The basic outline of Ireland’s economic collapse is well-documented -- crony capitalism, operating in a 19th century political climate, allowed close connections between Irish politicians, property developers and the banks to lead to immense prosperity. Simultaneously, however, they created the conditions for a shattering collapse.
But Lynch suggests it would be foolish to count Ireland out, and he has subtitled his book The World’s Most Resilient Country and Its Struggle to Rise Again.
“I’m not an optimist. Anyone who knows me knows I don’t believe the glass is half full. My question is usually, ‘What glass?’ But I don’t doubt for a moment that Ireland will navigate the difficulties that lie ahead of it over the next few years,” Lynch told the Irish Voice during an interview this week.
The Irish boom and bust occurred at a time when there was an ocean of capital, with low yields and low interest rates. From the Irish side of this the Irish banks, which were small players traditionally, suddenly became major players, with the arrival of Sean Fitzpatrick and Anglo Irish Bank.
Under his guidance, Anglo Irish was able to go out to global wholesale markets and borrow money at low interest rates, in euros, gaining access for the first time to a much larger capital pool than they’d ever had access to before.
“It was a little like giving your 16-year-old son a bottle of whiskey and the car keys,” says Lynch.
“They went out and borrowed all this money, then they turned around and lent it all to property developers. There were reasons why there should be some new construction -- the country was getting more prosperous, for the first time there was a net flow of people coming into the country rather than leaving, so there was reason for some new construction.”
But the good thing quickly became too much of a good thing. Then it went completely crazy. The Irish regulators were so weak and the Irish government was so complicit that there was no one left in a position of power to shout stop.
Having just suffered this terrible economic calamity, the Irish people are justifiably looking for someone to blame. “If you look at the performance of the Irish opposition parties during the boom years they don’t have clean hands. They were clamoring for even more tax breaks and public spending than the ruling Fianna Fail party.”
There’s no doubt that the Irish culture of impunity, where politicians, developers and bankers have repeatedly broken the law and evaded regulations without paying a price, played a role.
Back in the 1980s one of the things that motivated Irish leaders to get their act together and embrace the reforms that ultimately produced the Celtic Tiger was the threat of the International Monetary Fund (IMF) coming in and imposing a solution that would have been a humiliation after six decades of independence. To be in this position today is a black day for Ireland, Lynch contends.
“Things look very bleak for Ireland. The next several years will be filled with sacrifice and hardship for many people who are essentially blameless,” he says.
“But in my reporting over the years I’ve been in Turkey and Russia during economic crisis, where it looks like they’ll never get out of the ditch. Those societies have come back.
“That’s not to minimize the setback, but there will be a future for Ireland. If the Irish people use the next few years to tackle the necessary financial and political reforms that are needed there is every reason to look forward to a bright future.”