Wednesday, July 23, 2008

Marx's Revenge

If there's one thing we can be fairly sure about in relation to the outcome of the next general election in Ireland it is that the Labour Party will be one of the parties in government. This has nothing to do with their likely manifesto or 'success' so far. It simply has to do with economics.

Evidence from different countries shows that economic downturns tends to lead to increasing demands for re-distributive policies; whereas periods of strong growth tend to lead to demands for lower taxes and less regulation. So far so obvious. But the interesting thing is to consider what this means in the context of the recession we have entered (and may well have to endure for some time).

Here are a few things I expect:
  • there will be no significant cut backs in current government spending, especially on social welfare but also on middle class welfare (tax relief on mortgages, health insurance etc).
  • there will be no significant cuts in public sector pay or employment levels (on the basis that there are no consequences for refusing to make and take cuts).
  • there will be tax increases, firstly on the 'rich' (i.e.: other people), then on 'the rest of us'.

We never quite became card-carrying 'free marketers' in Celtic Tiger Ireland (after all, for a brief period, the powers-that-be were able to both cut taxes and raise spending); and we are about to 'revert to type' over the next few years as (exaggerated or irrelevant) concerns about inequality and poverty gain ideological ground. It is in that context that Labour can be fairly optimistic about their election prospects - assuming they're not run over in the rush to the left by every other party.

Mind you, it will leave an interesting gap on the right wing side of the political spectrum. Say for a party that champions better value for taxpayers (with an emphasis on lower taxes). One potential target for such a pitch: the generation that grew up with the Celtic Tiger (and who never quite imbued the traditional Irish guilt trip about money and the things it can buy) - they may well be open to persuasion.

Whatever happens, it'll certainly make for a far more interesting election next time round than the last one.


  1. Gerard,
    What do you mean by "the traditional Irish guilt trip about money"? Guilt about having money and if so, are you suggesting this is a catholic thing?


  2. It might be an Irish Catholic thing: I remember an old teacher telling me (and the rest of my class) that nobody ever became rich without cheating or breaking the law. Inspiring stuff ...

    But not all Catholics suspect the free market: I'm a big fan of The Acton Institute ( established in honour of Lord Acton, a Catholic liberal advocate in Victorian England.


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