BRIAN LUCEY: We must address our periodic economic self-harm

Tallyrand, the great French statesman and survivor, declared on its restoration that the House of Bourbon “had forgotten nothing and learned nothing”.

We are economic bourbons — we remember nothing and we forget nothing. We don’t learn from history in Ireland. Part of the problem is we perhaps have too much history. There is always an exception, some time that if not different was not quite the same to allow us the out of saying “ah, but this time it’s different”. From there it’s a short drive turning a corner, carefully not driving over the green shoots to see sound fundamentals and away we go.

The great economic historian Cormac Ó Gráda noted in 2011 that this crisis was the fifth in the history of the state. That’s one every 14 years, or 1.5 per generation. This is probably a world record for crises. Lets look at these and see what we can learn.

In the 1930s we had a crisis when DeValera, in what I can only think of as an act of economic lunacy declared an economic war with the UK, our then vastly predominate trading partner. Leaving aside the rights and wrongs, the economic war only ended when it became an irritant to the UK in their need to focus on the threat of Nazi Germany.

Throughout WWII the small, import-substituting industrial companies encouraged by Dev as part of his drive towards autarky, a sort of 1930s North Korea with priests, were hammered badly. By comparison, other neutrals enjoyed commodity booms. We exported people and cattle, usually in the same boats.

The 1950s, dominated by DeValera again, were a grim decade, with declining population and falling living standards. It took decades of hard work to turn the country to a paying proposition.

Then the national debt increased tenfold in the 1972-82 period.

In the 1970s and 80s, in particular, we renewed our love affair with exporting live cattle to Libya and people to anywhere that would take them, legally or not.

The hard work of the 1990s was blown to pieces by the collective folly of the credit boom followed by the Masque of the Red Death that was the fumbled bumble of the Cowen government’s decline into national bankruptcy.

There’s a broad thread running through this. It is Fianna Fáil. This is not to say that FF are history’s most evil monsters. They are not, they are a party that is as perfectly evolved to populist democracy as a great white shark is to devouring anything it can. Democratic to its very core, they time and again hold up a mirror to the Irish electorate, and get elected.

Usually, this ends badly, as the nature of democracy is for people to vote for jam today and tomorrow. It is only when the chips are really down that we as a people turn to the unpalatable alternative, usually wrapped in a light blue wrapper.

We learn nothing. We now see the undeniable starting point of a new, perhaps localised, but undoubted bubble in the housing market. On admittedly low volume we see house prices rising by double-digit figures. This is not greeted with horror but seen and hailed as a success.

Five years from the bursting of the bubble — the consequences of which took us from a national debt to GDP ratio of 25% to the present dizzying heights of near to 125%, resulting in the return of our favourite export Canned Paddy — we have simply forgotten that rising house prices are not a good thing.

National Economic Bourbonism exists not just in house prices. There will be a delicious, and literally dark, irony if the day after we exit the bailout a national electricity strike takes hold.

We can bluster about cloud computing, waffle about Silicon Docks and plamás about hi-tech exports till snowmen dance on the plains of Dis but if we cannot guarantee reliable electricity, we are not a fully modern society.

The exit of the troika should be seen as an opportunity to become better than we have been. In 1921, the per capita national income of Ireland as a percentage of western Europe was 57%. In 1971 it stood at 57%. Ireland had approximately the same per capita income in 1921 as Norway, Sweden and Austria and more then 50% more than Finland. All are now considerably wealthier than us and that is on GDP levels.

Our GDP figures are puffed up by an overly large multinational sector on which we are overly dependent and yet unable to harness for tax or jobs. If we adjusted downwards present- day figures to GNP we would see the differences that much starker.

We need to stop forgetting and take a long cold look at ourselves in the mirror. And we need to stop remembering and reminiscing and start wondering — what is it in the national culture that keeps us engaging in periodic bouts of economic self-harm?

- Brian Lucey is professor of finance at Trinity College Dublin


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