It is now some months since I last wrote regarding the Irish banking crisis and unfortunately the situation has worsened since then with debts accumulating at an even faster rate than previously expected. Also because of our accompanying severe fiscal crisis, international confidence has steadily receded. This in turn has led to sharply rising interest rates in the bond markets, which could yet prove a vital tipping point for the economy.
Realistically speaking, there is no easy solution to our problems. The present Government lacks true legitimacy (with Fianna Fail having presided over the very crisis that it is now trying to solve). However there is little reason to suggest that the main opposition parties would bring about any real improvement.
A new Government is likely to entail a coalition arrangement of Fine Gael and Labour. Enda Kenny the leader of FG and - likely - larger party after the next election is thereby in line to become Taoiseach. However he seems to lack sufficient intellectual grasp of the issues involved to inspire any real confidence (even among his own TDs). Also, there is likely to be a degree of conflict as between FG’s proposals to deal with the problems and that of Labour. So the uneasy comprises that will inevitably be required may only add to the uncertainty.
In any case political leadership at all levels is quite weak in Ireland with every mainline party desperate to achieve a wide level of popular consensus. This means in effect that there is no appetite anywhere for taking the really hard decisions needed to genuinely recover from the present recession. In effect political leaders just go along with the mood of the – in many ways – uninformed electorate regarding proposed policy decisions.
For example because of the huge losses of Anglo-Irish Bank, the popular angle is to promise to close it down (without any real recognition of the huge financial issues that inevitably would still be involved).
Now a more honest – and credible approach – would require doing a careful analysis of the likely cost and benefits of a variety of the possible proposals on offer before reaching a difficult decision with respect to any one option (which would still inevitably imply huge potential costs).
So opposition to present policy does not represent a coherent strategy (as the likely costs of any proposed alternative strategy are not honestly addressed).
However because the electorate – understandably perhaps – is still unwilling to embrace this harsh reality, opposition politicians are in many ways pandering to such sentiment.
And this is the very same problem that led to the huge property bubble of the Celtic Tiger (and its subsequent crash).
In the last general election in 2007 all the major parties had proposals based on unrealistic growth rates of 4% plus being maintained in the Irish economy (though such rates were clearly unsustainable due to the massive property bubble already existing).
Now imagine for a moment if say the main opposition party e.g. Fine Gael had accurately foreseen the impending crisis in 2008 thereby promising to put into effect immediately the harsh economic measures required for adjustment! Well, it would simply have been decimated at the polls even though such a proposed strategy would have represented true foresight and leadership!
So the point I am making is perhaps the very unpopular one that even though we like to think of ourselves otherwise, in fact we act quite immaturely as an electorate. Therefore we are always more ready to accept the easy option than the harsher medicine that true leadership and responsibility might often require.
And indeed this is not a problem solely confined to Ireland but rather is endemic throughout the democracies of the Western World. It could even spell the death knell of the capitalist system, as we know it. Basically the problem – which is the same problem that has created a growing monster out of the financial system – is that we continually place the desire for prosperity based on short-term perspectives above the need for policies that are sustainable in the long term.
And then when things go badly wrong we immediately look for scapegoats. So, in Ireland we blame the government, the bankers, the developers and the regulators for our problems.
However during the good times the behaviour of all these groups (which indeed was often greatly misguided) in large part was greeted by our enthusiastic approval.
So for example we voted Fianna Fail back into office because we saw this party as the best hope of continuing the illusionary Celtic Tiger dream.
We greatly welcomed the easy credit terms on which money was simply thrown our way by the bankers because this enabled us to purchase more and more houses; we were equally happy that the developers kept planning new estates providing what we were so eager to buy; and then when this was enough we went abroad in droves amassing property all over Europe and beyond.
And finally we were very happy with the easy regulatory and planning environment, which placed so little obstacles in the way of all this happening. Now when things have gone so badly wrong we project our anger on these same groups who we so vigorously supported during the boom.
Before true change can take place, firstly we need to properly acknowledge both the nature and extent of our current problems. Secondly we need to honestly accept responsibility for our considerable collective role in enabling these problems to develop.
Unfortunately there is little sign that either requirement is being properly met. While we now consciously recognise many of the issues, subconsciously we are still in a state of denial and largely unwilling to make the adjustments required.
And while this continues, we will just stumble on in the same unsatisfactory manner with our anger being vented on an ever increasing range of convenient targets.