CRYSTAL BALL GAZING

A favourite story of mine occurs in various forms but is usually attributed to
a character in Islamic folklore, Nasruddin. The story concerns a man who has
offended or outraged a king and is ordered to be put to death. He pleads for
his life and tells the king that, if spared for a year he will teach the king’s
horse to talk. The king accepts the offer but promises a worse death one year
on if the man fails to deliver.

The man is upbraided by his friends for his foolishness. He responds: “I have
gained a year. In that year I might die. The king might die. The horse might
die. The king might change his mind. And who knows….I might even teach the
horse to talk.” The moral being that much can happen in a year. The corollary
is that forecasting what will happen can be difficult.

Take the Irish Presidential election. By the time you read this Ireland will
have a new President. With seven candidates and given our quirky electoral
system, the race at this stage is too close to call . It has been fascinating.
The last two Presidents have, with style and energy, transformed a role that is
largely ceremonial, raising the stakes for all candidates this time round. The
attempt by Sinn Fein to supplant Fianna Fail as the major opposition force by
running its strongest candidate , Martin McGuinness, has added to the contest.

Indeed who wins is just one of the interesting aspects of the campaign. The
results, including the voting transfers between the candidates, will be studied
closely to see whether the remarkable outcome of the general election last
February was a once-off or whether it marked a sea-change in Irish politics.
Together with the accompanying by-election – to fill the seat vacated by Brian
Lenihan’s death (what had been Fianna Fail’s only seat left in Dublin) – the
Presidential poll gives the first opportunity to stocktake.There are signs that
the Teflon coating on the new government is starting to crack with its room for
manoeuvre circumscribed by the IMF as the first painful budget approaches.

Certainly there is a new volatility among a large section of the Irish
electorate, a willingness to be ultra – critical and to “throw the bums out” if
they are perceived to have failed to deliver. In February this led to a
collapse in the Fianna Fail vote, with much of its traditional support seceding
along class lines, middle class to Fine Gael, working class to Labour,
republicans to Sinn Fein.

Since then Fianna Fail has signally failed to recover and has seen its support
decline further in the polls, culminating in its decision not to contest the
Presidential election. In vain has the party leadership pointed out that the
new government is doing little beyond following the Fianna Fail blueprint for
economic recovery. So far the electorate has seen through that one – the
programme for recovery, negotiated with EU and IMF guns to the head, would
never have been necessary in the first place had Fianna Fail not wrecked the
economy.

Fianna Fail now faces a challenge for its self-proclaimed Republican soul, this
time in a head to head with Sinn Fein, which is also stealing what is left of
its populist quasi left-wing appeal. It can do nothing about it as it still
tarred with the brush of economic mismanagement as well as the harsh programme
of recovery. The omens do not appear good. Already some analysts are drawing
analogies with what happened in Northern Ireland, where Sinn Fein has
shouldered aside the SDLP.

Sinn Fein has a formidable party machine and a hard –headed leadership. And, it
should not be forgotten, two decades ago a sizeable rump of the political wing
of the Official IRA began the odyssey that led to membership of a government
coalition (as the Democratic Left), before eventually merging with the Labour
Party, where it soon took over leadership. Could this process be about to be
repeated, ceteris paribus?

Lest we forget, however, these events in Ireland have a slightly “phoney war”
feel to them They are taking place against the background of on-going
uncertainty in the international economy We have our own problems, and we are grappling
with them. Indeed we’ve earned brownie points for being the good guys and
taking our medicine within the EU, unlike the Greeks. The current popular line
is that Ireland will be well placed to take advantage of the world economic
recovery, when it comes. In one form or another all the political parties buy
into this line.

Whether we can deal with the debt mountain tends to be glossed over, or, in a
classic example of doublethink, our debt is dismissed as being something that
will be subsumed in the new arrangements to follow a realignment of the world
financial situation.This may well be, but there seems little or no appreciation
of, and certainly no informed debate on, the collateral damage for Ireland that
any such realignment would entail or, indeed of the type of catastrophic global
economic situation which would necessitate such a realignment.

The Left, with Sinn Fein as cheerleader in chief, has embraced with enthusiasm
the localised alternative of a national debt default. This tends to be viewed
through Micawberish spectacles, an approach reinforced, up to now, by the
perceived pussyfooting approach of the EU heavy hitters to the struggles of
Greece actually to implement a rolling programme of austerity. The grim reality
of what was involved for ordinary people when Argentina defaulted, or when the
Russian economy collapsed, has had little airing here. What happened in a
remote country far away could never happen to Ireland! Sadly, it could.

Here again crystal ball gazing can prove difficult. The international economy
may well go into meltdown. As the cliché would have it we are now in uncharted
waters.And if the world economy does collapse the next generation of economic
commentators and pundits will point to the events of the last three years-
since Lehman collapsed – and will conclude that the signs were there for all to
see, that there was a sequence of events almost teleological in nature which
brought about the collapse.Frankly the only things clear at the moment are that
the future is a hidden book and that the major political leaders worldwide are
agreed only on their fear of the unknown and what the future may bring.

Much can happen in a year. Greece may well default over the next twelve months,
in a process that began earlier and with consequences that will long persist.
Ireland seems to have bottomed out economically in some respects but the when
and how of recovery is contingent on many factors. We may get a helping hand –
Eurobonds or a common Eurozone debt have been talked about. So has a
fundamental restructuring of the Euro and the EU constitution itself.There are
even references to how the young USA launched the Dollar in 1790. What will
happen? Who can tell? The political obstacles to surmount seem almost as
formidable as teaching a horse to talk.”

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