Thus, instead of letting Anglo Irish Bank die, Fianna Fáil remained obsessed with saving it. To let Seánie FitzPatrick’s monster slink off to a well-deserved demise would have been to admit that most of what had happened since 2002 was a dangerous delusion. It was necessary, therefore, to keep the zombie bank alive with abundant transfusions of public cash. Anglo Irish got €3.8 billion from the state when it was nationalised. It then formed the largest single part of the Nama operation - €28 billion of the €77 billion in loans that were to be assumed by the state. (With a discount of around 30 per cent on the loans, this meant that the taxpayer was essentially putting up around €20 billion to keep Anglo Irish afloat.) And even after this, it was reckoned that Anglo Irish would need something between €6 billion and €10 billion of public funds to keep it solvent.
Altogether, this meant that the government was putting, directly or indirectly, at least €30 billion into a bank with an appalling history of cooking its books, manipulating its share price and giving vast, secret loans to its own directors and executives. To put this sum in perspective, it is about the same as the expected total tax revenues of the Irish state in 2009.
The rationale for this subsidy was twofold. There was a belief that the Irish property market would somehow recover over the next decade and that Anglo’s steaming midden of junk loans would therefore blossom with golden fruit for the taxpayer. And there was a dogged faith that a systemically corrupt bank that had never had much to do with the real economy of viable and sustainable businesses could somehow be transformed into a sensible, productive and economically useful institution. Just over the horizon there was a new world in which ‘Anglo Irish Bank’ would be a trusted international brand, ‘regulated by the Irish Financial Regulator’ would be a reassurance rather than a warning, and negative equity would be a bad memory.
The persistence of this mindset was surely the final proof that Fianna Fáil was incapable either of understanding what had happened or of radically reforming itself. The shock of the collapse had been profound, but it had not been deep enough to generate the conviction in government, in the higher levels of the civil service, in much of the media, or in large parts of the financial and business elites, that Ireland could not survive without radical change. The overwhelming feeling was that everything must be done - including pumping billions into an amoral and incompetent banking system and cutting social services like health and education - to ensure that nothing really changed. The impulse was to shore up the system, batten down the hatches and wait for deliverance by a global economic upturn.
No one in Fianna Fáil managed to express a coherent apology for bringing the country to its knees. The best the Taoiseach and former Minister for Finance Brian Cowen could manage in September 2009, a year after the disaster struck, was that ‘if people want me to apologise, I apologise in the event that people think I did something purposely wrong’. One of Ireland’s most successful businessmen, Niall Fitzgerald, a former chief executive of Unilever and a non-executive director of Bank of Ireland in the 1990s, recounted a dinner conversation with friends who still hold positions on the boards of Irish banks: ‘I told them: “You have to make a choice. Did you not know what was going on? If you didn’t, you must ask yourself, are you a competent director? And if you did know, you were complicit in recklessness and fraud. So which is it? Because there isn’t anything in between.”’ The conversation, Fitzgerald recalled, was ‘uncomfortable’. There was certainly no evidence that those in the business elite who served on the boards of banks were left with any sense of shame.
Given this inability of those in positions of power to come to terms with their responsibilities, there is little option but to look for a radical departure. Yet, as has already been suggested, this radicalism may consist of a return to a past that never was. The unfinished business of democratic modernity has to be the basis for an Irish recovery. There is a need to re-found the Republic. Such an act of re-foundation would have three cornerstones.
The first is the most abstract but also the most critical. There has to be a general recognition that the crisis is moral as well as economic. It is, indeed, a perfect illustration of the economics of morality - the absence of a sense of propriety, of restraint and of right and wrong, was not just obnoxious, it was economically disastrous. Public morality in this sense is all about sustainability. And sustainability is about knowing when to stop. Nothing in Ireland told people when to stop. The voters didn’t set limits on the behaviour of politicians. Neither the politicians, nor any effective system of environmental protection and planning, set limits for the developers. The regulators didn’t set limits for the banks. Unless there is an attitudinal revolution in which honesty, responsibility and a concern for the future become basic social values, nothing else is going to change. An end to the culture of impunity would certainly help, but that in turn would demand an end to the culture of denial and evasion. Irish people have to take hold of their own reality.
If they can do so, the second keystone of renewal can be put in place. This is a sweeping reform of the institutions of government. The elements of such a reform are obvious enough. There needs to be a proper system of local government, not just because it is a good thing in itself but because, in its absence, voters send politicians to the national parliament who really belong on local councils. This in turn would allow the Dáil to be slimmed down (in terms of numbers) and beefed up (in terms of power). A real functioning parliament that concentrates on the jobs of framing legislation and holding the executive to account may seem like a rather basic demand in an established democracy, but the reality is that Ireland has never had one.
