Halligan’s fellow Technical Group TD and future MEP if press-time polling is to trusted, Luke “Ming” Flanagan, is the most spectacular result of the election. But Ming isn’t like any other politician – the national media likes to group him with Mick Wallace and Clare Daly, but Ming is infinitely smarter than Wallace and not as ideologically tied up as Daly.

Luke Flanagan’s campaign was a textbook example of how to get elected in modern-day Ireland. He didn’t put a foot wrong in any of it. Flanagan spent the first week or ten days of the election running in the five and ten kilometre races that are all over the country now. Why? Flanagan’s biggest image problem in this constituency is that he’s a good-for-nothing layabout stoner, and he conquered that immediately by running the races and proving himself healthy as a trout. Genius.

Flanagan’s second, and no less inspired, tactic in the campaign was to loosely ally with other independents who were running in the locals. They got a slice of Flanagan’s charisma, of which he has buckets, while he got his leaflets distributed.

What was that worth? Think of it this way. On his Facebook page on April 16th, Flanagan thanked an independent candidate in Athlone for taking seven thousand leaflets to distribute. You know those bales of paper that you can buy in the supermarket for your printer at home? Seven thousand leaflets is fourteen of those bales, and would cost €4,200 to post. Genius.

But is Ming the exception or the rule? Did people vote for Luke Flanagan because he’s perceived as left-wing, or because they can’t help but like the man? Did people vote for Sinn Féin because Sinn Féin are left wing or because the anniversary of the 1916 Rising, the source and origin of the state itself, is looming and Sinn Féin seems to be the only party that wants to celebrate it, rather than hide it in some bizarre stew that also includes Passchendaele, Ypres and the sinking of the Lusitania?

It got very little coverage overall because it was a skirmish on the side of the great battles of the local and European elections, but the real soul of Irish politics could be seen in the Longford-Westmeath by-election. There were nine candidates on the ballot, of whom eight were from Westmeath and just one from Longford.

That single Longford candidate, an independent (of course) called James Morgan, entered the race late on a platform of “A Vote for Morgan is a Vote for Longford.” He polled 5,959 votes on the first count, of which 5,900 are unlikely to have come from Westmeath.

And that’s Irish politics in the nutshell. We pretend elections are about issues, but they’re not. Not really. Left/right, pro/anti Europe don’t matter a hill of beans. Irish elections are about defending the home patch because the entire culture has been set up that way for generations.

For the people of Longford to have put merit over geography is like the unilateral disarmament theory during the cold war. It seems noble, but you’re only inviting someone who isn’t noble to blow you away to Hell. Everything about the Irish system of elections is set up to ensure the continuance of this parish pump culture, where the back yard is more important than the nation.

Why are chronically ill children being denied medical cards? Why has something terribly rotten at the heart of the Garda Síochána been allowed to fester unchecked? Why will we be paying for water that we can’t even see through, to say nothing of drink?

Because the Irish political system makes fighting over whether Ballyglenna or Ballyknock loses its post office more important than the health of the nation’s children, the policing of the state, or access to clean water.

Is Ireland leaning to the left? Only insofar as we’ve decided to chase our own tails anti-clockwise for a change. Above anything else, Ireland needs reform of its political culture to elect a new type of politician and bury civil war politics for once and for all. It then needs comprehensive public service reform so it can raise sufficient taxes to protect the vulnerable, something it cannot do currently in the culture of wanton waste.

It will take twenty-five or thirty years for these things to come to pass. But until they do, until we have a functional democratic system instead of one ruled by clientelism, favoritism and nepotism, all the blood shed for Irish freedom will have been shed for nothing. Every precious drop of it.

What Have the Germans Ever Done for Us?

First published in the Western People on Monday.

She's in the Mayo colours -
how can she be that bad?

The Government are making a big deal of the budget being the “last austerity budget.” After this, they say, the bailout will be over. Ireland’s economic sovereignty will be restored.

Which leads me to a slightly traitorous question this morning. To wit: is that return of economic sovereignty entirely a good thing?

When the IMF responded to the bat signal from Ireland in 2010 the then-opposition made a big deal about the loss of Ireland’s economic sovereignty. The current Minister for Energy, Communications and Natural Resources nearly self-combusted in fury on Prime Time during one debate at the thought of the loss of our economic sovereignty, in one of his many memorably television performances.

But what exactly is this thing, economic sovereignty? The London School of Economics, who ought to know, tells us that it’s the power of a government to make decisions independent of other governments.

And that’s great in theory. But in practice, “ar scáth a chéile a mhaireann na daoine,” as the seanfhocal has it – “people live in the shadow of each other.” And that’s as true for countries as it is for people. The only country I can think of that exists independently of every other country is North Korea and North Korea gives every impression of being hell on Earth.

One hundred years ago, it was possible for a country to exist on its own. Even seventy years ago, when Eamon DeValera made his famous St Patrick’s Day address to the nation, saying the Irish were a poor people, contented with things of the mind, isolationism was still, kind of, an option.

But not any more. The twenty-first century counts its minutes in a globalised world, where we’re all living in each other’s pockets. For the past number of years, the particular pocket the Irish have been in has been Frau Merkel’s, to the general distress of the populace. Everything would be fine, we’ve been telling ourselves, if it weren’t for the Germans. But now the Government is promising a restored economic sovereignty, and escape from the German pocket, everything is going to be grand.

But is it? And is being under the Germans’ wing all that bad?

By the Germans, we mean the EU, really. The Germans call all the shots in the EU. Everyone knows it, and that’s almost certainly the real reason the British dislike the EU so much.

Although not as bad as the British, the Irish have a strange relationship with the EU. The EU built modern Ireland in many ways, and yet we despise it as an institution. The EU won’t let us do this, and they won’t let us do that. There’s every sort of regulation, tying us up and denying us liberty.

