History repeating itself?

Being back in Ireland it's difficult to avoid the economic crisis facing the country. The topic is receiving so little coverage in the main stream press in the UK that I had to ask an Irish colleague if the crisis had got worse in the 4 weeks that I’d been back in Ireland, apparently it's just that I wasn't aware how bad it was.

The major causes seem pretty clear. Large foreign investment coupled with low interest rates after joining the Euro resulted in a massive explosion of the property market.  Irish banks borrowed funds on the international markets to lend to Irish developers who used property as collateral. Once the world economy turned the banks found themselves exposed to loans that couldn't be repaid, secured against property that wasn't worth close to it's claimed value. Ladies and Gentlemen, we have that worst type of crisis, one that was entirely predictable.

And then things got worse. In order to keep the plates spinning the banks went to the government for help. The banks and government advisers claimed that the banks were profitable and well capitalised and that the immediate problem they were facing was simply a liquidity gap. The government paid €4 million for advice that agreed the banks were probably okay, but the same report explicitly warned of the possible future problems with providing a government backed guarantee for all depositors and creditors of Irish banks, especially given that the world economy was in what was described as a "very fluid" situation. Despite that advice, in late September 2008 the Irish government gave that blanket guarantee. It now seems clear that the banks either lied, had no idea of the level of debt they were holding or failed to appreciate  just how far property prices could fall, because as the world economy and Irish property prices continued to drop the extent of the problems with Irish banks became clearer. As as result of that government backed guarantee the whole country was in serious trouble.

The  banks and government in Ireland have an odd history. Despite Government bail outs in the past the banks have in recent years assisted some customers with illegal tax avoidance schemes and concocted illegal bank charges to steal money from other customers. But this is Ireland, and in a country this small the politicians, bankers and developers all know each other and what's good for the banks and developers is good for the government. But as it slowly emerged just how much trouble the banks were actually in, the warning contained in that €4M report must have looked remarkably prescient. The government had propped up the banks and developers, and to a certain extent itself, and in the process had practically bankrupted the country.

Despite the greed and hubris of those in charge who thought the Celtic Tiger was here to stay, the Irish public hold a large share of the blame, and not simply because they believed that property price could only go up. We have for decades elected incompetent politicians to represent us, not on the basis of their positions on national or global issue, but because we know them and they can be counted on for favours. Ireland may have been screaming out for a real transport policy, but being in control of the local planning permission board was where the real political power lay. Being such a small country the parochial nature of our politics results in politicians and business leaders operating in an almost incestuous environment that starts with cronyism, a lack of accountability and general arrogance before developing into full blown corruption.

Political connection will always trump professional ineptitude in Irish government, which goes some way to explaining why in the past a senior cabinet member tried to illegally import weapons, or why a minister for Finance held no bank account and was paid with briefcases full of cash. In most European countries that would be career over, in Ireland they were just mis-steps for the politicians involved before they both went on to become the leader of the country. Time and time again the people of Ireland have elected the same politicians in the hope that this time will be better, and those same politicians have failed us so often that rather than worry about the competence of the politicians I'm start to worry about the sanity of the electorate.

Ireland has the feel of a schizophrenic country at the moment, there is a genuine feeling on the street that things are about to get a lot worse, yet the restaurants and bars are still full. For the moment people have money and the crisis does seem, for the time being, to be limited to the banks and public sector. But based just on the number of people who have asked me about job opportunities abroad I suspect that a whole new generation of Irish are about to introduced to the meaning of the word Diaspora.

This country has seen bad times before and come through, and I believe the coming austerity and fallow years will eventually pass. What worries me the most is that the same incompetent and corrupt politicians will still be in charge.

Meanwhile, with few exceptions it seems the bankers and politicians will head to sunnier climes or retire on fat state pensions. The developers may not fare so well, but it is of little consolation to know that we may end up in the life boat with the people who sank the ship.