Tuesday, May 18, 2010
OVER August 28-29, 1990 an extraordinary debate took place in the Dáil. Even the fact that it was taking place at all was amazing because it would normally take the outbreak of war to recall the Dáil in August.
The debate took place about a measure called the Companies (Amendment) Bill, 1990. It was moved by the then Minister for Industry and Commerce, Des O’Malley, who described it as introducing a valuable new mechanism to rescue ailing but potentially viable companies. Its urgency, he said, had been caused by "a recognition that significant extra difficulties may be faced by Irish companies as a result of the present unrest in the Middle East".
In the course of his speech he outlined certain difficulties faced by the Goodman group of companies as a result of these "difficulties". The Goodman Group was owed around £180 million by "Iraqi entities" (actually, Saddam Hussein, who had been feeding his army on Irish beef, but it was never considered polite to say so). And that wasn’t all – when you added it all up, it was clear the Goodman Group, which had over recent years become Ireland’s largest beef processor, needed a lot of help, and quickly.
Seán Barrett, Fine Gael’s spokesperson, and the first one to respond to the minister’s speech, cut to the chase in his opening two sentences. "The truth of the matter is that the Government are asking this House to pass legislation today to prevent the collapse of the Goodman Group. Let us not mess about in any way; this is what this is all about."
He called for an inquiry into some aspects of the affair – including the relationship between the Government and the Goodman empire.
But it was when Dick Spring rose to speak in that debate that the real story began to unfold. He was clearly in possession of a lot more information than Seán Barrett had, or than Des O’Malley was prepared to reveal.
"I have in my possession," he said, "a complete breakdown of the banks to whom Mr Goodman owes money and the amount of money involved in each case. It makes extraordinary reading and amounts to a catalogue of commercial adventurism that is surely unacceptable by any business standards. It is the unacceptable face of Irish capitalism, to coin a phrase.
"What those figures tell us above all is that we would be fooling ourselves if we were to maintain that the Goodman enterprise is facing a little short-term difficulty brought on by the Gulf crisis. The Goodman enterprise is finished and the task facing us is to put a new, better and more honest entity in its place. Mr Goodman owes a grand total of just under £700 million in cash and guarantees. Altogether well in excess of 30 banks have been taken for a ride – American, German, Dutch, Swiss, Japanese and French banks, as well as Irish. The total can be broken down into about £500 million cash and approximately £200 million in guarantees. In so far as the cash state is concerned, nearly £60 million is owed to Irish banks, almost £80 million to foreign banks with Irish subsidiaries and more than £330 million to banks overseas. That indebtedness is twice what it was only one year ago."
There was a lot more to that speech. Factually, it all turned out to be correct, as further inquiries and investigations unfolded over the following couple of years. Dick Spring’s central prediction, however, was wrong. He said the Goodman enterprise was finished. Well, we can debate until the cows come home about what should have happened. But the Goodman enterprise – rescued by taxpayers’ money then, as the banks are being rescued today – is a flourishing private enterprise. The recently published Sunday Times rich list, for instance, reports that Mr and Mrs Goodman occupy the 20th slot in Ireland’s list of rich people, with a reported wealth of €365 million in 2010. It just goes to show, I suppose, that you can’t keep a good capitalist down.
But there’s a more important point here than remembering how we saved Larry Goodman. The point is that the collapse of the Goodman empire was the moment when we all began to discover, with real and appalling clarity, that there was a close relationship in Ireland between business and politics and banking. And we began to discover how deeply unhealthy that relationship can be.
Over the years following that Dáil debate, we found out about Charles Haughey. We found out about Liam Lawlor. We found out about Ray Burke. We found out a lot more besides.
In summary, we found out enough to try to ensure this sort of thing never happened again. That’s why Freedom of Information legislation was introduced, and ethics legislation, and legislation governing the giving and receiving of political contributions. All of that represented an important set of changes, and one way at least of reacting to the flood of revelations that began in August 1990.
Last weekend Garret FitzGerald wrote a piece about the contribution made by an equally strange relationship – that between Bertie Ahern and Charlie McCreevy. In that piece he said, among other things, "what happened here was that a change of government in 1997 led within a couple of years to the sudden abandonment of the fiscal responsibility that had been such a striking feature of the 1990s. Between 2000 and 2002 Minister for Finance Charlie McCreevy doubled the rate of increase of current public spending which, in a country then experiencing full employment, inevitably stimulated an increase in prices and wages almost 2½ times greater than in the rest of the euro zone … Within five years of that debacle we faced in addition the collapse of our housing bubble, which had been fatally stimulated by irresponsible government incentives. And this led in turn to the collapse of our banks, adequate regulation of which the government had failed to ensure".
BUT it wasn’t just strange economics that went on during those years. Freedom of Information was effectively dismantled as a sort of personal project by McCreevy. And little more than lip service has ever been paid to real regulation and enforcement of high standards. If you don’t believe me, look at some of the despairing statements issued over the years by the Standards in Public Office Commission (you can find them on www.sipo.ie).
The bottom line in all this is that there have been plenty of lessons to be learned as a result of public policy failures over the past 20 years. Not only have we not learned them, we have wilfully repeated the same disastrous and dangerous manoeuvres several times since then. We’ve known about the danger of unhealthy relationships for two decades, but we’ve insisted on facilitating, encouraging and incentivising those relationships. That’s not a mistake, it’s bad politics.
It’s worth remembering that, every time we are offered an apology for past mistakes. To err is human, to forgive divine, they say. But to forgive bad politics, where no lessons were ever learned, could turn out to be rather less than divine. It could turn out to be really stupid.
© Examiner Publications (Cork) Limited, City Quarter, Lapps Quay, Cork. Registered in Ireland: 73385.
