Ship of Fools; how stupidity and greed sank the celtic tiger

Fintan O’Toole (Faber and Faber, 2009) £12.99

Fintan O’Toole has written a most satisfying book combining some brilliant passages of lucid exposition with wicked criticism of the major fools who believed and propagated the myths of the Celtic Tiger. Please keep in the front of your mind that Alex Salmond is quoted in February 2008 as pledging that “we will create a Celtic Lion economy to rival the Celtic Tiger across the Irish Sea.” O’Toole’s comments on the Irish model of development:

“The formula was ultimately simple – be nice to the rich. Give capital its head, don’t stand in its way and it will work its magic. Let the wealthy become ever more wealthy and everyone will benefit. The tragedy was not that Ireland’s rulers and their cheerleaders chanted this mantra. It was that they actually believed in it.”

And on the consequences of evidence of large scale corruption and tax evasion:

“Tens of thousands of people, including a large slice of the business elite, defrauded the Exchequer of hundreds of millions of pounds. The consequences ought to have been profound. Instead, they were simply non-existent.”

But in addition to the eloquence, there is solid analysis demonstrating the extent of the rise and fall of the Irish economy. There is no denying that the Irish economic performance in the 1990s was remarkable. Unemployment fell from 15.6 per cent to less than 5 per cent. Poverty from 15 per cent to 5 per cent. Average GDP per capita from 66 per cent of the EU average in 1986 to 111 per cent in 1999. Ireland benefitted from six times the EU average for foreign investment. In the ten years to 2004 growth was 7 per cent per annum – double the US rate and triple the EU rate. Ireland went from a land of emigration to immigration. Peace was established in Northern Ireland and the Irish felt a lot better about themselves.

But the author shows that there was as much good fortune in the Irish economic miracle as anything else:

  • The decades of slow growth right up to 1988 and the status of the sick man of Europe produced a catch up surge.
  • The benefits of the long global boom of the 1990s blew wind into the sails of the Irish economy
  • The US invested $375bn in Europe in the nineties and Ireland picked up a small but significant portion.
  • Demographic factors – There was a bulge of younger people and women entering the labour market for the first time. Many elderly people were actually in the UK and the ratio of workers to dependents reduced from 10 workers to 22 dependents in 1986 to 10 workers to 5 dependents by 2005.
  • The EU poured in IR £8.6bn between 1987 and 1998. (some 2.6 per cent of GDP)
  • Heavy investment in state-funded third level education lead to the second highest level of third sector qualified population in Europe -at 42.3 per cent.
  • A high level of social partnership and industrial peace underpinned the rapid changes.

It was a myth that growth was a result of neo-liberal economic policies as portrayed by some propagandists.

In fact he shows that Ireland’s economic performance peaked in 2002 and has declined since with 20,000 manufacturing jobs lost between 2000 and 2006 and a balance of payments down from break-even in 2003 to Euro10m in the red by 2007.

What caused the problems is put down to the Fianna Fail government pursuing a policy of “growth derived from asset price inflation, fuelled by low interest rates, reckless lending and speculation”

Sadly the Celtic Tiger has been brought down. Irish GPD was set to shrink by 13.5 per cent in 2009 and 2010. Govt debt doubled in a year. Irish personal and corporate debt is the highest in Europe. Irish house prices have fallen faster than anywhere in Europe. Dublin has the highest property vacancy rates in Europe. The average Irish family lost half its assets. Unemployment rose faster than anywhere else in Europe. The state has had to establish a bad bank to take over the bad property loans that would otherwise wipe out all its banks- now the biggest property management company in the world. The issue is where does the country go now and the book concludes that it is doubtful whether lessons have been learnt, a new path defined and hope rekindled. He sees people not yet comprehending what has happened and who and what was to blame. There is a vain hope that business as usual can be restored.

The omens are not good. For all the talk of the V shaped recovery and the optimism of the markets, there are the examples of the other small states – Iceland, Greece, the Baltic republics. Iceland is exposed being out of the eurozone to currency markets but as the Greek experience shows a socialist government is powerless in the teeth of a eurozone equipped to enforce austerity measures. Nonetheless the option exists in Iceland to default and to resist the imposition of the errors of private speculators onto the population and the option exists in Greece of popular resistance, as their farmers have shown. The truth is that the battle for the future will be a long one with twists and turns to come with, perhaps, more to be learnt from the example of Brittany than Ireland for the future sustainability of the Celtic vision.

What this book shows with entertaining clarity is the delusions and bunkum that caused the problems in the first place but also that people are reluctant to face up to learn harsh facts. Can anyone tell me what Alex Salmond has learnt from this?

What I have learnt is that politicians in need of party funds to get re-elected and shadowy financial interests looking to promote get rich quick schemes need to be kept well apart. There is another book to be written about New Labour along these lines.

Cameron Brown