Tuesday, June 05, 2012

Time to Take a Break or even Stop

Garravogue River, Sligo 2005
Knowing when to Stop

As I scanned the staffroom of my school before we broke up last Friday evening for the summer holidays, I began to register the faces who would not be returning.  They were either retiring or leaving to go to work abroad - mostly in Canada and the United States.  With the downtown in our economy, emigration is now once again almost part of the fabric of this new Ireland.  However, this is not meant to be a sad post, but rather a more objective one reflecting things as they are.  Those leaving actually have not been forced to do so.  Perhaps they have been offered deals they could not refuse, but that is another matter.  They simply knew that for them it is time to go, time to move on to other, if not greener, pastures.  A natural end has come. 

Likewise with this blog.  As I peruse the last 1000 or so posts in this blog, I have noticed that I have in a way exhausted the well.  To continue this blog would only be to repeat oneself like "a broken record" or a tape stuck in a loop or whatever.  Better quit when ahead, I suppose.  As I type thoughts such as these, certain quotations, long committed to memory, come to my mind.  It's as if when I have nothing of worth to say, these old quotations jump to the surface to fill the vacuum.  The first words from Gerontion by T.S. Eliot vie for my attention: "Here I am, an old man in a dry month..."  However, while the first part of this line is very much getting ever truer (I am 54) the second part is distinctly inapt as it is raining here in Dublin today.  T.S. Eliots's poems are littered with references to dry and parched land.  Indeed he finishes this last quoted poem with another reference to dryness: "Thoughts of a dry brain in a dry season."  And in Four Quartets we read of the "(e)arth in forgetful snow, feeding//A little life with dried tubers" and several lines later "And the dry stone (gives) no sound of water."  That is the way my mind and soul feel now - a little parched for want of refreshment and enlightenment.

Therefore, I am going to call a halt to writing in these pages for the moment.  Perhaps, I will return to them after the Summer, or perhaps start a new blog with something else in mind.  As I said in a previous post this blog performed the function of a sort of Commonplace Book for this author - a virtual space where I could store some writings, reflections and musings.  However, they will still form a sort of on-line store which I can peruse from time to time.  That a readership built up for these posts was a bonus, nay a gift to this writer for which he is indeed very grateful.

Thank you all for reading and as we say in the Gaelic Language - "Go n-éirí an bóthar libh agus go mbíodh an ghaoth i gcónaí ar bhur gcúl - May the Road rise with you and may the wind be always at your back!" 

 New Blog here:  Wellsprings


Monday, June 04, 2012

Celtic Tiger 3


Generational Impacts: Positive and Negative
There is a general tendency in us Irish to be negative; probably resulting from the national inferiority complex due to hundreds of years of occupation by an outside power adverted to in our opening paragraphs.  Here, I wish to begin with the negative impacts because undoubtedly we are bombarded with them on a daily basis in both written and broadcast media who seem to literally thrive on depressing the populace.  Many commuters choose to listen to music on their way to work instead of listening to the gloom and doom of a programme like Morning Ireland. At least two young couples known to the present author are in considerable negative equity.  One couple bought an average three bed semi-detached house in a middle-class estate for some €555,000 in 2007 at the height of the Celtic Tiger only to have house prices in the same estate tumble to €265,000 in mid-2011.  Quite clearly we must agree with Nyberg (2011, p. ii) that “domestic Irish decisions and actions” were the main reason for the over-heating of the housing market as well as the economy in general.
The other major negative impacts are obviously the return of the two greatest historical scourges of modern Ireland, namely rising unemployment and increasing emigration. The latest figures available from the Institute of International and European Affairs (IIEA)[1] show that 9.7% of the EU labour force is unable to find a job; while Spain leads the field at 22.6% and Ireland comes in fifth position at 14.2%.  Similarly, recent figures from the Central Statistics Office[2] show that more than 3,000 Irish people are leaving the country each month, the highest number since the Famine.  Up to 76,000 people left Ireland in the 12 months leading up to April, including an estimated 40,000 Irish nationals. Despite the alarming numbers leaving Irish shores, CSO statisticians say that many who are leaving are not necessarily Irish citizens.
In all of this we may be fairly criticised for “sleeping on the watch” during the Celtic Tiger period and for “reaping the whirlwind” of growing unemployment and the scourge of returned emigration.  As Hardiman (2010, p. 75) puts it, we failed to see “the red lights flashing” when net lending by credit institutions quadrupled between 2003 and 2005 (net lending by credit institutions was running at 10% of GDP in 2003 and it spiralled to 41% of GDP by the end of 2005).[3]  One could think of other metaphors to describe the national blithe disregard for dangers ahead during the Celtic Tiger – an apposite and timely one might be “steaming ahead” at full speed with the nonchalance of the Titantic despite the iceberg-infested waters.

