If small nations are defined through their relationship with larger powerful neighbours then what happens when neighbours make unfair and unjust demands? What happens when they first strip a state of its sovereignty and then insist its citizens suffer extortionate economic and social losses to protect their banking systems and citizens wealth?
Government’s decision to expropriate money from private retirement savings accounts illustrates just how serious this state and its citizens are being impacted by a monetarist doctrine designed to protect larger, more powerful nation states.
Last week an unelected senior ECB bureaucrat explicitly threatened to consign this state to an economic stone age unless it abided by his organisations objective to protect larger member states economies and their banking systems. Is the ECB bullying small states into submission?
Having acted as a lender of last resort, the bank now finds itself backed into corner, unable and unwilling to take the next logical step, to restructure unaffordable debt. Instead, it raises the threat of an Armageddon like contagion should it even countenance restructuring.
The stupidity of this states decision to guarantee and then socialise bank debt cannot be unravelled despite Fine Gael and Labour party pre-election promises. Having been first mugged ourselves and then been stripped of economic sovereignty, we are now told the best we can hope for is a marginal reduction in interest rates. We know that we are being sacrificed on an Atlantic Wall constructed to protect others' citizens from what are fundamental Eurozone problems.
The inevitable consequence of being forced to socialise bank debt and stave off sovereign default is seen in the ill-advised decision to overtly raid private sector financial assets.
Taken to its extreme, a 100% tax on private financial assets would wipe out public debt tomorrow. On its own, the 0.60% levy may appear to be a small number. It is in fact a substantial amount of money that is not being invested in job-creating assets but used to fund public sector day-to-day running costs.
Excuses proffered by Government for raiding private sector retirement savings echoes the previous administration’s claims for the cheapest of banking bailouts.
Despite ministers and ill-informed TD’s spin and bluster, it could not legally guarantee that it will not be forced to expropriate more savings. Once again political ambiguity was deployed to play down the enormity of what is the thin edge of a very dangerous wedge.
The message is quite clear – there is now a real risk to private savings if left in the state. Those who can afford to will shift their money abroad and thus deny the country the productive wealth required to rebuild the economy.
While pension funds may be non-productive wealth, enforcing productive investment through state expropriation is inefficient and ineffective as the money will be channelled through a high cost, low return dysfunctional public sector bureaucracy. Suggesting expropriated savings will be ring-fenced to facilitate job creation is disingenuous as there is no direct connection between what government collects and spends.
Lateral thinking could have been used to encourage voluntary investment in specific funding vehicles and supporting frameworks for business enterprises starved of credit. Three years into a credit crunch and there is a mere hint of a small business loan guarantee scheme emanating from Government. Could private sector financial assets not be deployed to capitalise such a scheme and generate a return for investment?
Rebuilding a working banking system requires private productive wealth in the form of savings to fund new lending. The danger now is in adopting what are essentially war time-like expropriation powers, productive wealth will flee the country. Is it right to risk a flight of private capital?
If the ECB is clearly intent on protecting other states national interests and their citizen’s private wealth, is it in this state’s interest to raid private citizen’s financial assets?
Can it be said that reparations demanded and enforced through implicit and explicit threats by external forces are in the common good?
And is right the common good should used to reason an inequitable, unjust expropriation of private wealth?
While 0.60% may seem a small number, the decision to dip into a store of wealth to fund the state’s operating costs fundamentally impacts on the relationship between private property rights and the wider common good.
For this reason many are questioning the constitutionality of a decision largely caused and driven by less than benign external forces.
If small nations are defined through their relationship with larger powerful neighbours then what happens when neighbours make unfair demands?
A version of this article appeared in the Irish Examiner, Business Section, Monday 30th May 2011.
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