12 October 2008

In Reply to David McWilliams

This morning David McWilliams (right) published another very interesting article on his website.
You can read the complete text by going to http://www.davidmcwilliams.ie/2008/10/12/breaking-the-vicious-circle

In this article David suggests the establishment of a new international clearing house for banks under the direct authority of the G 7 (most industrialised) countries, which are the USA, Canada, Japan, the UK, France, Germany and Italy.

Once again I happened to be one of the first people to read the article, and the first to leave a comment at 5:58 a.m. this morning. Having read my comment, which was written impromptu and without preparation, a second time now, I realise that it is not just a comment on David's article, but goes further with its demands and is a separate article itself.

I am taking the liberty of posting it here as well, for the benefit of those who do not read David's articles or visit his website on a regular basis. So, here is the text:

Events in Ireland - and in most other countries - have been overtaken by the international reaction - or perhaps over-reaction - to the US credit crunch.

A new international clearing house under the control of the G 7 would be useful, I agree. But we need a lot more to get the economic fleet sailing again. State pressure on the banks will be necessary, yes, but at this stage one has also to contemplate a complete nationalisation of the whole banking system.

We were very kind and generous to the banks by giving the guarantees, but it seems to have little affect. The problem is that leopards do not change their spots. So they try to carry on, perhaps with reduced speed, but still staying on the same old course. This has to stop.

If we put all our money and state resources up, then I think we should also have control. And that means first of all a change of course and of leadership. Heads need to roll, quite a lot of heads, and from the top downwards. Most of the CEOs and directors have shown their incompetence and recklessness only too clearly, so they have to go - fast and without golden parachutes.

There should be a new rule that no-one in any company - including banks and stock brokers - can earn more than ten times the income of the lowest paid employee. This would lead over night to a massive increase in equality, and also lead to more investment.

Simultaneously Brian Lenihan should raise the income tax for all people earning more than 100,000 per annum significantly, and introduce new taxes on the buying and selling of shares. Betting taxes should be raised as well, and all the loop holes for the super-rich should be closed immediately.

Further the government should - through the budget - impose an immediate freeze of all consumer prices (especially for food, fuel, electricity and all essential commodities) for at least six months. This would be a great relief for everyone, but particularly for people with lower income, and get us well over the winter. The freeze should be reviewed in 6 months, with the option of an extension.

In terms of structure, all the various regulators should be abolished and merged into one single national consumer authority, directly responsible to the Taoiseach, and with real powers and teeth, as they are in existence already in many continental countries. This would reduce state expenditure and strengthen the effects of regulation.

IDA, FÁS and other institutions should focus on supporting existing Irish businesses and helping to start new enterprises - especially small and medium size companies - in Ireland and owned by Irish people. It has been one of the main mistakes to concentrate always on the big international companies - mostly US owned - and give them millions in advance of even coming and creating jobs. They all packed up again when the extra benefits ran out, or when they got better offers elsewhere.

In general Ireland and Europe should reduce their economical and financial ties with the USA as much as possible. The USA have created this crisis, out of greed, stupidity and criminal activity, and now the whole world is suffering as a result. We have to be realistic and look after our own interests first. (As the Prime Minister of Iceland said so rightly last week: Every man for himself.)

Fortunately we are not entirely on our own and have the EU and ECB behind us. If Europe uses her very well developed infrastructure and skill base, the recession will not last as long as is feared now, and it will also be manageable. Let the USA sort out her own mess, which is entirely of her own making!

Europe could come out of this crisis a lot stronger, and become the No. 1 economic power in the world, if we do things right. Otherwise we will always depend on whatever the USA is doing.
Let the Americans sink or swim, whatever they can manage. Their country is meanwhile so run down - in all areas - and riddled with social and political problems that have no relevance for us.

I am no socialist as such, and as we have seen in Eastern Europe, most socialist models have failed as well. But we need to realise that capitalism of the US & UK style, which has so far been our model as well, does not work. It has its failure already built into the system. So if we repair the damage, only to return to the old capitalist model, we can as well leave it and save us the bother and money.

There are very good and workable models of moderate capitalism with a social dimension, especially in the Scandinavian countries, but also in Germany, France and some other nations. These models we need to study closely, and then adopt which ever is the most suitable for us. If we do that, we will have a safe and prosperous future. If not, we will be sucked down into the abyss by the vortex created by the foundering last empire - the USA.

The Emerald Islander

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