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Dublin: 14 °C Tuesday 23 September, 2014

Column: It’s fanciful to think a wealth tax would make the rich leave Ireland

A former IMF head of the mission for Ireland has said an entire reliance on austerity was not the right move – yet we’re still following that road. David Cronin asks why.

David Cronin

MY BRAIN IS addled and my belly is full of blubber. I have just returned to Brussels after three weeks in Ireland, watching too many news bulletins and eating too much chocolate.

Here is why I am confused: the top story one day was that an International Monetary Fund official who elbowed Ireland into accepting a ruinous loan in 2010 had admitted that he got everything wrong. The “entire reliance” had been on austerity, according to Ashoka Mody, a former IMF head of mission for Ireland, and “clearly the experience, if experience was needed, has demonstrated that reliance on austerity is counterproductive”.

Croke Park rejection

The top story another day was that members of the country’s trade unions had voted to reject a package of pay cuts for public sector workers. Such an act of rebellion to austerity was long-overdue. Yet the response from the Labour Party – a supposed ally of the unions – was to moan. Brendan Howlin, a veteran Labour politician who is now a minister for austerity, went on TV to alert the nation about the difficult phone call he would shortly receive from the “troika”.

Howlin was almost demanding our sympathy as he prepared for a scolding from his masters in the IMF, European Commission and European Central Bank. He didn’t arouse any sympathy from me. Rather, I scorned his determination to continue with the very austerity measures that a senior IMF figure had so recently repudiated. It was impossible not to think of Albert Einstein’s definition of insanity: doing the same thing over and over again and expecting different results.

Benefiting the rich

Except, I’m not sure the champions of austerity want different results. Their prescriptions seem tailor-made to benefit the rich at the expense of people on low and middle incomes. From that perspective, the prescriptions are having the desired effect.

Social Justice Ireland, a group run by a principled priest Seán Healy, published a detailed analysis of the nation’s economy while I was home. It states that the gap between the wealthiest 10 per cent of the population and the poorest 10 per cent has “dramatically widened” since 1987.

In 2009, the top 10 per cent had an annual disposable income – the amount households can spend after they have paid all their income taxes – of nearly €120,000. The poorest, on the other hand, had to make do with less than €11,000.

Inequality levels

The gap is getting bigger. The Gini coefficient is an indicator of inequality ranging from 0 to 100. Ireland’s inequality levels were at 29.3 on this scale in 2009. By 2011, they had jumped to 31.1.

According to the latest “rich list” compiled by The Sunday Times, the number of Irish billionaires has almost doubled since the financial crash. And the future looks bright for the country’s elite, judging by a paper by Knight Frank, a consultancy on property. It predicts that the number of Ireland’s “high net worth individuals” – those with $30 million or more in net assets – will grow from 554 in 2012 to 751 by 2022. That would be an increase of 36 per cent.

All this data leads to a simple conclusion: Ireland could solve its economic problems by levying a special tax on the wealthy. But on the rare occasions this idea is raised in the mainstream media, it is blithely dismissed. The argument generally trotted out is that the rich will flee the country if they face higher tax bills.

Money would leave Ireland argument

The argument is a cop-out. Firstly, it is fanciful to believe that a wealth tax would cause the rich to quit in droves. Ireland’s history of emigration shows that it is primarily those with limited opportunities who have to leave, not the ultra-wealthy.

The alleged risk of the rich absconding makes the case for a wealth tax even stronger. To reduce that risk, it’s necessary to campaign for  the closure of tax havens, so that the greedy will not be able to squirrel away their cash.

And if some rich folk do split, the rest of the population should say “good riddance”. As Richard Wilkinson and Kate Pickett demonstrate in their book The Spirit Level, inequality is a scourge that causes or exacerbates a myriad of social and health problems. UNICEF, for example, has found that relatively equal societies such as Finland and Sweden score far higher on child well-being than unequal societies like the US.

We are too deferential to the rich in Ireland. It seems obscene that Bono, the singer, is still taken seriously as a campaigner against poverty. He and his fellow members of U2 are worth €612 million, according to The Sunday Times.

A more obscure Dublin band, The Radiators, released an album called Ghost Town in 1979.  That record came to mind after a visit to the Irish Financial Services Centre, which hosted a network of phantom banks. Between 2000 and 2006, the amount of money passing through them quadrupled to $1.6 trillion.

The lax regulation of the financial sector proved catastrophic in Ireland, as it did elsewhere. But the elite is carrying on as if nothing has changed.

David Cronin is an Irish journalist and political activist based in Brussels. He is the author of Europe’s Alliance With Israel: Aiding the Occupation (Pluto Press, 2011). His next book Corporate Europe: How Big Business sets Policies on Food, Climate and War will be published in June 2013. His website is www.dvcronin.blogspot.com. A version of  this article was first published on New Europe.

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