David McWilliams and the vindication of his impure capitalism (interview 2010).

By Miriam Cotton.mcwilliams

“I’m not a pure capitalist”.

“if Brian Lenihan lets the guarantee lapse after two years, which it is legally supposed to, then it has worked completely”

I recently spoke to David McWilliams in his Volvo Estate in a church car-park in Dalkey.  In case that seems intriguing, the purpose of our meeting was to conduct an interview – on recording equipment that does not cope with background noise in public spaces like the coffee-shop we had just left.  McWilliams has a strong personal presence and is possibly one of the most cheerful people you are likely to meet.  He is greeted warmly in his locality where most people appear to know him.  During the last year alone, he has travelled the world on a punishing schedule while making the documentary ‘Addicted to Money’, chaired a series of the comedy show ‘The Panel’, finished writing his book ‘Follow the Money’ and organised the controversial Global Irish Economic Forum at Farmleigh – among many other things.

MC: I want to ask your opinion about the economic crisis and Irish media coverage of it.   Morgan Kelly has referred to what he called ‘group-think’ by which he means how during the bubble there wasn’t much criticism of what was going on.  In the aftermath, we now have the ‘there-is-no-alternative’ to NAMA version of group-think . Who or what makes you angry about the way the media is behaving both during the boom and afterwards?
DMcW:  I think it’s quite obvious what I thought during the Celtic Tiger because I was almost completely on my own in saying this is a huge bubble.  I’ve always thought that.  I was vilified – well maybe not vilified – but slagged off. Ireland is constantly terrorised by conventional wisdom and anybody who breaks with it can expect to go through a three-phase process: the first phase is ridicule; the second is violent opposition and the third phase is the universal truth phase when everyone says “sure we all knew it was a bubble at the time”.  And that’s what happened to me.  It’s no big deal. In Ireland we feel we need permission to ask the obvious.  It doesn’t really make me angry – but it makes me sad.
MC:  With regard to the 2008 bank guarantee, people have accused you of inconsistency since at first you appeared to claim that the Minister for Finance, Brian Lenihan, was acting on your advice but subsequently distanced yourself from the guarantee.  Did you change your mind?
DMcW:  Well, first of all, I don’t think changing your mind is the end of the world.  The bank guarantee that I discussed with Brian Lenihan involved a guarantee that would be rescinded after two years specifically.  In a way it was a bluff, not a policy.   Once this guarantee started to be regarded as a blanket underpinning for all sorts of loans – then it changed materially from what I was discussing with the Minister for Finance.  The first thing is, if Brian Lenihan lets the guarantee lapse after two years, which it is legally supposed to, then it has worked completely.  Then we’re back to square one whereby we are in a position where we can simply get the creditors into the room and say “listen lads, we’ve no money”.  The whole idea was supposed to stop a run on the banks.  It’s like being a fireman in a forest fire where you have to ask yourself whether you stop it or let it blaze on.
And the second thing is the guarantee has given two years to figure out how bad things are at the banks – and it’s not just Anglo; it’s across the board.  Once you’ve figured it out, you simply withdraw the credit and say to creditors “sorry guys you simply backed the wrong horse and let’s do a deal”.  And that’s capitalism.  But what’s happened in the last while is that it’s being said that what is good for the banks is automatically good for us.
MC: But didn’t you depart from your capitalist principles by recommending a guarantee in the first place?
DMcW : I’m not a pure capitalist.  I think that what you’ve got to do if you believe you can stop something traumatic from happening is do it.  I don’t believe in this Austrian School idea which says that all recessions are the seeds of the next recovery – or that humans are infinitely able to react to unemployment.  They’re not.  My father was laid off many years ago and I know exactly what it’s all about.  Humans are not machines.  One of the reasons a run on the bank is disastrous is that the big guys get out first.  The little guys are shafted.  So there is nothing inconsistent in what I’ve been saying.
MC:  What is the distinction between Lenihan’s version of the guarantee and your own?
DMcW:  I  hadn’t expected that the guarantee would extend to sub-prime debt.  If we let the guarantee lapse this coming September as it is supposed to, it will have achieved its aims.  It will not have been a flawless policy but the best we could have done in the circumstances.
MC:  The least worst thing?
DMcW: I don’t want to be wise after the event.  I was very vocal both privately and publicly in saying we had to do something quite radical and different – something that takes the markets by surprise.  Having worked in the markets I know what they are like.  In many ways this is just a bluffing mechanism.  You’ve got to hit them where it hurts – do something that is so outlandish that they back off – show them you are in control.
MC: It surprised more than just the markets, though.
DMcW: But what was the alternative?  To let the banks go bust?
What the Europeans have just done with Greece and the Euro crisis is exactly the same thing – it’s effectively a blanket guarantee.
MC:  A lot of people suspect that NAMA at its core, particularly the Special Purpose Vehicle, is essentially corrupt – that the secrecy about exactly who, what and how much is involved may be designed to cover up and compensate for a multitude of sins.  What do you think about the SPV and how it will work?  Would you agree it is a scandal that something so profoundly undemocratic and lacking in transparency has been allowed?
DMcW:  Yes.  The Ombudsman was on the other day talking about the fact that the Freedom of Information Act has not been extended to cover NAMA which is always very worrying.  Nonetheless, it’s not the SPV that is the problem, it’s the logic of NAMA that is the problem – that this is a deeply cynical move.  You’re back to the group-think you spoke about earlier.  If in a small country you’re spending 2.8bn on professional fees, which is what NAMA will do, it buys a lot of silence.  The man who writes the cheque calls the tune.