However, while analysis of what went wrong is a positive thing to do, we certainly cannot benefit from playing the blame game.  Apart from the fact that it is a waste of time, it saps the nation of its spirit.    There is no single factor or any single person in which all blame can lie as we have seen above.  Many factors conspired to bring about the boom and bust and likewise many people shared in the rise and fall of the Celtic Tiger. We must avoid other very Irish reactions like begrudgery and finger-pointing that seem endemic in the Irish psyche.  Such attitudes need to change.  It is silly surely and wasteful of precious time for this country to continue to drown in indecision and petty argument over what sector, institution or individual deserves the most blame while the world economy keeps on turning.
There have been many other positive generational impacts accruing from the Celtic Tiger era.  For example, there were massive infrastructure improvements. The addition of the Luas, and Port tunnel in the Dublin area, coupled with the improvement of existing road networks and the addition of new roads all around the country are massive assets for the country to have. Certainly, we have many “ghost estates” dotted liberally around the country, but we also are the proud possessors of wonderful shopping malls, not alone in Dublin but elsewhere.  There has also been the Docklands development on both the north and south side of the Liffey.
It is also important to point out that while greed may have been the motive of many of us during the reign of the Celtic Tiger that there was also a noted spirit of altruism and generosity in the Irish nation.  Much of the extra money in Irish pockets financed many philanthropic ventures both at home and abroad.  On a local level, the author can speak of the immersion programmes in a lot of our secondary schools which bring much needed help to various nations in Africa and South America.

There are some other positive factors, too, to add to the above list of positive impacts of the Celtic Tiger era, viz., the fact that we were the single largest exporter of software for a short time and that we are still near enough to the top in the same chart.  Also we possess a well-educated population, willing and ready to work.  While there may be gaps in our education system like the fact that we come in at fifteenth place in a list of 27 countries with respect to mathematical literacy at age fifteen years.  However, we’re ahead of the UK and Germany according to this survey by the OECD[4] and we are attempting to correct our mathematical ability through the implementation of a new Project Mathematics course at second level.  Indeed, Canada and Australia are two major countries who actively canvass for Irish graduates and tradesmen and women to come to their countries because they know the quality of what they are getting.
Another positive factor is the number of women who became available for work during the Celtic Tiger era and this represents a huge skills base which can still be tapped by Ireland in the future.  Coupled with this fact, the proportion of our population that is young is greatest is the EU – that is, our birth rate or total fertility rate is unique in Europe, and this is envied by many other European countries where the birth rate is either static or falling.
Conclusion
We have seen that there are many positive factors which we can use to inspire us as we go forward as a nation into the twenty first century.  To wallow in negativity, to point the finger in a blame game or to bemoan our “outcast state” are simply not options.  We can learn much from our mistakes, and that is surely one great positive step on the road to recovery.  Let us learn from Nyberg (2011, p. iv) to become aware of the resulting damage to our economy from taking refuge in any type of “herding practices” and “group think.”  What’s needed is critical thinking coupled with a healthy scepticism of easy consensus.  Easy consensus can be nothing short of a disease as we have learnt to our cost.  From Ruane (2009, p. 124-125), let us become more aware of the reality as opposed to the theory of the “cyclical” nature of any economy.  She makes a good case for the promotion of good solid “counter-cyclical” thinking, stating that as a nation “we’re not sufficiently counter-cyclical.”[5]

 Likewise, we must give more credence to prophetic voices who counter mainline consensus arguments.  This is not alone sound philosophical thinking that takes account of the arguments of the opposing side, but good sound policy, because easy consensus simply may be just that, the easy way out in the short term.  In this regard, we have been promised a good Whistleblower’s Act[6] to protect such prophetic voices.
We have, as a nation, much to be proud of culturally, and much of that can, does and will add to our economic future.  However, we are also a spiritual people, in the broadest sense of that term, who understand at a profound level that economic welfare alone is not enough to promote true wellbeing and happiness.  Sweeney (2008) reports that the Human Development Index, on foot of 2004 data, ranks Ireland as fourth in the world, while the EIU (2004) places Ireland top of the league for the highest quality of life of 111 countries.  Material wellbeing while important, therefore, is certainly not the sole factor in rating either wellbeing or happiness.  Sweeney (2008) highlights Ireland’s good social networks as being a major contributory factor to that high rating of wellbeing. 

