If you have an Impossible Problem - Break the Rules

I was talking to a friend about my next blog, I rashly asked him to suggest a topic. He suggested that I write about the Irish economic crisis. 

Now I am not an economist, but the more I thought about it, the more complex it became.  The first issue was ‘defining the problem’.  What exactly is Ireland’s problem?  - that depends on who you are.  The nature of the problem depends on which group of stakeholders you belong to, and the list is almost endless.  Bankers, bank shareholders, economists, politicians, taxpayers, workers, the UK treasury, UK taxpayers, the ECB, EU politicians, etc. - each will have a slightly different view on what the problem is and how to solve it. 

So then I started to think about how other economic disasters were resolved.  Argentina is an interesting case.

In 2001-2, Argentina suffered an economic collapse.  The causes were many and varied, it was a rollercoaster ride of political and economic turmoil.  It defaulted on its foreign debt of $132Bn.  The exchange rate of the peso went from 1 to 4 to the dollar.  Employment collapsed and imported goods disappeared.  To get by, people used unofficial ‘complementary currencies’ and bartering.  Eventually, the government ignored the IMF’s guidelines and secured a complete recovery.  Today, Argentina has one of the highest GDP growth rates in S. America and has repaid all of its foreign debt.

Breaking the rules worked for Argentina. The proposed solution for Ireland appears to be geared to wider political as well as economic issues, and follows all the rules.

Perhaps Ireland should break the rules too.



Joseph Stiglitz, Nobel Economics prizewinner, wrote an article questioning the wisedom of the IMF rules. (Argentina, short-changed: Why the nation that followed the rules fell to pieces)  http://www.yorku.ca/robarts/archives/institute/2002/stiglitz_argentina.pdf