Madam, – As another non-practising economist, who until recently worked at a senior level in the banking industry in Ireland and the UK, I would disagree with Anthony Wills’s analysis (October 15th), despite its sound logic and rationale.
His argument does not consider the political culture of Ireland which, in my view, is wholly ill-disciplined, favouring, at every opportunity, the softest option possible until the wheels are about to fall off (1987) or do fall off (2008-10). Even the Progressive Democrat “mould-breakers” were unable to stand over hard, rational decisions (O’Malley and Barringtons Hospital: Grealish and health cuts in his electoral patch). The Fianna Fáil and Fine Gael mindsets, which reflect a far greater percentage of “we, the people”, are far more spineless in the face of hard decisions, such as those needed for decades to get those who spend the people’s money to treat it as if it were their own, rather than as an endless sprinkling of manna from heaven. As for Labour, the vacuity and populism of its opposition confirms the point.
Applying this lens to the current debacle reveals a Government wallowing in, then becoming dependent on, the flood of stamp duty and construction related VAT, “current (and therefore supposedly endlessly recurring) revenue”, totally unable, because of our political culture, to get value for it. Value would have come from, for example, getting a fair return from the “ATM” of benchmarking!
Separately, we had a regulatory system which watched the banks’ wholesale funding ratios soar to the point of unsustainability. Even if they had been competent enough to seek to call a timely halt, do we seriously believe the Bertie Ahern-led government would have tolerated the implications? It was the discipline imposed from outside by the Maastricht Treaty, the forerunner to the Single Currency, which underpinned the stability and growth we enjoyed from the early 1990s until the froth of the early years of the 21st century, so well analysed by Mr Wills.
Were it not for this external constraint, do we seriously believe we would have been disciplined enough, as an electorate, to have pursued fiscal policies consistent with avoiding a succession of soft option currency devaluations? We had the power to manage the implications of cheap euro-zone money (for example very high tax rates on development land profits versus incentives to build apartment blocks in Carrick-on-Shannon!), but no stomach.
Taking a 35-year view, including the auction of the 1977 election, I do not believe we have the discipline required to stably manage our own financial affairs over the long term. Our government and its masters, a combination of the electorate and the public-service monolith, do not emotionally accept the concept of limited public resources which must be managed well to get value. Europe thankfully provides a bit of that discipline, as evidenced by the requirement for a four-year budgetary plan. Sadly this time, it is much too late. – Yours, etc,