Finally, our history has taught us much as a nation.  The present author’s father was fond of quoting a short phrase: “we’ve never died a winter yet,” a phrase he said he learnt from his grandfather whose three brothers emigrated to the United States in the late nineteenth century. Those brothers and their offspring sent many a dollar home to Ireland, and their returning descendants continue to marvel at the advances made by the Emerald Isle over the last fifty or so years.  Many of us are also well aware of the lesson that income levels are not necessarily the real stuff of life, that health – physical and mental – is more important, provided that is that Maslow’s primary needs are met first.  Once again we hear many of our fellows rightly opine that “your health is your wealth,” and this lesson has been reinforced by the demise of the Celtic Tiger.  It would seem that on reflection, we do not need the economist Richard Layard[7] to remind us where our real happiness lies.


[3] She continues: “Growth in banking at that speed and on that scale should have rung alarm bells in the Financial Regulator. But Ireland had adopted the British and U.S. Model of ‘light touch’ regulation...” (Ibid., p. 75)


[5] Ruane (2009, p. 140) underscores the fact that “Government needs to operate counter-cyclical policies and thus be ready for a downturn – it should not be taken by surprise when the inevitable happens.”

[6] Feb. 08/2012: “Minister Brendan Howlin this morning promised to make whistleblower legislation the ‘best in the world’.” See http://whistleblowersireland.com/, accessed 12/05/2012

[7] Cf. Richard Layard Lecture 2: Income and happiness: rethinking economic policy, Lionel Robbins Memorial Lectures 2002/3. Delivered on 3, 4, 5 March 2003 at the London School of Economics

Bibliography

Brown, T. (2004), Ireland: A Social and Cultural History, Harper Perennial, London.

Clarke, M (2010), The Bubble Blog, http://www.thebubble.org.uk/politics/the-demise-of-the-celtic-tiger . Accessed 7/05/2012.

Crotty, W. & Schmitt, D.E. (2002) Ireland on the World Stage, Pearson Education Ltd., Essex, U.K.

Daly, M. (2006), The Slow Failure.  Population decline and Independent Ireland, 1920-1973, Madison: The University of Wisconsin Press.

Ferriter, D (2005), The Transformation of Ireland 1900-2000, Profile Books, London.

Fitzgerald, J.D. (2003), Life after Debt, Administration, Vol. 51, nos. 1-2, 73-88

Foster, R.F. (2001), The Irish Story: Telling Tales and Making it up in Ireland, Penguin Books, London.

Foster, R.F. (2008), Luck and the Irish: A Brief History of Change from 1970, Oxford University Press, New York.

Garvin, T. (2004), Preventing the Future. Why was Ireland Poor for so Long?  Dublin, Gill and Macmillan.

Healy, T (2012) Irish Independent, Wednesday April 18.

Henry, P.L. (1978), Anglo-Irish and its Irish Background. In English Language in Ireland, (ed. D. Ó Muirithe), Mercier, Cork.

Kiberd, D (1995), Inventing Ireland: The literature of the Modern Nation, Jonathan Cape, London

Layard, R (2003), Lecture 2: Income and happiness: rethinking economic policy, Lionel Robbins Memorial Lectures 2002/3. Delivered on 3, 4, 5 March 2003 at the London School of Economics.

Nyberg, P. (2011), Misjudging Risk: Causes of the Systemic Banking Crisis in Ireland. Report of the Commission of Investigation into the Banking Sector in Ireland, Stationery Office, Dublin.

Quinlan, R (2011) The dirty dozen: the 12 men who together destroyed our economy, Sunday Independent, December 04, 2011.

Ruane, F. (2009) Resonances from Economic Development for Current Economic Policy-making.  Economic Development: 50 Years on 1958-2008 (ed. Mulreany, M), Institute of Public Administration, Dublin.

Sweeney, J. (2008) Quality of Life over the Coming Decades. Ireland 2022.  Towards 100 Years of Self-Governance, (ed., Callanan, M.), Dublin Institute of Public Administration.

Sweeney, J. (2012) Class Notes and PowerPoint presentations.

