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‘Rocky Road: ’On the Political Origins and Consequences of the Crisis in Ireland

Written for FEPS in November 2010 in the aftermath of the beginning of the Troika programme in Ireland. The original text has not been amended.

Media coverage

Introduction

A cursory glance through commentary made on social media by Irish users over the past two weeks may leave the unfamiliar European surfer at a loss. Platforms like Facebook and Twitter have been set alight with references to the “men of 1916” and myriad articles were posted which pondered the likely reaction of the state’s Founding Fathers to the arrival in Dublin of officials from the institutions who will take responsibility for a bailout mechanism. In this vein, the usually cosmopolitan Irish Times editorial lamented that “There is the shame of it all. Having obtained our political independence from Britain to be masters of our own affairs, we have now surrendered our sovereignty to the European Commission, the European Central Bank and the International Monetary Fund” (Irish Times, 18 November 2010).

One of the most common references posted in recent days has been to the poem “September 1913” by William Butler Yeats and its epiphoric couplet “Romantic Ireland’s dead and gone/It’s with O’Leary in the grave”. There are mixed feelings about such commentary in Ireland. Kevin Myers vented his spleen when he wrote “Thus, in a nutshell, the ignorant historical mumbo-jumbo that has for 94 years defined our political discourse: folklore masquerading as historical fact” (Irish Independent, 23 November 2010). Yet much of the subsequent content of Myers’ critique misses the point. Collective communities seek discursive continuity with the past and it is noteworthy that the focus is on a previous idealistic project which failed, but which produced a popular reaction of a sort (Zerubavel, 2003). It is not yet evident what will be the extent of popular reaction to the fall of the Celtic Tiger economy. However, there is an underlying implication in this search for discursive continuity that Ireland’s crisis predates the credit crunch, the financial and economic crisis, and their ongoing social ramifications. Ireland’s tragedy is, at heart, political and it raises concerns for the European polity as a whole.

Such discourse is nothing new. In 1966, Conor Cruise O’Brien wrote in ‘The Embers of Easter’, that “The greatest tragedy about the creation of a state on the basis of ideals impossible to attain was the release sought through national fantasy” (O’Brien, 1966). This paper will attempt to shed light on the origins and the course of Ireland’s boom-to-bust experience with reflections on ideological escapism and the dominance of machine politics. We will analyse the particular political context that produced the light touch regulatory environment and the Celtic Tiger economic model. Finally, we will look at the options that are left to the Irish citizenry and their political class, drawing on lessons from elsewhere in Europe.

Irish Democracy – A Victim of History

Discussions of a 21st century financial crisis rarely return to the legacies of First World War era political elites but in the Irish case, as evidenced by the references to 1916, it is necessary to lay a few issues to rest before proceeding. Since the period of the Home Rule movement and the subsequent rise of the militant and secessionist Sinn Féin, there has been an underlying contempt for government and for parliamentary democracy in Ireland which has dogged independent Ireland for the generations since (Garvin, 1991: 22). Until the 1960s – and in some cases beyond – the political establishment became a perpetrator of a sort of ideological escapism which sought to blame political and economic problems on the partition of Ireland into northern and southern entities (Lee, 1987: 360). Thus, the problems of poverty, social stagnation and emigration would be overcome with the realisation of the aims of the republican harbingers of 1916.

The political process developed on a different trajectory to elsewhere in Europe on all of the four political cleavages outlined by Lipset and Rokkan: class; urban-rural; clerical-secular; and, core-periphery (quoted in Whyte, 1974: 650). Essentially, Ireland persisted in acting as an economic periphery to the United Kingdom supplying cheap food and migrant labour until the first economic boom of the 1960s. Within Ireland, rural habits of political organisation spread to urban politics and have informed political life ever since. The PR-STV[1] voting system compounded this and brought the evolution of a heavily clientelist system based on brokerage and patronage. The interaction of such factors as poverty, fragmentation of power, strong parochialism and particularism in the relationships of social life create a context applicable to modern Ireland in which machine politics can flourish (Higgins, 1982: 74). The Fianna Fáil party has always been the most successful at exploiting this system and has therefore remained the perennial party of power.

