A DOSE OF REALITY 1102 XXIV

A DOSE OF REALITY

  Estonia joined the Euro on January  1st 2011. It was the latest step by this small Baltic state to distance itself from its grim recent past.  At a time when there is so much doom and gloom and whinging about loss of sovereignty in Ireland it is worth reflecting briefly on this past. Talk to the Estonians about loss of sovereignty. Ireland survived the Second World War unscathed and, whatever else we can say, we have been the authors of our own destiny since 1922.

Estonia was not so fortunate. In 1939 it enjoyed a standard of living roughly on a par with other Nordic countries. It was then occupied by a Soviet army of 100,000. In 1940 its status as an independent country was abolished. Over the next year 7,500 Estonians were murdered, at least 11,000 more deported. By 1943 half of the country’s M.P.s had been murdered by the Soviets – you can see their names and dates of death on a plaque outside Ireland’s Embassy in Tallinn. Their President died in a KGB prison “hospital” after 16 years; his chain of office has yet to be returned.

After 1945 thousands more were imprisoned (where 6,000 died) or were deported to Siberia.  25,000 people, mainly farmers and their families, were deported in 1949, to facilitate collectivisation of agriculture and to break a rural guerrilla resistance movement. All this out of a population of little over a million. Over the next 40 years several hundred thousand Russians and other non-Estonians were settled in the country, a move seen by Estonians as a long term project to destroy Estonian nationalism. Even today Russians constitute 25% of Estonia’s population. Yes, talk to the Estonians about  loss of sovereignty.

Estonia did not regain independence until 1991 and the Russian armies did not withdraw until August 1994. Estonia quite literally dragged itself up by the bootstraps. It dramatically restructured and privatised its economy.  It abolished virtually all its tariffs. It successfully launched its own currency, tied to the Deutschemark. It joined NATO and then the EU. Estonia still has some way to go, with incomes and living standards still well below most of the EU, including Ireland. Its economy has had ups and downs in this period.   It faces a demographic crisis. It faces the challenge of the Russian minority. Its politics is volatile. Yet there is acknowledgement of what has been achieved and consensus that there can be no going back.

By contrast, to listen to the chat shows and some commentators, one would think that Ireland has fallen back to historic levels of hardship and poverty. There has been anger at every cut in welfare and increase in taxation. Yet  the existing unsustainable welfare  levels are of recent origin and well ahead of inflation while the tax increases likewise have merely rolled back some of the cuts of the Tiger era. And very few of the punters who benefitted on either front complained at the time about the government’s largesse. The public search for scapegoats has now shifted. First were the bankers the speculators and Fianna Fail. Now our EU partners, the European Central Bank and Germany are in the frame, as is our membership of the Euro.

It is surely time for a reality check. We were not invaded seventy years ago; we did not endure a subsequent 50 years of occupation, dictatorship and murder.  Now is a far cry from the 1950s, popularly regarded as the nadir of independent Ireland, when the last great wave of emigration (over 1% of the population annually, including my own family) took place. Older readers will remember the tremendous sense of hopelessness then prevailing.  There was no inward investment. There were no jobs.They will also remember – I do – the very real rural and urban poverty of the time. Welfare payments were derisory then and for long afterwards.

The country was socially backward, Church dominated and, as we now know, at least complicit and tolerant of a brutal sub-culture involving physical and sexual abuse of children in state supported institutions and of vulnerable women in set-ups such as the Magdalen laundries. Censorship was rife (almost exclusively preoccupied with sexual references). Contraception was illegal. Married women were excluded from most state occupations and women generally were paid far less than their male counterparts in similar jobs. State jobs and, indeed, school graduation, were contingent on graduating in Irish, a neat way of excluding both Northern Protestants and any emigrants with families contemplating a return (it certainly deterred relatives of mine).

Fast forward to the 1980s. The parallels with the current fiscal situation are close. Indeed the borrowing levels in the late 80s, as percentages of GDP, were worse than those projected in the current four year plan. Yet there the resemblance ends. There had been no boom. Inflation and interest rates were through the roof.  Official unemployment was 20%, the real figure much higher. Emigration was heading for the 50s level. Taxation rates (for those who paid – evasion had become a way of life for many) were punitive. There was little disposable income; it was the era of home- made beer. Welfare payments, though improved, were still miserable.  There was no agreement on a solution; the most popular T.V. talk show actually featured a debate on Ireland defaulting on her national debt, with the case for doing so being put by a schoolboy!

Ireland has made a quantum leap in the last two decades, economically, socially and culturally. Ceteris paribus, like Estonia, there is no going back. Yet unlike Estonia, this does not seem to be acknowledged.  2010 saw the end of a lot of illusions, and perhaps the dawn of reality has made the sudden stall in prosperity that much more difficult to accept. There are tough times ahead, certainly, but the plateau we are now on is significantly higher than 20 years ago. There may be no return to the Tiger levels of growth but our recent experiences will surely equip us better for a more structured future.” Sadder but wiser” may be the new appellation. We will still be a far cry from the 80s or the 50s.

The Borrowing Elephant which now preoccupies us has two elements. The first, the fiscal gap, has to be bridged, as in the 80s, like it or not, and this should not be shirked.  The banking element on top threatens to overwhelm the country. There are divided counsels on this, but there is alsoa bigger picture – the European one. The future of the Euro will be determined over the next year or so. Finding a solution presents an enormous political challenge to all EU states. The seriousness of the problem, and the threat to the whole European Project – from which Ireland has benefitted so much – has become more apparent in recent months. Any solution will have to grasp several nettles, including that of the date for burden sharing by bondholders, as well as refining the relationship between weak and strong Eurozone states Who can foresee the outcome? It may well be that time, and events, will solve the banking debt issue for Ireland. “Hard pounding, gentlemen.”

 

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