The cute-hoor party

by Henry on February 21, 2009

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.

{ 80 comments }

1

Rich Puchalsky 02.22.09 at 5:48 am

As long as libertarianism lasts, there will be someone to say “Dude, medieval Iceland shows that we don’t need a government!” It doesn’t matter whether Ireland goes wrong now; it has already joined the myth. Centuries from now some genetically altered humanoid will be telling some fully virtual AI “Dude, late twentieth century Ireland shows that we don’t need financial regulation!”

2

blah 02.22.09 at 7:29 am

I must be provincial. That was the first time I have ever come across the term “cute hoor.” I had to look it up.

Also, I would like to note that it becomes especially clear during times like these that there is not a sharp line to be drawn between the bezzle and the non-bezzle. It is more like a continuum. I would like to see the economists develop more precise bezzle measurements.

3

ejh 02.22.09 at 9:57 am

Unlike anyone else’s, the Irish boom was essentially construction-led

Er, Spain?

4

EWI 02.22.09 at 10:38 am

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

What Henry is perhaps too modest in mentioning is the name of one Fine Gael, not least for the sake of non-Irish readers (I haven’t heard of Labour or Green members being accused of corruption in this respect, have you?). I say this because if Fianna Fáil is the face of ‘new’ money, then Fine Gael is surely the face of ‘old’ money in Ireland (certain more refined professions, big farmers and those who consider themselves ‘gentry’) – in other words, those for whom the system was rigged many generations ago.

(there was a 125,000 person protest march in Dublin yesterday)

Today, actually. I marched, myself (placard and all).

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.

I would say merely that we have had a fuller dose of the free-market (c.f. the grotesque index of “Economic Freedom”) than the other Anglosphere countries. Due in no small part to the utter triumph of the ideologues (best represented by the Progressive Democrats) in completely rewiring our supine government, financial, academic, media and yes, academic institutions to embrace their Randian worldview. Would Fine Gael do any better? I doubt it.

5

EWI 02.22.09 at 10:40 am

Today, actually. I marched, myself (placard and all).

Or at least, a “today” (yesterday, Saturday) in which the CT comments worked…

6

Tracy W 02.22.09 at 12:37 pm

Political corruption involving tax breaks, cosy relationships between banks and regulators, and differentiation between greenfield and urban renewal sites shows that market liberalisation fails?
Yep, Ireland was one of the more free-market economies in the world. Yet if they were giving tax breaks to property developers, sounds like a lot of intervention was going on in the property market.
Hopefully Ireland will show the advantages of democracy in dealing with political corruption, as opposed to a dictatorship.

7

ejh 02.22.09 at 12:48 pm

Due in no small part to the utter triumph of the ideologues (best represented by the Progressive Democrats)

I was vaguely wondering if Michael McDowell was going to be recalled to the public stage like Coriolanus in order to save the nation (if not the world).

8

kidbitzer 02.22.09 at 12:55 pm

dunno if this is apposite, but one factor that has fed corruption in some u.s. cities is popular complacence based on a reaction to previous racial oppression.
so, e.g., dc’s staggeringly corrupt marion barry was tolerated by many black voters because it’s about time that one of our own gets to work the system. after centuries of white people cheating, why get fastidious just now when the cheater is black?

is there any of that in the popular attitudes to corruption in ireland?

9

Freshly Squeezed Cynic 02.22.09 at 1:24 pm

Yep, Ireland was one of the more free-market economies in the world. Yet if they were giving tax breaks to property developers, sounds like a lot of intervention was going on in the property market.

Free-market economies cannot fail! They can only be failed!

Honestly, Tracy, if by now you do not see that a culture of lax regulation in the economic sphere can have the consequence of lax regulation in the political sphere, and that those with economic power have political power that can be used to, yes, intervene on their behalf, even in a free-market economy, then I’m not sure any discussion we can have will be fruitful.

Adam Smith had it right when he suggested that businessmen should be allowed nowhere near the organs of government. It seems to be a necessity of any democracy, whether free-market or not. The question is, how do we make this occur? And more importantly, how do we make it occur without libertarians bitching about how money is free speech and heavy-handed regulations on lobbying and our political representatives are on a par with the Holodomor?

10

dsquared 02.22.09 at 1:49 pm

Tracey, this “our ideology has never truly been tried! We were against those corrupt types all along!” thing was pretty much destruction-tested by the Trotskyists.

11

JoB 02.22.09 at 1:57 pm

But Tracy of course does not have an ideology, so I’m sure she does not think that the remark in 9 can ever apply to her.

12

ejh 02.22.09 at 2:04 pm

pretty much destruction-tested by the Trotskyists.

Not sure how “tested” would work here.

And more importantly, how do we make it occur without libertarians bitching about how money is free speech

By not giving a stuff what a bunch of rich spoiled brats exercise their choice to whine about?

