In a previous editorial (HI 18.3, May/June 2010) I expressed the hope that once we quantified the scale of our current fiscal difficulties the only way to go was up. Well, now we know—c. €50 billion to bail out the banks and cuts of c. €15 billion in government spending over the next four years—and I’m not so sure. How will it be possible to take that much spending out of the economy and not kill it stone dead? And for what? To keep international money markets happy? They have been singularly unimpressed by our efforts so far, with the country having to continue to borrow at premium rates. But, as Prof. Louis Cullen points out in this issue (pp 10–13), Irish politicians’ obsession with the country’s financial good name may be misplaced: ‘investors, always in need of borrowers, have short memories’. He also highlights the tendency of bankers in crisis to play up unscrupulously the vulnerability of the financial system as a means of getting the State (i.e. the taxpayer) to foot the bill.
To justify the imminent hairshirt, some commentators have cited positively the example of Ray Mac(‘the knife’)Sharry’s cutbacks of the 1980s, which, they argue, eventually paved the way for the Celtic Tiger. But they neglect to mention other factors, such as the doubling of EU structural funds, a surge of foreign (mainly US) investment in anticipation of the Single European Market, and the collapse of the bipolar world, which opened up new markets and massively expanded global trade. None of these factors are now in play . . . but we can always hope—like Mr Micawber—that ‘something will turn up’.
It may be difficult for readers under, say, 40 to appreciate this, but we’ve been here before—albeit not on the same scale—not just once but several times, in an apparently endless cycle of boom and bust. Are we fated to run on this treadmill forever? Albert Einstein once defined insanity as doing the same thing over and over again and expecting different results. He also observed that the difference between stupidity and genius is that genius has its limits.
