Northern Ireland and the Double TransitionDr. 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 political dynamics it is moving from a situation of conflicted democracy and violence to one where democracy is supported and broadly participative.

However, it is also moving from an economic framework that is formulated upon social democratic ideals to one that is dominated by market agendas and neo-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 Ireland

Most public expenditure in NI funded under the assigned budget – adjusted to reflect changes in per capita expenditure in England

Capital spending funded through the use of NI resources or through direct borrowing is tightly constrained. The capital used with count against NI’s capital budget.

“In contrast, under current Treasury rules as long as a PPP is off-balance sheet (i.e. the project is recorded as a contract for services rather than a financial lease in the public sector’s accounts), there will be no direct impact on the NI capital budget, while annual charges count against the revenue budget as they are incurred.” (NIPSA, p.9)

11 May 2010

Dear Chief Secretary,

I'm afraid to tell you there's 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 only jeopardise 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 only jeopardise recovery, but also fail the next generation.”

Mervyn King, TUC Conference, 15 September 2010.

“In the European context tax rates are high and government expenditure is focused on current expenditure. A “good” consolidation is one where taxes are lower and the lower government expenditure is on infrastructures and other investments.”

Mario Draghi. 24 February 2012.

“The ideal fiscal consolidation ... must be focused on spending cuts and not tax hikes.

It is essential that [this consolidation effort] is perceived as credible, irreversible and structural to have 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 cent

29 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 cent

29 February 2012: €529.5 billion to 800 banks – 3yrs @ 1 per cent

“Some banks, particularly in Spain and Italy, used portions of those funds to buy higher-yielding bonds issued by their governments at a time when most investors remained skittish, and it helped reduce government borrowing costs.

But many banks primarily used the funds to pay down maturing debts or simply deposited the money at other banks or with the ECB itself, even though they yield less. The infusion fell short of some politicians' hope that it would stimulate bank lending to customers in struggling European economies.”

Wall Street Journal, 1 March 2012

Implementing reform is a real challenge and this requires that we win the hearts and minds of the people.

Countries are faced with the option of either profoundly reforming their public expenditure and social security systems or putting their long-term sustainability at risk.

Jean-Claude Trichet, 31 May 2004

1. Cut government spending

2.Cut wages

3.Use central bank credit to buy paper assets

4.Keep inflation low