Sunday, June 03, 2012

Celtic Tiger 2

A Short History of the Celtic Tiger: From Boom to Bust

This says it all!
As I have alluded to before, we are a very young state, not yet 100 years old.  Our coming of age as a nation on the world’s political and economic stage has been a sharp learning curve. As Fitzgerald (2003) points out, it took us some four years (the period between 1972 and 1976) to learn that inflation was not under domestic control.  This, coupled with other limited information, meant that our fiscal policy making was always somewhat flawed.  In the same article, Fitzgerald highlights our poor planning with respect to our increasing population and our then government’s reckless bargaining with Trade Unions, heedless of labour costs. However, the author goes to pains to stress that “bad economic decisions were not merely due to foolhardy politicians or a foolhardy electorate.  Ignorance of how the economy actually worked laid some of the ground-work for the many mistakes made in the decade.”  (ibid., p. 77) 
Brown (2004) points out that it was way back in 1977 that the seeds of our current problems were sown with the election of a Fianna Fáil government under the leadership of Jack Lynch when the party won its biggest ever election victory with a majority of twenty seats. The major reasons for its huge victory were the populist economic policies – abolition of rates on private dwellings, the replacement of motor tax on smaller cars by a flat-rate tax of £5, and increases in personal income tax allowances.  In short, now that the people’s expectations had risen since the advent of the TV and with the consequent comparisons between standards of living on either side of the Irish Sea, this new government under Jack Lynch had little option but to borrow heavily on foreign markets. To add a darker and more ominous colour to this new borrowing trend, our debt was denominated in foreign currency, not in punts.  Also labour costs were rising in line with those in England, and, coupled with an international oil crisis, this meant that we were gradually going to lose any independence of decision making with respect to monetary policy.
Undoubtedly our joining the EEC on January 1, 1973 was a turning point in the economic development of Ireland as it opened up so many more markets to our growing economy.  This also ended our strait-jacket dependence on Great Britain.  In a sense, Ireland could have been said to have developed an Oliver Twist-like attitude in coming to the European table and asking for more.  Between the CAP and structural and cohesion funds we had much to benefit from being part of Europe – and so between 1973 and 1993 we were net receivers, often blithely unaware that some day we, too, would become net givers.  To this extent, Máire Geoghegan-Quinn, the current European Commissioner for Research, Innovation and Science was correct when she opined in the early nineties that we Irish are “conditionally integrationist.”[1]  I quote this here as it portrays Ireland in a dependent light, looking selfishly to what we can get from membership of the EU rather than seeing ourselves in a more positive light as a nation which has much to give in our talents, creativity and culture to the rest of Europe.  The fact that since NICE 2 (September 2002) we’re net contributors to the European Union, rather than silent receivers, should be seen as a mark of our coming of age as a modern European nation.
During the Ireland of the IDA period (1957-1986) the societal project had been that of modernisation which essentially meant the raising of living standards and employment rate to EU standards. In the period immediately following, that of the Ireland of the Software Specialist (1987-2007) (the era of the Celtic Tiger) this societal project was universalised into a quality of life for all the citizens of the island.  We truly believed we were about to realise the cultural and economic dreams that were mere wild hopes in the minds of the State’s founding fathers.  Nyberg (2011, p. i) makes the point that it was this buying into the myth of “a new and different world” that led the banks and authorities to relax “traditional values, analysis and rules.”
Where economic policy had been free trade and integration in the former of these two eras, that of the latter became adaptation to globalisation of the markets. While the symbolic event for the Ireland of the IDA was the building of the Ballymun Tower Blocks (1966) that of the era of the Software Specialist was the Sixth Irish EU Presidency (2004) when Ireland had seemingly come of age as an equal partner with her fellow Europeans on the world stage.  Once again, all of this fed into the predominating culture of success and self-belief and into the myth of the Celtic Tiger.
