Dirty Bertie

by Henry on January 21, 2010

If I’d had time last week to write about Irish politics, I’d have blogged about Bertie Ahern’s success in getting the taxation authorities not to make him pay any taxes on his forthcoming autobiography. Creative works enjoy an exemption under Irish tax law. Both “Alex Massie”:http://www.spectator.co.uk/alexmassie/5698076/the-latest-great-irish-storyteller.thtml (who reveals that the former Taoiseach’s full name is Patrick Bartholomew Ahern – news to me) and “Fintan O’Toole”:http://www.irishtimes.com/newspaper/opinion/2010/0112/1224262119416.html are quite upset about all of this. I’d have expected O’Toole to be more forgiving; after all, in his recent book (forthcoming soonish “in the US”:http://www.amazon.com/gp/redirect.html?ie=UTF8&location=http%3A%2F%2Fwww.amazon.com%2Fs%3Fie%3DUTF8%26x%3D0%26ref_%3Dnb%255Fss%26y%3D0%26field-keywords%3Dfintan%2520o%2527toole%2520%2526%252334%253Bship%2520of%2520fools%26url%3Dsearch-alias%253Daps&tag=henryfarrell-20&linkCode=ur2&camp=1789&creative=390957 unless you have a Kindle, in which case it’s available already) on feckless politicians, property developers and the travails of the Irish economy, O’Toole describes Bertie as:

“a character in a long-running soap opera. Such characters are meant to be people like us, except that an absurd number of dramatic things happen to them. Their marriages break down, they have complicated, drawn-out love affairs, their children marry pop-stars and have twins, or become famous novelists overnight.

Surely, the autobiography of a fictional character is fictional itself by definition, and hence as creative as creative can be?

More to the point: O’Toole’s book, _Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger_ is highly recommended. It is written in haste and _saeva indignatio_ and hence not as polished as his work usually is, but is very strong in both analysis and indictment. Since Daniel has already “promised a review”:https://crookedtimber.org/2010/01/07/i-scream-you-scream-we-all-scream-for-icesave/#comment-301281 (and what could possibly go wrong with such a promise?), I won’t write one here, instead making two short points.

First – one of the excellent aspects of the book is its discussion of the ways in which Irish politicians used the “Celtic Tiger” myth to recreate Irish society as an ersatz version of US capitalism, while right wing and centrist American pundits used it to belabour the US and Europe because they weren’t more like Ireland. To the best of my knowledge, precisely _none_ of the latter group of pundits has publicly revisited their opinions on the awe-inspiring excellence of the Irish economic model in the wake of its collapse. I hope that when the US edition of the book comes out it gets the attention that it deserves – perhaps some journal of opinion ought to ask Paul Krugman (who has “some interest”:http://www.nytimes.com/2009/04/20/opinion/20krugman.html in the Irish case) whether he’d be willing to review it. I also suggest that glib Tiger boosters, starting with Thomas Friedman (whose genuinely foul “The Way of the Leprechaun”:http://www.nytimes.com/2005/07/01/opinion/01friedman.html somehow evaded O’Toole’s notice), should be forced to read the book, memorize it, ingest it, and regurgitate it whole so that the next pundit in the queue can repeat all stages of the process (I imagine that Amity Shlaes would be a “very worthy second recipient”:http://www.jewishworldreview.com/cols/shlaes081501.asp).

Second – general excellence notwithstanding, there is a quite significant hole in the book. Apart from a brief reference near the beginning to the “weaknesses and limitations” of the social partnership process, and an aside later on about how workers made out like bandits from the privatization of Eircom, there is no discussion of the role that trade unions and the left played in either passively supporting the Celtic Tiger economy (through their supine acceptance of inequality etc) or actively embracing it. If social partnership and consultation played a role in Ireland’s economic success during the 1990s and early 2000s, it surely also played a part in its downfall too. It may be too crude to argue that trade unions were bought off by wage increases and tax cuts for their members, so that they weren’t too bothered trying to organize the growing sectors of the economy or provide a substantial alternative vision of Irish prosperity – but it isn’t that far from the truth either. If the Irish right (represented by an alliance of Fianna Fail politicians who were cosy with business, and the PDs who were ideologically gung-ho free marketers) was intellectually ascendant over these years, it was partly the left’s fault. I’d surely have liked to have seen O’Toole discuss this – it seems to me an important part of the story that he isn’t telling.

