“The dangers arising from the potential bubble in the housing market are significant. […] it could turn an external shock in the Irish economy into a cause of major trauma.”
Sensible economic commentary hasn’t been as rare as most people think over the past decade or so. The above quote, to give an example, is from the Economic and Social Research Institute’s Medium Term Review published in October 1999. The ESRI, who were set up by the government as a semi-independent body to provide research and advice, were quite clear in their recommendations at the time; abolish mortgage-interest relief, slow the increase in public-sector wages, and run a large budget surplus. Most independent economists, mindful of the fact that our membership of the Euro required a change in fiscal policies, would have given pretty much the same prescription for long-term economic stability.
Of course, I don’t have to tell you that the government ignored this advice. Since the bubble burst, many well-informed commentators have shown in great detail how successive Fianna Fail led coalitions have led the country down such a disastrous economic path. What these commentators often fail to point out, though, is just how important a role the opposition parties have played in facilitating our national downfall.
Fine Gael and Labour are currently enjoying a surge in popularity, where the main cause of this surge has been, understandably enough, their not being Fianna Fail. Indeed, opposition TDs spend most of their time these days campaigning against Fianna Fail, rather than for their own party, with the clear underlying implication that they wouldn’t have made such a complete mess of things had they been in office themselves. Unfortunately for the opposition parties, who are happy to rely on unsubstantiated counterfactuals, the evidence for this implication doesn’t really hold up. Over the past decade both parties have repeatedly promoted economic policies almost indistinguishable from those pursued by the government.
Take mortgage-interest relief as a prime example. Since formally joining the Euro in 1999, Irish interest rates have been decided by the ECB, and any sensible economic commentator would have pointed out that these rates were too low for the rapidly growing Irish economy, and needed to be offset by appropriate fiscal policy to prevent, among other things, a long-term property bubble. The ESRI and others correctly pointed out that mortgage-interest relief, the practice of subsidizing mortgage repayments, was having exactly the opposite effect; by lowering the effective interest rate, it was inflating the bubble even further. The scheme, which at its peak cost the state €500 million a year, was possibly the most damaging of any of the government’s economic policies, and experts made repeated calls for its abolition.
One would think, with Fine Gael and Labour’s claims to economic responsibility, that they have spent the past 13 years opposing such reckless policies. In fact, far from calling for the abolition of mortgage-interest relief, the two parties actually made repeated calls for its expansion, as well as promoting a wide variety of other schemes that would have inflated the housing bubble even further. Of course, these policies were always easy to sell to the electorate; with property prices rising, they all claimed to make it easier for people to afford homes, even though their real effect was far less benign.
The same pattern manifested itself in other areas of economic policy; where experts advised moderation in tax cuts and spending increases, and the running of a large budget surplus, the election manifestos of the main parties in both 2002 and 2007 consisted largely of competing claims as to which party would at the same time both tax the least and spend the most. Instead of voicing the flaws in government policy and acting as a counter to economic short-termism, the opposition parties were in fact bolstering it, by not giving the public any other option.
This almost complete homogeneity of opinion isn’t a modern phenomenon in Irish politics, either. Time and time again, studies have shown that Irish voters don’t distinguish between parties on the basis of policy. Not only is this true for Fianna Fail and Fine Gael, who have their roots on either side of an issue no longer relevant to Irish life, but it’s been shown that even the supposedly centre-left Labour Party and now-defunct centre-right Progressive Democrats attracted voters that were effectively indistinguishable from each other in terms of their stated ideological preferences.
There are likely many causes for this lack of ideological cleavage in Irish politics, ranging from the then ideological Labour Party’s decision not to contest the 1918 and 1921 elections, to our electoral system which favours local, rather than national politicians. Regardless of these, though, there can be only one solution that would provide us with a political system where parties offer genuine choice, and opposition parties effectively counter the complacency of governments, and in the end this solution relies on us, the voters.
As citizens we have failed ourselves, and our nation, for too long, voting for local fixers instead of national statesmen, supporting parties that peddle comfortable lies instead of uncomfortable truths. We must take it on ourselves to seek more from our elected representatives than simply not being the people who got us into this mess; they should be men and women of expertise and genuine conviction, and it is our duty as voters to demand this of them. If we fail to do so, we may still eject Fianna Fail from government and punish them for their failings, but we will have done nothing to tackle the political culture that allowed them to make such mistakes, and will inevitable allow future governments to do just the same.