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Race to the bottom

Ireland’s already severe economic troubles just got a whole lot worse.

Its plan to reduce its budget deficit to 3% of GDP in four years by cutting spending by €7.5bn has been undermined by lower growth prospects both at home and abroad and higher debt interest costs.

So, in a warning of what is to come elsewhere, Ireland’s Fianna Fail government has DOUBLED its programme of cuts to €15bn.

And this comes only days after the UK's Lib-Tory Coalition announced the latest details of its own savage assault on the public sector intended to hit a strikingly similar target.

You can almost feel the brutal threat contained within the official Irish statement:

The Government realises that the expenditure adjustments and revenue raising measures that must now be introduced will have an impact on the living standards of citizens. But it is neither credible nor realistic to delay these measures.

And you can almost see the baseball bats wielded by the bailiffs sent in by the money marketeers who’ve driven up the price of borrowing for Ireland, and a long list of other highly indebted countries.

Our obligations are clear. We must demonstrate that we are bringing sustainability to our public finances. We must stabilise our debt to GDP ratio over the period of the Plan. And we must set out our strategy for returning our economy to growth.

Things are getting rapidly worse for the millions of ordinary people already struggling to deal with the costs of debt repayments incurred when governments decided they had no option but to bail out the bankrupt banking sector in 2007 and 2008 and issued monstrous amounts of new credit in the hope that it would stimulate a ‘recovery’.

Despite better than expected growth figures for the UK in the last half year, its economy hasn’t even recovered half of the production it lost during the first part of the dive into its worst post war recession.

Meanwhile, the world economy is heading into a renewal of decline. Look at South Africa for example. Unemployment there is growing relentlessly beyond 25%. If the workers who’ve given up looking for a non-existent job are included the figure is over 36%. Whilst carmaker Ford has used its government bailout to slash production, sell off Volvo and cut its involvement with Mazda and returned to profit, parts of America have an official unemployment rate of 20%. And one person in five out of work is the official rate for the whole of Spain.

With profit-seeking capitalist society no longer able to offer jobs to so many people – and forcing governments to slash support for the unemployed – belief in the system is being undermined. It’s no wonder that the dream weavers are hard at work spreading the myth of a ‘return to growth and prosperity’. As increasing numbers begin to realise that the game is up, the need for a society that is based on need rather than shareholder returns becomes increasingly urgent.

Cameron has just delayed the details of the growth package that was expected to follow the biggest assault on public spending since the post war creation of the welfare state. Could this be an admission that there’s nothing he can do besides opening the way for a few thousand jobs in off-shore wind turbine manufacture?

It’s high time people – workers, students, farmers, pensioners, the unemployed, communities – formed new kinds of democratic forums and began to explore how to use them to take things into their own hands. As illusions that the system can provide for people’s needs are broken up, there is nothing to lose and everything to gain.

Gerry Gold
Economics editor
27 October 2010

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