{ 26 comments }

1

marcel 01.21.10 at 8:43 pm

A bit disingenuous to link to https://crookedtimber.org/2010/01/07/i-scream-you-scream-we-all-scream-for-icesave/#comment-301281 and not here, no?

And while I’m at it, sozialism. Online, Americans who spell it correctly, don’t know what it is, and those who know what it is aren’t allowed to spell it.

2

Henry 01.21.10 at 8:47 pm

I actually had somehow missed seeing dsquared’s follow-up qualification and implicit invitation – but on much of the substantive stuff (especially the shenanigans surrounding the Financial Services Center), he is much, much better qualified to write a review than I am. As well, obviously, as being much funnier. So I am disinclined, all in all, to take the pressure off …

3

Gene O'Grady 01.22.10 at 12:17 am

It’s a bit unfair for criticising anyone for ignoring something by Tom Friedman, isn’t it? What else would a reasonable person do with Friedman?

4

P O'Neill 01.22.10 at 1:17 am

Consider the scenario of a politician with a mysterious capacity to raise undisclosed funds for personal use from business interests.

Republic of Ireland: scenario dealt with by decade long “tribunal” spanning two elections and no definitive accounting yet in.

Northern Ireland: revelations less than a month old already being investigated by financial experts from organized crime unit of the police.

We should have just outsourced all the corruption investigations to RUC/PSNI. Although it’s still not clear that the voters would have cared about the outcome.

On the unions, David Begg is a symbol of the problem. He has yet to explain whether he agreed with all the central bank decisions during the Tiger years or if he used his board position to unsuccessfully argue against some of them.

5

Ray 01.22.10 at 9:04 am

Who are ‘the left’ in your second point? Because there were always people arguing against partnership, people arguing against tax cuts, people arguing against privatization, people trying to unionise new sectors of the economy. Were you expecting the trade union leadership to be doing all of these things? The leader of the Labour party? Some grand coalition to have sprung into life against the PD/FF axis?

And really, how fair is it to suggest that social partnership had much of anything to do with the collapse of the economy? There were two major problems with the economy –
1. Government revenue was almost entirely based on the construction industry. Income tax was lowered and the hole was filled with stamp duty, VAT on building materials, income tax from construction workers, etc. When the construction industry collapsed, the revenue melted away.
2. The banking industry was unregulated, which meant that it too was massively overexposed to the construction industry

Do you think social partnership negotiations were going to take in general taxation and banking regulation policy?

6

mollymooly 01.22.10 at 1:57 pm

I would have thought any element of literary creativity in Ahern’s bookybook came from the ghostwriter.

7

CMK 01.22.10 at 2:07 pm

Re: the Irish Left and the Celtic Tiger.

There’s a lot of truth in your description of the relationship between the Irish soft-Left and the Celtic Tiger. But I think one qualification is that in the Irish context it’s not helpful to equate the ‘trade unions’ with the Left. A fair number of the upper echelons of the trade union movement are Fianna Fáil fellow travellers who see part of their role as marginalising the Left within the unions: see the various efforts to undermine challengers for the leadership of the unions over the past ten years. The experiences of Mick O’Reilly of the ATGWU and of the Irish Locomotive Drivers Association, are two examples of how rigidly the partnership model was policed within the trade union movement, often through fairly unpleasant methods.

8

James Conran 01.22.10 at 2:20 pm

Ship of Fools is indeed a good read. Some of the stuff on Irish political culture in the boom in particular is excellent.

I also agree it feels a bit rushed in places (understandably in terms of seizing the debate while the crisis is still hot, not to mention the Christmas book market). I think the neglect of social partnership’s role in the debacle is reflective of a wider ambiguity in O’Toole’s thesis between these two propositions:

1) neo-liberalism was tested to destruction in Ireland: behold the terrible consequences

2) boom time Ireland lived in an unreal bubble where no real choices needed to be made in terms of political economy – dramatic tax cuts and extravagant spending increases were perfectly compatible

Proposition one is not compatible with proposition two. O’Toole is understandably drawn to proposition 1) in so far as he sees the collapse as more or less vindicating his critique of the Celtic Tiger. Here he emphasises Ireland’s “poster boy” status in the Economist/Wall Street Journal/Cato Foundation.

But he also points out that many non-neo-liberal (or non-conservative – he conflates these two at times) features of the Irish political economy played a role in creating the boom (social partnership, feminism [read: increased female labour market participation], publicly funded education etc.).

