Ireland: the Bank that Ate a Country (2010)

Submitted by martin on 17 November, 2010 - 9:50 Author: Editorial
Ireland

James Connolly, the Irish socialist and trade union leader shot by the British in May 1916 for his part in the Easter Rising, was convinced, early in the last century, that capitalism simply could not develop fully in Ireland.

From that assessment he argued that only a Workers’ Republic could really free Ireland from foreign domination. In any case, he didn’t want capitalism to develop, go on developing — didn’t want the Irish bourgeoisie to saddle themselves more securely on the backs of the working people of Ireland.

He was wrong in thinking that capitalism could not develop fully in Ireland. The way Ireland’s financial crisis is going now suggests he was entirely right that only a Workers’ Republic could honestly serve the people of Ireland.

The bullying by the international capitalist money markets of this small country of 4.5 million people is scandalous. The European Union governments are trying to force the Irish Republic to accept their proffered big loan to help in its economic difficulties. The Dublin government is resisting because with the bail-out will go handing over key areas of state independence to the money-lords of Europe — for instance, giving them the right to dictate higher taxes to Dublin.

Ireland boomed in the 1990s and until a couple of years ago. There was much talk of its “Celtic Tiger” economy. But it was an economic boom that rested on top of a financial quagmire — a great property boom financed by mortgages from banks that themselves built up a pyramid of debt to other banks.

In 2007-8 the collapse of a bubble of “subprime” (that is, bad) mortgage debt in the USA panicked American and other financiers, bankers, and speculators, and led to a global economic crisis. Ireland’s “Celtic Tiger” quickly turned into a scared and very small cat in the international financial jungle.

The Anglo-Irish Bank had been the most reckless of all in seeking fabulous wealth for its directors by way of making enormous numbers of dodgy loans and recklessly borrowing to finance its operations. It faced sudden bankruptcy. Its bankruptcy would have had catastrophic consequences for the other Irish banks. If the banks collapsed, the country’s economy would seize up.

Irresponsible bankers had brought the Irish economy and the Irish people to the brink of catastrophe.
And so, as in Britain and America, the government stepped in to bail out the banks. The Irish politicians (the government is a coalition of Fianna Fail, De Valera’s old constitutional nationalist party, long a party of big business, with the Greens) went further. In September 2008 the government guaranteed all the deposits and debts of the banks. No other country went that far.

The measure caused resentment in Britain, because it gave the Irish banks an “unfair” advantage in the competition for customers: if the Irish government was offering such guarantees, why should anyone stay with shaky British banks?

Like the mythical Atlas holding the world on his shoulders, the Irish coalition government heaped the financial institutions on the shoulders of the Irish state. It nationalised the Anglo Irish Bank to save it. In late 2009 it paid out 54 billion euros to the banks to take “bad” assets off their hands (at above market prices) and quarantine them in a government-run agency, NAMA.

It brought in a raft of savage cuts in welfare and social spending. The living standards of the people were pushed down ten per cent and more. Unemployment rocketed. It is now 14% — double Britain’s rate — and rising.

These savage attacks on the working class and working people were better, so Ireland’s rulers thought, than the surrender of control of taxes and so on that would go with a European Union or IMF “rescue” package.
But the Irish state is no Atlas. Underwriting the debt of the banks pushed the state itself towards financial default. How would it finance what it was doing? By selling bonds (IOUs) on the international financial markets.
Seeing the country’s weakness, the international financiers have made it very costly for the Irish government to raise money. They have demanded prohibitively high interest rates.

If Ireland collapses financially, it will be a catastrophe for its creditors, mostly banks based in the bigger countries of the European Union. It will also impact badly on the other weak EU economies — Greece, Portugal, perhaps Spain, perhaps Italy. If one or more of them collapses, that will, as with falling dominoes, hit the bigger economies.

To change the image — like mountain climbers roped together, one could drag another down, and that would drag another, and so on. The abyss yawns.

That is why the EU is twisting Dublin’s arm to let it come to the rescue — in the interests of all the countries of Europe and beyond, and in the first place of their bankers.

Dublin will probably give in. The government’s resistance may only be “for show”, to an electorate that is already hostile to the politicians and would probably resent very much the affront to a national sovereignty won with so much difficulty.

The whole international crisis of the last three years is portrayed vividly in the Irish story. Crazily irresponsible, greed-maddened, self-serving private citizens in control of the commanding heights of the economy, and running things for their own benefit. A system that lets them go scot free from the catastrophe they made for millions of people.

Politicians who are in the pockets of the very rich. Who put in billions of taxpayers’ money to rescue the bankers. Who will return the banks to full control of the financial pirates once the crisis is sorted out.

In Ireland politicians have long scarcely bothered to hide corruption. Charles J Haughey, Taoiseach [prime minister] in the 1980s and early 90s, took a million pounds from the man who owns the Dunne’s chain-store network, and didn’t spend a day’s time in jail for it when the truth came out. Now the politicians are hand in glove with the looting bankocrats to the tune of billions.

An angry electorate is more or less powerless until the government decides to call a general election, and then faced with little choice: the main opposition party, Fine Gael, agrees with the basics of what the government has done.

Capitalism is rampant in Ireland — contrary to what James Connolly expected. Rampant capitalism is what Connolly knew it would be. There may be a lot of Irish workers who will draw the obvious conclusions from that in the years ahead.