By Philip Pilkington, a journalist and writer living in Dublin, Ireland
Recently the Irish Taoiseach Enda Kenny pandered to his base once again by saying that the Irish people are to blame for the current state of their economy due to reckless borrowing undertaken during the boom years. I refer not to his base in Ireland, of course — their opinion has hardly mattered since the election — I refer instead to his base among the international financial community. For it is these people that need Kenny’s confession because it is their economic model that has been proved false by the Irish crisis — and so a mea culpa is needed from the victims so that they can avoid the responsibility that they know they bear.
This little stunt by Kenny made most Irish people spit and a political analyst might wonder what Irish voter would Kenny appeal to after laying the blame on the ‘Irish people’ in the abstract. It was a stupid move by a politician long known for his tactlessness. But it also says something about what the international financial community require of the countries that they have destroyed.
On May 31st 2004, then President of the European Central Bank Jean-Claude Trichet heaped praise upon Ireland for its economic miracle. ““The process of transformation that Ireland began over four decades ago has become a model for the millions of new citizens of the European Union,” he said, speaking at the Irish central bank, “The new Member States of the EU have had to confront economic challenges whose magnitude and long-term importance are similar to those that faced Ireland when you began your work. Thanks to Ireland’s economic success, to which you devoted your life, we can be confident that economic reform works.”
Trichet believed in the Irish model because it conformed to how he, together with the vast majority of other economists and policymakers, understood an economy should work. While we should not go too far into the technical details of this, put simply these commentators missed the massive expansion in private sector borrowing because they did not believe it could have harmful consequences.
Although it is not often spoken about in such terms, the fact is that economies need debt to grow. If we accept as a given that the ability of an economy to produce exports (not to mention find buyers) is limited, the only way in which new money can enter an economy and facilitate growth is by some entity in a given country going into debt.
During the boom years Ireland played by the rules of the neoliberal game. From 1998 to 2004 it ran a roughly balance current account — which means it did not import too much in relation to exports. And as far as the government budget goes Ireland ran a surplus every year from 1998 to 2008 (except for 2003 it ran a tiny deficit). No wonder then that Ireland was the star pupil of the international economic consensus. This was quite literally model behavior.
But with the government not running into debt and imports and exports roughly balanced, where could the new money required for growth come from? Well, obviously the private sector is the only place left — and indeed the new money came precisely and predictably from there. Ireland’s growth, as we were soon to see, relied almost wholly on private sector borrowing and the inflating of a massive housing bubble.
After the international community encouraged Ireland on this path, believing it to be the poster child for a dubious economic ideology, it is the Irish people that are supposed to take the blame for the failure of this policy model.
This is madness, of course. But no one notices. Why? Because they do not speak the language of power and must try to understand things in simple moral terms. Since most of the Irish population do not understand the economic model that was bestowed upon us by international leaders and their representatives in Ireland they must instead seek solace in simple moral arguments.
But why don’t our own patriotic commentariat explain what has happened and absolve the Irish people of their guilt in simple logical terms? Why don’t they point out that these reforms were sanctioned and pushed by the very people that now demand our infinite apologies? Because, quite simply, almost every single person in Ireland today qualified to explain what happened was complicit in pushing this economic ideology. And so to explain to the Irish people what actually happened would be to give them the rope with which to hang the commentariat.
Tragic as this may be, there is at least one saving grace: namely, that the Irish people know something stinks when the likes of Kenny comes out and play-acts his guilt in front of an international audience. There is a general feeling amongst the populace that they have been had. They know that during the boom years they played by the rules handed down from Frankfurt, Brussels and, yes, Davos — and they sense that it is these rules and the lawmen behind them that are to blame for the current mess.