Are the Irish economically illiterate?

As we approach the sixth in what seems to be a never-ending run of austerity budgets the public, despite some spin on the part of the Government and others, just does not sense we are anywhere near emerging from the economic abyss.

Consolidation – in the form of unemployment stabilising by not getting any worse, a stabilising of income levels, and some curb on the overall cost of living for instance – is as much as most people dare to hope for, at least for the foreseeable future.

Even that is a tall ask when we factor in the expected avalanche of new charges such as the property tax and the expected cuts in payments such as child benefit. Even the pensioners, we are told may not be spared on this occasion.

Before pre-Budget speculation really takes off, perhaps it is time to take stock and reflect on how Ireland got itself into this position - or rather how on earth the State keeps getting itself into these truly awful situations. For the great recession of 2008 is not the first to give rise to an economic crisis in Ireland. While virtually all countries experience periods of contraction, Ireland has endured at least three truly awful economic crises in the short period since independence – the dark days of stagnation in the 1950s, the awful lost decade of the 1980s, and now the great recession.

The much recited claim that Ireland is “a small open economy vulnerable to external shocks” will no doubt be invoked by some as an explanation – so for example the 1950s were difficult as Europe recovered from the ravages of WWII, the oil shocks of the mid to late 1970s gave rise to the 1980s crisis, and of course Lehman Brothers and the credit crunch lie behind the current crisis.

Yet if this is a valid point, then surely we should be even more acutely aware of the need to exhibit caution and prudence in the management of our own economic affairs to act as some form of buffer against these shocks?

The reality is that Ireland has on a number of occasions engaged in some truly horrendous mismanagement of its economic affairs that has left the nation with a collective raging hangover and resulted in several decade-long periods of misery. We could say that Ireland since independence has proven itself to be economically illiterate. Why is this so?

Lack of loyalty to the State?

One claim often advanced is that Ireland’s problems are partly explained – or at least exacerbated- by a lack of loyalty to the State. The argument goes that while people may have loyalty to the concept of the nation, this does not extend to any great pride in the State.

While Germans have a great pride in their reputation for efficiency and the manner in which that manifests itself in the running of their country or the British have a great pride in the concept of a National Health Service that sees the state provide healthcare at the point of delivery to its citizens, there is nothing comparable in the Republic of Ireland.

It is not necessarily that the Irish people do not believe in a big state or big government - along the lines preached by some politicians in the US for instance - but rather that there has never seemed to be the desire here to build a state with strong characteristics of its own and has therefore never manifested itself as a sense of loyalty to the State. This in turn has led inevitably to a lack of interest in protecting that State with the result on a number of occasions that we have allowed the State to go bankrupt.

Insider sees some truth to this assertion. While people do not object to the idea that the State should provide for its citizens, this feeling is not driven by a desire that we have a well-functioning State that provides for those who need it in an efficient manner. Rather it is driven by a desire to make a grab for as much as one can from that State.

Insider feels there is another related factor that is equally important which complements this lack of loyalty to the State – the power of localism and putting the local interest ahead of the national interest.

The power of localism

Many will instantly recognise this factor and point to characteristics such as the greater focus put on local issues at election time and the focus by politicians on constituency matters ahead of national issues. This is undoubtedly one manifestation of it but it is even more prevalent than that.

Take for instance the system of government encouraged during the Ahern era, which Insider has in the past described as ‘a Cabinet of Regional Czars’. Ministers ideally should be concerned with two things – managing their own portfolios and then having the Cabinet function as an efficient collective to ensure the smooth management of the country. During the Ahern era however the focus was on maximising the spoils of the Celtic Tiger for the benefit of a minister’s constituency or region.

Ahern encouraged this further by essentially employing two criteria for choosing people for ministerial office – their track record in bringing in a running mate in the constituency and ensuring there was ‘geographic balance’ in the Cabinet.

Of course the two fed each other as appointment to the Cabinet on the basis of geographic balance meant the chosen minister would be motivated to maximise spoils for the region, thereby maximising the chances of electoral reward and bringing in a running mate at the next election.

This was by no means prevalent only during the Ahern era but he brought it to new levels, almost putting the criteria for ‘regional balance’ on a statutory footing. To make matters worse, the Ahern era coincided with a boom (albeit largely a false one in retrospect ), which further encouraged this belief that Cabinet was all about divvying up the goodies.

Local heroes and sins forgiven

The focus on the local over the national manifests itself as well in the application of standards in public life. The election of politicians with dubious ethical track records on the basis that ‘they deliver for the constituency’ is one example. Another is the willingness of some people in the border region to call for the Quinn family to be exempted from the rigours of the law on the basis they have created employment in that region.

As a country that had only been independent for 75 years when the Celtic Tiger arrived on these shores and having largely been in the economic doldrums for much of that period, there was always going to be the risk that Ireland would find it difficult to handle the sudden transition to economic boom and the State coffers suddenly overflowing with money.

Unfortunately such fears came to pass. Initial bemusement followed by pleasure that Ireland had come of age economically gradually turned to a misplaced euphoria and arrogance. Unfortunately many of the weaknesses in the Irish psyche – the excessive focus on localism, the insatiable appetite for property investment, the eagerness to grab what you can from the State – gradually intervened to ensure we could not bring ourselves to prudently manage and maintain our new-found wealth and economic strengths and yes, ultimately we started to run away with ourselves.

Is there any hope for us?

Having considered some of the factors that has led us to continually driving ourselves into the ground economically is there any chance that we may finally learn our lesson and avoid repeating our mistakes?

Insider noted earlier that while there may be a lack of loyalty to the State, there is still some loyalty to the nation. The hope would be that the loss of economic sovereignty that the arrival of the IMF brought could leave lasting scars that will lead to a determination not to repeat these terrible mistakes.

The fact that Ireland has also enjoyed a period of strong economic performance – in contrast with previous recessions for example where we seemed destined for misery – may give rise to a belief that things could and should be better, and anger that we did not preserve what we had.

Insider also hopes that the sight of people suffering in the wreckage of the economic crash would lead to a determination not to have a repeat of this. It must be noted that a common theme of the various periods of economic ruin over the years has been that some well-placed people have done rather well for themselves and have skilfully shielded themselves from the worst ravages of the crises. This current crisis is no exception in that regard.

Ultimately Insider feels political reform is needed. It is not just that Ireland has been economically mismanaged over the years, rather we have failed to govern ourselves in a coherent manner. That however is a story in itself and one that Insider will return to on another occasion

 

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