Wallowing in recession

There can be no doubt that Ireland’s economy is suffering badly, but are some people enjoying it too much?

As this is my first official contribution to Slugger O’Toole I thought I would begin by bringing up some themes that would give people an idea of where I am coming from, politically speaking. It draws heavily on my own recent work. Finally, it’s only a think-piece, not a manifesto.

Wallowing in recession

To some degree the Irish border has always been imaginary, or at least so functionally non-existent that porous doesn’t even begin to describe it. Despite this there is no getting around the reality that Ireland is home to two separate polities, whatever any of us thinks of the issue. There was some feeling in nationalist and republican circles that the booming economy in the South made Irish unity an inevitability. This was, for the most part, idle talk among people who didn’t have their hands on the levers of power. Both Sinn Féin and the SDLP continued to recognise the question was fundamentally political in nature and couldn’t be simply ignored (though both parties did play the ‘let’s pretend’ game).

Much like the liberal conceit that the EU makes the national question an irrelevance, there is more than a dash of wishful thinking in the notion that political disputes will melt into thin air as history marches inevitably onward. Nevertheless, it was a feeling that had plenty of currency. Until the credit crunch.

For this reason alone, never mind the very real economic ties between the North and South, it’s worth taking a look at the Southern economy, specifically how the enthusiasm of recent years has given way to a case of the béal bocht that makes Peig Sayers look like an optimist.

So, where to start? The meeja, of course.

It is almost impossible to turn on a current affairs programme on television or radio without hearing about our impending demise. So shrill are the voices that one could be forgiven for confusing a typical news broadcast with a re-run of ‘Dad’s Army’. Newstalk radio presenter George Hook has been talking down Ireland’s economy for over a year now, claiming at some points that we were actually experiencing a depression. And Hook is far from alone. Celebrity economist David McWilliams and investment advisor Eddie Hobbs have been among the most vocal in attacking the government, with Hobbs in particular demanding deep cuts to income levels and generally doommongering.

Opposition politicians have, of course, had plenty to say – after all, it’s their job – but what is most interesting is the fact that the public mood is a strange cocktail of anger and resignation.

How the country should deal with a recession is a question that sharply divides people along political lines, but most people in Ireland – at the juncture anyway – seem to broadly favour an interventionist Keynesian approach. Taking that as a given, then, is it really right that all of that money should be spent in the way it is? Rather than patching-up the failing institutions, wouldn’t it be better to massively invest in creating a broad-based and productive economy?

Of course, like any good journalist, I’m not here to provide solutions, merely to note things. The significance of the question about how the recession is dealt with is that it indicates not only an unwillingness to face up to the matter of what makes a productive economy, but also contradictory attitude that we deserve to be punished and yet it is not our fault.

Economics, not moralising

It is perfectly true that Ireland’s boom was not quite the miracle it was once thought to be. If one was so inclined one might say that it was in fact a historical aberration, though that view does a disservice to the changes the economy has witnessed in the past twenty years: the Republic of Ireland went from 65 per cent of the UK’s per capita GNP to 140 per cent in just 20 years. What is indisputable is that the country’s improved economic performance transformed the lives of Irish people, even if the spoils were unevenly divided. Quite why many liberals spent their time criticising this is a question worth asking.

No-one denies that many were left behind by the boom but is it really possible that it was actually a bad thing for Ireland to experience rapid economic expansion?

With urbanisation (and, indeed, suburbanisation) came modernisation; with materialism came secularism; with work came personal freedom. As an example, increased car ownership tends to be viewed through an environmental prism, rendering it a problem. Another way of looking at it, though, is that people on lower incomes are finally afforded personal mobility and the freedom that comes with it. (1)

Anyone who argues from a liberal position that the boom was bad will quickly find they have some strange bedfellows: arch-conservatives. In 2005 John Waters bemoaned how increased wealth had brought with it alcohol abuse and gangland violence, and said the nation failed ‘to look beyond the impermanence of the material world, to put values of decency and compassion before money’. Surely this is topsy-turvy view of not only the relationship between crime and economics, but also a distorted and fundamentally anti-human outlook?

As John Hearne noted, the international press had a field day reporting on Ireland’s woes, often exaggerating them wildly. Why, though, have we ourselves been so keen to be downbeat about our future? ‘Times is tough’, to be sure, but even the most ardent anti-Fianna Fáiler could be forgiven for thinking Bertie Ahern was on to something when he implied that some people are so down in the mouth that they should kill themselves.

Then there is the cod-socialism of ‘bash the rich’. Watching super-rich developers and bankers fall from grace is fun, no-one is denying that. But it isn’t helpful. Any pain experienced by the captains of industry will be meted-out tenfold to the rest of us.

Boom town rents

The common perception during the boom was that the construction sector slowing would have little effect Ireland’s wider economy because most of the work was done by immigrants. This was never true. In fact, in 2006 employment in the construction sector in Ireland accounted for a total of 252,100 jobs from a total of 1,929,800. Of these, 22,600 non-nationals were employed in construction, less than were employed in both the manufacturing and hospitality sectors – and, interestingly, only slightly more than were employed in financial and business services. (3)

The fact that, in 2006, the average price for a three bedroom house in Greater Dublin was €752,734 (approx. £515,214 at the time) (2) indicates a severely over-heated economy. In terms of house prices things were not quite as bad as they were in England where planning regulations meant that few new houses were actually being built. At least in Ireland many of the houses bought and sold were new and thus represented actual productive investment in the economy.

Of course, three years later we now know that when the construction sector tanked the economy went down with it. Worse still, it wasn’t a purely local phenomenon: the entire world economy wobbled badly and at some points looked as though it might actually fall over. Ireland fell as fast as it did because it wasn’t just construction in trouble, it was everyone, everywhere.

However, the fact remains that the Irish economy did not have a sufficiently wide industrial base. Over-reliance on construction was always a bad idea – as is over-reliance on any individual sector – but there appears to be no political will for building a broad-based economy through capital investment in productive new technologies.

As the dole queues lengthen it’s no surprise that people are feeling worried, but that’s no excuse for high-profile figures in Irish life, particularly ones who are still coining it for practically cheerleading the recession. Turning the economic recession into widespread psychological depression will do nothing for any of us. We don’t need therapy or a chance to have a go at politicians, we need an end to austerity starting with a decent economy that provides jobs and wealth.

Jason Walsh is the editor of forth magazine

(1) Between 1997 and 2007 the population of the South increased by 18 per cent while the number of registered motor vehicles increased by 71 per cent and the number of driver licence holders increased by 37 per cent. Source: Road Collision Facts 2007, Road Safety Authority/Údarás Um Shábháilteacht Ar Bhóithre
(2) As calculated by economist Constantin Gurdgiev in 2006
(3) Source: Here to Stay: Non-National Workers in the Irish Economy, AIB Global Treasury Economic Research

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