Sins of the Father (32 page)

Authors: Conor McCabe

BOOK: Sins of the Father

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The best trick the devil ever played, wrote Baudelaire, was to convince the world that he did not exist. The merging of the interests of Ireland’s comprador class with that of the State – not only structurally but with the flag, the culture, the ‘green jersey’ so often referenced by politicians and business leaders – has had the same effect. When a millionaire declares on TV and radio that austerity is in the national interest, he is in fact telling the Irish people that the class he comes from – the class he protects – does not exist. But it does. And it is the Irish people that carry the burden of its continued presence.

CONCLUSION

The 2008 banking crisis was not caused by an outbreak of moral failure or individual weakness. The significant power of Irish banks to dictate economic and monetary policy, and to protect themselves against the negative consequences of such policies, had developed over decades. The social and economic forces which fed and sustained that power run deep within Irish society. The exploration of those power dynamics, their significant strengths and structural weaknesses, has been the central theme of this book, and what follows is a brief summary of those main points.

At the time of its independence, the Irish Free State was a fully-integrated part of the UK economy. Its role within that economy was primarily agricultural, more specifically, the provision of livestock for the finishing farms and slaughterhouses of England. This relationship, not surprisingly, benefitted livestock breeders and traders, who had come to prominence in the post-famine era, as land was cleared and secured for grazing rather than tillage. This became a source of conflict within Irish rural society, between small farmers and graziers. Upon independence, however, it was the graziers who were in the ascent and Irish economic policy developed with their interests very much at heart. The end of formal political links with Westminster meant that the Free State was now an independent country but without an independent economy. In order to secure its future, it needed to expand its industrial base and develop new markets. For this it needed credit, something that a central bank based around a national currency could provide.

The Irish banking system, however, was entirely focused towards the London financial markets and resistant to the development of a national currency subject to democratic oversight and focused on the economic demands of the state. The first banking commission rejected outright any move towards fiscal independence and Irish parliamentary control. The need to expand agricultural and industrial output, in order to provide an economic base for sustainable communities, was pushed to one side. The result was increased emigration, with the Free State providing not only cattle and finance to the UK, but also a steady stream of labour. The lack of industrial growth also meant that there wasn’t a sufficiently strong economic base to provide the standard of living demanded by the aspirational Irish urban middle class, who turned to the state for grants and tax relief in order to fund the type of home ownership and petit-bourgeois lifestyle they read about in the newspapers, and watched on cinema screens.

The emergence of Fianna Fáil as a political force in 1927, followed by its rise to power in 1932, saw a change in aspects of economic policy, with greater use of tariffs to encourage industrial growth. These initiatives were soon hampered by self-inflicted blows. The party kept the parity link with sterling. It also decided to focus on the expansion of production for the home market only. The structural deficiencies within Irish agriculture, including the continued use of the Shorthorn for both dairy and beef production and the serious lack of a food processing industry, remained untouched, as did any attempt to expand exports to anywhere except Britain. The second banking commission recommended the establishment of a central bank, which in its first act outlined its commitment to parity with sterling, a move which immediately undermined the very reason for its existence. Irish credit remained pitched at sterling levels, stifling growth.

The demands placed on the Irish economy in order to maintain parity included periodic deflations, which were timed in line with the dynamics of the British, not Irish, economy, and an obsessive concern with inflation at home. By the end of the 1940s the Irish state was more dependent on Britain then it had been at the time of independence, while an overweight Irish pound stood drenched in sterling and out of breath, its hands on its knees, desperately trying to take a few more steps towards expansion before it collapsed from exhaustion.

The 1952 Ibec report was clear as to the changes in economic policy which Ireland had to undertake in order to expand its economy and provide opportunities for job creation. Its authors simply could not understand why the state persisted in exporting livestock to Britain, given the potential for industrial growth which the slaughter and processing of animal produce would provide. Similarly, the practice by Irish banks of investing in British securities with the full support of the central bank and Irish government seemed bizarre, given the fundamental need for credit and investment in Ireland. Its calls for an expansionary policy, with a fully-funded central bank using deposits to underwrite the Irish pound and provide credit, as well as an agricultural policy which would see the creation of a viable and profitable food processing industry on Irish shores, were dismissed in favour of the pursuit of foreign investment. Such a move allowed the Irish state to appease the banking sector and its cheerleaders in the Department of Finance. It allowed credit and foreign investment to enter the Irish economy without a revaluation of the Irish pound – something that was needed in order for indigenous businesses to attain the level of credit needed for sustainable growth. The state was on a path to industrial expansion, but one which was centred on tax breaks and financial incentives to multinational companies, and not necessarily the development of local industry and indigenous exports.

The expansion in financial investment, construction, and land sales, gave rise to a particular type of Irish capitalist entrepreneur. There was money to be made by providing services to foreign investors. Construction, banking, insurance, property, road haulage, and legal services – these were the areas of commercial activity that gained a commanding presence in the Irish economy, all of which directly benefited from the influx of American, German, British and Dutch companies. At the same time, there was also money to be made by
speculating
on the boon to the economy which foreign investment brought.

