THE IRISH GOVERNMENT is halfway through its Presidency of the Council of the European Union. The Presidency Programme targets “stability, jobs and growth” and picks a round of “fights” namely: the fight against poverty, the fight against hunger, the fight against the effects of climate change, and the fight against tax evasion and tax fraud.
In the ‘fight against poverty’, the programme makes reference to the Europe 2020 Strategy, which aims to lift 20 million people out of the risk of poverty or social exclusion by 2020. No mention is made of the fact that, last year, the Irish government reduced its target from eliminating consistent poverty by 2016, to reducing it to 4 per cent by 2016.
Austerity undermining recovery
The European Anti-Poverty Network expressed alarm at this reduction. In its key message on the overall target, the organisation said: “Austerity policies are generating poverty and undermining an inclusive recovery.” Far from reducing poverty, European and Irish policy, through austerity, is concentrating wealth and thereby increasing poverty. Ireland, at the helm of the EU, is presiding over poverty.
The EU, which often praises its own role in international development, need not look beyond its own borders to see widespread poverty. Twenty-four per cent of the EU27 population is at risk of poverty or social exclusion (approximately 120 million people) and up from 23 per cent the previous year. At 38 per cent, Ireland has the highest rate of children at risk in Western Europe and the fifth highest of the EU27.
Irish homes being forced into debt
The Irish League of Credit Unions ‘What’s Left’ surveys are important indicators in the Irish media and have been ‘noted’ by the Troika. The latest of these, based on December 2012, showed that 61 per cent of people have less than €100 left at the end of the month once essential bills are paid, 36 per cent have less than €50 and 20 per cent have nothing at all. Another survey showed that 56 per cent of Irish homes have been forced into debt to pay household bills.
The CSO’s Survey in Income and Living Conditions demonstrates that almost one quarter of the population, over one million people, experienced two or more types of deprivation in 2011. These types of deprivation include: unable to afford to replace any worn out items of furniture, without heating at some stage in the last year, and unable to afford a roast one a week. This poverty has manifested itself in hunger as 10 per cent of the population or 450,000 people are in food poverty. One cannot deny that there are a significant amount of people that are struggling to get by in modern Ireland.
We remain a very wealthy as a society
Despite these levels of poverty, we remain a very wealthy as a society. But this wealth is concentrated in very few hands. According to the CSO and Credit Suisse, the total wealth in Ireland is €468 billion. Half of this is owned by the richest 5 per cent. The top 1 per cent (36,000 adults), where the true extent of the concentration of wealth is seen, own a startling €131.5 billion or 28 per cent of all wealth in Ireland. This is same amount as owned by the poorest 80 per cent, 2.9 million adults!
The application of austerity in the last six budgets, far from closing these gaps or protecting the vulnerable, has seen the rich get richer. According to the CSO, between 2009 and 2010 the disposable household income of each decile fell, except that of the richest 10 per cent – which increased. In the year following two austerity budgets, the poorest 10 per cent of people got 26 per cent poorer while the richest 10 per cent got 8 per cent richer.
The proponents of austerity, the Troika, cannot even agree over whether the policy is working, with recent exchanges between the EU and IMF. An IMF working paper in January found that “stronger planned fiscal consolidation has been associated with weaker growth than expected” and that “fiscal multipliers were substantially higher than implicitly assumed by forecasters,” particularly in the short term.
Things being made worse
Fiscal multipliers, though only one factor to consider for fiscal policy, are an indication of the effect of changes in government spending on economic output (GDP). The IMF has found that fiscal multipliers due to fiscal consolidation (austerity) are far higher than originally assumed and are of the order 0.9 to 1.7. This means that every €1 cut from government spending will reduce economic output by between €0.90 and €1.70. Far from improving the situation, austerity is making things much worse and, in fact, both Ireland and the Eurozone are officially back in recession. Despite the government rhetoric, employment is not rising and emigration is.
Austerity may not be working for most of us, but it certainly is for the super-rich. The richest 300 people in Ireland make up the richest 1 per cent of the richest 1 per cent of adults. These 300 people in Ireland own €66 billion. That’s more than that of half the population and almost as much as the entire bailout package. The era of austerity has been very good to these people as their take has risen from €50 billion (2010), €57 billion (2011), €62 billion (2012) to €66 billion (2013), according to the Sunday Independent. That’s an increase of one third in just three years.
Debt, investment and demand
It is in this context that at least €64 billion of private banking debt has been taken on by the Irish State. According to economist Michael Taft, Ireland has borne the brunt of European banking debt, 42 per cent of the total cost of the European banking crisis. The recent promissory notes ‘deal’ does not represent any success for the Irish Presidency of the EU. The liquidation of IBRC and conversion of the promissory notes to 25-40 year government bonds completes the transfer of private banking debt to sovereign debt liable to be paid by the Irish public. According to Prof. Terrence McDonough of NUI Galway, the deal represents little to no saving, will not reduce austerity, and is really a “scam”.
As austerity continues, and as the property tax and the Croke Park 2 cuts are coming down the line), domestic demand (personal consumption + government expenditure) has fallen each year. The latest Quarterly National Accounts show that personal consumption has fallen by €7 billion government expenditure by €5 billion since 2007, however the big loser has been gross fixed capital formation (investment) which has fallen by over €20 billion and is now the lowest in the EU27 as a percentage of GDP.
The true fight against poverty is a fight against austerity. It is a fight for public investment to overcome unemployment and a fight to put the needs of the vast majority in society above those of the super-rich.