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- Michael Lewis
The current issue of Vanity Fair has a very lengthy investigation of the collapse of the Irish economy by Michael Lewis, author of a number of lively accounts of the dismal science of economics. Liars Poker and The Big Short are very accessible and often funny investigations of the bizarre world of high finance that focus on the people involved to illustrate larger insights.Turning his attention to the situation in Ireland, he uses the same technique. As an Irish American, I was most amused by his ironic observations on how this particular economic crisis is informed by the unique qualities of the Irish.
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Here’s his explanation for the unusually strong Irish ethnic identity:
The Irish insistence on their Irishness—their conceit that they’re more devoted to their homeland than the typical citizen of the world is—has an element of bluster about it, from top to bottom. At the top are the many very rich Irish people who emit noisy patriotic sounds but arrange officially to live elsewhere so they don’t have to pay tax in Ireland; at the bottom, the waves of emigration that define Irish history. The Irish people and their country are like lovers whose passion is heightened by their suspicion that they will probably wind up leaving each other. Their loud patriotism is a cargo ship for their doubt.
Here’s his comparison between the Irish collapse and the American version:
The Irish real-estate bubble was different from the American version in many ways: it wasn’t disguised, for a start; it didn’t require a lot of complicated financial engineering beyond the understanding of mere mortals; it also wasn’t as cynical. There aren’t a lot of Irish financiers or real-estate people who have emerged with a future. In America the banks went down, but the big shots in them still got rich; in Ireland the big shots went down with the banks.
At the conclusion of an account of the meeting as which it was decided to have Irish taxpayers provide a guarantee of the debts of the Irish banks, he explains the choice confronting Irish Finance Minister Brian Lenihan:
Lenihan faced a choice: Should he believe the people immediately around him or the financial markets? Should he trust the family or the experts? He stuck with the family. Ireland gave its promise. And the promise sank Ireland.
To drive home the profound folly and, frankly, tragedy of that decision, he describes how this it played out for one financier in a way that, frankly contradicts his point that the big shots suffered:
Not long ago I spoke with a former senior Merrill Lynch bond trader who, on September 29, 2008, owned a pile of bonds in one of the Irish banks. He’d already tried to sell them back to the bank for 50 cents on the dollar—that is, he’d offered to take a huge loss, just to get out of them. On the morning of September 30 he awakened to find his bonds worth 100 cents on the dollar. The Irish government had guaranteed them! He couldn’t believe his luck. Across the financial markets this episode repeated itself. People who had made a private bet that went bad, and didn’t expect to be repaid in full, were handed their money back—from the Irish taxpayer.
And, finally, explains, in part, why the Irish seem to be absorbing this catastrophe with such stoicism. Unlike Greece, the Irish are not marching in the streets. Instead, they appear to be taking ownership of this situation as a whole society. An Irish friend wrote to me, “We were on drugs- almost an entire nation !!” There is not a lot of public wailing. Again comparing the Irish to Americans:
Two things strike every Irish person when he comes to America, Irish friends tell me: the vastness of the country, and the seemingly endless desire of its people to talk about their personal problems. Two things strike an American when he comes to Ireland: how small it is and how tight-lipped. An Irish person with a personal problem takes it into a hole with him, like a squirrel with a nut before winter. He tortures himself and sometimes his loved ones too. What he doesn’t do, if he has suffered some reversal, is vent about it to the outside world. The famous Irish gift of gab is a cover for all the things they aren’t telling you.
It’s a long read, but well worth the time.
On a more positive note, a recent piece in Forbes entitled, “Four Reasons the Irish Roar Will Return,” Nin-Hai Tseng outlines the qualities in the Irish economy that position it well for recovery. These include low taxes, a young, productive and educated workforce and the following:
Unlike Greece, Ireland’s economy is overwhelmingly made up of exports — they account for about 80% of GDP versus just 7.2% in Greece. Facing huge debt and deficits, it’s clear both countries will have a hard time relying on demand for goods and services at home. If anyone can look at markets abroad to increase GDP growth, it’s Ireland given the sheer scale of exports its economy already runs on.
Hope springs eternal.