13

astrongmaybe 02.22.09 at 2:19 pm

I haven’t followed the party politics of this too closely, but I am mystified at how the Greens continue to justify their coalition with Fianna Fáil. Maybe their ministers and TDs can persuade themselves that they’re reforming things from the inside, helping guide the ship of state at a time of crisis, etc., but at some stage surely the party rank-and-file has to balk at continued participation? If they did it right, the Greens could even gain some kind of electoral advantage from a tactical pull-out. Does anyone know the parliamentary arithmetic – could FF continue with just the support of independents, ex-PDs, etc.?

14

Rich Puchalsky 02.22.09 at 2:21 pm

“Yep, Ireland was one of the more free-market economies in the world. Yet if they were giving tax breaks to property developers, sounds like a lot of intervention was going on in the property market.”

Everyone’s already picked on poor Tracy. But remember the wisdom of Ayn Rand: A=A. A “free-market economy” is the exact same thing, by observation, as a “lot of intervention going on in the property market”. You can’t criticize a tautology.

Which is a gibe, yes, but seriously what else would people expect? A free market is one in which people use whatever power(s) they have to better their market position. When ideologues cause governments to back off from principled regulation, the result is necessarily the private use of the government for personal gain, because there’s nothing to stop it. And the government can hardly not be involved, because the government defines property in the first place. (Arguing with that last point means that you’re not worth my time to argue with, so don’t take it the wrong way if you do so and I don’t reply.)

15

Freshly Squeezed Cynic 02.22.09 at 2:27 pm

By not giving a stuff what a bunch of rich spoiled brats exercise their choice to whine about?

You know that, I know that, alas, it seems to be de rigeur for our political elites to take a different view.

16

Freshly Squeezed Cynic 02.22.09 at 2:35 pm

Does anyone know the parliamentary arithmetic – could FF continue with just the support of independents, ex-PDs, etc.?

The number of independents supporting the government on the way in, according to wiki, was 4. Plus the 2 ex-PDs, one of whom is a Minister and thus will pretty much be a guaranteed supporter of the government barring resignation, and Fianna Fáil, and you have a total of 83 TDs. I think this is one short of a majority. There are a total of five independents, and I don’t know what way the other independent lies, but I think the answer to your question is “depends”. It’s close enough to a majority that they could probably still carry on as a minority government.

17

Freshly Squeezed Cynic 02.22.09 at 2:36 pm

“Does anyone know the parliamentary arithmetic – could FF continue with just the support of independents, ex-PDs, etc.?”

The number of independents supporting the government on the way in, according to wiki, was 4. Plus the 2 ex-PDs, one of whom is a Minister and thus will pretty much be a guaranteed supporter of the government barring resignation, and Fianna Fáil, and you have a total of 83 TDs. I think this is one short of a majority. There are a total of five independents, and I don’t know what way the other independent lies, but I think the answer to your question is “depends”. It’s close enough to a majority that they could probably still carry on as a minority government.

18

P O'Neill 02.22.09 at 2:36 pm

I think Matthew Engel should be excused from the charge of Irishry. Here he is nearly a year ago, well off the standard tourist trail in Co. Cavan and getting some nice quotes from curate in a post-scandal Church. I’m guessing from the Meath and Cavan references in how he writes about Ireland that there must be a family connection there. Incidentally, the Times (UK) puts some names on those unnamed property developers.

Besides all the economic challenges facing Ireland, there’s also the challenge of looking in the mirror when it comes to figuring out how we got into this mess. I’d guess quite a few of the 120,000 marchers in Dublin on Saturday voted FF in the last election. Then there’s the Green voters who must be wondering how that vote got turned into a Green-sanctioned bailout for property developers.

The ordinary union members might also want to take a look at their own leadership, who were happy to sit around the table with Bertie Ahern (last seen hyping the Celtic Tiger in Honduras) to divide up what was then an expanding pie. “Social Partnership” was a co-option scheme and not much else.

19

Freshly Squeezed Cynic 02.22.09 at 2:39 pm

Crap, double post. I should also note that I forgot to take into account the Ceann Comhairle, who’d vote with the Government to break a tie. Assuming it’s the same in Ireland as the UK, that is. So amend that answer to “probably not, but the independents will be in an excellent bargaining position”.

20

Paddy Matthews 02.22.09 at 3:17 pm

Does anyone know the parliamentary arithmetic – could FF continue with just the support of independents, ex-PDs, etc.?

The four independents currently are, listed in decreasing order of likelihood to support the opposition:

Finian McGrath – leftish socialist republican type who did a deal with Fianna Fáil after the election but walked away from the deal after the old-age pensions debacle last October. Would be likely to support the opposition.

Michael Lowry – ex-Fine Gael cabinet minister who, having initially marketed himself as a “Steve Silvermint” cool clean hero determined to root out Fianna Fáil shenannigans in government, was forced to resign back in the 90s after his own “snuffling in the trough” came to light. (Like EWI, I’m not convinced – based on what I’ve seen at a local level – that Fine Gael would be significantly better on this front given the opportunity.) Has continued to be re-elected and somewhat surprisingly did a deal with Fianna Fáil after the last election. Likely to stay bought unless Fine Gael present him with a better offer.