Do you know what else the EU doesn’t let us do? Starve.

Ireland joined the Common Market / EEC in 1973, forty years ago. We’ll commemorate (after a fashion) the hundredth anniversary of the 1916 Rising in three years time, but there’s a case to be made that the EU has had a greater influence on the nation because it brought Ireland into the modern age. Money has flowed into Ireland for the past forty years from Brussels and in return we religiously shoot down every referendum, until the EU learns to ask us nicely.

A lot of this is the fault of the political culture of course, and another reason why the political culture is crying out for reform. For forty years the nation has been conditioned to just about tolerate the EU, like some doddery old relation whom we’ve been instructed to keep sweet in the hope of inheriting the land.

The Maastricht treaty was the treaty that set the ball rolling on the current drive for greater European Union, and was instrumental in the creation of the Euro. How was it presented at home? An eight billion pound jackpot for Ireland. Nothing else. Show me the money, and to hell with the big picture.

So the political culture is now reaping what it sowed in EU terms. Forty years of suspicion and distrust have their legacy. People talk about the EU not being democratic, as if that were a bad thing from our perspective. There are four million Irish and eighty million Germans. If the EU were truly democratic, do you think there would be Croke Park Agreements and Haddington Road Agreements and all the rest of them? There would be Reichstag Directives, and that would be that.

Ireland punches miles above its weight in the EU, yet we don’t realise it. We don’t realise just how well we’re doing. For eight hundred years Ireland was part of another multi-national organisation, on which the sun never set, and all we got for it were penal laws, a border and a long legacy of sectarianism.

During the Famine, the Irish were let starve, on the basis that the land was of greater economic use while grazing sheep than housing peasants. During the economic meltdown, the Germans sighed, sat down and wrote the Irish a cheque. That’s the difference.

And still people don’t realise it. Burn the bondholders!, they cry. Turn over the moneylenders’ tables in the Temple! And when asked who would then fill in the gigantic hole in the national coffers, we’re told we’ll be fine – someone always turns up.

Well, no. Someone doesn’t always turn up. Argentina defaulted on its debts ten years ago. When the Argentinean President, Christina Fernandez, went to visit the new pope, she had to fly the long way round, to avoid her airplane being impounded by one of Argentina’s many creditors. The fact Pope Francis is so concerned about the poor is because he has seen so many of them, and he has seen so many of them because Argentina’s governments have not been good.

We have been luckier. Ireland got into the EU in the nick of time and finally caught up with the modern world. When the modern world went to our heads, the EU came in to save us again. Get rid of the Germans? May they never go away.

Have We Learned Anything in the Past Five Years?

Des Geraghty, late of the Workers’ Party, Democratic Left and SIPTU, said something in passing when reviewing the papers on The Week inPolitics yesterday that should have made the nation stop and take notice. Presenter Seán O’Rourke asked Des about Cyprus. Des replied that “unfortunately for Cyprus, it’s the latest part in the on-running saga about the Eurozone. The crisis seems to shift from country apart from our own.”

Apart from our own. At the start of the Eurozone Crisis, which itself is a subset of of the worldwide Great Recession, Ireland was identified as one of the countries most at risk of economic collapse, the so-called PIIGS – Portugal, Ireland, Italy, Greece and Spain (it’s only last week that anyone outside of either Cyprus or Greece found out that Cyprus was even part of the Eurozone, of course). If the crisis is, as Geraghty says, shifting from country to country apart from our own, does that mean that our country might have – gasp – done something right? Might have weathered the storm? Might yet take her place among the nations of the Earth?

You would think, after the long hard years of austerity and Morgan Kelly prophecies and IMFs and Troikas and the rest of it that there would be some sort of national holiday declared. That the Taoiseach would address the nation with this happy news, that the nation is at safe harbour once again.

Of course, a reason not to do that would be that Ireland may not be in safe harbour at all. So much unexpected doom has descended from clear blue skies in the past five years that the Taoiseach would be forgiven for taking nothing for granted. But that said, Cyprus has been an object lesson in what happens when you try to bluff the financial world’s royal flush with your miserable pair of fives. You get whomped, and whomped good.

And how could it be any other way? People talk about right and wrong in these things. There is no right or wrong in financial markets. There is only capital – who’s got it, and who wants it. Nothing else.

The government, both this one and the last one, recognised that from the start and got with the program. That is why you’re reading this at your leisure now, rather than queuing at an ATM for your daily ration of what was once your own money.

The tragedy for the nation is that the nation doesn’t know this. As far as the nation is concerned, Angela Merkel is the worst oul' wagon since Maggie Thatcher, we’re all slaves to Europe and musha, I don’t know what we’re going to do at all.

There is a fundamental disconnect with how politics is conducted in this country and how its perceived by the electorate – the people who mandate the politicians to conduct the politics in the first place. We elect politicians to fix drains and get harangue low grade and underpaid civil servants to get pensions for people who don’t deserve them. When it comes to global economic catastrophe, having one over on a county manager somewhere doesn’t really cut it.

This week sees the Meath East by-election, where the favourite to be elected is the twenty-six year old daughter of the man who’s tragic death caused the by-election in the first place. She is surely doing her duty by her lights, but it’s a lot to ask of anyone who’s been through that trauma to just step up like nothing happened. Meanwhile, the other candidates are usual suspects, with the exception of a Captain Birds-Eye lookalike who makes Mick Wallace look like Pericles of Athens.

After the crash we were told things would never be the same again. Things are exactly the same again. The world has changed. Ireland has gone through the valley of darkness and come out the other side, but the people haven’t really noticed. And two years on from the Moriarty Tribunal, it’s very much business as usual behind the closed doors of Irish public life.