Article on Finance

3rd  March 2009

The financial calamity which surrounds us is not a natural catastrophe – it’s not a Tsunami, Earthquake or Volcano. It is man made and as such should be susceptible of a human solution. More than that it was all too predictable and there were even a few timid voices warning of breakers ahead. What we needed was clear decisive and comprehensive action from Government, but instead the response has been hesitant and piecemeal. We have had enough of politically partisan point-scoring in both Dail and Seanad and the antics of parliamentary Madame Des Farges and Robespierres who extract regular headlines from the media by calling for yet another head in the basket, more blood on the floor and the ritual exposure of incompetence, without tackling the root sources or providing a positive alternative.

I do acknowledge that 20 / 20 hindsight vision although frequently claimed is infrequently provable. However even as a mere customer I did notice something of a whiff coming off the banks at street level. I didn’t like being deliberately pushed out of banks onto the pavement, given a piece of plastic and told to shove it into a hole in the wall, or being made unwelcome in the banking halls and finding it impossible to get to more than a nodding acquaintance with the bank manager before he or she was changed, in case they became too familiar with our banking practices, thereby becoming able to make an informed estimate of our credit worthiness. I did create scenes in banks and incite people beside me in inordinately long queues to rebel. I spoke out in public pointing out that banks were merely shops selling money, that we were the customers, as well as their most reliable and traditional source of income and that the bank would neglect our interest at their peril as they pursued speculative profit. I put on the record of Seanad Eireann that I was in regular receipt of unsolicited offers of tens of thousands of Euros in unsecured loans from various banks. I also routinely expressed concern at the granting of hundred percent mortgages the danger of a property collapse and consequent negative equity. I said the day of reckoning for the banks would come, and come it has with a vengeance that they richly deserve. The pity of it is they now have their hands in the pockets of those ordinary customers whom they routinely treated with contempt.

They were not alone; telephone companies, airlines and other utilities have been privatised and now show all the moral principles of snake oil salesmen. It’s impossible to get an honest price from any of them or to get any consistent servicing of their installations as all these activities have now been franchised out. You are told you have to shop around, there are bundles of this, bundles of that, bundles of the other and the same with air fares. The consumer is constantly at the sharp end of three card trick merchants as we are invited to find the lady under the latest opaque glass tumbler. And what else are those other toxic bundles in which 18 carat crap was given a lick of gold paint by the financial institutions? All of this of course was accompanied by an orgy of vulgar materialism in which the media gleefully joined.

Two years ago I was invited by University College Cork to give a lecture in honour of Philip Monahan a product of old style Irish republicanism who had become the first City and County Manager of Cork. I had never heard of him but I read his biography written by a young UCC Professor Aodh Quinlivan and was impressed by his career. In my talk I addressed what I described as some of the “Big Issues” confronting not just Ireland but the planet, including the disastrous population explosion with its impact on climate and resources and the economy. Among other matters I took a radical look at the whole economic system. I had already said some years previously in the Seanad that those who gloated at the funeral of Communism might well find themselves attending the obsequies of Capitalism before they were finished.

In my UCC talk I looked at the basis of market Capitalism and the money system it enshrined. It seemed to me to be perfectly obvious that Capitalism was predicated on an unsustainable principle, that of an infinitely expanding market on a planet that contained only finite resources. The corollary of this is that the little tin god we have made of competition is at the end of the day an exercise in futility. In fact there is often in political discourse an intellectually lazy lack of distinction between competition and competitiveness. An uncritical subservience often exists to an inflexible form of competition that can in fact militate against both competitiveness and consumer rights.

We were assured by populist commentators such as the ubiquitous Eddie Hobbs that the removal of the Groceries Order would increase competiveness and lower prices. We were even told the amount by which a basket of groceries would drop. I argued against the abolition of the Groceries Order and was one of the few who voted against it. I said that it would be exploited by the big supermarket groups and that the ones to suffer would be small neighbourhood shops and the consumers. The record seems to show pretty conclusively that I was right. The next target of the competition zealots was another vulnerable group – part time actors who earned a few bob doing voice overs. They were forbidden on pain of court proceedings and criminal sanctions from having their trade union negotiate on their behalf as a group. Many of these people were earning less than 7,000 a year supplemented by social security but they were treated as if they were the most ruthless of multinational corporations.

Almost immediately after this I came up against the competition shibboleth in the drinks industry. I am a voluntary member of the North Inner City Policing Committee. We asked for a report on the licensing system which permitted every huckster’s shop to be stuffed to the rafters with gin, whiskey, beer and wine – and what did we get back? A long paean from officialdom about how this was all a very good thing because it encouraged competition. Not a single word about the social cost despite the fact that report after report both domestically and internationally has shown that the serious alcohol problem that we as a nation share with some other European countries is greatly exacerbated by two principal factors – price and ease of accessibility.

