Over in the UK the climate and energy secretary, Chris Huhne, has given a speech in which he warns of a “possible 1970s-style oil shock“. Meanwhile here in Ireland, as Labour and Fine Gael continue their coalition negotiations, rising oil prices look certain to provide the new government with its first serious challenge, even as the IMF/EU “bail-out” drags us into bankruptcy.
On the subject of the “bail-out”, German chancellor Angela Merkel insisted a couple of days ago that there was little room for renegotiation. There’s a hint that interest rates might be reduced very slightly, but it would be a token gesture and one that will have no real impact on Ireland’s future (though you can bet that Enda Kenny will be hailing it as a massive success… it’ll be his “Peace In Our Time” moment and it’ll happen right at the start of his leadership). Instead, the financial institutions of Europe, backed by the most powerful governments, are demanding that the Irish people pay for the reckless behaviour of private institutions over which they had no control. It’s beyond the merely unjust and enters the territory of tyranny. An aggressive response isn’t merely appropriate, it is damn near obligatory.
But what should that response be?
The first thing that should be done is the Irish Central Bank should begin printing large numbers of new banknotes. Or rather, old ones… the Irish punt. These should be held in reserve in the event we need them. The government should then send a negotiating team to Strasbourg, Paris and Frankfurt and explain that the Irish people will not accept the tyranny being imposed upon them. We have run up a large sovereign debt and will repay that, as we should. However, we simply refuse to force private debt onto public shoulders. The choice then lies with Europe…
They can accept our position, in which case Ireland will endeavour to reduce the public deficit — which will still involve hardship for the Irish people, no question about it — and repay the sovereign debt in euros. Meanwhile the institutions of capitalism which made disastrous bets on the Irish property boom will have to accept their losses. As is morally and legally right.
Or they can reject our position; in which case we will unilaterally default on the bank debt anyway, and repay our sovereign debt in punts.
I’m not suggesting that the transition out of the euro would be painless. Far from it. It would be bumpy and involve a hell of a lot of obstacles. But I genuinely believe that the alternative — accepting the legitimacy of transferring private debt into the public domain — will be far worse. I also believe, were we to adopt the aggressive position I suggest (a position that merely mirrors the tyrannical position being adopted by Europe towards us, let us not forget) there’s a better than average chance that Europe will acquiesce to our demands. A unilateral decision to default on the debt and pull out of Europe will ultimately, especially in these rather skittish times, do plenty of damage to the European project, as well as to Ireland.
Again, let me stress that I take no pleasure in suggesting this course of action. If you’ve read my piece on The Maastricht Treaty, you’ll know that I am very much in favour of the spirit of the European Project. But it also seems to me that so long as Europe is being run in the interests of financial institutions rather than the citizenry that an oppositional stance is required.
And the oil price?
Ah yes, the added wrinkle. The price of oil is on an upward trajectory again. Instability in the Middle East and North Africa is certainly contributing to this, but that’s far from being the whole story. The truth about exaggerated reserves in OPEC nations is finally beginning to filter out, while other countries are also seeing a faster than expected fall in both reserves and production capacity. On top of that (and not entirely unrelated to it), global food prices have now reached record highs.
Both of these developments suggest a clear strategy for the incoming Irish government who will simply not be able to rely upon the economic growth forecasts it is basing its already absurdly optimistic figures on. Firstly, the Irish agriculture sector needs to be expanded. This should not be rocket science for a country that was primarily agricultural up until very recently. Given that rising oil prices will make the mechanisation of farming more expensive, farmers should be given incentives (perhaps in the form of employer tax breaks) to hire additional labour.
At the same time, significant incentives should be provided to companies to set up wind and wave energy projects. These incentives could include things like employer tax breaks (again) and even tax-free profits for the first year after the farm repays its set up cost. On the one hand, yes, this would be loss to the treasury (though I prefer to see it as a non-upfront investment in the project) but the gains — in terms of employment / getting people off the dole and training them, plus the long-term advantages to the national infrastructure — will more than pay for this.
Our government should be doing all of this, as well as announcing a national emergency strategy that is ambitious and infused with real vision. It should commit itself to an Ireland that can feed and power itself, without recourse to imports, by the time it leaves office. Which is definitely not to say that Ireland should be looking to remove itself from global trade. Merely that Ireland should accept that in a world where the global markets in food and energy resources have become impossibly volatile and are likely to put even the wealthiest nations under strain, that as a small, fertile, sparsely-populated island we are in an almost unique position to take control of our own destiny. And far from trying to weather the approaching storm, we should be looking to disembark the leaky ship of international capitalism and take shelter before it hits.
Of course, our government hasn’t got the intelligence, the vision or — let’s face it — the balls to pursue such plans. Will the next one? I can only hope so.