A brilliant study on boom and bust
Ireland stumbles upon good luck briefly, trips and falls
By Dr R Balashankar
When the Luck of the Irish Ran Out: The World’s Most Resilient Country and its Struggle to Rise Again, David J Lynch, Palgrave Macmillan, Pp 256 (HB), £16.99.
SEVERAL countries, like Iceland, Greece and Ireland were tossed around like pieces of wood during the recent economic tsunami that hit the world. What makes Ireland’s story more poignant than the others is that it was enjoying economic prosperity after several centuries of poverty.
"For almost eight hundred years, Ireland’s story had been one of the almost unbroken impoverishment and national impotence. For eight long centuries, the dirt-poor Irish had been on the losing end of history while other nations rose in turn." David J Lynch in his book When the Luck of the Irish Ran Out, speaks of how the people who had survived crisis serially had a short run at wealth and how the luck ran out too fast. They had "endured" famine, deprivation, and the British.
While every other country in the world seemed to be riding high on economic growth in the 1980s, Ireland was struggling with an exploding government debt at 130 per cent of GDP. With political reluctance to cut social spending, the tax rates hit 65 per cent and the standard corporate levy at 50 per cent. "A toxic brew of taxes and debt was poisoning the economy."
People with ambition and drive left Ireland. By 1911 one third of all people born in Ireland lived outside the country. And in the 1980s, the best educated girls and boys were leaving. According to the book, in Boston alone, there were more than 70,000 Irish men and women under the age of 25.
Along with economy, the country had been undergoing social stagnation. The Catholic Church had an iron grip on Ireland’s policy and planning, touching all spheres of governance. The church drew the line good and bad, beyond which no respectable Irish person could stray. More than 90 per cent of people attended Mass every Sunday and two-third people said they had no trouble with Church teachings. And yet, beneath this veneer of god-fearing society lay the pent up and silent resentment against the social rules - on contraception, abortion, homosexuality and issues like that. Stories trickled in from various parts of the country, of infants being killed because they were born out of wedlock, mothers dying during delivery, because they were unwed and got no medical support, and of women being punished for these crimes, not men.
Then, in the early 1990s, scandals broke out that put the Church leaders in a bad light. There were cases of pedophile priests and to the horror of the people it was revealed that the higher ups in the church and the government had covered up these cases, protected the men involved and in fact posted them in other parishes, without informing the leaders about the misdeeds of the new appointee. "For the bishops, the priority clearly had been preventing reputational damage to the church rather than safeguarding their flock."
The political change came in the mid-nineties, with neo-liberal, market-oriented Progressive Democrats coming to share power. The Irish economy was now going to go the American way. As economy picked up, the Irish started to come home. More people came in than those who left. Unemployment fell from 16 per cent in 1993 to 10.3 in 1997. With this came a little social freedom. Roddy Doyle, one of the celebrated Irish writers made a four-part serial for BBC called Family, which unmasked the reality of the Irish families. Domestic violence, alcoholism, and incest were plaguing the society. Says David J Lynch, "The series represented a frontal assault on the venerable Irish tradition of pretense, of wilful blindness to troublesome realities."
Ireland was now on a boom. To quote only one instance of the new-found wealth: five hundred women placed their names for waiting list for Hermes shopping bags, that started at $5,000. People for whom once fine dining meant boiled potatoes and brown bread were packing eating joints that sold appetisers for $50. Between 2002 and 2007 Irish banks almost tripled their lending, shoveling money at borrowers, courtesy global surplus cash. The property rates shot up and houses came up everywhere. People were booking themselves homes much beyond their need and capacity to repay. There were buyers who were willing to buy property at astronomical prices, with multiple bankers supporting the buyers on paper.
And then the burst came. It came even more suddenly than the boom. Within a few years, the dream of Irish gold was losing the glitter. Property prices started to slide off. Banks were left with huge bad lending. The banks had violated norms left, right and centre, taken risks unheard of before, in lending money. Says the author, "There was another way in which Irish bankers were responsible for their predicament. They had allowed themselves to become hooked on borrowing from aboard in a way that left their balance sheets profoundly vulnerable." By 2008, Irish banks owed the rest of the world an amount equal to 60 per cent of the country’s annual output.
David Lynch in his analysis of the boom and the bust says that Ireland, genuinely reaching a level on well-being in the late 1980s, for the first time in several centuries, adopted the American and European economic models. In the absence of political will and competent regulators, a "U.S.-style blind reliance upon the market and financial institutions’ abetted bad economic practices, that were doomed to fail. The names of the by-now familiar financial rogues like J P Morgan, Greenspan crop up in the Irish story too. The single most Irish culprit was the Anglo Irish Bank. By a conservative analysis, Irish economy would take years to reach the 2007 level of economic growth. The target year is anytime between 2021 and 2026. Such was the plunge it took for such a short lived boom.
The lay-out of the book is highly interesting. David Lynch, a seasoned journalist and writer on economic issues, first draws the history of Ireland, in short crispy chapters, followed by the Irish society. From there the story of the boom and bust appears more heartbreaking. Centuries of poverty has tested the endurance of the Irish. They had come out the winners. So with such resilient population, it is only natural that they would overcome this crisis too. As a senior Irishman T K Whitaker said, "...we may not confess openly to our wrongdoing - but I think we learn from experience ... and then we hopefully will re-emerge on the broad and sunlit uplands." Well-written, crisp and without jargons, the book makes an excellent reading, even to a non-economic reader. It is a mixture of Irish economy and history, and culture, an inter-mingling of it that adds flavor to narration.
(Paldgrave Macmillan, 785998, Houndmills, Basingstoke, Hampshire RG21 6XS)