At the moment we have taxi drivers all over the country almost in a state of insurrection. They cannot make anything approaching a living wage. Why? Because deregulation in pursuit of “competition” once again was carried to extreme lengths. Every taxi rank in Dublin and other cities is choc a bloc with taxis, while other ones kerb – crawl around the place waiting for a space to materialise. On top of that quite a number of the new entrants to the game have apparently not been tested at all on their local knowledge or were inadequately tested. One evening recently I was going home. It was pouring rain and I hailed a taxi in the street. I gave him my address and asked him if he knew where North Great Georges Street was. He was not a native of Dublin and he racked his brains for a minute and then said “up near Aungier Street and Wexford Street”. I said “no that is South Great Georges Street. North Great Georges Street is on the other side of the river”. “What river?” he asked. “You mean what planet darling” I quipped and legged it out of the cab.

And what is the Regulator doing? Insisting on putting the fares up despite the protest of the taxi drivers. Then I suppose that is “competition” for you as Albert might have said. So it shouldn’t come as much of a surprise to learn that it was a Regulator who kept ESB prices artificially high over the last few years in the name of “competition” while our export competitiveness declined as a result or that Aer Lingus is making a loss and that former Team Aer Lingus now SR Technic has closed down, whereas left unprivatised they could at least have continued with the work of Team Aer Lingus in servicing Aer Lingus planes.

In Cork two years ago I asked the question “What is money?” and I provided what I still think two years later is a relevant definition. Money is the symbolic representation of energy. In early times one worked perhaps for a farmer and was rewarded with a sack of potatoes, satisfactorily tangible and with almost nothing of the symbol about it, except perhaps the longing for the reward during the hours of toil. You could take it home feed the family and provide yourself with the energy for the next days work. Move on a step and the reward becomes a gold ducat. This still has intrinsic value but is moving in the direction of the “symbolic”. The next stage is the introduction of a piece of paper, worthless in itself but bearing the message that the Governor of the Bank of Ireland promised to pay the bearer on demand the equivalent of such and such a weight of gold. Well, as we all know now, it requires confidence to live on a promise and I remember well 60 years ago receiving a ten shilling note from a glamorous uncle. When I asked my grandmother to take me into town to present this promise to the Bank of Ireland and carry home my infinitesimal hoard of gold she laughed and said “That’s only a story darling”. And was she right!

Along came cheque books, stocks, shares, investments in futures, things that did not and might indeed not ever exist but  which were given a notional value moving us into the world of virtual reward. Then all over the planet fluorescent screens began to glow into life and seated at them pimply little brats scarcely out of school who had never lifted a shovel in anger. This was the arrival of virtual money transfers. Seated at their screens these economic adolescents could twiddle a knob sending ancient financial institutions like Barings Bank down the drain and with it the life time savings of people who had shed real sweat and tears, who had toiled, striven in fields and factories, on trawlers, in hospitals and on production lines. The whole financial system became a casino, all hoping to win, all eyes on the big prize, no one noticing that the roulette wheel was spinning out of control until first one and then another of those who tried to cash in their chips found some one had actually broken the bank, and not just at Monte Carlo. At the time I was reviled for using the casino image. Now it has become a cliché.

We are in my opinion merely tinkering at the edges of a system that has passed its sell by date and unless we address this radically, and recalibrate the entire financial system in order to bring symbols into greater alignment with the actuality of labour and the energy expenditure of ordinary man we will find that the system will continue remorselessly to unwind until perhaps it arrives back at stage one where we all got on – in the world of simple barter.

But, you may ask, have I anything constructive to say. Yes but nobody is listening and then hence this article. With regard to the banks I have been saying for quite a long time that what we need is one bank, fully nationalised owned by the people, a new Bank of Ireland that is really a Bank of Ireland and a bank for and of the people, fully accountable and with acceptable codes of ethics and good governance. This can be created with the merger of all the well run and profitable accounts. All the endangered property assets should be distrained and placed, not in a toxic bank, but in a new agency to be established by law to be called The Property Management Agency by analogy with the National Treasury Management Agency. The role of this would be to manage property prudently on behalf of the people, all rights of the property speculators would be removed and their assets sequestered. I have been repeatedly suggesting this in Seanad Eireann on the record since the beginning of this year.

(Indeed according to correspondence between myself and Dr. Peter Bacon I was making these suggestions in the first place at least two months before such an idea was discussed by Government. But NAMA as constituted now is an uncertain and distorted image of my original idea and is likely to be implemented in a different order to that that I suggested. Therefore I take no responsibility for the consequences of this. Remember the assets of which I spoke are not the loans which may indeed be toxic but the physical assets – the property.)

I have also asked repeatedly, but of course without getting a reply, why none of those responsible for running the banks have been charged with reckless trading, something they clearly must have known they were doing for some considerable time. At various times over the last twenty five years I was Board Chairman and Chief Executive of two companies, although I have no business training. However I was always very conscious of the implications of trading recklessly and scrupulously took steps to avoid any such situation. It is astonishing to me that those in such senior management positions did not do likewise in the banks.

