Sir, – I disagree with Donal Donovan and Antoin Murphy (“Blinkered thinking at heart of Irish economic crash”, Opinion, June 24th) that the “blame” for our current woes lie uniquely in failures of Irish governance arising from fatal group-think among policy elites.
Almost identical errors of governance could be identified as the “explanation” for the crisis in any number of countries, from Spain to Portugal, Italy to Greece. Even much larger economies, such as the UK, the US and France, suffered banking failure, explosion of sovereign debt and economic contraction of a systemic quality different to Ireland’s only in relative scale. “Governance failure” was not a uniquely Irish phenomenon.
In their great book, Manias, Panics and Crashes, Kindleberger and Aliber showed how all financial crises in western history had been caused by sudden expansions in the credit system combined with technical innovation in its form. The decade following the collapse of communism saw a euphoria in the west that globalisation had abolished the cycle of boom and bust, an attitude summed up in the title of the book by Reinhart and Rogoff, This Time is Different – Eight Centuries of Financial Folly.
The explosion of world credit from 2000, combined with the “technical innovation” of electronic transfer and newly invented debt-trading “instruments”, overwhelmed the world with “unsound” money against which institutional defences nearly everywhere proved inadequate. As Avellaneda and Hardiman put it in 2010 in relation to the EU: “The under-institutionalisation of the normal policy restraints at European level imposed the need for heroic levels of self-constraint on the part of the peripheral economies.”
The only economies left standing as the tsunami of the global credit crisis passed were the manufacturing economies of northern Europe which had long resisted the blandishments of Keynesian financial expansionism. The actual instrument in Ireland’s case for protecting against the anarchy of international credit lies in speedy consolidation of the euro zone and acceptance of its monetary and banking disciplines. As Brendan Halligan recently told the Institute of International and European Affairs, Ireland must align itself unequivocally with the countries driving this process, and this can allow for no special pleading such as in relation to the IFSC. – Yours, etc,
PHILIP O’CONNOR,
St Peter’s Terrace, Howth,
Dublin 13.