Such a system based on close proximity and patronage was taken to the umpteenth degree by the machinations of business elites and the Fianna Fáil party during the Celtic Tiger era. It is worth highlighting that, throughout the 20th century, emigration was persistently used as a “safety valve” through which the political system could be protected as those who would be most likely to bring social disorder left in search of opportunity elsewhere (Ferriter, 2005). At the outset of this current crisis, some commentators pointed to the global nature of the financial meltdown which for much of 2009 limited geographical mobility. However, the spectre of emigration has returned to Ireland at the same time as themes of economic sovereignty and governance have returned to the fold. Faith in the political system is at an all-time low and fears of inchoate, violent reactions inform the discourse in certain media circles.

Political impotence and the “Neo-Liberal Moment”

In his final book Ill Fares the Land, Tony Judt argued that the “social democratic moment” seen in Western Europe after World War II was the product of a very particular set of circumstances unlikely to repeat themselves. Ireland was not, however, a beneficiary of these circumstances. Having not participated in the war, Ireland could not capitalise on the Marshall Plan schemes available. Certain elements of the Catholic social teaching which was prevalent at that time also opposed the construction of a comprehensive welfare state like those elsewhere in Europe (ibid). Despite declaring as a republic in 1948, civic morality was outsourced to clerical authority and open civic republican discourse did not fully develop. With a few exceptions, the new republic missed its social democratic moment.

The “neo-liberal moment”, which has only now run to ground, was also a product of a particular set of circumstances. In this instance, Ireland was on the cusp of the wave. For Judt, this moment coincided with what he calls the “unbearable lightness of politics”. He reserves a significant amount of criticism for the present generation of European leaders ranging from Angela Merkel and Nicolas Sarkozy to Herman Van Rompuy.

Irish political culture fell all too easily into this dynamic. In addition, the prevalence of patronage as a modus operandi in Irish politics was well suited to the fragmentation of political discourse that has taken place since the 1960s. Back in 1987, the Labour Party politician and academic Michael D. Higgins observed that “one of the most discernible and alarming trends in contemporary society is the acceptance of politics, society and economics as separate spheres” (2006: 53). Politics was reduced to a contest of competing populisms culminating in the degradation of citizenship itself.

During the 1990s, two external trends unfolded which had considerable effect on Ireland’s economic development. Ireland came to benefit hugely from the massive increase in European Union Structural Funds under the Delors Commission. This provided much needed investment in infrastructure and other public goods. At the same time, the state became enthralled with the Anglo-American model of economic life with its concentration on low taxation, privatisation of services etc. Former Tánaiste (Deputy Prime Minister) Mary Harney expressed this most emphatically at a business leaders’ meeting in which she said that ideologically, Ireland sailed “closer to Boston than Berlin”. In many cases, government politicians downplayed the role of Europe in building Ireland’s prosperity but still expected the electorate to vote in favour of the Treaties of Nice and, more recently, Lisbon (O’Toole, 2009: 172). The tendency of the Celtic Tiger to bite the hand that fed it was evidenced by arrogance even towards the institutions of the state. Politics simply did not matter while investment was booming and credit flowed freely. The events of recent weeks run the risk of further distancing the Irish populace from the European institutions.

Yet the largest beneficiaries of this opulence knew that politics mattered as long as it was good for business. Fintan O’Toole has written extensively on the astounding level of white collar crime that existed in Ireland during and well before the Celtic Tiger era and Ireland’s neo-liberal moment. This was an era of brokerage politics writ large. The Irish parliament’s Public Accounts Committee wrote after an earlier scandal that: “There was a particularly close and inappropriate relationship between banking and the state and its agencies. The evidence suggests that the state and its agencies were perhaps too mindful of the concerns of the banks, and too attentive to their pleas and lobbying” (ibid, 52).

The construction industry and the banking and finance sector have been hit by numerous corruption scandals in recent decades. The resulting tribunals of enquiry have exposed a tight nexus between certain politicians and the worlds of finance, regulation and senior levels of the civil service. The convergence of this local environment with the global ideological parameters of the neo-liberal moment produced one of the most unsustainable economic bases in the western world.