I think propostion 2) is the more true. The politics of the Celtic Tiger period were an ideological mush. Economic policy was not consistently neo-liberal, Thatcherite etc. I think many of the neo-liberal aspects of policy – e.g. anti-regulation, tax cuts – are damaged by the collapse. So too is social partnership.

9

James Conran 01.22.10 at 2:27 pm

I meant to mention one bit that must have been rushed, because it surely should have been edited out. When O’Toole writes about the various reliefs that allowed the rich to minimise their tax bill, he gives the strong impression of confusing marginal and effective rates.

10

ajay 01.22.10 at 2:55 pm

I would have thought any element of literary creativity in Ahern’s bookybook came from the ghostwriter.

Not to mention any element of sublimity and funkitude.

11

Ray 01.22.10 at 3:31 pm

James Conran –

I think O’Toole’s position is fairly clear – the boom was not as much the result of neo-liberalism as it’s advocates liked to argue, but the bust was. Partnership, feminism, education were positive factors in growth, nothing to do with collapse. Deregulation and low tax rates helped create the boom, but also caused the bust.

It’s an easy out to say that the politics of govt weren’t completely consistent. No govt’s policies ever are. But the general thrust of government – reducing direct taxation, reducing regulation, supporting privatisation – was clear. And I don’t see where ‘social partnership’ can be anywhere near as responsible. It may have fed into inflation, but it wasn’t inflation that left us in this mess.

12

Henry 01.22.10 at 4:53 pm

Ray – an important prong of O’Toole’s argument involves a cultural shift which he believes (I think correctly) helped enable the shenanigans that brought the whole mess to an end. Here, I reckon that there is a very strong argument that unions were (with a few honorable exceptions) complicit in grabbing what they could for their members, without paying nearly as much attention as they should have to broader issues of social inequity. As early as 2002, “Paul Teague”:http://www.ria.ie/committees/pdfs/teague.pdf was identifying imbalances between increasing wages and profits, and widening of inequality among waged workers as issues that the social partnership was failing to deal with. He also talks to the striking decrease in union density associated with the period of social partnership – this is something that the unions only really pushed on at the very end, when it was clear that the whole process was in trouble.

Furthermore, the unions also _did_ play a significant role in general taxation policy – as often happens with tripartite bargaining (which social partnership really was – the farmers etc were window-dressing), the perceived role of the government was to sweeten the pay deals for the unions somehow. In other countries, unions pushed for better work support programs, social assistance etc – in Ireland they pushed for more tax cuts. I don’t think that this discredits social partnership or tripartite bargaining – but it does point to some serious risks with it (and I suspect O’Toole would acknowledge this, if he were pushed on it – he does mention in passing that the process had flaws).

CMK – this is absolutely a fair point. To qualify the qualification a bit, though, the interesting question is why not only the FF hacks, but also, as P O’Neill points out, the people like David Begg (who is not a socialist revolutionary, but not a FFer either), went along with the program.

13

James Conran 01.22.10 at 6:26 pm

Ray,

“…the general thrust of government – reducing direct taxation, reducing regulation, supporting privatisation – was clear.”

I think it’s fair to say that the government’s philosophy on regulation and privatisation was neo-liberal, but only moderately so. I’m not sure if the FF-PD governments reduced financial regulation per se – certainly FO’T’s argument is that there has never been much regulation of banks to undo. The only big privatisations (unless we count PPPs) I can think of are Telecom Eireann/Eircom and Aer Lingus. Undoubtedly taxes were substantially cut, and the effects of this were masked by revenues generated by both “real” and bubbly growth.

Against this, you had centralised tripartite wage setting, increased welfare benefits and massively increased spending (both in real terms), especially in the health system. In the six months prior to the 2002 election public spending increased 22%. That was an important part of the “general thrust” of policy and it couldn’t be derived from any neo-liberal, free market etc. textbook.

In a sense government policy seems to have been the resultant of the struggle between PD-McCreevey ideology on the one hand and FF populism/electioneering on the other. But with the possible exception of privatisation, you wouldn’t need neo-liberal ideology to explain anything – Bertie/FF didn’t need ideology to tell them that tax cuts combined with spending increases were a good idea.

14

P O'Neill 01.22.10 at 6:47 pm

One sector that does look ideologically-driven is health. There is an obsession with generating private provision at the expense of huge implicit subsidies (e.g. underpriced private use of public facilities) or outright tax incentives for private facilities. The lunacy of “co-location”. The underpricing of private insurance that comes from having the largest insurance company (VHI) with an opt-out from being run like an insurance company. And the treatment purchase program in which they reduce the waitlist pressure by paying for care abroad. These are all measures to squeeze the public system and make it the lower tier in a significantly two-tiered system (unlike UK where despite the problems, NHS is still the preferred provider for most people).