Joe Behan – elected as a Fianna Fáil TD but resigned from the party after the pensions debacle but is emotionally still a Fianna Fáiler and has continued to vote with them on some other issues. Has the appearance of someone who is too fundamentally decent to prosper in Irish politics.

Jackie Healy-Rae – seventy-something walking bogman stereotype who plays up to the role. Fianna Fáiler who fell out with them in 1997 over his failure to get selected
as a general election candidate and has scraped home in subsequent elections and has obtained a number of deals with minority Fianna Fáil governments. Hopes to have his son/clone succeed him at the next election but likely to be stymied by his Fianna Fáil constituency colleague John O’Donoghue being Ceann Comhairle (Speaker) and thus reducing the number of available seats in the constituency to two. “Not as green as he’s cabbagey-looking.” Any deal would probably require the replacement of the Ceann Comhairle, which perversely would make forming a government harder for the opposition.

21

Deliasmith 02.22.09 at 3:23 pm

No-one has commented on this and this.

When Vincent Cable has his way and those overstuffed UK public sector pensions are attacked I wonder if our boys in Afghanistan and the boys in blue will be spared?

Bruschetta-eaters be aware: I write as a Trotskyist.

22

engels 02.22.09 at 3:36 pm

If Trotskyists had supported the general direction of Stalin’s policies, but moaned that he hadn’t gone far enough, then they might be considered to be in a somehow analogous situation to ‘libertarians’ with regard to the free-market policies of Reagan, Thatcher, etc which have been enacted over the last three decades and are now unravelling so spectacularly. As far as I am aware, that was not the case.

23

kid bitzer 02.22.09 at 3:56 pm

dunno how apposite this is, but.

one of the factors feeding political corruption in some u.s. cities is a perverse reaction to previous oppression.
i have in mind particularly the astoundingly corrupt marion barry of d.c., who was returned to office by an electorate that knew very well that he was skimming and trimming, but felt that this all constituted a way of sticking it to the man. after centuries of watching white people cheat and steal, why get fastidious just now when it is one of our own profiting from it?

is there any of this at work in irish politics? the very title of your post suggests a certain indulgence towards the malefactors, and indulgence perhaps bred of solidarity against a previous oppressor.

24

astrongmaybe 02.22.09 at 4:00 pm

Interesting: the Irish government is flying kites in the press for a “government of national unity” with unspecified “exceptional powers.”

The Sunday Independent comes out fairly clearly against elections and against parliament, which it refers to in terms of “squabbling TDs.” (Read: “useless talking shop… firm hand of authority needed… no bloody nonsense…” etc.)

25

engels 02.22.09 at 4:24 pm

I mean, if, for example, Milton Friedman or Friedrich Hayek had struggled against Reaganite or Thatcherite capitalism to the extent that they were forced into exile by Reagan or Thatcher and ultimately assassinated on their orders then the analogy might start to look a bit more compelling…

26

ScentOfViolets 02.22.09 at 4:56 pm

Adam Smith had it right when he suggested that businessmen should be allowed nowhere near the organs of government. It seems to be a necessity of any democracy, whether free-market or not. The question is, how do we make this occur? And more importantly, how do we make it occur without libertarians bitching about how money is free speech and heavy-handed regulations on lobbying and our political representatives are on a par with the Holodomor?

My theory – just a theory of course – is that there is a ratchet effect which drives these slides into corruption, cronyism, plutocracy as the faux aristocracy. That is, it is possible for a determined, well-financed minority to over time, advance it’s agenda in small increments which are greater than the sum of the parts. It is much, much harder to move the other way, or to reset these small slides. In fact, about the only way to do this is through virtual collapse of the existing order, at which point a sort of scary populism begins to make itself felt.

I don’t know if this is human nature, something intrinsic to all human institutions, or perhaps an effect that can be edited out with the right jiggery-pokery in the right spots at the right times (this seems to be a popular plot in fiction, especially science fiction.)

Here’s a specific, relatively innocuous example: Columbia, Missouri’s ‘Can Ban’. This was a five cent deposit municipal ordinance applying to beverage containers in order to encourage recycling. Passed in 1977, the law was not actually implemented until 1982, even though it had broad popular support (this is a college town, and the year that Carter was sworn into office.) In fact, for twenty years, up until it’s appeal in 2002, most citizens professed being quite happy with it, took pride in it as a symbol of progressivity.

Nevertheless, in 2002, the law was repealed. Why? Well, because this was not first, the second, nor even the third attempt to get the can ban off the books; it was the fifth. And this was done in the context of a certain political, um ‘atmosphere’, shall we say, what with the conservative party being ascendant during a time when the mood of the country was markedly conservative. Finally – the supporters of the repeal outspent their opponents ten to one, with much of the money coming from outside corporate donors, such as the National Soft Drink Association. I don’t suppose the fact that the repeal was deceptively packaged (again by an outside consulting firm) as a vote for recycling, rather than a referendum on effectiveness, cost, and fairness the way the first four recall attempts had been framed hurt its chances any either.