The Fall

In terms of public policy, the Irish case highlights key problems that exist in terms of the way in which politicians relate to their citizens. Terrence McDonough’s article ‘The Irish Crash in Global Context’ comparative analyses the Irish case with respect to global neo-liberalism. The four dominant focuses are globalisation; neoliberal institutions, fiscal and monetary policies; weakened labour; and, “financialisation”. Thus, McDonough finds a grain of truth in the Irish government’s assertions that the Irish crisis should be regarded as a global crisis of neo-liberalism. However, he denies the government their ready escape by asserting that the crisis in Ireland was compounded by Ireland’s “own particular capitalist institutions” (McDonough, 2010)

It was a fallacy to talk of an Irish “economic miracle”. As an English-speaking country with an educated population, membership of the Eurozone and a low tax regime for corporations and financial institutions, Ireland became an attractive destination for foreign direct investment. Economic expansion greatly increased the demand for commercial and residential property and Irish banks took advantage of the greater access to credit provided by membership of the Economic and Monetary Union as well as very low interest rates. Financial institutions such as Anglo-Irish Bank grew at an alarming rate and funded increasingly risky investments on the back of credit flows from lenders in other EU member states and further afield. The subsequent inflation of the construction bubble left the state exchequer increasingly reliant on property related revenues.

Three aspects of government policy increased this reliance further. Firstly, the low income tax regime buoyed consumer spending but meant that the state had to look elsewhere for revenue. The shortfall was filled by VAT and stamp duties from construction. Secondly, from 2002 (the year of a General Election, incidentally) a further tranche of property based tax incentives was implemented to maintain the property bubble which was already at risk of bursting. This was most obvious in the hospitality sector. The government force-fed property development to the extent that developers would build hotels not for commercial demand but for the tax breaks. The hotel industry became virtually unviable, with a 53% occupancy rate (O’Toole, 2009: 116). Worse still was the fiscal position of the Republic of Ireland. The third major flaw was consistent espousal of the virtues of “light touch regulation” and the paltry level of application of even this light regime. This, again, is a question of political decisions.

With the onslaught of the subprime crisis in the United States, the global credit crunch, and the uncertainty in the financial markets, Ireland’s property bubble burst with disastrous consequences. The statistics from the subsequent two years speak volumes of the vulnerability of the Irish economy. Tax revenues fell 34% in the two years up to April 2010 and the Irish deficits rose from a surplus of 3% of GDP in 2006 to an 11.7% deficit in 2010 according to the estimates of the European Commission (Irish Independent, 5 May 2010). When one includes government support for the banking sector, the deficit presently exceeds 30% (Financial Times, 25 November 2010). With a financial and fiscal crisis, an unemployment crisis ensued, setting off what McDonough classifies a “classic Keynesian downward spiral of rising unemployment and falling demand” as well as a massive withdrawal of credit across the economy, both to businesses and consumers (McDonough 2010).

Economist Morgan Kelly raised fears of further in his melancholy article entitled ‘If you think the bank bailout was bad, wait until the mortgage defaults hit home’ (Irish Times, 8 November 2010). He dealt with the human cost of those families struggling to deal with overpriced mortgages and the economic cost of its implications for the state. His view was that the state was heading for bankruptcy and that a bailout would be necessary but that too high an interest rate would be detrimental. Within three weeks of this article being released, the government had agreed for a bailout mechanism with the ECB, the IMF, the European Commission and three individual member states. The average interest rate of 5.8% is well in excess of the figure Kelly sees as serviceable for the state. His final remarks, raised fears of the emergence within five years of a “hard right, anti Europe, anti-Traveller party that will, inconceivable as it now seems, leave us nostalgic for the, usually, harmless buffoonery” of the traditional civil war parties. In a country that has never had a strong hard right tradition, such a prospect raises serious concerns not only for Irish political culture but for similar potential developments the European Union itself.

Implications and Conclusions

The month of November 2010 provided an instructive example of contrasting styles of leadership. On 7 November, Greek Municipal elections were held amid the ongoing difficulties facing that country. It may appear as a surprise that these elections were a relative success for the ruling PASOK government especially given the measures they were forced to introduce after acceding to power. When drawn upon this, however, Prime Minister George Papandreou asserted that he and his government did not simply implement cuts in expenditure. Instead, they approached the people of Greece with a plan to reform a flawed system in which PASOK had also participated. This demonstrates that electorates respond to honesty and maturity in their political leaders. Compare this with the actions of the Irish government in the two weeks that followed.

