The idea that the less well-off would have done better had the entire banking system been allowed to fail is nothing short of puerile.
This was the line spun by the Labour Party in the run-up to the last election and it is such a good story that I find it hard to blame them for telling it
SAY a prayer for Brian Lenihan when we exit the bailout next month. Thank him for making a plan and sticking to it until he knew it was safe to hand over.
“It’s going to take five years” he said calmly, in the full knowledge that he would not be there to take any credit.
That didn’t stop him. He just wanted to do the right thing. When the collapse of 2008 happened, the first thing he put on the agenda was “How are we going to pay social welfare?”
The infantile idea put about that by choosing to save the banks the Government was choosing not to maintain the social infrastructure — and the fact that this idea had traction — just shows how uneducated we are as a people.
The hard fact is that we live in a capitalist economy. Our economy follows the European model in applying checks and balances to capitalism and levying taxes to redistribute our wealth.
The argument as to what checks and balances there should be, how much taxation is levied and how it is spent is what political debate is about in this country. It is not about abandoning the capitalist system and turning our backs on globalisation. There is no appetite whatsoever for those arguments.
I’m not saying that’s a good thing. Capitalism has delivered on the millennium world poverty goals, but the climate change caused by such levels of economic growth impoverishes others. It is probably true that if we banned capitalism tomorrow our greenhouse gas emissions would plunge to safer levels. But no serious environmentalist pushes this agenda because it would bring poverty and war and it is not politically possible — however catchy “Back to the Stone Age” is as a political slogan.
It is grossly dishonest to pretend that we don’t live in a capitalist economy and that capitalist economies don’t need banks. When large banks fail in capitalist economies it has massive consequences for people who never stepped into the bank in their lives. And worse consequences for those who never stepped into any bank.
Banks effectively have an unwritten guarantee in stable, developed countries. That’s why bank regulation is so important. Indeed, I have no prejudice against State-run banks, but experts I have asked say it would not be trusted internationally and we do now live in a globalised world.
So we need draconian regulation and oversight. Because when a country’s entire banking system fails — as ours was on the brink of doing on Sept 29, 2008 — the fabric of the society is shredded.
That’s why the bank guarantee was considered the “least worst option” by Donal Donovan and Antoin E Murphy in their study The Fall of the Celtic Tiger. The effects of our recession have been terrible. But they have entailed a step down of just two places in our position under the UN Human Development Index from fifth to seventh in the world. They have actually raised our place under the “equality” heading to sixth in the world.
The first “austerity” budgets after the 2008 crisis were found by the ERSI to be highly “progressive” in distributing wealth from the rich to the less well-off, reversing the trend of the boom budgets.
The idea that the less well-off would have done better had the entire banking system been allowed to fail is nothing short of puerile. This was the line spun by the Labour Party in the run-up to the last election and it is such a good story that I find it hard to blame them for telling it.
What I find impossible to excuse is the fact that almost the entire media industry, including our public service broadcaster, swallowed and peddled this puerile story. And is still doing so.
This inane analysis has had serious consequences for this country. It contributed to the international loss of confidence in this country before the bailout.
It has also had serious consequences for the current Government. Swept to power on a wave of anger against Fianna Fáil and a wave of ignorance about the “catastrophic” and “notorious” bank guarantee, it then went on to re-guarantee the banks on two occasions.
Michael Noonan seems to be a very decent man and he has, in the broadest terms, done the right thing by the country. He has put Lenihan’s plan into action and followed the terms of the four year plan which was written, not by the troika, but by the Fianna Fáil/Green government.
Michael Noonan was a friend of Brian Lenihan’s. The end of the last government was partly engineered by the fact that the then government broadly trusted Michael Noonan not to lead Ireland into default. Handing over to his predecessor Richard Bruton would have been irresponsible given his loose talk of default, however partial.
Brian Lenihan’s concern was to hand over without dropping the baton. And that is what happened.
This was good for the country, but it leaves the current government with the problem of having to spin as different what is the same. Hundreds of man-hours are going into keeping this spin going, as minister after minister is told to repeat again and again that they led the country “from the chaos of Fianna Fáil”, if I am quoting Ruairi Quinn exactly.
I FEEL sorry for the intelligent members of the Government who would probably have preferred a more honest line from the start. But the honest line does beg some huge questions, such as, what is the difference between Fine Gael and Fianna Fáil when they are following the same policy? And what does Labour stand for in the context of capitalism? And what does “sovereignty” mean in the context of globalised capitalism and euro membership?
Nothing excuses the fact that we got to the brink in the first place. It’s true that the then opposition was shouting for measures to cut tax and re-inflate the property bubble, but the buck stops with Fianna Fáil and the PDs because they were the governing parties.
Brian Lenihan was a member of Fianna Fáil, and Minister of State for Children. I don’t know how he felt about the low tax/high spend model. If he disagreed, he didn’t disagree strongly enough to leave the party. But whether it was because his politicial orientation was different or because he was just too damn talented, he was kept out of the limelight by Bertie Ahern. It was the much-maligned Brian Cowen who promoted him to the post of Minister of Finance in a surprise move.
How often Lenihan’s wife Patricia Ryan must have rued that day as she sat at home, night after night, waiting for her terminally ill husband to come home from his department. It is possible that she shared his commitment to this country to such a degree that she sacrificed that time without resentment. I don’t know.
But I know one thing for sure: if we get to Dec 15 and successfully exit the bailout we will have learned nothing, absolutely nothing, if we try to pretend it wasn’t the courage of Brian Lenihan who charted our course.
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