The odds of getting the original ordinance back on the books? Close to zero, unless there is another wave of populist disgust with curbside litter, the motivation for the original bill. And for very depressing, very obvious reasons.

And that is the ratchet mechanism at work. It tightens slowly but inexorably one way, never the other. The only thing that drives motion in the other direction is populist discontent. I really can’t see anything to be done about it.

27

John Emerson 02.22.09 at 5:04 pm

You say Ireland, I say >Iceland.

Beware the land named “*land”. Take everything out of markkas, zloties and kiwis.

I don’t think that Newfoundland and Greenland are weighty enough to drag their nations down, but if the two nations go to war over Hans Island (Danish, obviously, from the name), they might push things over the edge.

28

John Emerson 02.22.09 at 5:11 pm

perhaps the huldufolk and leprechauns didn’t get their bowls of milk.

29

Zephyrus 02.22.09 at 5:14 pm

engels, to my knowledge Trotsky was part of the Left Opposition to Stalin. He was calling for collectivization back during the NEP. Stalin allied with Bukharin (I think was his name) and marginalized and then exiled Trotsky. And promptly took up collectivization as a wedge against the Right Bolsheviks. (Not an expert, but this is how I remember it being taught in school.)

That said, I’m not sure your interpretation of the analogy is correct. The idea is that there is some ideal implementation of the ideology that one group would have correctly made real, while the other not-us group put into practice in a corrupt way. Trots say this about Stalin’s implementation of Russian socialism; free marketeers now say it about Ireland’s implementation of a free market. Before they went “bad,” both were more than happy to claim the fruits as their own.

30

Chris A. Williams 02.22.09 at 5:17 pm

Newfoundland managed to go bankrupt during the century when this was least fashionable. They’re ahead of the game already.

31

Dwight Thieme 02.22.09 at 5:31 pm

I see that there are people who have commented both before and after me whose posts are visible to the general public. Am I wrong to think that my comments are being singled out for moderation? Is this a glitch in the software, or a new policy that I am unaware of?

SEE POST ABOVE – OUR COMMENTS SECTION CRASHED AND SOME COMMENTS WERE LOST TO POSTERITY, INCLUDING APPARENTLY YOURS. SINCE YOU APPEAR TO BE A NEW COMMENTER HERE, YOUR COMMENTS AUTOMATICALLY GO INTO MODERATION.

32

John Emerson 02.22.09 at 5:42 pm

The Province of Newfoundland and Labrador has been the most successful province ever in terms of gaining world recognition for its two official dogs. The Alsatians are their only competition, and the Germans contest their ownership. Most of Old Europe is commemorated only by pastries and sausages, or in the case of Sweden, turnips.

33

Barry 02.22.09 at 5:56 pm

I dunno about you, but when I hear the word ‘Swedish’, I don’t think of turnips :)

34

Righteous Bubba 02.22.09 at 6:01 pm

I dunno about you, but when I hear the word ‘Swedish’, I don’t think of turnips :)

It’s heartening to see that somebody else thinks of ABBA too.

35

EWI 02.22.09 at 6:02 pm

The ordinary union members might also want to take a look at their own leadership, who were happy to sit around the table with Bertie Ahern (last seen hyping the Celtic Tiger in Honduras) to divide up what was then an expanding pie. “Social Partnership” was a co-option scheme and not much else.

Already noted, believe me. Firstly the lengths being gone to in minimising the effects of action (the Saturday choice for the march, for one), and moreover that there’ve been no business lobby shills demonising the big union bosses in the press, which speaks volumes (the dogs that aren’t barking…)

@astrongmaybe
Interesting: the Irish government is flying kites in the press for a “government of national unity” with unspecified “exceptional powers.”

The Sunday Independent comes out fairly clearly against elections and against parliament, which it refers to in terms of “squabbling TDs.” (Read: “useless talking shop… firm hand of authority needed… no bloody nonsense…” etc.)

This was an Eoghan Harris-originated kite, in the face of the impending FF electoral meltdown:

http://cedarlounge.wordpress.com/2009/02/16/henry-mcdonald-discovers-independent-senator-eoghan-harris/

36

John Emerson 02.22.09 at 6:04 pm

Well, it’s “Swede”.

You have to get to know Swedes for awhile before their turnipish nature becomes evident. Vodka sometimes helps.

Greta Garbo and Ingrid Bergman made strenuous efforts to keep their turnip nature hidden. E.G., Garbo’s “I vant to be alone”. Fortunately the LA press was mostly just interested in booty-related gossip, and some say that the sexual scandals were just diversionary ploys on the part of the Swedesses. In any case, they were able to take their secrets to the grave.

37

John Emerson 02.22.09 at 6:07 pm

ABBA, Britney Spears, et al: Socialism has come to this?

38

John Emerson 02.22.09 at 6:20 pm

ABBA corporation.

The article is 27 years old, but the corporation still exists.

39

nick s 02.22.09 at 6:39 pm

Unlike anyone else’s, the Irish boom was essentially construction-led

Was it not the same in Spain? I don’t doubt that Ireland’s much smaller population makes a difference, given the long-standing institutional incestuousness (the same might be said for Iceland in that regard) but there are certainly examples of the same kind of construction-led dodginess across Europe and the US on a regional or municipal level, which are only mitigated by scale.

40

JoB 02.22.09 at 7:27 pm

Now do something groundbreaking and try to put ‘ABBA’ in print, with the 2 B”s joined at their vertical backs! If you can do that, you receive honorary Swedesmanship, along the likes of Meryl Streep.

41

John Quiggin 02.22.09 at 7:49 pm

Tracy, and others pushing this line might be interested in this offer.

42

Deliasmith 02.22.09 at 8:31 pm

43

roger 02.22.09 at 8:48 pm

Tracy’s view could be an honestly anarchic view – either there should be no government intervention (which, essentially, means government) or laissez faire will fail. But this rather wipes out any policy recommendations from the libertarian side, which – even if they consist of recommending some lesser government intervention – are always going to fail the founding principle.

If, however, you aren’t an anarchist, and accept some government role in the economy, then I think the lesson of Ireland and the States is the Friedman-esque preference for indirect intervention via the tax code has not been a large success. Why? Because politics, too, is a market, and tax changes can as quickly entrench themselves – be subject to capture – as interventionist regulations.

44

DC 02.22.09 at 9:37 pm

I don’t think it’s fair to say that “the Irish boom was essentially construction-led” – this may be true of the 2002 – 2007 period but the true “Celtic Tiger” 1994 – 2001 period was export-driven (via FDI).

I would also question whether it’s true to say that Ireland “had a fuller dose of the free-market … than the other Anglosphere countries.” One of the most prominent features of our political economy since 1987 has after all been centralised wage bargaining, plus the proceeds of growth have been used to increase public spending as well as to reduce tax rates.

But certainly Ireland does appear as a particularly stark enditement of “light touch regulation” in the financial sector.

45

Alex 02.22.09 at 10:34 pm

pundits like Thomas Friedman were depicting Ireland as a poster-boy for liberalized deregulation and economic success

We call this “Friedman’s sign”.

46

astrongmaybe 02.22.09 at 10:41 pm

We call this “Friedman’s sign”.

There’ll probably turn out to be Tom Friedman equivalent of the “curse of Hello magazine”: if he’s bigged you up in one of those globalization bedtime stories, you’re doomed, on the fast-track to bankruptcy or worse.

47

alanb 02.22.09 at 10:42 pm

WRT to the relative cleanliness of Fine Gael and Fianna Fail, I think it was a character in either a Roddy Doyle or a John O’Farrell book who described the contrast between them as “the difference between shit and shite”.

48

engels 02.22.09 at 11:07 pm

The idea is that there is some ideal implementation of the ideology that one group would have correctly made real, while the other not-us group put into practice in a corrupt way. Trots say this about Stalin’s implementation of Russian socialism; free marketeers now say it about Ireland’s implementation of a free market. Before they went “bad,” both were more than happy to claim the fruits as their own.

…And liberals/social democrats presumably say this about welfare-state capitalism ‘before it went bad’ ie. was hijacked by neo-liberals in the 80s. I’m not sure why anyone would think this was a smackdown.

49

Freshly Squeezed Cynic 02.22.09 at 11:26 pm

Thomas Friedman once complimented my house. Fell down two months later.

50

Freshly Squeezed Cynic 02.22.09 at 11:26 pm

Thomas Friedman once complimented my house. Fell down two months later.

51

astrongmaybe 02.23.09 at 12:17 am

The house is flat, you see.

52

Ronzoni Rigatoni 02.23.09 at 12:33 am

“Unlike anyone else’s, the Irish boom was essentially construction-led”

Spain? How ’bout Florida?

http://www.miamiherald.com/news/columnists/carl-hiaasen/story/903185.html

53

EWI 02.23.09 at 12:44 am

I would also question whether it’s true to say that Ireland “had a fuller dose of the free-market … than the other Anglosphere countries.” One of the most prominent features of our political economy since 1987 has after all been centralised wage bargaining, plus the proceeds of growth have been used to increase public spending as well as to reduce tax rates.

You, sir (or madam) have clearly not been privy to that towering monument to the hubris of the international wingnut welfare train that is the Index of Economic Freedom, which clearly states otherwise. In our own case, this was helpfully compiled by our own home-grown (and a few expats) libertarian loony fringe, the Open Republic Institute.

