Cronyism and Impunity – Ireland Pays the Price

by Michael Patrick O'Leary

This article was published in the Sunday Island on March 5, 2011.


On February 25 2011, Ireland chose a new government.The turnout was 70.1% per cent and was the highest since 1987. The election was a resounding success for the Fine Gael (FG) party and its leader Enda Kenny, although the proportional representation system means that FG will need a coalition partner. Kenny, who will be the new Taoiseach (prime minister) himself won 17,472 first preference votes in his Mayo constituency- the highest number for any candidate. The outgoing Fianna Fail (FF) government was severely trounced. FF have been in office for most of the republic’s life – 60 of the 79 years since it first won office in 1932. Its vote has only rarely dipped below 40%. This time it was 15%.

Many senior figures lost their seats. One casualty was Seán Haughey (son of the notoriously corrupt former Taoiseach Charles Haughey). In the Dublin area the FF vote was down to 8% with only one FF candidate winning a seat.

FG won 76 seats, Labour 37, FF 20, Sinn Féin 14, United Left Alliance 5 and Others (including the United Left Alliance with five) 14. The share of first-preference votes was: FG 36.1%, Labour 19.4%, FF 17.4%, Sinn Féin 9.9%, Independents 15.2% and Green Party 1.8%.

The Green Party were in government in the previous coalition. None of their candidates were elected this time. They were punished for their complicity.

Gerry Adams for Sinn Fein topped the poll in Louth, in the north-east. His party scored its best-ever election result in the Republic and will be a major Opposition force.

When FG was in government last, it formed a coalition with Labour, with Labour’s Dick Spring, former Rugby international, serving as deputy PM. This time, the courtship has not been smooth. Labour are in a stronger position than heretofore. There are major differences between the two parties on the reduction of public-sector debt; the ratio between tax and cuts and public-sector reform. The Labour leader, Eamon Gilmore, said he was confident that a programme for government could be negotiated.

The election was caused by the meltdown of the Irish economy after a few years when it seemed a model to the world. Between 1993 and 2000, Irish GNP grew by an average of 9% a year; unemployment—which had reached a peak of 17% in the 1980s—almost disappeared.

People flocked to Ireland from Africa and Eastern Europe. Now emigration, the curse of the island nation throughout history, is rising again. With youth unemployment exceeding 30%, many young Irish people have already fled abroad. According to the Economic and Social Research Institute, at least 100,000 Irish citizens will be emigrating in the next two years.

The country’s well-educated workforce made it attractive to foreign investors, particularly American corporations. The US share of industrial investment in the Irish economy rose from 32% in 1990 to 68% in 1997. FDI was concentrated in computers, pharmaceuticals and electronic engineering. The Celtic model did not have enough sustainable indigenous strength. Multinational corporations were responsible for 85% of total Irish economic growth. Multinationals exported 90% of their output; Irish-owned firms sold less than 40% of what they produced abroad.

Part of the illusory Irish prosperity depended on “financial services” – in other words, funny- money practices akin to money-laundering, which caused Dublin to be called “Liechtenstein on the Liffey”.

Property and financial services created a bubble economy. Despite the wealth of some, Ireland ranked second-to-bottom in the OECD league tables for poverty and inequality; only the USA fared worse. The number of households earning below 50% of the average income rose from 18% in 1994 to 24% in 2001. Government expenditure on social protection as a proportion of GDP was 20% in 1993, but fell to 14% by 2000—barely half the EU’s average.

When I lived in Ireland builders were a scarce and expensive commodity. We wondered why so many houses were being built when the population never exceeded 4.5 million. The average price of a new house rose from €67,000 in 1991 to €334,000 in 2007, by which time there were 21 new units of housing being built per thousand citizens. Our own house was an old one but we saw its market value rise by 464% in four years. Unfortunately, the apartment we bought when we sold that property has no chance of being sold now for anything near what we paid for it; it is doubtful if it can be sold at all.

Construction became the main source of new private-sector jobs, with employment in the industry rising by 59% between 2000 and 2008. Some estimate there are 300,000 unoccupied homes. The National Housing Development Survey identified 2,800 “ghost” estates which presented safety hazards. Hundreds of thousands of homeowners have already found themselves saddled with negative equity as a result of the crash, with as many as one in seven families affected. The jig is finally up for the Irish. Ireland had to follow Greece with the begging bowl to the EU and IMF. PM Brian Cowen could not absolve himself from blame on the grounds that the problem started before he took office – he had been the finance minister who engineered the boom and failed to stop the bust.

In Sri Lanka we have the mudalali; in Ireland they have the Gombeen Man. Politicians achieve prominence by cronying up to influential local figures and doing favours like getting jobs and planning permission in return for political support. The “brown envelope”, i.e. bribery, has long been a feature of Irish politics and commerce. FF has been particularly adept at developing clientelist networks which delivered just enough goods to ensure personal loyalty and gratitude through parish-pump politics.

Widespread disillusionment with the political class has been focused by writers such as Fintan O’Toole and David McWilliams. Bob Geldof felt it necessary to announce that he did not intend to run for president in October. In one of his more printable comments the ex-Boomtown Rat spoke of boom and bust. “The overwhelming feeling I have is one of sadness for the country – and of anger for the incompetence beyond measure, the sheer stupidity and the clear venality which has Ireland where it is now”.

O’Toole wrote: “People are sickened by the amorality of so many aspects of our public life, particularly those where politics and business overlap. Cronyism and impunity are the twin pillars of an edifice that has to be demolished.”

As with austerity measures in all countries, it is not the culprits who tighten their belts. Ordinary taxpayers pay for bank bailouts, the old and the vulnerable see their welfare benefits and public services cut savagely, while speculators whose “risk-taking” caused the problem continue to get their bonuses. The bondholders who engaged in speculative commercial activity should be punished by taking the losses rather than getting unlimited compensation.

Sri Lankans who call for more privatisation and less regulation should take note of Ireland’s fate.