Northern Ireland and the Double Transition Dr. Conor McCabe, UCD School of Social Justice
Northern Ireland and the Double Transition▪ Double Transition▪ Financialization and the Nature of Neo-Liberalism▪ Public-Private Partnerships▪ Corporation Tax▪ Monetary & Economic Policy – UK Framework
Double Transition –Northern Ireland is undergoing a double transition. In terms of its politicaldynamics it is moving from a situation of conflicted democracy and violence toone where democracy is supported and broadly participative.However, it is also moving from an economic framework that is formulatedupon social democratic ideals to one that is dominated by market agendas andneo-liberal principles.
Some characteristics of Neo-liberalism -Attacks the post-war compromise between producer capital and labour –compromise that put severe checks on free movement of capital - Great Britain and Northern Ireland = Welfare State - Irish Republic = Corporatist State / Rerum Novarum (Vocationalism)•Pushes a monetary policy designed to benefit financial rentiers•Privileges asset-price speculation over producer-led employment•Needs to kill inflation in order for asset price profit-seeking to work
PPP and Northern IrelandMost public expenditure in NI funded under theassigned budget – adjusted to reflect changes inper capita expenditure in EnglandCapital spending funded through the use of NIresources or through direct borrowing is tightlyconstrained. The capital used with count againstNI’s capital budget.“In contrast, under current Treasury rules as longas a PPP is off-balance sheet (i.e. the project isrecorded as a contract for services rather than afinancial lease in the public sector’s accounts),there will be no direct impact on the NI capitalbudget, while annual charges count against therevenue budget as they are incurred.” (NIPSA,p.9)
11 May 2010Dear Chief Secretary,Im afraid to tell you theres no money left.Sincerely,Liam Byrne.chief secretary to the Treasury.
“The British Government has run out of money because all the money was spent in the good years.”George Osborne, 25 February 2012
“So we cannot just carry on as we are. Unless we reform our economy - rebalance demand,restructure banking, and restore the sustainability of our public finances - we shall not onlyjeopardise recovery, but also fail the next generation.”Mervyn King, TUC Conference, 15 September 2010.
5 March 2009. QE : £75 billion 10 October 2011. QE : £75 billion 2009 – 2011. corporate bond purchase via asset purchase facility : £375 billion 2012: Monetary Policy Committee approve a further £50 billion.“So we cannot just carry on as we are. Unless we reform our economy - rebalance demand,restructure banking, and restore the sustainability of our public finances - we shall not onlyjeopardise recovery, but also fail the next generation.”Mervyn King, TUC Conference, 15 September 2010.
“In the European context tax rates are high andgovernment expenditure is focused on currentexpenditure. A “good” consolidation is one wheretaxes are lower and the lower governmentexpenditure is on infrastructures and otherinvestments.”Mario Draghi. 24 February 2012.“The ideal fiscal consolidation ... must be focusedon spending cuts and not tax hikes.It is essential that [this consolidation effort] isperceived as credible, irreversible and structural tohave impact on sovereign debt spreads.”Mario Draghi. 15 November 2012
Long Term Refinancing Operations (LTRO)21 December 2011: €489.2 billion to 523 banks –3yrs @ 1 per cent29 February 2012: €529.5 billion to 800 banks –3yrs @ 1 per cent
Long Term Refinancing Operations (LTRO)21 December 2011: €489.2 billion to 523 banks –3yrs @ 1 per cent29 February 2012: €529.5 billion to 800 banks –3yrs @ 1 per cent“Some banks, particularly in Spain and Italy, used portions of thosefunds to buy higher-yielding bonds issued by their governments at atime when most investors remained skittish, and it helped reducegovernment borrowing costs.But many banks primarily used the funds to pay down maturingdebts or simply deposited the money at other banks or with the ECBitself, even though they yield less. The infusion fell short of somepoliticians hope that it would stimulate bank lending to customersin struggling European economies.” Wall Street Journal, 1 March 2012
Implementing reform is a realchallenge and this requires thatwe win the hearts and minds ofthe people.Countries are faced with theoption of either profoundlyreforming their publicexpenditure and social securitysystems or putting their long-term sustainability at risk. Jean-Claude Trichet, 31 May 2004
1. Cut government spending2.Cut wages3.Use central bank credit to buy paper assets4.Keep inflation low