15

Ray 01.22.10 at 7:01 pm

I think the unions pushed for lower taxes because that was the door that was open, but even there, they pushed for taking people out of the tax net at the bottom, and lowering the standard tax rate. Did they push for lowering the upper tax rate?
And ‘general tax policy’ is a lot more than income tax. I don’t think stamp duty vs property tax was part of partnership negotiations, or section 23 extensions in Leitrim, or the many various tax avoidance schemes available to very high earners.

I’m not saying that ICTU were farsighted and selfless contributors to the debate. But I think the suggestion that ‘mistakes were made all round’ papers over the fact that the most serious mistakes were made by a very small group of people, equally that ‘everyone was out for themselves’ isn’t helpful when a (related) small group raked in money hand over fist.

16

James Conran 01.22.10 at 7:01 pm

I accept a lot of what you say P O’Neill, but the hybrid public-private system was inherited, not invented during the boom. The new pro-private policies introduced, especially by Harney, may be bad health policy and fiscally wasteful, but they’re relatively marginal aspects of the health system. Co-location never happened and probably won’t ever. Meanwhile the public health system was hardly starved of funds.

The treatment purchase fund involves using public funds to pay private operators to treat public patients. It may involve an increased private sector role, but so would switching to, say, a Dutch-style universal insurance system (as advocated by both opposition parties). I’m no expert in health systems, but a shift away from a Beveridge/NHS model is probably welcome and certainly doesn’t have to mean a move to an American-style private health system. Harney may want that (I don’t know) but the treatment purchase fund isn’t evidence of that. All public goods contain private inputs. The education system buys books and tables from private suppliers.

17

James Conran 01.22.10 at 7:33 pm

To go back to Ray’s previous comment, he said:

“…I don’t see where ‘social partnership’ can be anywhere near as responsible” – i.e. as responsible “the general thrust of government – reducing direct taxation, reducing regulation, supporting privatisation”.

The role of regulatory failure in bringing about the crash is obvious, but as I said before this seems to have been more a matter of long term neglect of financial regulation rather than the ideologically driven undoing of a pre-existing regulation regime a la Reagan or Glass-Steagall.

I’m not sure what role privatisation could have had.

The only thing the tax cuts can be blamed for are things that social partnership can be blamed for too: fuelling inflation (thus hurting competitiveness) and structural fiscal deficits which were masked by bubble revenues and left us in a poor fiscal position to deal with the crash. (However I would note that Irish exports, however dodgy the statistics due to MNCs, seem to have held up remarkably well and that the likes of the IMF thought fiscal policy was in structural balance until things went belly-up and they decided we had had structural deficits all along.)

It is true of course that the many property investment reliefs fuelled the fire, but I don’t think this was a central cause of the bubble. For this we probably need to look at EMU – another part of the puzzle ignored by O’Toole, despite being utterly central to the story of both boom and bust. Like social partnership (but far more important) this is ignored presumably because it is inconvenient – one of the book’s ideas is that we abandoned our European identity and went American (cf Harney’s famous Berlin Vs Boston remarks). The things FO’T likes caused (or rather were unacknowledged factors in) the boom, the things he doesn’t caused the bust. So transnational redistribution of wealth via the EU helped bring the boom. But it’s our American alter ego that causes the crash. I don’t know if analysing the impact of joining the Eurozone would have been amenable to the considerable style O’Toole brings to his polemic, or to the cultural focus of his narrative. It is an inherently technical, possibly dull, topic. But it certainly matters and warrants more than it is given in Ship of Fools.

18

Ray 01.22.10 at 8:50 pm

The only thing the tax cuts can be blamed for are things that social partnership can be blamed for too: fuelling inflation (thus hurting competitiveness) and structural fiscal deficits

How did social partnership cause structural fiscal deficits? An increase in public spending, fine – and even there you have to accept that public sector wage increases were more of a response to than a cause of inflation – but how did it force the govt to base most of its revenue stream on property?

(Regulatory failure was not new, but more important given the massive expansion of the financial services sector and how that tied into construction).

I can’t speak for F O’T, but he would probably agree that EMU made it harder for the govt to cool off the boom and respond to the crash, because it removed control over interest rates for example. But since the govt was doing its best to inflate the property bubble, would they really have raised interest rates? And given that EMU removed some of the policy options available to the govt, shouldn’t have they made more use of the options they still had?

19

CMK 01.22.10 at 9:05 pm

Henry, my personal reading of it is that men like Begg viewed the trade union movement as a vehicle for social mobility (their own and that of others) and, also, they developed a distaste for what they regarded as the futile and divisive industrial relations climate in Ireland during the 70’s and 80’s. Coupled with the severe economic and political problems of the 1980’s, partnership would have appeared to men like Begg to offer the trade union bureaucracy a chance to participate in governance and influence far beyond what could be achieved through conventional trade union activism. Partnership, by its very nature, meant close involvement with Fianna Fáil and, I suppose, a form of the ‘Stockholm Syndrome’ kicked in a some point; boundaries were blurred; trade unionists leaders forget that they represent workers and regarded themselves as brokers between the state, Capital and Labour. And, at a personal level, proximity to the centre of power is seductive for most individuals and trade unionists are no different. Mr. Begg, however, will have a lot of explaining to do pretty soon, given his membership of the Central Bank board during what we now know to have been a wholly illusory ‘boom’. My recollection is that F O’T touches upon the role of the Central Bank in ‘Ship of Fools’.

20

James Conran 01.22.10 at 11:15 pm

Increased public spending, including on public sector pay, didn’t force the government to run a structural deficit – after all they could have funded the spending by increasing (or simply not cutting) taxes. But by the same token they could have funded tax cuts with spending cuts or freezes (or even just moderated increases). As it happens they did neither. Instead they cut taxes and increased spending while also reducing the debt/GDP ratio, all based on transitory tax revenues. Clearly both the tax cuts and the spending increases were responsible for the structural deficit.

Sure the government should have made use of the policies it had available, although it would have had to be an international outlier in terms of responsibility and wisdom to do so in fiscal policy, given that the national debt was coming down even as all this cash was being splashed via tax cuts and spending increases. I think the Chilean government did something like this with its windfall revenues from copper prices in recent years, eliminating the national (net) debt. It wasn’t popular at the time and after it was completely vindicated it doesn’t seem to have been rewarded to judge from the recent election result…

21

EWI 01.23.10 at 12:11 am

It wasn’t popular at the time and after it was completely vindicated it doesn’t seem to have been rewarded to judge from the recent election result…

The outgoing Chilean leader has an 80% approval rating. Blame the defeat of her would-be heir on a lacklustre performance and a media mogul opponent who could throw unlimited resources at his campaign.

22

EWI 01.23.10 at 12:13 am

@ Henry Farrell: I foresee a future deal where Lowry and O’Brien’s troubles fade away in return for less enthusiasm for FF heads (in their own corruption worries).

23

EWI 01.23.10 at 12:24 am

On the Irish health system; co-location is still in progress, so far as I last heard. And the HSE is nothing if not a vehicle for moving what public health-care we have towards privatisation (for those not familiar with Ms. Harney, among other things her husband was the head of IBEC, the main business lobby here).

On the unions; utterly useless, as others have mentioned riddled with FFers, and only ever bestirred themselves to keep real trade unionists like O’Reilly and Ogle out. The trade union leadership would make fine US Democrats; their preferred strategy of the past twelve months was to leak word to the press that they weren’t serious about what they were supposedly fighting for, and to surrender to government and the business lobby in advance.

Most of them are now hitting the eject button to get out before the angry membership starts breaking down the door. Meanwhile, it seems left up to isolated individuals and groups in Impact to actually implement the industrial action scheduled for this Monday in the public sector, the leadership already preparing to surrender (again).

24

James Conran 01.23.10 at 1:10 am

True, Michelle Bachelet was extremely popular. But, still, the finance minister’s prudence wasn’t popular and the incumbent party didn’t win. Not sure why besides the reasons you cite.

Here’s the story about the copper-related prudence by the way: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aw3k8Wv9eY2I

25

P O'Neill 01.23.10 at 1:43 am

The National Pension Reserve Fund was meant to be the Chilean style piggy bank from the good times, but they’ve just blown a large amount of it on the banking bailouts, which is another sector where an ideological interpretation of government policy may be warranted — in the crisis years.

26

James Conran 01.23.10 at 10:28 pm

Yes I definitely think there is some kind of ideological issue behind both the September 2008 guarantee and NAMA, though of the unconscious variety rather than the more explicit McCreevey version. To be fair we’re probably better off for having the NPRF there to fall back on in the crisis even if bank bail outs are not what it was designed for.

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