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The Irish Debt Crisis Story
By the mid-1990s, the historically troubled Irish economy began to move into a phase of rapid growth. Of course, the Irish economy could only improve from lows of the 1980s, but this economic success was measured against the collapse of economies in nations such as Japan. The turn of the decade was characterised by a global recession, and the rise of the Irish economy at this time was likened by some commentators as having similarities with the ‘Tiger’ economies of South East Asia in the late 1980s By 2005, the New York Times was lauding ‘Ireland’s Economic Miracle publishing ‘the amazing story of how Ireland went from sick man of Europe to rich man in less than a generation’ (NY Times, April 25, 2009). Many factors contributed to Ireland ’s phase of accelerated economic growth, some planned, some serendipitous. European Union support and subsidies, low corporation tax rates of 10–12.5 per cent, the high rates of young, well educated, English speaking graduates in the workforce, the cultural links between Ireland and the United States, the Peace Process in Northern Ireland and the support for Ireland provided by successive US Governments, ongoing state support for direct foreign investment, the development of better internal infrastructure and the increase in female participation in the workforce all contributed to growth in the 1990s.
Ireland’s key area of industry was no longer agriculture and domestic manufacturing. By the 1990s, the Irish economy shifted, and high technology based multinationals, financial services and the internet-based knowledge economy supplanted the traditional forms of economy, as the economy boomed. This transformation was facilitated by a number of factors, such as the establishment of the International Financial Services Centre in Dublin , whereas Ireland ’s low corporate tax rate which was far below many European countries. Concerns about some of the factors in such a dramatic transformation began to be voiced by international commentators. These concerns were to be addressed by the establishment of the Financial Services Regulatory Authority (IFSRA) in 2003. Of course, Ireland ’s banking sector was itself historically problematic. According to Irish author and Senator Shane Ross:
‘Ireland has a shameful banking history, not a proud one. For over thirty years Ireland has been cursed by banking scandals. While the smaller scandals and the smaller banks have come and gone, the activities of the larger ones suggest that banking skulduggery is endemic’.
Many of the elites in Irish society came under scrutiny in the years either side of the Millennium. Many of Ireland ’s major institutions, such as the political class, Catholic Church and banks were caught up in a series of scandals that involved abuse of power, vulnerable children and financial privileges. A series of costly Tribunals of Inquiry were called to investigate the behaviour of an array of figures and groups in Irish society. A second phase of the economic boom was fabricated through an inflated property market in the early years of the 2000s. However, the vastly overrated pricing of properties and very high rates of lending from the banks led to a ‘casino culture’ in the Irish property market which fuelled the inevitable bust that followed. The economist David McWilliams has claimed that property transactions became a national sport, as nearly half a million properties changed hands in the three years between 2005 and 2008. Wealthy investors developed portfolios of properties in Ireland and the United Kingdom , and across Europe . European banks gave large loans that many Irish recipients were never in a position to pay back.
With the onset of the global economic downturn in 2008, the Irish economy was over exposed to the vagaries of the market, and in many ways the gullible rookies in the Irish investor sector had been duped into a spiral of debt and over priced properties by shrewd and unscrupulous financiers. In 2009, the National Assets Management Agency (NAMA) was established, in an attempt to reclaim some of the value of Ireland ’s collapsed property market, with limited success.
The IMF and European Central bank had become involved in Ireland ’s economic affairs in the aftermath of the banking guarantee given by Fianna Fail Finance Minister Brian Lenihan in September 2008. Lenihan had been a part of the coalition that participated in Ireland’s phase with the Presidency of the European Union in the 1990s, and his sense of heightened duty went so far as to bring him to guarantee the debts of not just the Irish banks, but of the speculators and bond holders who take financial risks as a central part of their profession.
The dilemma of ‘who to trust’ which is facing the Irish public has been best summed up by social economist David McWilliams:
Why should we trust the people who got us into this mess in the first place? They were wrong then and they are wrong now. The politicians, bankers and developers think they can hand us the bill and walk away from the carnage. They want us follow a route that will make things worse for the ordinary man on the street while saving the bankers at the top of the tree, insisting that there is no other way.
Furthermore, the international financial sector had Eurosceptic elements opposed to the European Union and Eurozone, and utilised the Irish and Greek banking and debt crises as a vehicle to undermine these institutions. One example of this was the downgrading of Ireland ’s credit rating to junk status in July 2011, despite a positive review of Ireland ’s response to the debt crisis by the International Monetary Fund (IMF). It would appear that Ireland ’s elites had taken on more than they could handle with the dualistic agendas of the Central European Bank and the non-aligned financial agencies setting the agendas for Irish economic planning for the foreseeable future. Subsequently, a disaffected malaise has enveloped Irish society, with the economic recession causing a further eradication of the social fabric.
Of course, the question remains, where does Ireland go from here? Without doubt, the time has come for a new agenda in Irish politics, one which is at once sustainable and just for all who inhabit the oft beleaguered Emerald isle. It remains to be seen if this new form of politics will emerge from existing grassroots or elite sectors of the political spectrum. Nonetheless, Ireland ’s slow by consistent emergence from the problems of the fiscal crisis will be a journey of rediscovery and reinvention for the Irish people.
Dr. Liam Leonard is a Lecturer in Sociology and Human Rights at the Institute of Technology, Sligo, Ireland. He has written several books on Environmental Justice and Politics. He is the Co-editor of Sustainable Politics and the Crisis of the Peripheries: Ireland and Greece: