FERGUS FINLAY: Party days of the Celtic Tiger have left us with a nasty hangover

DAN O’BRIEN is probably one of the people that Bertie Ahern thought would be better off committing suicide.

Over the years he has been a rigorous critic of the way we handled our economy, and has been especially rough about the link between economics and party politics.

Of course (and this is what would get up Bertie’s nose) he lives in an ivory tower. But then, don’t all economists? They always seem to know what’s best, even when they’re completely wrong. But O’Brien’s expertise seems to really annoy people. Could it be that, depressingly, he saw through an awful lot of the hype and bluster about the Celtic Tiger before a lot of other people did – even if he wasn’t always right?

O’Brien is one of about 120 people employed by the Economist Intelligence Unit as “country analysts”. The unit itself is a powerful tool used by industrialists and investors all over the world, so O’Brien’s views matter. According to their website, he’s an expert in Ireland, Germany, Italy, Malta, Spain and the European Union. Apart from the EU, he lists his specialist subjects as “Constitution and institutional affairs; external relations; transatlantic relations; trade policy; Lisbon agenda; Stability and Growth Pact, monetary policy. Economics and politics of Spain, Italy, UK, Ireland. Northern Ireland peace process”.

As you can see, there’s not a lot he doesn’t know a lot about. And now he’s collecting his views, in a book published this week with the rather uninspired title of Ireland, Europe and the World. I guarantee you, if you’ve been involved in policymaking in Ireland over the last 10 years or so, it will annoy you, this book.

O’Brien is honest and decent enough to include some pieces in the book that indicate he wasn’t always right. In 2007, for example (in a piece entitled “The Celtic Tiger’s real strengths”) he was predicting that there was every reason to believe the success story would continue, whatever short-term bumps might lie in the road ahead, because Irish entrepreneurs were leading the way in the knowledge economy. Mind you, a bit earlier than that, in 2006, he was warning darkly that Irish household debt exposed our economy to real risk.

In one fascinating passage in that piece, he says (after talking about the difficulty in the American property and construction sector), “Quite apart from US recession being the biggest near-term risk for the Irish economy, the collapse of the American property market would suggest that other economies are vulnerable to similar corrections. Thankfully, the interest rate cycle in the euro area is close to its peak. Although rates are set to rise further in the new year, a jump of the magnitude seen in the US in recent years is not on the cards. The era of cheap money appears set to continue for the foreseeable future.”

Well, we still live in an era of cheap(ish) money – it’s just as well we do, because if interest and mortgage rates were going up, there’d be revolution on the streets. But the availability of cheap money didn’t protect us from the collapse of our very own property bubble. Actually, I think it’s a misnomer to call it a property bubble. It was always more of a property balloon. Have you ever noticed that only one of two things can happen to a balloon (unless you stick a pin in it). Either it lies around the place as, little by little, the air leaks out of it and it just slowly sags away to nothing. Or it bursts because too much air was pumped into it.

Our balloon was blown up by politicians, a little bit more with every puff, until it had to burst. Some of the puffing happened in the Galway tent, but more of it happened in budget after budget in the early McCreevy years.

Dan O’Brien is particularly hard on McCreevy, although it’s clear he liked him personally and admired his courage in standing up to Charlie Haughey. His harsh judgment in 2004, when McCreevy departed our shores for his illustrious career in Brussels, bears looking at again.

“But for the real story of McCreevy’s time as Finance Minister, one has to consider his spending record, because that was where he had genuine influence. And here the picture is dismal. Start with the recklessness with which he used taxpayers’ money for electoral purposes. While governments everywhere tend to loosen the purse strings to win voters’ favour, from 2001 McCreevy simply upended the public purse, allowing spending to run out of control.”

Something is captured here that I believe historians will come to examine in more depth. Bertie Ahern and Charlie McCreevy will make their own case that they were in fact the authors and creators of the Celtic Tiger years. Michael McDowell is on record at least a dozen times in claiming that the tax policies of those early years (inspired by the PDs, of course) were the thing that changed the course of history.

The real irony of the Celtic Tiger was that almost everything they did was designed, on the one hand, to stimulate growth, and on the other to fatally undermine it. The reigning philosophy of the time – and O’Brien captures this too – was well summed up in two “McCreevyisms”. First, “if I have it, I’ll spend it”. And second – “Party on!”

This philosophy was behind a range of policy decisions that all looked great in the short term (and won a lot of votes). The SSIAs, described by O’Brien as a “multi-billion loss-maker”. Decentralisation, “an act of political patronage on a scale unlike anything ever attempted before”. The “filleting” of the Freedom of Information Act. And a lot more besides. There probably has never been a time in anyone’s history when there was so close a connection between economic policy and the electoral cycle. And nobody shouted stop.

WE’VE been through a lot in the last 15 years, both highs and lows. O’Brien’s book will serve as a useful reminder of some of the reasons it has been such a bumpy ride, and it is being published at an interesting time.

I notice quite a few memoirs beginning to appear all of a sudden – Bertie’s and Albert’s are no doubt going to be vying with each other at the tope of the best-seller lists – and I don’t suppose the memoirs are going to offer too much in the way of objective recall. (Not that I can blame anyone for that, since my own memories of those times have often been described as a bit subjective themselves.) But it is useful, amid all the continuing self-serving blather, to have a bit of cool dispassionate analysis about what we did right and what we did wrong.

We’re all a bit in mourning now for the poor old Celtic Tiger, and we’ve had so much change, so fast, that already last year seems like the good old days. Reading Dan O’Brien’s book reminds us that the good old days weren’t perfect either. But maybe, if we listened to the critics instead of telling them to go and commit suicide, we mightn’t be in the mess we’re in now.

* Ireland, Europe and the World, €24.99, by Dan O’Brien, will be published by by Gill and Macmillan this week.


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