THERE'S no surer sign of extreme crisis than when an economist feels free to try his hand at satire. In the "funny peculiar" bit printed in italics at the start of his recent controversial Irish Timesarticle, Morgan Kelly told us the game is up for this Republic and recovery is impossible. But economists don't do satire well. Some, not Prof Kelly of course, don't even do economics well. One thing very few of them do at all is modern history, so here are a couple of lessons.
The German author Hans Fallada set the scene for his epic novel Wolf Unter Wölfen(Wolf Among Wolves) in the following words: "This is Berlin, Georgenkirchstrasse, third courtyard, fourth floor, July 1923, at six o'clock in the morning. The dollar stands for the moment at 414,000 Marks." It can be seen from the exchange rate that Germany's economy was in trouble. If this State had stayed out of the euro, would the currency speculators have ensured a similar conversion rate for the Irish Pound? The Germany of those days was in a terrible state and worse was to come: the rise of Nazism, defeat in war and the destruction of the country's entire infrastructure. But Germany has survived to become Europe's largest and strongest economy.
In 1991, I found myself in Moscow as the Irish Timescorrespondent, reporting on the fall of the Soviet Union and the rise, if that's the proper term, of the New Russia. When the Red Flag was lowered from the Kremlin, the young market-reformer economists, mainly from families of the old Communist establishment, launched a programme of shock therapy with the Bolshevik ruthlessness of their daddies. The immediate result was inflation of 2,500 per cent but there were no riots, or disturbances or lootings, for the Russians are a fatalistic people. Their historic experience has seen to that.
The Tsarist autocracy in which peasants starved had been followed by the first World War in which more than three million Russian citizens died, a civil war in which nine million died, Stalin’s terror in which more millions lost their lives and more peasants starved and a second World War in which 26 million Soviet citizens were killed.
Inflation of 2,500 per cent was chickenfeed compared to those tragedies and Russians knew in their hearts that because they had survived worse in the past they would survive this too. They did not lose their confidence.
One Russian friend put it in the clearest terms: “Capitalism is a terrible system, it is cruel, it has no compassion. But it is there. It is real. It exists.
“Communism is a wonderful system in which everyone is cared for and everyone has opportunities to develop. But it was never there. It was never real. It never existed. We have lived in a dream world. Now we must live in reality. There is no other choice.” Does the bit about living in a dream world ring a bell with those who rode on the back of the Tiger? In 1992 Russia’s dream world was replaced by a nightmare. The elderly and the poor were forced on to the streets to sell their belongings in order to survive. To this day certain pictures of deprivation remain vivid in my mind: an entire family, their previous prosperity shown in their good winter clothes, now standing destitute in the snow of downtown Moscow singing the haunting hymns of the Russian Orthodox Church in search of alms; an elderly grandmother in a metro station forced to sell pornography to survive, street underpasses choc-a-bloc with beggars.
There was some real satire too, not from an economist but from an inmate of a prison camp in Novosibirsk who wrote to President Yeltsin asking permission to send food parcels to his family on the outside.
Just six years later, in the autumn of 1998, it happened all over again. An example of the inflation in that year struck me forcefully in Sally O’Brien’s Irish Pub on Bolshaya Polyanka Street. I had arranged to meet a contact and bought a pint of Guinness while I awaited his arrival. It cost me 64 roubles. My contact arrived less than a minute later. I bought him a pint. It cost 76 roubles.
Rouble-denominated bond yields exceeded 200 per cent. The Moscow Stock Exchange index MICEX fell 65 per cent in 35 minutes. Banks collapsed more dramatically than in Ireland, but there were enough of them left over to keep the country going.
There were no daily forecasts of impending total ruin. There was no prognosis that the “patient” would never recover, for Russia had always survived and now it has. Its people may not now live in a liberal democracy but they are better off financially than at any time since the second World War.
Russia’s vast natural resources helped it overcome its difficulties and one of those resources was its resilient people. Ireland’s greatest natural resource is her people too, a people who in previous generations survived against all the odds. But has the daily dose of doom fatally eroded the Irish people’s confidence? There are some indications that this might be the case.
Some even want a return to the bosom of Mother England. Two small countries in horrific financial difficulties have adopted a more mature attitude. Icelanders don’t hark back to Danish colonial days and no Latvian would even countenance a return to rule from Moscow. Like the Irish they are justified in demanding that the culprits be punished. More than that, they have retained their confidence. Because they have done so they will survive.