Author: Kevin O’Rourke

What is the problem that selling Aer Lingus is supposed to solve?

I am writing this in the Aer Lingus lounge in Heathrow’s new Terminal 2, somewhere I spend a lot of time. Like a lot of other Irish people, I am a loyal customer of the national carrier, for a very simple reason: it’s a fantastic airline. It serves lots and lots of destinations direct from Dublin — no more going through London to get anywhere, which was once very often the case. It’s cheap — thanks to competition with Ryanair, British Airways and others. It offers the things that frequent fliers want — lounge access and terrific service. It pays decent wages. It’s Irish.

What’s not to like?

When deciding whether or not to sell the State’s remaining stake in Aer Lingus, you have to make value judgements, whether you admit to doing so or not: there are no “scientific” grounds to prefer one outcome to another. It’s the customer experience that matters to me, and I don’t see why you would think that selling the State’s stake would improve that in the long run.

So, what’s in it for me consumers?

Here’s a radical thought: ballot Aer Lingus customers, and see what they think. Isn’t the customer supposed to be king?

Ultra posse nemo obligatur, anyone?

Paul Mason has a blog post and interview here, worth reading and watching. I am going to stick my neck out and assert that Manolis Glezos does in fact speak with a certain moral authority. But it is the German deputy finance minister’s constant insistence on obeying the law that prompts this post, along with its title. For German government use of the principle in the economic domain, see here (p. 188).

Another one from Jordà, Schularick and Taylor

The latest in an important series of papers by Jordà, Schularick and Taylor is described here.

Although they don’t spin it this way (which is not surprising, since they don’t provide evidence about the impact of fiscal policy on housing booms and busts), the work suggests to this reader potential arguments (on top of the more standard ones) regarding the benefits of automatic stabilisers and countercyclical fiscal policy.

Irish virtue, Irish (or should that be FG?) interests

There has been some talk recently about how Greece should take its medicine the way Ireland has. So here is a chart, taken from the IMF’s WEO database, showing the two countries’ structural budget balances as a percentage of GDP:

 

Even if you start the clock in 2008, there is a sizeable difference. And if you start in 2010, when the programmes started, there is no comparison in terms of the “fiscal effort” made. (And yes, I know, it would be much better to look at ex ante measures of austerity, but this is what was to hand.) On top of that, the multiplier in Greece is presumably larger than in very small and very open Ireland. The EC estimates that it is almost twice as large in this paper, not that I take their Greek multiplier estimate particularly seriously. And finally, there is this chart which a friend sends me.

So, to summarise: the Greeks have done more “reform” than we have, have endured a lot more austerity, and live in a country where the costs of austerity are likely to be higher than here. Perhaps the Irish government might want to tone down its assertions of relative virtue, and display a bit of solidarity with Greece. Is a less deflationary and less creditor-friendly Eurozone  not in Ireland’s long term interests, assuming that we remain a member of the single currency?

Except of course that it won’t, for party political reasons. And you can see why. Expect to see more ad hominem attacks on dangerous ex-IMF radicals and other fellow travellers in the months ahead (despite the fact that the government is expecting the electorate’s gratitude for…implementing the programme that the self-same IMF and its fellow-Troika members designed! You couldn’t make it up.).

A moment of truth for the European project

I thought that an appropriate way to celebrate Syriza’s victory was to do what I should have done a long time ago, and finally read Peter Mair’s Ruling the Void on the journey from Dublin to Oxford this morning. It’s a terrifically insightful (and readable, and short) book that had me nodding in agreement throughout, and you could base a whole series of blog posts on it. So let me just pick up, on the day that is in it, on one of the very last points made in the book:

…we are afforded a right to participate at the European level…and we are afforded the right to be represented in Europe, even if it is sometimes difficult to work out when and how this representative link functions; but we are not afforded the right to organise opposition within the European polity. There is no government-opposition nexus at this level.  We know that a failure to allow for opposition within the polity is likely to lead either (a) to the elimination of meaningful opposition, and to more or less total submission, or (b) to the mobilisation of an opposition of principle against the polity — to anti-European opposition and to Euroscepticism

Democratic political systems need oppositions which can force policy reversals if voters decide that that is what they want. Kicking the bums out is not enough, we have to be able to kick out their policies as well.

Syriza is opposed to European macroeconomic policy, and won the elections on that basis. They speak for lots of Eurozone voters, not just Greek ones. If the EU have any sense they will not play hardball with the new Greek government, especially since just about everyone agrees that Greece’s debt is unsustainable. Nor should anyone be hoping that the new Greek government will be “pragmatic”, and forget its opposition pledges once in government. The Greeks want fundamental change, and have voted for a democratic pro-European party to express that desire — which, you might think, is a lot more than the Troika deserves. If Syriza doesn’t deliver, for fear of upsetting its Eurozone partners, voters may turn to parties that really are anti-European. In the Greek context, that could be very ugly indeed.

How the EU responds to last night’s election will tell us a lot about the actually existing European project.