During these two eras our industrial policy was export-led and multinational in the first instance and R & D intensive and networking-centered in the second. For  two magical decades, Ireland seemed to have at last set aside its old greener Republican distractions of Civil War politics, and from this glorious period of calm, grew a true economic powerhouse – the Celtic Tiger – that also seemed to rival the rest of Europe in terms of economic growth and individual wealth. The great turnaround for Ireland came when successive governments moved towards a policy encouraging foreign investment and development. Taxes were cut and import duties were minimized making Ireland one of Europe’s most open economies.  This approach worked wonders and seemingly overnight, factories were being built and massive housing projects were started. The building industry was allowed to spiral out of all control, and through poor or even no credit control measures which saw 100% mortgages become the norm, coupled with poor risk management policies, the Irish banks became excessively exposed to the property market.  Hence, property values skyrocketed and newly-rich developers scrambled to bring the next grand project online.
And yet no one asked where was all the money for these wonderful and dreamlike projects, which were getting more grandiose all the time, coming from. Naturally, much of the money to undertake these elaborate enterprises was borrowed but no one – and especially not the banks providing the funds – worried about the viability of these wonderful projects.  Indeed, they continued to lend out money with no due regard to risk or to the ability of the borrower to repay. The resultant bubble was due in part, then, to the main Irish banks fuelling a credit boom with relaxed lending in the context of what Professor Honohan, Governor of The Central Bank, called “complacent and permissive” [2] banking regulation.
Indeed, famously Seán Fitzpatrick, the now infamous chairman of Anglo Irish Bank was heard to opine on the airwaves that there was too much regulation of the banks and that the “light-touch” regulation policy encouraged by successive Fianna Fáil-led governments in financial institutions did not go far enough. The actions of many of these financial institutions were in fact illegal and corrupt.  The Irish banks were lending money that they were in turn borrowing heavily from Europe.  That either the ordinary Joe Citizen or the not-so-ordinary property speculator or entrepreneur might inevitably fail to meet their repayments sooner or later never appeared to dawn on those lost in the magic and delirium of the seemingly never-ending money merry-go-round.
In 2006, the then Taoiseach Bertie Ahern declared "the boom is getting boomier".[3] This former Taoiseach played his part in inflating our economic bubble through his government's introduction of tax reliefs for developers and investors, encouragement of 'light touch' regulation of the financial sector, and through the inflation of the public sector and its pay bill to unsustainable levels.  Be that as it may, there are many other culprits outside this one man, who, along with Seán Fitzpatrick, is an easy target and an all-too-obvious scapegoat.  Apportioning blame is all too easy and can often descend to character assassination by route of “argumentum ad hominem.”  To some extent, Brian Lenihan, is correct in stating that we all partied.[4]
The day of reckoning for borrowing recklessly inevitably came.  Through the night of Monday, September 29th, 2008, and into the early hours of Tuesday, September 30th, crisis-management talks with the CEOs and chairmen of the major banks took place, involving the Taoiseach, Brian Cowen, and the Minister for Finance, Brian Lenihan. Their purpose was to prevent the collapse of Anglo Irish Bank later that day – and possibly other banks later that week.  It would prove to be the biggest financial gamble, and arguably the biggest policy decision, ever taken by an Irish government. The move in September 2008 to guarantee the banking system, covering both customer deposits and controversially the various banks’ own borrowings to a total of €440 billion, tied the future of the country and its finances to the survival of its banks. It has forced billions in losses – possibly up to 70 billion (but who knows the exact eventual figure?) – on Irish taxpayers. It has socialised the cost of decade-long misadventures of runaway banks whose managers and private shareholders enjoyed the spoils of bumper profits through the boom.  The economist David McWilliams, one of the many people from whom Linehan got advice on the fateful night of the Bank Guarantee, reported that he hadn’t expected that the guarantee would extend to sub-prime debt. He said later: “I thought we’d do what Sweden and Switzerland did – which was a selective guarantee. The idea for the guarantee came from a bank I had worked at – the Swiss bank UBS, back in the early 90s. The Swedes did something similar a few months later in 1993. I remembered that that they’d done it and that it seemed to work.” [5] In short, Humpty Dumpty has had “a great fall” and our identity as a generation, in line with Mannheim’s definition given above, is forged by meeting this crisis and in attempting to put Humpty Dumpty “together again.”  With this in mind we now turn to both the positive and negative impacts of our greatest financial crisis.



[1] Quoted Crotty, W. & Schmitt, D.E. (2002) Ireland on the World Stage, Pearson Education Ltd., Essex, U.K., p. 89.  Ms Geoghegan-Quinn was then Minister of State for European Affairs and she made the comment in 1990.


[4] See footnote 3 above.

[5] David McWilliams - "Bank Guarantee Was A Bluff, Not A Policy": Frank Interview With Mediabite http://www.mediabite.org/article_The--Rock-Star--Economist_384381524.html.   Accessed 9/05/2012.