A Q&A with David J. Lynch, author of
WHEN THE LUCK OF THE IRISH RAN OUT
(Palgrave Macmillan, November 2010)
Q: What got you interested in this topic?
A: First of all, my family emigrated from County Kerry, Ireland, in the mid-19th century and I’ve always been interested in the story of the country’s development just in a very personal sense. As a foreign correspondent based in London in the late 1990s, I also covered the Northern Ireland peace process and saw the “Celtic Tiger” emerge. Finally, after returning to the US from China in 2005, I covered the global economy as it struggled through the worst financial crisis in 75 years. Ireland’s experience amid that crisis seemed to bring its story almost full circle: from rags to riches and halfway back again.
Q: How did you conduct your research? Did anything surprise you in your writing of this book?
A: I made several reporting trips to Ireland in 2009 and 2010, interviewing all of the major players. I also used the National Archives here in Washington to access Irish publications of the early 1980s, including old newspapers, government reports etc. And I read all of the books by Irish authors that have appeared in the last year or two dealing with specific aspects of the current crisis. Then I tried to put this incredible story of one country’s quarter-century journey into the broader context of what has been happening in Europe and around the world. What I found noteworthy was that while the Irish boom-and-bust reflected characteristics that have been part of every financial bubble going back to the Dutch Tulip craze of the 17th century, it remained a uniquely Irish story, shaped by identifiably Irish ingredients.
Q: You write that Ireland was once called a land of “brilliant failures,” by Oscar Wilde. Can you elaborate on this quote? After 800 years of poverty, in the 1990’s Ireland saw a healthy economy, employment rate and watched its artists emerge as global stars. What led to this robust time? And why didn’t it last?
A: I think Wilde was drawing a contrast between the acknowledged gifts of the Irish – the genius for storytelling in written and spoken form – and the island’s perennially troubled history. In the 1990s, the country finally appeared to have gotten its act together thanks to more sensible economic policies, determined peacemaking in the north (aided by American diplomats among others), and a notable cultural flowering. While I think it’s difficult to draw a direct causal link between the political/economic advance and the cultural achievements, I don’t think it’s entirely an accident that Ireland won global plaudits for its music, movies and literature at the same time it finally healed a generations-old political breach and attained unprecedented prosperity.
Q: How did the banking crisis of 2008 affect Ireland? How are ordinary Irish citizens faring in this economy, and how has it affected daily life?
A: The near collapse of the Irish banks represents the single most costly failure in modern Irish history. Ireland’s financial woes are now in a class by themselves. Amid the 2007-08 credit crisis, economies all over the world shrank, but none more so than Ireland. Industrial output, peak to trough, dropped 17%, the worst performance by any industrial economy. Unemployment soared from roughly 4% to nearly 14%. The cost of bailing out the nation’s failed banks, which is still rising, is headed past one-quarter of annual output. For all the complaints in the US about TARP, the Irish bailout expressed as a percentage of economic output would be roughly akin to four TARPS.
Q: How has the economy affected society, and vice versa, throughout Irish history? What role did the Church play?
A. Ireland’s economy for generations was incapable of providing enough jobs for its people. That meant a tradition of emigration, which acted as a social safety valve bleeding off those who might have been a source of discontent or who might have agitated for social change. Once the economy really began to roar in the 1990s, that emigration reversed and for the first time in its history, Ireland became a magnet for other peoples. Eager young workers from Eastern Europe and refugees from Africa flocked to the country, changing the makeup of the population. As for the church, Irish Catholicism historically stressed acceptance of one’s fate on earth while looking ahead to a happier time in the afterlife. By the 1980s, though, as Ireland was struggling to shake off its economic malaise, the influence of the church on popular attitudes was receding.
Q: Your book is filled with strong charismatic Irish people. Tell us about Sean Fitzpatrick.
A: Sean Fitzpatrick was a farmer’s son from County Wicklow, who against all odds built a tiny, insignificant business into the nation’s third-largest bank. He did it with charm and hard work and by making his Anglo Irish Bank more aggressive and customer-focused than his hidebound rivals. He enjoyed enormous success and by the turn of the century was the embodiment of Ireland’s go-go Celtic Tiger economy. And then, the traits that brought him great riches – among them a refusal to abide by convention or to recognize limits – became his undoing, leaving him today a bankrupt social pariah.
Q. Does Ireland’s experience have any relevance for other countries?
A. Absolutely. At the moment, Ireland is ground zero of the European debt crisis. Its ability to repair its banks and reduce its government budget deficit thus will have important implications for global financial markets, European economic policy and even the fate of the euro. But the Irish case also is important for contemporary debates over economic policy in the U.S. The conventional wisdom is that when economies are trapped in a recession, governments should willingly expand the deficit in order to pump more money into the marketplace. But among those Americans who worry about the $1 trillion-plus annual U.S. budget deficit, however, cutting red ink is seen not just as a way to avoid being punished by markets with higher borrowing costs the way Greece or Ireland has been. Deficit reduction is also seen as something that will spur economic growth. There are only a couple of examples historically where that has actually occurred – where cutting the deficit led to the economy growing faster. One is in Ireland in the late 1980s, as I describe in the book. In a way, it’s ironic. In the 1980s, Ireland borrowed important ideas from American economic thought. Now important voices in the U.S. are looking to Ireland for inspiration.
Q: Where does the Irish economy stand at this moment, and how does the future look? What can be done to help the country bounce back?
A: Ireland remains in a very tough spot. After appearing to emerge from a punishing recession earlier this year, the Irish economy shrank in the second quarter at an annualized rate of nearly 5%. A shrinking economy coupled with a steadily rising toll for repairing its ruined banks means a budget deficit that makes the Greeks look parsimonious. Some investors are beginning to take seriously the notion of Ireland defaulting on its debts or perhaps turning to the International Monetary Fund for help. Either would be deeply humiliating. To avoid such a fate, the Irish government is determined to impose further spending reductions on a populace that already has suffered cutbacks in public sector pensions and other government services. The next few years are certain to be difficult and contentious ones for Ireland.
That said, I’ve seen the consequences of previous financial crises in countries such as Russia, Turkey and Indonesia. Those experiences have taught me two things. First, crises in the financial sector inflict tangible pain on individuals far removed from the world of high finance. And second, no matter how terrible the episode, crises eventually pass. Economies don’t shrink forever. The pain eventually recedes and people rebuild and recover. That’s why I’m optimistic that the Irish – and their American cousins for that matter – will eventually do what’s needed to bring about brighter days.