Tuesday, 22 May 2012
Systemic corruption rapes Ireland's fair land
In the global corruption stakes Ireland is not a front runner but arguably it leads the field for allowing corruption and cronyism to bring a country so low so quickly with near disastrous, environmental consequences. The economic consequences of reckless bank lending to beguiled, naive mortgagees are bad enough as Ireland once more sees its brightest and best young generation forced to emigrate for lack of work, leaving behind broken-hearted parents but, according to Prof. John Sweeney, president of An Taisce, (Ireland's National Trust) the rape of the environment brought on by the economic crisis could dwarf that crisis through an international energy shortage, ecological collapse or runaway climate change.
Ireland is still a land of stunning, melancholic beauty, where lakes, rivers and the seas attract anglers and tourists from around the world, so is the environmental risk fuelled by corruption at all levels in the planning process and national government as serious as An Taisce claims and can the economy be turned round quickly enough to avoid decades of stagnation?
Economics will not be mocked
On the second point the jury is still out but the lesson is clear enough. When greed bestrides the saddle the devil will finally exact its merciless due. Venal politicians often trump economics but ultimately economics will always trounce politics, leaving in its wake shattered, bewildered, ordinary folk least able to defend themselves from the worst excesses of intractable, casino-style mercantilism, whilst the catastrophe's architects enrich themselves.
The EU and the IMF have done about as much as they can to ease the burden on Irish taxpayers by cutting the interest rate and repayment terms on the Euro85 billion bailout from 5.8% to 3.5-4% and extending the repayment period from 7.5 years to 15 years, which according to Irish officials will save the Irish taxpayer Euro600 million to Euro700 million a year. As part of the agreement to this revised deal the Irish government drew up an austerity programme detailing four years of tax rises and spending cuts.
The potential problem with austerity programmes is that it could reduce rather than raise economic growth and so leave a country less able to repay its international debts. Reneging on those debts, however, is not a sensible option. If nations are not chastised for their fiscal delinquency then they will never learn from economic history and, like Greece, are likely to become recidivist sovereign debt welchers, par exellance. Greece is a classic example of allowing political aims and endemic corruption to override economic good sense, and like Ireland, when adopting the Euro currency, it was like catching a falling knife. Both countries could not adjust their own interest rates to cope with changing national fortunes while at the same time they were allowed to borrow at ludicrously low interest rates which fuelled the Irish and Greek property booms.
Nemesis was not unpredictable
As in America, the unsustainable Irish property boom, fuelled by cheap credit and corporate greed, was the country's economic nemesis but it could not have been realised without a scandalous disregard of financial good governance, which was certainly not confined to Ireland. German banks, in particular, were only to eager to lend to Irish banks to stoke the housing and commercial property boom. But there is something in the Irish Psyche which loves a gamble but when the gamble involves borrowed money on a national scale then it becomes a potentially disastrous, destabilising force. That, however, does not mean that Joe public should be treated contemptuously simply because Joe public is, by and large, untutored in economics. They look to those they voted into power for good governance but the elected have betrayed them for their own venal ends.
There was nothing opaque and unpredictable about the growing banking storm in 2007. As I warned in print* five years ago: "The Bank of England's rate policy since being spooked by the dot com bust six years ago, aided by overly eager banks to lend irresponsibly, is a major cause of dangerously high national indebtedness. The banks and credit card companies may well pay a high price for their rapacious stupidity through record numbers of strapped consumers seeking voluntary insolvency deals." If a mere, hack journalist can foresee these events then readers can be assured that Governments, their advisers and irrepressibly greedy financial institutions also saw it but to their indelible shame did nothing to avert it. But in Ireland's case it took in far more than self-serving financial institutions on the make. It also involved corruption on an unimaginable, unprecedented scale in the property planning process.
In the State of the Nation, a Review of Ireland's Planning System, 2000-2012, the National Trust for Ireland said: "It is now clear from the recent publication of the final report of the Mahon Tribunal that together with a failure of the regulation of the financial sector during the 'Celtic Tiger' property bubble there was a catastrophic and systemic failure of the planning system which was characterised by endemic corruption, lack of transparency and marginalisation of voices that tried to draw attention to inherent weaknesses."
Environmental issues could dwarf economic crisis
Prof. John Sweeney, president of An Taisce, said on April 12, 2012: "In carrying out our work in the planning system An Taisce's purpose is not blinkered opposition to development but opposition to blinkered development. The lesson that must be learnt from the 'Celtic Tiger' era is that the persistent marginalisation of questioning voices weakens our democracy, economy and our society. Without greater perspective and even handedness to ensure we tread more lightly on the Earth we become more and more vulnerable to systems failures -- any of which could dwarf the current economic crisis such as international energy shortage, ecological collapse or runaway climate change."
A report by Mr Justice Mahon exposed endemic and systemic corruption and cronyism at the heart of the Irish planning system and which reached the highest levels of government. "There is no doubt that the systemic failure of planning in Ireland helped inflate the property bubble, leaving in its wake a great deal of poor quality development , reckless over zoning, chaotic sprawl, a legacy of 'ghost' developments and widespread environmental degradation," he said. Of particular long-term concern is 'locked-in' long-term costs of high dependency on greenhouse gas emissions. "The reality is that Ireland is now reaping the devastating consequences of those who promoted development-at-all-costs and seismic miscalculations," he added.
The legacy of profligacy
The profligacy of the 'Celtic Tiger' era has bequeathed an insidious legacy of very high per capita greenhouse gas emissions, significant water quality deterioration, a crisis in biodiversity and nature conservation, consistent breaches of EU law and a chronic over dependence on imported fossil fuels, mainly oil, storing up major costs for the future.
Perhaps purblind, An Taisce was arguably too critical of out-of-town mega stores which research shows that 1.4 jobs are lost in town centres for every new job created out of town. According to one US study a general failure on the part of mega stores to trade with local suppliers and recirculate money back into the local economy sees a net loss of at least 150 jobs for each new out-of-town mega store constructed. But this seems to ignore that it is not just all about jobs. Large, out-of-town shopping centres are logistically more efficient than deliveries to many, small in-town shops, and by extension more benign to the environment. They are also cheaper and so allow shoppers to save money that could be spent elsewhere in the economy and so accelerate money's circulation.As regards failure to trade with local suppliers that is something that could always be remedied, at least in part, by the willingness of local suppliers to use the law of comparative costs in their favour.
No good governance --- No solution
Dire though the banking crash in Ireland is, the country will recover. Its well-educated, industrious, youthful workforce suits the country well for attracting high, value-added industries like consumer electronics, pharmaceuticals and even forklifts, albeit encouraged by a benign corporate tax rate which other EU member countries would like to see changed. But emigration of the country's brightest and most entrepreneurial is a worry, for Ireland can least afford such losses if it is to prosper and repay its loans.
Banking establishments, as Thomas Jefferson warned, are more dangerous than standing armies but if that is so then venal politicians and corrupt officials everywhere are their willing harlots and recruiting sergeants. Gelding both parties would go far to preventing a recurrence of the worst economic crisis to befall Ireland since the 1930s depression. The problem is how to do it, for politics, business and honesty are never easy bedfellows.
A good start would be a yes vote in Ireland's referendum on the EU fiscal pact on May 31. To give it its full title, The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, a yes vote would allow Ireland access to the Eurozone's future permanent bailout fund, the ESM. The pact's key word must surely be "Governance". Two thousand years ago a great publicist opined: "Without charity I am nothing." Could it not be said today that "without good governance we are undone"?
*Warehouse & Logistics News, London, February 1st, 2007