Tuesday, November 09, 2010

Morgan Kelly, Fiscal Autonomy and the Kindness of Strangers

Morgan Kelly is not like the other members of the Irish economic commentariat. The officer class of the bean-counters – David McWilliams, Jim Power, Brendan Keenan, Brian Lucey – are on TV or radio so often you could imagine they were all somehow related to Ryan Tubridy. There’s no escaping them.

Kelly ploughs a different furrow. He is never on TV or radio, and is not available for press interviews. His only contributions are more or less bi-annual philippics in the Irish Times on the economic issues of the day, philippics that foretell the end of days just around the corner, where there will weeping, wailing and gnashing of teeth.

Stylewise, Kelly is a combination of the Biblical prophet Jeremiah (“Jerusalem! Jerusalem! Turn back to the Lord your God!”) and Corporal Fraser of Dad’s Army (“Doomed. We’re all doomed.”)

And Kelly may well be right. He has certainly hit a nerve with people who email links to Professor Kelly’s works when they come out and then spend the rest of the evening idly wondering where a man might get a good price on a rope and a bottle of brandy.

Professor Kelly also taps into a powerful vein of self-loathing and lack of confidence in the nation when he reflects how things have come to this: “Europeans had to endure a decade of Irish politicians strutting around and telling them how they needed to emulate our crony capitalism if they wanted to be as rich as we are.” We can all feel the lash there.

However. An Spailpín can’t help but wonder if Morgan Kelly’s current guru status has more to do with style than substance. Your humble correspondent wouldn’t like to try taking on Professor Kelly on the substance of the matter as An Spailpín has no financial training whatsoever. But on style issues there was one thing I noticed about Professor Kelly’s piece yesterday that gave me pause to wonder if that was brimstone I could smell or just more hot air.

Professor Kelly remarks that “During September, the Irish Republic quietly ceased to exist as an autonomous fiscal entity, and became a ward of the European Central Bank.” What does that mean exactly, “an autonomous fiscal entity”?

An Spailpín’s guess is that “an autonomous fiscal entity” is a state that can control its own money free of the influence of other states. And this has only ever been the case for three of the 89 years of the state’s existence.

The Free State punt was introduced in 1928, seven years after “independence” but as a currency it was directly linked to sterling. One English pound was one Irish pound. The only difference was the picture on the banknotes. Irish banknotes were printed in England, and the coins made by Her Britannic Majesty’s Royal Mint, until 1978.

In financial terms, Ireland didn’t even have dominion status as a currency. Perhaps this explains why Ireland wasn’t able to take advantage of our neutrality in the war – because the currency was bound hand and foot to the British war effort. We were only, in those most evocative of Irish phrases, kinda independent. Sorta free.

The punt lasted for three years among the currencies of the Earth, by which stage we joined the EMU and hung on for dear life while the value of the punt fluctuated like a citizen’s heart rate on reading another of Professor Kelly’s articles.

If I am doing the Professor a disservice maybe someone could email me but in claiming that Ireland ever was an “autonomous fiscal entity” it seems to me that Morgan Kelly is having a little bit of jam on it. It is not today or yesterday that Ireland has become reliant on “the kindness of strangers.” This has been the state of play since the foundation of the state.

When Brian Lenihan introduced his emergency budget last year, Richie Ryan, was interviewed on This Week on Radio One. Ryan, who served as Minister for Finance under Liam Cosgrave from 1973 to 1977, said that when he was appointed he got a letter from one of his predecessors who said that he would pray for Ryan and “the cross you bear for Ireland.”

That’s the reality of Ireland’s fiscal autonomy. The Tiger was the chimera; the hard life is the reality over the history of the state. Ireland is a very small country with no natural resources and a huge reliance on foreign direct investment to keep the show on the road. We are in no position to pull faces about the kindness of strangers. If strangers are running our economy maybe that’s a good thing. We’ve certainly made a bags of running it ourselves.