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FORMER CHIEF ECONOMIST of the International Monetary Fund Simon Johnson has spoken about what Ireland can expect from its dealings with the IMF – and the future prospects of the country’s economy.
Speaking to Newstalk’s Business Breakfast presenter Margaret E Ward, Johnson said that the long process of repairing the economy had just begun.
Johnson, who is currently senior fellow at the Peterson Institute for International Economics, wrote an acclaimed article named The Quiet Coup, for The Atlantic magazine in 2009: Johnson speaks to Ward about this article, clarifies what we should expect from the IMF, and explains why Ireland might be looking to China for financial help in the near future.
Johnson explained the basic process involved in a country’s dealings with the IMF:
Basically you have to decide who’s going to be saved of the rich and powerful people – because it’s always the rich and powerful who have brought you to the crisis. So, which of those people get to stay on the lifeboat, and how will the costs of this crisis spread across society? This becomes a very difficult conversation - a struggle if you like. And this is really a backdrop to any IMF negotiation with a country getting a loan.
He also explained that Ireland is not alone in this crisis – but says that fact may be cold comfort:
I don’t know if it’s any consolation to Ireland but you’re not in this alone. Other developed countries have allowed their banking systems to become far too powerful; to take on reckless risks; and to capture the minds, hearts and perhaps pocketbooks of politicians. And the consequences – as you are now aware – of this are devastating. Always and everywhere.
The biggest problem is debt… If you don’t restructure the debt, will the markets say ‘Yes, this is a final resolution’ or will they just say ‘Well, we’ll go along with this for a little while but we’re likely to lose confidence again’?
It takes a while for it to catch up with you – maybe a decade, maybe less, maybe more – and when it does catch up with you it’s absolutely awful. And it’s going to be awful in many of these situations for a long time.
Johnson also spoke about the possibility of Ireland receiving financial help from China in the future:
If the problems spill over to Spain then you will be talking about a level of financial backing that can’t actually be afforded by the European facility and the IMF right now, and you’d have to look for additional resources around the world.
Now, the Americans could come and help you but, as you know, the US mid term election swung the politics towards the right – and a particular part of the right that is obsessed with a so-called ‘no bailout’ mantra. The Republicans now control the House of Representatives, so you won’t get more funding for the IMF from them and you won’t get direct loans of any scale from the US administration. So you have to look aroiund the world and say who is sitting on cash?
Your eyes fall naturally on the $2.5 trillion – or more – that China has. It would not surprise me at all if the Chinese were involved with buying Irish debt down the road… This is a tremendous opportunity for them – and an opportunity of course, provided by the policy failures at the European level and by the bizarre politics of the United States.
When asked about how long it will take for Ireland to come out of the crisis, Johnson said:
I’m afraid it’s going to take a long time. These situations are always traumatic. They are often accompanied by a big depreciation in the exchange rate which often fuels a recovery in emerging market situations – Korea after 1998 for example, Mexico after 1995, and Argentina after 2002 – But its very unlikely that Ireland is going to have that.
I don’t think Ireland will leave the eurozone, that would be too disruptive. I don’t think the euro is going to collapse like those other emerging currencies did in the past: It’s going to be a long haul even in the best scenario.
Countries to not go bankrupt and go out of business like companies do – but this be an issue that is with you for the best part of a decade.
Makes me realise how lucky we really are despite everything.
Oh ye! Being rules by morons is far easier than any of that! At least the morons who govern us just take our money!
Ur an awful bollox…
Why? Being ruled by idiots is heaven compared to any of that. Is it not?
Jesus, some of these pictures are harrowing and the stories behind them, even worse! It really makes you think about our own, ‘first world’ problems…
Puts things into context compared to the whining gimp patrol on here moaning that they cant afford skinny lattes and holidays because of the mortgage on their massive house
Thatcher was a great friend of Augusto Pinochet during and after his brutal reign. At the same time she was denouncing Nelson Mandela as a terrorist
I teach history and when it comes to the holocaust or the famine the kids always ask, how did people let that happen? Whats crazy is that we are still letting it happen!
You only have to look at the treatment of travellers to realise ‘hate’ is alive and well in Ireland.
Yeah it’s so shocking and depressing to see what people do to each other. Governments dont give a toss unless it’s worth something to them. Thousands being killed in Syria and all they’re doing is political posturing.
Those pictures of the North Korean kids goes to show the world what a “Socialist Paradise” really looks like.
And now the madness of NK has declared war on S Korea. Utter madness. What is going on within their heads?
As for the morons that say we are having it bad. Move to North Korea please.
I think your the only person describes it as a socialist paradise
Daniel I was being sarcastic using the usual leftie description of a socialist country.
My family affected in 2004 tsunami…still hav nightmares.
Nobody should be afraid to give to charity or to fill their Trocaire box….
There is always someone always worse off than us…
Not a cent would I give to Trocaire… I dont really care about the third world
Thousands of people were killed or ‘disappeared’ during the regime led by General Augusto Pinochet until 1988….
Two point nine thousand to be precise in 8 years. An hours work for Chairman Mao or Comrade Tito, both still very much beloved………
Seriously, it’s an insult to include Pinochet and not include the Balkans war. Pinochet’s only sin was to align his economic policy with the liberal Chicago school and produce a relative success of a country (in contrast to an array of Latin American lefties who screwed up their countries). On the other hand, the massacre in Srebrenica for example (for which the armed ‘forces’ of an EU country take the blame) resulted in three times more dead in only half a day. Your criteria, dear Journal, is rid of logic.
Chile was the world’s biggest producer of tin but it was being exported to America, especially to the Coca-Cola Co., for extremely low prices. When Allende came to power he wanted to nationalise the industry. This would have cost Coca-Cola millions as the tin for their cans and bottle tops all came from Chile. They put pressure on Henry Kissinger to do something about this. He in turn tasked the CIA to overthrow the government and replace it with one favourable to America’s needs. That’s where Pinochet came in. Thousands were murdered just so he could line his pockets, and America, a country that prides itself for its democracy, destroyed this fledgling democracy for purely monetary reasons. Pinochet didn’t create the Chilean economy. In fact, he set it back years.
Ah yes, the nationalization of various industries would have been another Latin American socialist success just like that of Argentina where Peron’s (national)socialists policies brought the country to a permanent state of disrepair. Argentina is a unique case in the economic history insofar that it was the only country in the World that managed to drop off the top-20 richest countries list (it was replaced by Japan) in the past 100 years. Even the BBC had this to say about Chile:
“The economy of Chile is ranked as an upper-middle income economy by the World Bank,[9] and is one of South America’s most stable and prosperous nations”
If it was down to Allende’s chest-thumping, this would have ended in IMF bail-outs and plundering of pension funds just like it did in Argentina (presumably also the fault of those goddamn Americans).
Bleeding-heart students don’t mind wearing badges with romantic images of that serial murderer CheGuevara for the same reason. So much about principles. Leftists generally like guys in uniforms who murder opposition and rule by decree but only if they align with socialist policies. Pinochet could have had his restaurants in Dublin like Mao only if he had read Marx a bit more and did not use leftist methods to deal with leftist thugs.
The story of Allende and Chile is what cemented me as a socialist. The likely election of a left govt in Greece, Syriza next time around could see a IMF/EU technocratic coup to ensure the austerity agenda is not interrupted in Europe. It’s very scary considering the openly fascist right wing that already has support in Greece.
You could have looked closer to home at Russia and Eastern Europe for how this whole socialism thing works out.
Look even closer to home, maybe the q for food parcels at the cappuchin friary to see how capitalism has worked out….
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