My wife and I recently returned to New Hampshire from a ten day vacation to County Galway in Ireland. While there I wanted to get a sense of how the global economic decline was impacting the Irish. The news has been that they have been experiencing their own boom and bust story and I wanted to see how it may be similar or different from our own. I found that we share much that is troubling.
Historically, Ireland has not been known as an affluent country. In many ways it never seemed to shake its reputation of a poor country from which millions escaped potato blight and the oppression of the English. Here in America, the Irish immigrants seemed to be more known for scruffiness and drunkeness until President Kennedy helped polish their image. Then, during the 1990’s we started hearing of a different tale coming out of Ireland. An Irish economic emergence, which was to become known as the Celtic Tiger, was recognized worldwide. Suddenly we heard that more young people were walking the streets of Dublin with cell phones glued to the sides of their heads than were youth in New York City. Multinationals and major American firms were setting up shop. Apple, for example, established its European headquarters in Ireland. A well respected educational system combined with strong national pride had led Ireland to be a major player in software, chemical, and pharmaceutical industries. Property values, commercial development, and the overall standard of living began to increase. Even the brutal politics of the North softened as Sein Fein and Unionists decided to oppose each other free of violence. Musically, the Chieftains moved over to make room for Riverdance and Celtic Women. Western Europe’s poorest country had suddenly become chic.
But along with much of the western world, Ireland’s economy began to sour, and precipitously. Last Fall they, along with Iceland, had hit a brick wall. The Celtic Tiger era seemed to grind to a sudden halt. It didn’t take being in the country long by reading newspapers and speaking to the very open and chatty residents to see what had happened. Their story sounded familiar albeit with a different accent. The banks had over-speculated on property, construction, and commercial development. The largest banks, for example Associated Irish Banks (AIB) suddenly found 25% of their assets distressed. In order to remain solvent commercial and residential lending needed to be sharply reduced or curtailed. The big national debate now is about the necessity of the government’s National Asset Management Agency (Nama) plan, which is their version of a bank bailout complete with all of the controversy we see here. Unemployment is rising and the youngest generation of workers is getting their lesson in impermanence by having to tighten belts for the first time in their lives.
So, what do I take from this dual sob story? It is that ordinary citizens have been alerted to the high impact which can result from the interaction of banks and real estate on everyone’s lives. These high stake business relationships can greatly affect the lives of people many degrees removed the principle players. Both Irish and Americans citizens are appropriately asking themselves whether or not greater oversight and regulation should be asserted to those in the banking industry and the politicians they report to. If a bad decision hurt just themselves that would be one thing, but unfortunately their bad decisions can create black holes into which we all get sucked. The result of actions taken by unelected and enormously influential banking representatives has been economic calamity, especially in higher unemployment. Should not the people have a say in the possible negative outcomes of their decisions, which are contrary to our respective national interests?
Americans share much with the Irish both culturally and economically. And although it’s not realistic to expect boom times to go on forever it is nevertheless reasonable to expect business, especially a wide ranging one like banking, to be mindful of what is best for their nation. If they can’t regulate themselves in that endeavor, then someone will need to step in and do it for them.