You may recognise the names of the ORI’s three libertarian megabrains: Constantin Gurdgiev (World Medal of Freedom, 2006/Man of the Year, 2005 from the American Biographical Institute, no less) ; Paul McDonnell (WSJ contributor, once upon a time, of the notion that Irish is an “aboriginal” language) and Moore McDowell (yes, brother of a certain ex-leader of the PD’s), at least two of whom are current Libertas plc associates – what a small world we live in.

54

EWI 02.23.09 at 12:53 am

Belay that – I must apologise for misleading the good readers of Crooked Timber, for it appears that in 2009 the damned Aussies have stolen our third-place ranking in the Index.

(Great. First they take our best Gaelic footballers for this “Aussie Rules” abomination, then they take this…)

55

garymar 02.23.09 at 1:59 am

Thomas Friedman once praised my genitals. Left testicle shriveled one month later.

When I think of Sweden, I think of, in no particular order, high suicide rate, gloomy jazz coffee houses, strong social welfare network, and Gustavus Adolphus. And I’ve never even been to Sweden.

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derrida derider 02.23.09 at 2:25 am

EWI – Oh god no, this is terrible news. I’m an Aussie – clearly the Heritage lot have gravely endangered our economy.

Can’t you get one of those FF politicians to bribe the Heritage lot to rank Ireland higher? In return we’ll give your footballers back with a nice suntan, I promise …

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M-H 02.23.09 at 2:49 am

We travelled in Ireland in June of 2008 and while there were construction sites everywhere, no-one was working on them. [Insert Irish joke here... haha] We were told several times that the huge number of home units that were being built – and not just in Dublin; we travelled all over the south and saw lots of rows of half-finished houses just sitting in fields – were needed to house the huge number of construction workers who were needed to build this huge number of home units…. It seemed a little, er, odd.

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P O'Neill 02.23.09 at 3:03 am

we travelled all over the south and saw lots of rows of half-finished houses just sitting in fields – were needed to house the huge number of construction workers who were needed to build this huge number of home units…. It seemed a little, er, odd.

You’ve just expressed the mystery of Dubai as well.

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dsquared 02.23.09 at 8:02 am

I don’t think it’s fair to say that “the Irish boom was essentially construction-led” – this may be true of the 2002 – 2007 period but the true “Celtic Tiger” 1994 – 2001 period was export-driven (via FDI).

I basically agree with this, although for “FDI” I’d substitute “pretty blatant tax competition”. Also, the Irish workforce grew massively during that period – there was a huge shift of women into the Irish labour force and net migration reversed.

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PreachyPreach 02.23.09 at 8:23 am

“pretty blatant tax competition”

Which, FYI, was not principally the lower corporation tax rate. The careful and deliberate avoidance of certain fundamental anti-avoidance measures explains most of Ireland’s attractiveness.

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ejh 02.23.09 at 9:13 am

There’ll probably turn out to be Tom Friedman equivalent of the “curse of Hello magazine”: if he’s bigged you up in one of those globalization bedtime stories, you’re doomed, on the fast-track to bankruptcy or worse.

Wasn’t there something similar with Tom Peters? (I hope so anyway. I did my librarianship course ten years ago and in the first term I saw more Tom Peters videos than books.)

If, however, you aren’t an anarchist

Ah, libertarian. Anarchists are against laws, governments, armies and police forces. Libertarians are against laws, governments, armies and police forces except to defend their money and property.

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dsquared 02.23.09 at 9:16 am

Wasn’t there something similar with Tom Peters?

yes – some astonishingly embarrassing proportion of the companies lauded in his “In Search of Excellence!!!11!” book ended up in insolvency a short while later.

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DC 02.23.09 at 12:42 pm

Yes dsquared, demographics (plus increased female participation) allowed good economic performance to become Tiger-like. So did did easy credit caused by EMU. And clearly tax competition was a big part of the FDI story going right back to the 1960s (and indeed it is questionable how much of our exports really have anything to do with Ireland at all), though for the 1990s I would add in something about the American boom plus globalisation – I think you need this to explain the scale of US FDI in Ireland in the 1990s.

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EWI 02.23.09 at 2:31 pm

Can’t you get one of those FF politicians to bribe the Heritage lot to rank Ireland higher? In return we’ll give your footballers back with a nice suntan, I promise …

Well, I’ll see what I can do. Certainly, the cailiní over here seem eager for the return of any and all Ó hÁilpín’s, from what they tell me ;)

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Talented Octopus 02.23.09 at 3:01 pm

The “Cute Hoors” is of course an ironic term. They were not cute; firsly, beacause any mug who had access to the money was faced with a win win situation;

“Syndicated property investments proved popular in Ireland because banks often loaned the equity required to invest in the fund. In many cases, investors only had to pay €6,500 a year to borrow €100,000″.

http://www.tribune.ie/business/article/2009/feb/22/billions-of-euros-in-loans-to-developers-are-non-r/

Second, they were not cute; because they got caught with no trunks on, when the tide went out. It is a feature of more sophisticated rich democracies, that the corruption is so well embedded, that only a few small fry get caught out. The irish are not actually very good at corruption; their gambling mentality, combined with a diffident streak, will always serve to catch them out.

