There was no one definitive reason for Ireland’s supersized banking crash in 2008. In its place we had to content ourselves with several partial explanations – excessive risk-taking, casino banking, non-existent regulation – which collectively amounted to what various reports called “systems failure”.
For an angry public, who had been forced to take on €64 billion in bank debt and careered into a biting austerity project, the systems failure explanation was a cop out. It seemed to lay blame everywhere and therefore nowhere. We wanted a proper fall guy – a greedy, incompetent, rule-breaking banker – but crises aren’t caused by individual bad apples. They stem from more fundamental issues.
One of the principal drivers of the financial crisis was out-of-control credit growth, a process that had been building for decades, and one in which the wider public did, on some level, partake. I’m straying dangerously close to the late Brian Lenihan’s “we all partied” comments but most of us knew what he meant at the time even if he was excoriated for it.
Which brings us to Ireland’s current high-price culture and how much we as consumers are implicated in it.
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Eurostat’s annual price survey, published last week, pinpoints Ireland as the most expensive state in the EU, with prices last year 46 per cent above the EU average. Prices here have been on a divergent path for several years. In 2015, the same report indicated they were 28 per cent above the EU average; the difference has risen every year since.
The cost of alcohol and tobacco, energy, transport and communications here are now all grossly out of kilter with European norms.
Just like the banking crisis, there are several plausible explanations: our island status, our small and dispersed population, higher wages, a lack of competition, taxation (particularly on alcohol and cigarettes), insurance costs, lower government subsidies for things like transport and childcare.
They all contribute but there’s no single, all-encompassing explanation for why we have Scandinavian prices without the salaries to justify them.
That doesn’t mean we’re not convulsed by the issue. Reports of price gouging or excessive profiteering form an increasing segment of the news flow.
A story about the price of tea and scones at Cashel Palace Hotel in Co Tipperary published on The Irish Times website last year knocked reports about Russia’s invasion of Ukraine, which had just happened, off the most-read list.
It’s not obvious that a “Buy Irish” campaign similar to the one held in the 1980s would have the same buy-in now as much of the cynicism is directed at Irish retailers.
The role we as consumers play in this high-price culture isn’t quantifiable but we do seem to be considered a pushover compared with our European counterparts. Part of this is that Irish people have a tendency to conflate frugality with stinginess, hence we don’t like to make a fuss about money even in the face of bad service or a lack of value. Questioning a bill is form a torture for many.
Irish consumers also tend to be suspicious of cheaper products, equating price with quality when the relationship doesn’t always hold. Surveys show shoppers here tend to prefer branded goods over own-label products at a level that’s not replicated elsewhere.
While part of the grocery market here is discount, the main segment isn’t, meaning you can have the same products being sold at different prices almost in the same vicinity, suggesting price competition is still relatively low. In Germany, the entire supermarket offering is discount.
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“What happens in Germany is that everything is a discounter, their main supermarkets are the discounters,” Daragh Cassidy, head of communications at price comparison website Bonkers.ie, says. “You just wouldn’t have a situation where something costs half the price across the road because all the Germans would go to the cheaper place,” he says.
“Watching prices or shopping around is kind of looked down on here,” Cassidy says. People are more careful with their money in Europe, he says, noting Ireland has a greater amount of convenient stores, where the mark-up in prices is considerable.
It can seem harsh to implicate the consumer in some of the obvious price gouging that goes around us. The mark-up in hotel prices in Dublin for next summer’s Taylor Swift concerts – room prices at one establishment were reportedly lifted from €359 to €999 – is a stonewall example. And blaming it on Booking.com, as some hotels have done, is dubious at best. These instances only give the Government more reason to remove the lower rate of VAT for hospitality.
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But despite the recent spike in inflation, consumer demand hasn’t really blinked. Firms have been rising prices and we’ve been paying them. In many sectors, spending has been rising in tandem with prices.
Demand, of course, is a cumulative measure and doesn’t necessarily reflect individual households increasing their spending. There are greater numbers of people at work – a record 2.6 million – and spending.
Economists will also cite capacity constraints as a driver of prices. In his annual pre-budget letter to the Minister for Finance, Central Bank governor Gabriel Makhlouf said there were now “binding capacity constraints” in the Irish economy and labour market that were contributing “to more robust domestically-driven price inflation”.
There is unfortunately no smoking gun in Ireland’s high-price culture but a string of partial, plausible explanations, one being a consumer that doesn’t like to complain.