One TV reporter with Ireland’s national broadcaster RTÉ put it very succinctly: “It’s been a dramatic week in politics, beginning with government denials that the IMF were on their way, swiftly followed by the arrival of the IMF”. Taoiseach Brian Cowen effectively lied to his public. He has proven himself to be a deplorable communicator throughout the financial crisis when the need for communicative leadership has been greatest. For Irish citizens, he has come to epitomise the arrogance and disconnectedness of political elitism and the impotence ascribed by Tony Judt to Cowen’s contemporaries elsewhere in Europe. This is painfully obvious to commentators outside of Ireland too. British newspaper The Observer referred to other states caught out by the credit crunch but says that “Ireland’s unique misfortune is to have, in Brian Cowen’s Fianna Fáil government, leaders who shipwrecked the economy and then capsized the lifeboats”. Rumours of Cowen’s inebriation during a radio interview quickly spread to the international media too – and this at a time when Irish people are particularly sensitive to the re-emergence of damaging old ethnic stereotypes.

The belief among the general population is that Fianna Fáil have wasted the boom and then made the state beholden to reckless banks. Thus, most people tend to blame the government first and foremost. However, there has been an underlying implication in certain commentary which has the potential to deflect this anger outwards to the institutions of the European Union as details of bailout conditions and bondholders’ identities emerge. During the second referendum campaign on the Lisbon Treaty, the Eurosceptic organisation Libertas attempted to give voice to such a platform but failed. Now there is a danger that the “tough medicine” included in the bailout package will give rise to the malevolent organisations warned of by Morgan Kelly.

There has been some more constructive dialogue aimed at reforming the political system. The Irish Times ran a series entitled “Renewing the Republic” in which commentators from many walks of life wrote of their vision for improving Irish political culture while opposition parties have made their own proposals too. The think tank TASC has been at the forefront of building a progressive perspective for renewal. The FEPS-TASC conference “Towards Recovery”, held in Dublin in October, rejected the “ideologically driven austerity agenda” which sought to dismantle the welfare state (Irish Examiner, 23 October 2010).

Ultimately, the ability of Ireland’s political system to reform itself will prove an interesting test case for democratic discourse in the rest of Europe. This will require effective leadership and honest dialogue – and not the ideological escapism that has haunted the past – so that politics can regain trust. Public debate must regain its normative character and not merely be resigned to the administration of things, bereft of a value narrative. Tony Judt put it pointedly when he said “It is the gap between the inherently ethical nature of public decision-making and the utilitarian quality of contemporary political debate that accounts for the lack of trust felt towards politics and politicians” (Judt, 2010: 180). It will take intelligent and courageous leaders to change this.

 

Bibliography

Media

Financial Times

Irish Examiner

Irish Independent

Irish Times

The Observer

Radio Telefís Éireann

Secondary

Ferriter, D. (2004), The Transformation of Ireland: 1900-2000, London: Profile.

Garvin, T. ‘Political Cleavages, Party Politics and Urbanisation in Ireland: The Case of the Periphery-Dominated Centre’, European Journal of Political Research, Volume 11(4), 1974, pp. 307-327.

Garvin, T. (2004), Preventing the Future: why was Ireland so poor for so long? Dublin: Gill and Macmillan.

Higgins, M.D. (2006), ‘The Limits of Clientelism: Towards an Assessment of Irish Politics’, in Causes for Concern: Irish politics, culture and society, Dublin: Liberties Press.

Judt, T. (2010), Ill Fares the Land: A Treatise on Our Present Discontents, London: Allen Lane

Lee, J.J. (1989), Ireland 1912-1985: Politics and Society, Cambridge: Cambridge University Press.

Mair, P. (1987), The Changing Irish Party System: Organisation, Ideology and Electoral Competition, London: Pinter Press Ltd.

McDonough, T. ‘The Irish Crash in Global Context’, The Citizen, Issue 3, autumn 2010, online.

O’Brien, C.C. (1968), ‘Epilogue: The Embers of Easter 1916-1966’, in O.D. Edwards and F. Pyle (eds.), 1916: The Easter Rising, pp. 223-241.

O’Toole, F. (2009), Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger

Whyte, J. (1974), ‘Ireland: Politics Without Social Bases’ in Rose, R. (ed.), Electoral Behaviour: A Comparative Handbook, New York: Free Press/Macmillan pp. 619-651.

Zerubavel, E. (2003), Time Maps: Collective Memory and the Social Shape of the Past, Chicago: Chicago University Press.


[1] Proportional Representation by Single Transferrable Vote

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