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Paddy Matthews 02.23.09 at 3:58 pm

Certainly, the cailiní over here seem eager for the return of any and all Ó hÁilpín’s, from what they tell me ;)

Are all the Ó hAilpíns bar one not back already?

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SamChevre 02.23.09 at 4:14 pm

I’m with Tracey, I think.

It’s a common feature of US land-use decisions that the more regulation there is, the more certain it is that all the important developers have strong political ties. It seems that in Ireland, the same was the case–politically-connected developers were able to build structures others couldn’t, in locations others couldn’t, and this was profitable for both politicians and politically-connected developers.

I’m entirely uncertain where, in this fact-pattern, one finds evidence that more regulation would help.

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jay bee 02.23.09 at 4:33 pm

It seems that the difference between Ireland and Spain is that while the Irish developers were getting themselves a helicopter, their Spanish equivalent had a private jet – or so my banker friend in aviation finance tells me …
… a typical celtic tiger tale, he joined an Irish start-up venture capital business, they were bought out by RBS so now he’s chasing down the cute hoors of Spain on behalf of her brittanic majesty’s loyal taxpayers

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Tracy W 02.23.09 at 5:22 pm

Okay, free-market advocates are ideologues who believe that the market will always produce perfectly efficient outcomes as long as the government doesn’t intervene, and either advocate a government focussed merely on protecting property rights and preventing force, or are straight out-and-out advocates of anarchy. For some reason their ideological straightjackets prevent them from seeing how governments can assist and guide a country to full economic development, as they are all mindless believers in the strong version of the Efficient Markets Hypothesis.

Except when a government turns out to have been giving tax benefits for property development and making distinctions between “urban renewal” and “greenfields developement”. At which point governments giving out tax breaks suddenly becomes evidence of the failure of free market policies.
“We are at war with Eurasia. We have always been at war with Eurasia.”

DSquared: Tracey, this “our ideology has never truly been tried! We were against those corrupt types all along!” thing was pretty much destruction-tested by the Trotskyists.
I await with bated breath your explanation of how giving out tax breaks to property developers, and making a distinction between greenfields and urban renewal (which I presume was happening for a legal reason) fits in with a traditional Austrian-style economic analysis of the pretence of knowledge, or a public-choice critique of government planning, or the standard neo-classical ECON 101 assumptions. Or perhaps you are thinking of some other variant of free market economic policy? Would you do me the honour of telling me which one?

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dsquared 02.23.09 at 5:26 pm

I await with bated breath your explanation of how giving out tax breaks to property developers, and making a distinction between greenfields and urban renewal (which I presume was happening for a legal reason) fits in with a traditional Austrian-style economic analysis of the pretence of knowledge, or a public-choice critique of government planning, or the standard neo-classical ECON 101 assumptions

I am afraid that your request is queued up behind an outstanding request from numerous Trotskyists of my acquaintance, for an explanation of how a totalitarian state capitalist imperialist Soviet society fits in with a traditional Marxist-Leninist analysis of the development of proletarian consciousness, and they’ve been waiting since 1989 so you might be out of luck.

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ejh 02.23.09 at 5:53 pm

Just so I know – is the ultra-free-market idea that all land can be built on or otherwise disposed of by those who acquire it in whatever way they choose? I mean there are reasons why land sale, use and development are regulated, and while of course this may mean that access to that land is often only through corruption, that doesn’t actually explain or dispense with the reasons for regulation.

(Incidentally, it’s far from the only reason why the construction sector is notoriously corrupt, though at the same time it’s far from the least important reason.)

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P O'Neill 02.23.09 at 7:45 pm

Spain is looking like an interesting example of other ways to botch investigations of property market-politician linkages.

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roger 02.23.09 at 7:51 pm

Are we talking about land in the U.S. Because, of course, that land was originally seized by the government from the naturals – the Indian nations – and sold off to homesteaders. The government also made enormous landgrants to railroads to get the economy off the ground. Then, in the 20s, the government used its powers to not only seize rivercourses but to change them. When, in 1978, socialist president Jimmy Carter stripped down water projects funded by the Federal government, it set off a Western revolt by the same people who then complain if the government sets up onerous environmental restrictions on their land – lan d that would be worthless without the water. Incidentally, free marketer Ronald Reagan restored the funding for the water projects when he came into office. Being governor of California, and presiding over one of the most expensive government funded water project ever – which spanned the Brown Reagan years – gave him plenty of experience in using freemarket rhetoric and mixed market policy.

As for your other objections TW – you seem to have ignored them. Granting for a second that the tax laws you reference are bad – they are evidence that, of course, tax capture happens. Which is why Friedman’s notion that government fiscal intervention should be through tax policy only has worked out so badly.

