Americans who think that their economy in bad shape should be glad that they don’t live in Ireland, where the economy seems to be completely melting down. Matthew Engel has a grimly entertaining article on the collapse of the housing market, which has a bit too much stage-Irishry for my liking, but gets at the underlying political economy of the final years of Ireland’s economic boom.
the desperate developers of one estate, Athlumney Wood, did what practically every retailer in Ireland is doing: they held a sale and slashed prices by half. Last week they got rid of 25 properties. Semi-detached houses that once touched €330,000 ($416,000, £291,000) sold for €175,000. … Unlike anyone else’s, the Irish boom was essentially construction-led, and places like Athlumney Wood are the new Ireland. …
Indeed, it’s easy to believe that the cute-hoor party, covering politicians, builders, financiers, bankers, senior civil servants and every chancer in Christendom, has been running the place for their own benefit for years. Here, everyone who matters knows everyone else. But careful observers are more specific in their analysis. “There was an alliance between Fianna Fáil and the property developers,” says Jane Suiter, who teaches politics at Trinity College, Dublin. “The government saw light-touch regulation as giving Ireland competitive advantage. And as far as Ahern was concerned, the biggest multiplier for votes was construction jobs.”
Roy Foster’s astute, if cheerfully partial, account of Ireland’s recent history, Luck and the Irish, provides some historical background.
But the most gilded life was led by the financial entrepreneurs who were most closely involved in the Golden Circle of Fianna Fail supporters. It was almost as if political connections helped the rich to qualify for the indulgence of the Revenue Appeals Commisssioners, a body that looked with exceptional kindness on the Dunne family trust among other cases. … Tax breaks were offered to builders of multistorey car parks, or city hotels, or seaside apartment blocks. … Greenfield sites were, strangely, targeted for so-called ‘urban renewal. From 1981 investigative journalists were pointing out the disproportionate number of Fianna Fail TDs who had interests in property development, or who were actually auctioneers themselves. Those involved in county council politics rapidly realized how their influence could be exploited, and on this fertile ground countless corrupt relationships began to flourish.
The most interesting point for me here isn’t that Fianna Fail, Ireland’s dominant political party, is unusually corrupt (there’s a decent case to be made that it is more corrupt than other major Irish political parties, but those other parties too have had prominent members snuffling in the trough). It’s that Fianna Fail has specifically benefited from its relationship with the construction industry in ways that other parties haven’t. When construction was doing well (as it has been for a long, long time) so did the Fianna Fail party, and vice versa.
This isn’t working out so well these days. Scandals (much worse than in the US) involving lax supervision of banks that appear to have had very cosy political relationships indeed, massive government deficits, pension levies and other fun stuff. And all tied up with unsustainably large loans to (as yet unnamed) property developers. The Fianna Fail party’s support seems to be cratering, despite the ineptitude of the leader of the main opposition party, Fine Gael. The last major opinion poll saw Fianna Fail coming third behind the Labour party for the first time since polling began.
In the past, Irish voters have taken a remarkably supine attitude towards political corruption. But then, the major scandals broke during a period of rapidly increasing prosperity. Now, not only is the bezzle out in the open for everyone to see, but voters appear to be drawing connections between massive fraud among the economic elite and their own prosperity (there was a 125,000 person protest march in Dublin yesterday). It wasn’t too long ago that pundits like Thomas Friedman were depicting Ireland as a poster-boy for liberalized deregulation and economic success. Now, the country is better seen as an advertisement of all the things that can go wrong when swift liberalization, lax regulation and cosy relationships between business and politics come together.