Even this kind of institutional reform will be relatively useless, however, unless it is accompanied by a realignment of the political party system. The current alignment is still shaped by the two big, populist right-of-centre parties, Fianna Fáil and Fine Gael, whose origins go back to a civil war in 1923 and whose real differences have shrunk to virtual invisibility. Every possible alternative has to express itself as a marginal variation within the tribal power plays of what might be called Fianna Gael. The result is to produce a Henry Fordist politics in which voters can choose any government they like so long as it is essentially right of centre. This has made it almost impossible for the system to offer clear alternatives to voters. It has also sustained the habit of group-think in which orthodoxies function as self-evident truths until they turn out to be fatal delusions.
The third element of a Second Republic is the articulation of a social vision. The scale of Ireland’s economic collapse, and the decision of the government to throw the remaining public resources at failed banks, means that a decade of relative hardship is all but inevitable. The immediate prospect for the country is a series of deflationary budgets, spiralling unemployment, a wave of mortgage defaults and savage cut-backs in already inadequate social services. This will probably lead to social unrest, but it will almost certainly lead to the return of a familiar mechanism: emigration.
If other Western economies begin to pick up while Ireland slogs through a long depression, the young and mobile will do what their ancestors did for hundreds of years. They will go. And this will throw Ireland back into a vortex from which it seemed to have escaped once and for all. Ireland was underdeveloped for so long because it was trapped in a vicious circle. Underdevelopment led to emigration which stripped out both population and the forces of change, reinforcing underdevelopment. In the mid-1990s, this vicious circle turned into a virtuous one: a rising economy attracted back emigrants, who in turn boosted the economy. If this process is reversed, Ireland could be facing much more than a decade of austerity.
To avoid this danger, Ireland needs to be able to offer its people more than a grim merry-go-round of deflationary budgets depressing the economy, leading to more deflationary budgets. The country has to invent a future for itself. It has to be able to articulate a concrete sense of what kind of place it wants to be. To do this, it has to engage with
a wider reality: the era of the kind of free-market globalisation for which the Celtic Tiger became the poster child is over. What will most probably replace it is a much more highly regulated, slower-growing and state-directed market system in which security and quality of life outweigh the dream of getting rich quick.
The good news for Ireland is that it has just learned a particularly painful lesson in the lack of a direct connection between rampant economic growth on the one hand and a decent society on the other. The failure of the Celtic Tiger project leaves the population with a bittersweet reflection: the availability of money did not in itself lead to a good health service, top-class infrastructure in areas like public transport and communications, an education system that could support pretensions to a place at the leading edge of science and technology, or an end to consistent poverty. This may be depressing, but it has a more hopeful corollary. Real social progress comes from a combination of resources and vision. For the last decade, Ireland had the resources without the vision. For the next, it might have fewer resources but it can generate the ambition, the values and the energy to use them well.
Values, in political terms, are priorities. A system which has been built on the avoidance of explicit choices has to be refashioned so that it can, not simply make those choices, but generate a real consensus around them. To do that, it has to start with a sense of justice. There has to be a common understanding that Ireland can no longer afford to indulge fantasies of abundant wealth. Politicians and mandarins have to start seeing themselves as public servants, and being paid accordingly. Bankers and business executives have to define their status by something other than the outward rewards of greed. The non-taxpaying aristocracy has to be sent, figuratively at least, to the guillotine. A fair and transparent tax system, that takes most from those who have most, can produce, not just more public resources, but a sense of shared responsibility.
It is, under these conditions, perfectly possible to create a society in which life for the majority is actually better and more secure than it was during the height of the boom. If resources in the health system are not split between subsidised private medicine and underdeveloped public facilities, the same money can go a lot further. A very good public pension system could be created from the amount of money currently spent on the state pension plus the €3 billion annual subsidies to private pensions. The extravagant wastefulness of the property boom, in which huge resources were squandered on the creation of houses, hotels and offices that no one really wanted, can be turned to the provision of decent homes for everyone. Even in straitened times, a political system which gives priority to the meeting of basic needs (health, education, childcare, housing, pensions) and cuts out the swaggering, the pet projects and the pampering of an elite, can deliver real improvements for the majority of citizens. That in turn can replace the boomtime delusions of grandeur with a real sense of pride.