In the 1960s and 1970s the state started to provide these entrepreneurs with a similar range of grants and tax incentives as those offered to multinationals. In the case of office blocks in the 1960s, the state not only funded the speculation, it acted as tenant as well. The PAYE system, first introduced in the late 1950s, became a cash faucet for the government. The revenue generated through the direct taxation of ordinary workers was fed directly to speculators and foreign investors via the litany of tax havens which propped up these new industries. Such was the lack of concern about developing indigenous growth that the country’s natural resources were sold off wholesale without a second thought. In Ireland, the handshake did not secure the deal, the handshake was the deal. The middleman became the dominant force in modern Irish capitalism. The type of local business interests which expanded on the back of foreign finance were all about making the deal happen. Construction, finance, land and law: this was the four-leaf clover, the new lucky charm for the modern Ireland of Lemass.

By the 1970s the trick of foreign investment, and speculation on same, was running out of steam. Growth in the Irish economy relied more and more on construction, both commercial and residential. The notion that exports needed to be linked to the wider economy was given lip-service but little else. The growth in building societies and the entry of banks into the private mortgage market took place alongside moves to strangle public housing as a viable option for working people and the increased use of tax incentives to bolster owner-occupancy as the only real option open to families. Housing was increasingly portrayed as a cure for all social ills, a bulwark against inflation, a nest-egg for retirement, a full-proof pension plan for the honest worker. It was also a multi-billion pound industry, where standards and security played a very minor role. The Kenny Report was shelved precisely because it threatened to upset the speculation machine. It threatened the livelihoods of the various politicians, bankers, builders and landowners who profiteered from the rezoning game. By the time the Telesis Report was published, only eight per cent of all materials used by foreign companies in Ireland were sourced from Ireland. This was in spite of repeated calls by foreign companies for the development of secondary industries to act as feeders for production. In the late 1980s, the widening of Ireland’s tax relief schemes to include financial services helped to turn the state into a glorified offshore bank.

The 2008 crisis was not a natural disaster. No dams were breached, no bridges destroyed. The crisis was a paper crisis. The scramble to protect that paper brought a wave of destruction across Europe, one that has affected the lives of millions of people. The decision by the Irish government to guarantee the deposits and liabilities of the Irish banking system was a bailout of well-connected bankers, speculators and builders, and their standing army of lawyers, accountants and administrators. It was done to protect a particular strata of society.

Such was the sale of the crisis that not everyone, even of the inner circle, could be saved. There have been bitter fights along the way, and the high-profile case of Sean Quinn and Anglo is one such example. This was not a conflict between classes, however, or two different visions of how Ireland should be. Neither Quinn nor Anglo were calling for the democratic transformation of finance in this battle.

Even today, after all that has happened, there are alternatives. They are present in the work produced by the likes of the Nevin Economic Research Institute; TASC; NIPSA; Trademark Belfast; Social Justice Ireland; Unite; MANDATE; Research on Money and Finance; the New Economics Foundation; ATTAC; Syriza; Dexter Whitfield; Yanis Varoufakis; and the Rosa Luxemburg Foundation, to name just a few. There are many others across Europe engaged in struggles against the dominance of the financial
rentiers
in political, social and economic life. It is incumbent upon us to learn more about the work they do.

NOTES
INTRODUCTION

i
Fintan O’Toole,
Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger
(London, 2009), p.219.

ii

The Irish Times
, 20 December 2008.

iii

Ibid.
, 14 February 2009; 15 June 2009.

iv
Fintan O’Toole is an exception here, as he consistently highlighted the moral failings of Irish businesses and financial institutions for almost thirty years. His is no ‘Road to Damascus’ conversion.

v
Shane Ross,
The Bankers: How the Banks Brought Ireland to its Knees
(London, 2009), p.271.

1. HOUSING

1
Ruth McManus, ‘Blue Collars, “Red Forts” and Green Fields: Working-Class Housing in Ireland in the Twentieth Century’,
International Labor and Working Class History
, No.64 (Fall, 2003), p.52.

2
Ebenezer Howard,
Garden Cities of Tomorrow
(London: Faber & Faber, 1965), p.49.

3
Tony Fahey, Brian Nolan and Bertrand Maître,
Housing, Poverty and Wealth in Ireland
(Dublin: Combat Poverty Agency, 2004), p.20.

4

British Medical Journal
, 23 June 1906, p.1,494.

5
Michelle Norris, ‘Housing’, in Mark Callanan & Justin F. Keogan,
Local Government in Ireland Inside Out
(Dublin: Institute of Public Administration, 2003), p.169. Additional figures relating to labourers’ cottages are from this source.

6
President W.T. Cosgrave, 1 April 1925.

7

The Irish Times
, 3 May 1923.

8

Ibid.
, 3 January 1921.

9

Ibid.
, 26 February 1924.

10
Quoted in Ruth McManus,
Dublin
1910
-
1940
: Shaping the City & Suburbs
(Dublin: Four Courts Press, 2002), p.359.

11
Quoted in McManus,
Dublin
, p.358.

12
McManus,
Dublin
, p.81.

13

The Irish Times
, 24 May 1924.

14

Ibid.
, 12 November 1924.

15

Dáil Debates
, Vol.6, 25 January 1924, pp629-30.

16
Cathal O’Connell,
The State and Housing in Ireland: Ideology, Policy and Practice
(New York, 2007), p.25.

17
McManus,
Dublin
, p.80.