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geo 02.23.09 at 8:04 pm

dsquared@70: you might be out of luck

Aw, c’mon. I gather that glibertarianism has been pounded to dust numerous times in the illustrious history of CT. But some of us are relative newcomers, and others just can’t get enough of the spectacle.

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Maria 02.24.09 at 2:33 am

If this is typical of continued opposition questioning of the government, and if information emerges to support it, we could be looking for a new government very, very soon.

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EWI 02.24.09 at 12:26 pm

@Maria: meet the new government, same as the old government?

Well, okay – Fine Gaelers don’t especially have a historical liking for builders (though some councillors have been working on that). But you guys do rather seem to like your big financial movers and shakers…

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Maria 02.24.09 at 8:43 pm

To be honest, I’d quite like to see Labour have a shot at putting a government together.

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toby 02.25.09 at 10:00 am

I live about a two miles from Athlumney Wood, and was not aware of the sale. But the story is probably true.

Sad to say, most of the article is also true. Irish voters have been remarkably supine, particularly in the case of Bertie Ahern. Ahern followed (after a short interval) Charles J. Haughey, a man found (after he retired) to be living of the large monetary contributions of various businessmen with “no favours asked or given” (!).

There was also Ray Burke, another top Fianna Failer, who went to jail for accepting bribes. Ahern was thick-as-thieves with Haughey and Burke, yet even when it was obvious he was just as bad as they were, he still garnered votes and was probably the most personally popular Taoiseach since 1921. I am not sure of the general perception of him now that he has been shown up as a snake-oil salesman. There is even a fantasy “things would be ok if Bertie was still in charge” element in many newspapers.

You may guess that the country is still in a sort of denial, and industrial strife cannot be far off.

Story: Ahern, who is now on the international “elder statesman” conference was flying out to an exotic destination when he met a group of constituents at Dublin Airport. Being a man with the common touch, Bertie’s gambit was “Howr’ye, lads! Heading over to the Big Apple for bit of shoppin’?”. The reply “Bertie, we f**king emigratin’!”

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Paddy Matthews 02.25.09 at 11:55 am

Well, okay – Fine Gaelers don’t especially have a historical liking for builders (though some councillors have been working on that).

You don’t say…

May I introduce you to my local Fine Gael councillor.

Here’s some of his handiwork, as featured in the Irish Times before Christmas. The IT failed to mention his dual role as property developer and county councillor.

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Tracy W 02.25.09 at 5:00 pm

Dsquared: I am afraid that your request is queued up behind an outstanding request from numerous Trotskyists of my acquaintance, for an explanation of how a totalitarian state capitalist imperialist Soviet society fits in with a traditional Marxist-Leninist analysis of the development of proletarian consciousness, and they’ve been waiting since 1989 so you might be out of luck.

Somehow I already suspected I would be. I will attempt to bear my disappointment as best I can.

Ejh – yes that is the ultra-free-market idea. The not-quite-ultra-free-market idea is to deal with pollution problems by either taxing the activity or a cap-and-trade. I don’t know the free-market reasoning is for differentiating between urban renewal and greenfields sights, judging by comments here I understand that the reasoning is that if it’s failed then it’s free-market by definition.

Roger – as for a link between corruption and lax regulation, if that is the point you are referring to, may I refer you to the Heritage Foundation’s Index of Economic Freedom (http://www.heritage.org/Index/), and Transparency International’s Corruption Perceptions Index. Now we can’t do a direct comparison between the Index of Economic Freedom and the Corruptions Perception Index as the Economic Freedom Index incldues the corruption perceptions index, thus creating a bit of a multicollinearity problem, but luckily the Heritage Foundation publishes a breakdown of their index. If I compare Financial Freedom to the 2007 Corruption Index (where the higher the score the less the corruption, with Denmark, Finland and NZ tying for the least corrupt countries in the world) I get a correlation of 65%. If I do the same comparisons but with the Investment Freedom Index I get a correlation of 71%. The correlation is not perfect, Ireland and the USA are 17th and 20th in the world respectively in perceived lack of corruption, despite having financial freedom index ratings of 90 and 80 respectively, and the same for investment freedom index). And correlation does not show causation. It may be that a lack of corruption causes limited financial and investment regulation, it may be that some third factor causes both. But a lack of correlation does imply a lack of causation. If limited regulation causes corruption I would expect to see the less regulated countries being the more corrupt ones. (I repeat, I am not claiming here that a lack of regulation causes a lack of corruption, I suspect that the two are both caused by the interactions of other factors in society but I don’t have any proof.)

I didn’t bother discussing this before as Freshly Squeezed Cynic said that if I didn’t share their worldview, then they were doubtful that any discussion would be fruitful, the detail that Freshly Squeezed Cynic didn’t bother actually supplying any supporting evidence for their view made me inclined to agree that it would be a waste of time trying to change their mind, and I am trying to cut down on the length of the comments I write.

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