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Why We Are Where We Are
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Tuesday December 28, 2010 22:57 by Bryan Wall
"The ongoing economic destruction of Ireland is not surprising when one looks at the history of collusion between bankers and politicians, at the highest levels, in Irish politics. Over the years, some of this has been revealed by insiders and tribunals. "
Throughout the history of the Irish state, Ireland was seen as an almost backwater of the Western World. It was a country literally and both metaphorically on the fringes of Europe with an economy which always seemed to be floundering in the doldrums. All of this changed in the nineties with the onset of the Celtic Tiger which was effectively brought about by low corporate taxes, an educated workforce and the low cost of wages. All of this led to a massive upturn in the economic fortunes of Ireland but when things should have naturally slowed down, those with political power ensured that the Celtic Tiger was extended beyond its natural lifespan by creating a bubble. The bubble in this case was a property bubble and like all bubbles in economic history, it was bound to burst. The government, and their associates in the banking industry and construction industry, did their best to try to convince people, not only in Ireland but also all across the world, that Ireland was the perfect economic model to follow. In reality it was all smoke and mirrors when in actual fact the entire economy was based on a lie; the need for more and more property. This lie, along with the cronyism at the very top of Irish politics, has led to the situation which we are now in where we are likely to default on our sovereign debt within the next 2 years.
Those in power have always had a “cosy relationship” with the banking industry, despite any pretensions that indicate otherwise. Thirty years before the current crisis, the banks had been “colluding, on a massive scale, with fraud, tax evasion and routine breaches of exchange control laws”. Put simply, during pre-Celtic Tiger Ireland, whilst the country was suffering from mass unemployment etc, the privileged classes were abstaining from legally paying their taxes, DIRT, and they were willingly helped by the banks. This was all known by the Department of Finance however. “The state authorities knew about widespread organised crime committed by financial institutions and their customers and did essentially nothing to stop it”. Nothing was done because the government saw “its job as supporting the banks rather than controlling them”. This is exactly what has happened in the last two years with the bank guarantee and NAMA. Bank debt is now intertwined with sovereign debt and this is what is slowly killing the country and why we have had to resort to a bailout from the IMF and EU. The excuse given for this “light-touch” approach was that it was in the “national interest” to not “rock the boat” as otherwise the elites would simply leave the country with their money. This was the main fear and reason that those in government wheeled out to the public and still continue to do. Those in power just let it happen and they did so again when it came to Ansbacher.
Not only were members of the Central Bank directly involved in the Ansbacher fraud, but so was the Taoiseach at the time, Charles Haughey. After he became Taoiseach what little investigative research was going on into Ansbacher by the Central Bank was toned down even further. This is a perfect example of just how blurred the lines between the State, Politics and the machinations of the economy, and the main players in the economy, are. As a further example, Adrian Byrne, one of the inspectors chosen to examine the bank involved in Ansbacher at the time, G&M, and seemed to turn a blind eye to it, later went on to become “a key figure in banking regulation during the Celtic Tiger years, firstly as the Central Bank’s head of banking supervision and then, until 2005, as the personal adviser to the chief executive of the Irish Financial Services Regulatory Authority”.. All of this paved the way for the excesses of the banking industry during the boom i.e, little or no regulation and a blind eye turned to illegal and semi-legal activities, so much so that during the boom, developers were not pursued for due taxes and the amounts that they were meant to pay were just written off by the Revenue.The building industry, for example, used various loopholes in the tax system to avoid paying as much tax as possible on their property developments. Although this was perfectly legal, “the Revenue Commissioners took the view that significant amounts of tax were being lost – €40 million was the estimate for 2006 and over €200 million between 1999 and 2006”. When the Revenue Commissioners brought this to the attention of the then Minister for Finance, Brian Cowen, and suggested that he remove these loopholes, he agreed. However, after intense lobbying from the construction industry, Cowen reneged on his promise.
Special interest groups, both in and outside the government, ensured that the banking industry and their friends were protected and continue to be protected. This became as evident as never before on the night of the banking guarantee in September 2008. As money was literally flowing out of the country, the government needed to step in and prevent a run on the Irish banks. However, “It is not clear whether Cowen and Lenihan had been informed about the full nature of the crisis that fateful evening”. Noted Irish economist, David McWilliams, agrees with this statement and has written that “While the Minister was on radio busy reassuring us that the banks were fine, the National Treasury Management Agency – effectively a branch of the Department of Finance - was busy pulling its deposits out of Anglo Irish Bank because it felt the bank was too risky, and didn’t tell him!”
The aforementioned special interest groups are always a part of any country but in Ireland these groups seem to be the ones with the real power and influence over the politicians, and by extension, the state. If you follow the monetary breadcrumbs, you’ll eventually come to this conclusion. They have seemed to hijack the country, along with their associates in various seats of power in the government, and are now bleeding the economy dry. There are those who refer to Ireland as a “Banana Republic” and this term has more substance to it than one would care to admit; “The answer to the question “Who really runs Ireland?” may be answered best by asking another question: “Who has the money?” When you know that, you have your answer to the first question”. With all of this in mind, we can clearly see just how politics and the state have played a role in the economy and it’s ongoing destruction.