2014-04-22 - Socio Economic Review 2014 - Full text and cover - FINAL

produce greater and more lasting prosperity than the collective decisions of the
Irish people.
Arising from this series of false policy conclusions and false assumptions, there were
many resulting policy failures. Among these were:
i) Failure to take action to broaden the tax base by, for example:
a. introducing a site-value tax.
b. removing existing tax exemptions which have no demonstrated cost-benefit
advantage.
ii) Failure to overcome infrastructure deficiencies, such as in broadband, public
transport, primary health care, water, energy, social housing and waste.
iii) Failure to create a universal health service based on need.
iv) Failure to address income inequality.
v) Failure to appropriately regulate the banking, financial and professional services
sector.
vi) Failure to control the property bubble by providing affordable, quality housing
for all.
The European Context
Rising defaults on subprime loans in the United States were the triggers for the
Global Financial Crisis (GFC). Crotty (2009) has pointed to a fundamental cause in
the underlying structural and theoretical weaknesses of a post-1980s ‘New Financial
Architecture’ – created through financial deregulation - which accentuated asset
price bubbles, concentrated risk and created incentives for financial institutions to
become extremely leveraged. While deregulated global finance has often been
stereotyped as an ‘Anglo-Saxon’ phenomenon, within the EU the liberalisation of
the financial sector had also been pursued as good in itself and cross-border
European financial flows were viewed as a benign result of monetary integration
and capital liberalisation.
Blankenburg, King, Konzelmann and Wilkinson (2013) have described the way in
which the GFC revealed the structural distinctions between the core and the
periphery that had emerged within the Eurozone. The common currency removed
exchange rate risks and led to a convergence of interest rates and yields on
government debt. From this balance-of-payments view – of which Martin Wolf of
the Financial Times is the most influential exponent - of the origins of the Eurozone
crisis, current account deficits within the Eurozone were financed in Ireland and
Spain by large private sector deficits mitigated by smaller public sector surpluses,
while in Greece and Portugal a combination of private and public sector deficits
emerged (Blankenburg, King, Konzelmann & Wilkinson, 2013: 464).
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