MC: I don’t think I’ve ever seen you use the word corrupt about NAMA.
DMcW: Look, Ireland is a deeply corrupt country – the whole boom was corrupt.  You don’t have to use the word corrupt to know that.  The county councils were corrupt, the bankers were corrupt, the landlords.  The developers – I’m not sure if they were actually corrupt but the Galway Tent was a deep corruption of our system of government.  Look at the golf classics that Brian Cowen organised for himself – look at those things.  It’s legal but there is a difference between being legally right and morally right
MC: People on the left are bemused to put it mildly to see all the capitalists apparently unaware they are running around with their theoretical trousers round their ankles yet still sneering at more egalitarian theories of economics.
DMcW: Who is sneering?
MC: I’m not talking about you personally.  I’m just saying that the left can’t but know that this collapse has evolved pretty much exactly as Marx, for example, said it would and despite the terrible consequences of it there is still little or no fundamental questioning of the capitalist system in mainstream politics or economics. You were speaking to John Gibbons in the Irish Times recently and you referred to what you called “peak everything|” and said that we are not just facing into “peak oil”.  I think you had been visiting a smog-saturated city in China…
DMcW:  Yes, I was making the documentary ‘Addicted to Money’ and it was not supposed to end with the environment – the script I had written had a totally different ending.  I am asthmatic and I was in a polluted environment where I started to realise that in actual fact the big issue is ‘peak everything’  It’s an iteration of something that we humans have got to come to terms with – that there are a lot of us around, that there are only finite resources.
MC:  And yet in another context you would say that we need to return to growth if we are to have recovery.
DMcW:  Not necessarily.  I’ve never been a growth fetishist at all – ever.  I think the idea of steady economics with a zero growth rate is a very interesting one – you don’t necessarily need to keep pumping the machine all the time.  The reason I think capitalism works is because I actually think it is fair. If you can create an environment where people can maximise their own potential – that’s the ideal world.
MC: But that doesn’t incorporate any concomitant sense of responsibility and duty.
DMcW:  It does!
MC: But where is that happening?  There is massive inequality; we’re engaged in horrific wars which are really just resource grabs – all in the name of capitalism.
DMcW:  Who is the worst polluter in the world?  China and Russia are right up there.
MC:  The US is the worst polluter.
DMcW:  Pollution is not an ideology.  East Germany was in a terrible state after the collapse of the Soviet Union.  The vandalism in the mind of the polluter isn’t associated with any particular ideology.
MC: Would you agree that media coverage of the left is a) virtually non-existent and b) extraordinarily biased in a hostile and rather superficial way?  The crimes of 20th-century Stalinist socialism are held up as an inevitable outcome of trying to create a fairer society.  Yet the crimes of capitalists over several centuries go virtually unremarked in many instances.  Genocidal land and resource grabs have been going on all the way down the line but they’re sanitised and sold in the name of God and democracy.
DMcW:  Do you think so?
MC: Yes. Absolutely.
DMcW:  I don’t see the world that way.  Take the war in Iraq for example – there was almost uniform condemnation in the media.
MC: Not at all!
DMcW: I’d have said that was a logical position – that the United States was simply fighting an unjust war.  However appalling Saddam was and I’m not sure he was much more appalling than people in other places who have been propped up.  But my point is that if you look here for example, partnership is a great example of the social democratic left of center that has had almost uniform media support.
This is a Catholic country, this is not a left wing country.  There is a lot of corporatism in Ireland – so that partnership fell into that sort of area.  It’s a sort of soft left
You realise that there is the Narcissism of small differences in many countries.  I think in Ireland the differences between the left and right were, particularly in the partnership were non-existent.  So there was a Narcissism on both sides.  But in actual fact they both sat down and implemented the same policies.
MC: The Labour Party?
DMcW: The Labour Party, the trade union movement…
MC:  The Labour Party has almost completely abandoned its socialist principles.
DMcW:  I think you’re probably right.
DMcW:  These groups were sitting down in rooms and hammering out deals with IBEC.  Really, the left gave up on the left!
MC: It’s still incontrovertible that our media is dominated by centre and right perspectives.
DMcW: Do you really think so?  I suppose the difference is that I don’t think of the world in that way. I don’t see the ideological issue as being the most crucial issue facing us.  The most urgent issue the country is facing is that we have a kleptocracy.  We are allowing the banking system to suck all of the resources out of the country.  It’s actually cronyism.  It’s a gombeen form of capitalism.  If you read Synge, he describes a person who on the one hand is agitating the local farmers to go against some of the land acts but on the other hand is aggressively throwing those farmers off their land.  The gombeen man is putting the land back up for sale and giving the people the fare to America.  It’s the same thing now.  The gombeen man is central to the whole thing.
MC:  What is the Abbey production going to be about?
DMcW:  It’s very simple really.  The idea is that in the crisis Ireland splits not so much between rich and poor, or urban and rural or young and old – but between insiders and outsiders.  Hopefully it’s humorous.  It’s gentle – I suppose I’ll be a bit like a stand-up economist!
The full version of this interview will shortly be published on the MediaBite website with commentary.
‘OUTSIDERS’ will be showing from the 16th of June 2010 on the Peacock Stage at the The Abbey Theatre in Dublin.