Let no one bleat that the rights of property are guaranteed and vindicated by the Constitution. The governing concept in the Constitution in this as in every other respect is the common good and I think in the current climate there are very few who would argue that the common good is best served by rescuing speculative bankers who have fraudulently helped themselves to money in pursuit of their own interests rather than the well being of ordinary citizens who stand to lose jobs, homes and pensions. If managed properly this property can be made to work and generate income. Eventually at the end of the day an ex gratia payment might be made to the original owners. Moreover some of this land could be made available especially in areas around our towns and cities at a peppercorn rent to provide allotments to help those who wish to supplement their diet at local cost with fresh fruit and vegetables. This would help morale among the unemployed to whom a rudimentary start up kit of tools, seeds and a planting manuel could be granted.

One of the advantages of nationalisation and the creation of the National Property Management Agency would be to allow all of us as citizens to get at last some purchase on and knowledge of the extent of the blank cheque which has already been issued to the banks. The debts of the various banks seem to me to be like flubber. This was a substance featured in a comic film starting Robin Williams in which a crazy inventor produced a green substance that was almost impossible to control because of its instability and constant changes in volume, mass and mobility.

Next, Fas must be strengthened. Criticism of Fas has in my opinion greatly exceeded its wrong doings and no credit has been given to some of the excellent work it has done in the past for our marginalised communities. Some proportion must be kept as this is an agency that is more than ever desperately necessary. For example the Fas Centre in Jervis Street in Dublin instead of being closed should be revitalised. But not only Fas, the Combat Poverty Agency and the Equality Authority both of which have been virtually destroyed and left with a mere nominal ghost existence should be immediately reinstated and fully funded. I have for some time had a strong suspicion that Government was well aware in advance of the financial maelstrom into which we were heading but chose not to address this difficulty with the appropriate financial measures. A decision was taken instead cynically to disable all those agencies which could provide a representative voice and a safety valve for the most marginalised.

There should be a quick and simple cost benefit analysis of all major infrastructural projects and those with the capacity to generate employment, facilitate industry and benefit the community should be implemented starting immediately. There should also be an immediate audit of every single ministerial department to locate and eliminate waste. Six months ago even I as an outsider and an amateur located a potential hole in the social welfare benefits. I had been alerted to a situation in which some visiting EU workers had returned home leaving one member of their group to collect all social welfare payments and repatriate them to people no longer in this state.  I asked the Minister if photo identification of any kind was required for receipt of these payments. She did not know but promised to find out. I was correct in my suspicion and belatedly the situation is now being rectified. I have repeatedly pointed out situations in which vast amounts of office store room space were rented by Government agencies and left idle throughout the country. Moreover inordinate and unchecked over-payments were made in the road building programme. Time and again I have pointed in the Seanad to situations were where after pressure from parents patients and public representatives, medical treatment programmes were initiated. Almost inevitably the first step was to appoint managers.  Then the embargo on public service recruitment was encountered and no medical staff or delivery of treatment was provided. But the “managers” were left idly and expensively twiddling their thumbs.

All such flab must be immediately ruthlessly and surgically excised. We should use lateral thinking, of which God knows there is plenty in this country. There should be established for the first time a new ministry, not of homeland security which the Bush regime installed in the US but a Minister of Home Security to monitor the effects of this recession on home owners and to devise means whereby decent hard working people may be permitted, using what ever extraordinary measures are necessary, to retain the basic essentials of human dignity – a home in which to conduct their family life. We should rid ourselves of the illusion that moral frippery such as the legalisation of casinos will compensate for their degrading affect on society by giving exchequer returns, and instead concentrate on the simple resources with which this land is abundantly provided.

This is not the first time that I have called for example for investment in and development of the shellfish industry around our coast. We have the most wonderful raw material – prawns and I mean real prawns, not the wretched little water logged rubbery tasteless efforts imported from Asia, and our own beautiful fresh crab. Why is it that you almost never get crab mayonnaise on offer in Irish restaurants? This may appear silly. But why not make this country a world centre for gourmet sea food tourism? We have the ingredients and we certainly have the talent to create world class cuisine. And thinking of the sea why not really for the first time endorse and explore realistically the possibility of deriving energy from the wind and the waves both of which God knows we have in abundant supply in this island. I have been meeting recently with representatives of an Irish based green technology company called Wavebob. They already have a working prototype of their principal design for extracting energy from the natural motion of the sea. Most of the problems have been solved in terms of design and mechanics but of course the remaining problems are provided by bureaucracy. I need scarcely mention the need to re-examine the disgraceful gift of our oil and gas reserves in the Corrib fields to Shell Oil. Let us remove the red tape, let us facilitate start up businesses, let us for God sake, having cleaned out the Augean stables of our financial system, get on with creating a new and prosperous Ireland that contains not just the impersonal economy so stupidly glorified by Thatcher and Reagan, but a community and a society in which we once again can be proud to be Irish.