Letter to Irish PoliticiansSubmitted by Ireland4Paul on Tue, 05/15/2012 - 09:52
Just today, I decided to contact every politician in Ireland to propose suggestions which would enable us to prosper. So far, I've had some positive replies. Here is the body of the letter:
As a young voter in Ireland, this is the first time I have ever felt compelled to contact all relevant politicians, partly due to the worsening economic conditions and negative outlook. As the unemployment rate has increased to 14% according to official figures and the debt to GDP has risen from a record low in 2002 of 24.8% to a staggering 108.2% in 2012, the situation seems bleak. One might question how we allowed our country to descend down this slippery slope, but at this stage, there’s no time for pointing fingers or assuming we have all the answers. We are now in a position where we can learn from mistakes made and take proactive measures to ensure Ireland can again become the dominant force it once was in Europe.
Albert Einstein once said that the definition of insanity was; ‘doing the same thing over and over again and expecting different results’. We now find ourselves in a position where we are ready to accept another bailout when clearly, the last one was damage enough. It surprises me that people could ever think that the solution to debt is borrowing more money. By that same logic, one could assume that the solution to alcoholism is to drink yourself sober. If I were in debt, having access to more loans or “bailouts” is not going to help me get out of debt. It will not work. There are very obvious reasons for this. When a Central Bank prints money, loans it out at interest to banks and government, yet fails to print the money required to pay the interest, a situation arises in which there is scarcity in the money supply. This also contributes to a system of perpetual debt which will inevitably collapse.
I have never been a fan of those who criticise policies and decisions yet contribute no alternative solutions, so I will focus on solutions rather than problems. Having studied economics and monetary policy for quite some time, I’ve been fortunate enough to discover many solutions which have been proven to work throughout history. There are some realistic measures that can be taken to bring Ireland back towards a booming economy.
• Complementary Currency: During the Great Depression in Austria, a small town by the name of Wörgl was facing 30% unemployment and lacked the funding to carry out any infrastructural or maintenance projects for the town. In an attempt to tackle this problem, they introduce a complementary currency called ‘Scrip’ which was used symbiotically with the Austrian Schilling. The Scrip required a monthly stamp to remain valid, which cost 1% of the value of the Scrip. Because nobody wanted to pay the holding tax, everyone receiving the notes would spend them as fast as possible. Over the 13-month period the project ran, the council not only carried out all the intended works projects, but also built new houses, a reservoir, a ski jump and a bridge. The key to its success was the fast circulation of the scrip money within the local economy, 14 times higher than the Schilling. This in turn increased trade, creating extra employment. This experiment became known as the ‘Miracle of Wörgl’ and even attracted the attention of then French Prime minister Eduoard Dalladier. A similar system has been operating in Switzerland for decades. Over 20% of businesses in the country use a complementary currency called ‘Wir’. This has been a contributing factor to Switzerland’s robust economy. As the Swiss franc weakens, people use more ‘Wir’. As the Swiss franc strengthens, people use more Swiss francs.
• National Currency: If Ireland were to leave the Euro and return to our own sovereign currency, we would initially see an immediate devaluation of our currency. The benefits of this are staggering. Exports would soar as the goods in Ireland would be far cheaper to purchase – this would lead to an increase in Revenue. Tourism would increase as Ireland would be a cheap destination. If the National Currency was made legal tender, it could be used to spend down the National Debt, and then return the excess supply of currency through taxation to prevent runaway inflation. However, one condition of this national currency is that it would need to be issued interest free. Printing money and loaning it at interest would result in the same cycle we are currently in with the euro crisis where there isn’t enough money in circulation to pay back the principle plus interest as only the principle has been issued. If a government has the power to issue a government bond, it should have the power to issue its own currency. They are essentially the same, except one is interest bearing, the other is not. This would also protect us from any destabilisation in the economies of other Euro members.
• Deregulation: As economic history has demonstrated, the more freedom in the markets, the more growth and prosperity that can be achieved. By even removing import tariffs and quotas, there would be significant benefits to consumers in Ireland. The consumer would be able to avail of cheaper goods from foreign markets without being penalised for doing so. Tariffs and quotas although intended to protect the local industry, results in a distortion of the market and consequently, the consumer bears the cost. Also, by just lowering our corporation tax, we would have a significant increase in the number of companies that would want to locate in Ireland, which would bring a lot more jobs to our country. As much as people think the corporation tax affects company profits, it really doesn’t. Again, it’s the consumer that loses out. The company would either hire less people or raise the cost of their products in order to compensate for loss of profits due to the tax.
It’s time for Ireland to set an example to the rest of the world on how to deal with this global recession. We can become the benchmark and show other countries how it can be done. We would be far more respected as a country, a nation and an economy. It’s time to do what’s best for the people of Ireland and not what’s best for the failing “European Project”. If you have any questions regarding my suggestions, please feel free to contact me.
If any of you have suggestions or feedback please feel free to comment.