It is worth remembering, too, that in Ireland, as in all other developed societies, there was, beyond a certain point, no real relationship between money and happiness. Surveys showed that while GDP was doubling, the proportion of people declaring themselves ‘very happy with the life you lead’ actually declined steadily from a peak in 1997. This does not mean that there should be nostalgia for mass unemployment, emigration and poverty. But it does suggest that there is, for the Irish as for most human beings, a point at which basic needs are satisfied, a reasonable degree of security has been achieved and powerful but intangible feelings like belonging to a society in which one can feel some pride become possible.
That point is contained in one word that the Celtic Tiger did not have in its lexicon: ‘enough’. Ireland cannot, and should not, seek to return to the hysterical hyper-capitalist growth of the period between 2002 and 2008. But if it keeps its eyes fixed on that point where enough is enough, it can, not just survive, but thrive. Its people have enough energy, enough talent, enough resourcefulness, enough imagination. The question is whether they have enough constructive anger to kick away a system that has failed them and make a new one for themselves.
Index
Abrahamson, Lenny
agriculture
Ahern, Bertie: adaptability/ opportunism; fundraising; Irish economy and; personal finances; political values of; proposed salary rise; public image; relationship with Charles Haughey; speech by
Ahern, Cecelia
Ahern, Georgina
Allied Irish Bank (AIB)
Americas Society
Andrews, David
Anglo Irish Bank
Ansbacher scam
Ardagh, Seàn
Asgard II
Bacall, Lauren
Bailey, Mick
Bailey, Tom
Bank of Ireland
banking regulation ; see also Central Bank, IFSRA
Barry, Sebastian
Benson, Mary
Bradshaw, Lar
Bruton, John
Burke, Ray
Byrne, Adrian
Byrne, Nicky
Carr, Marina
Catholic Church; sexuality/reproductio n and
Cato Institute
Cayman Islands
celebrity culture
Celtic Tiger; creation of; decline of; economic growth and; legacy of
Celtic Tiger, The (dance show)
Central Bank: as regulator of banking system
Christina O (yacht)
Clarke, Michael
Colley, George
Commitments, The (film)
Common Agricultural Policy
Conlon, Jerry
construction industry
Corruption Assets Bureau
Coughlan, Mary
Cowen, Brian
Cromien, Seán
cronyism
Culliton, Jim
debt, levels of: personal public
Delors, Jacques
Depfa (Deutsche Pfandbriefanstalt)
depopulation
deprivation, cycles of
Desmond, Dermot
DIRT (Deposit Interest Retention Tax)
Doherty, Pat
Donovan, Terry
Douglas, Roy
Drumm, David
Dubai
Dunlop, Frank
Dunne, Ben
Dunne, Sean: plan to develop Ballsbridge, Dublin
economic competitiveness
economic forecasts
economic growth
economic miracle
education
Eircom
El Tigre Celta: Modelo Irlandes de Desarrollo
emigration
English, Barry
Enright, Anne
enterprise, encouraging
EU (European Union)
Eurofood; see also Parmalat
European Commission
exports
Fahy, Michael
false economy
Farrell, Pat
female sexuality, controlling
feminism
Fianna Fáil ; power of; sexuality/reproductio n and
Financial Times
Fine Gael
Finnegan, John
Fitzgerald, Niall
Fitzgerald, Scott
Fitzpatrick, Seán
Flatley, Michael
Flood tribunal
foreign investment: US; Netherlands
Fox News
Free market ideology
Friel, Brian
FSI (Financial Services Ireland)
Gallagher, Paul
GE Capital Real Estate
global ideology, Irish habits and
globalisation
Gogarty, James
Good Friday agreements (1998)
Gramm, Phil
Gross Domestic Product (GDP); decline of; EU level of
Gross National Product (GNP)
Guardian
Guinness and Mahon (G&M) Bank
Hanafin, Des
Haran, Paul
Harney, Mary
Harris,
Pino
Haughey, Charles
Hello
Hely-Hutchinson, Mark
Heraty, Anne
Heritage Foundation; Irish model and
Honduran National Business Council
Houldsworth, John
Hurley, John
Iceland
IDA (Industrial Development Agency)
IFSC (International Financial Services Centre)
IFSRA (Irish Financial Services Regulatory Authority)
ILP (Irish Life and Permanent)
IMF (International Monetary Fund)
immigration
income taxes, cutting
infrastructural developments
Intel
Irish Bankers Federation
Irish economy; collapse of; growth of
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