IRELAND’S ECONOMIC crisis was mostly self-inflicted and could have been avoided, economist Colm McCarthy told the MacGill Summer School in Co Donegal last night.
Formerly chairman of the body known as “An Bord Snip Nua”, Mr McCarthy said the current economic crisis is worse than its predecessor in the 1980s. “First of all the banks didn’t go bust in the 1980s.” Ireland did not have its own exchange rate now and the “well-timed” devaluation of the Irish punt in the 1980s was no longer an option.
Some European governments could borrow as much as they wanted but states such as Ireland, Portugal and Greece had to face very steep increases in borrowing costs. The Greeks had “effectively lost their economic sovereignty” in a bailout by the International Monetary Fund and the European Union.
There had been a “really massive” failure of economic governance in Ireland. “We’ve had relatively a bigger banking collapse than anyone else.” Most of the damage was “self-inflicted and could have been avoided”. There were plenty of warnings but these were not heeded.
There was institutional failure in the banking sector. There had been “populist public spending bubbles” from 1974 to 1981 and 2000 to 2008, twice in one generation.
The political and administrative system was “dismissive of dissent” about the strategic direction of macro-economic policy.
Quite a few economists opposed joining the euro and there was an unwillingness at the time to thrash out the pros and cons of the issue.
More recently, former taoiseach Bertie Ahern was roundly applauded at an Irish Congress of Trade Unions conference in Bundoran when he suggested that his critics should “commit suicide”.
“The public debate is dominated by lobbyists and not by analysis,” said Mr McCarthy. “I want to have a go at the media.” The public debate on economic policy was “just not serious enough”.
“A lot of the broadsheet media have gone downmarket,” he said and this was also the case with a lot of RTÉ’s current affairs coverage. “The media, again, tend to be quite willingly fed by lobbyists”, with a lot of “rewritten PR handouts”.
The banking inquiry would commence shortly and the role of auditors in the “fiasco” that had occurred “really has to be on the agenda”.
There had been a tendency to blame the Department of Finance too much for the banking crisis. The Central Bank was the supervisory authority. He would fault the department for many things but “not for failing to bark after hiring a dog”. Mr McCarthy was recently appointed by the Government to chair a review group on State assets and liabilities.
Former minister for education Gemma Hussey said that, in 2016, Ireland would celebrate the 100th anniversary of the 1916 Rising and she wondered if “the elephant in the room”, ie, proportional representation, would still be there and continue to be ignored.
“Will the leaders of our country in that year still have been elected under the same outdated system? Will they still have managed to avoid the job which is crying out to be done – the abolition of multi-seat proportional representation and its replacement by a modern, efficient system worthy of a good European democracy?” she asked.
Labour Party justice spokesman Pat Rabbitte said political reform was not simply a matter of changing the electoral system: “Dereliction of duty by government is separate from weaknesses in the political system.” Wrong decisions by government and a propensity to avoid decisions for reasons of “self-serving cronyism” should not be conveniently filed away under defects in the system.