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John Phelan: How Ireland's 88-year experiment in self-government came to an end

Picture 10 John Phelan is a Conservative Party member and a final year economics student at Birkbeck College.

On December 17th 1922 the Union flag was lowered over the Royal Barracks in Dublin, marking the end of British rule in southern Ireland. To a large extent (quite how large was the cause of the brutal civil war) this moment marked the achievement of the dream of Patrick Pearse who, on Easter Monday 1916, had announced, “We ordain that the elected Representatives of the Irish people alone have power to make laws binding on the people of Ireland”.

On November 22nd 2010, the 88-year experiment in Irish self-government came to an end. Worried that Ireland’s economic woes could infect them, its partners in the Euro, accompanied by representatives from the IMF, descended on Dublin to demand that the Fianna Fail government accept a loan. After days of brow beating and arm twisting that would have put Lloyd George and Churchill to shame, the Irish acquiesced.

The Irish experiment in self government ended in regret. In their anger, the Irish cursed everything that had happened to their economy in the previous twenty years, anything to do with the ‘Celtic Tiger’ was now reviled. This risked throwing a decent fiscal baby out with rancid monetary bath water. The famously low corporation tax of 12.5% introduced in the 1990s attracted business to Ireland; by 2001, more than 13% of all Foreign Direct Investment into the European Union went to Ireland. Between the late 1980s and Ireland’s entry into the Euro, this helped to add 500,000 jobs to the Irish economy’s existing 1.3 million. This led to a doubling of Irish GDP per capita. Then the Euro came along.

The experiment ended in excess. When they entered the Euro in 1999, the Irish inherited the low interest rates of the Euro area’s dominant economy, Germany. Able to borrow cheap, government and individuals alike went on a spending binge. Between 2000 and 2003 public spending rose by 48%. The boxwallahs from Brussels and Washington arrived at a Dublin Airport - whose manager is on a salary twice that of the German Chancellor.

For individuals, debt as a percentage of household income rose from 68% in 1999 to 113% in 2004 to keep up with house prices, which tripled over just ten years. Irish banks were happy to help the housing bubble inflate, tripling their lending between 2002 and 2007 to over €360 billion. Builders borrowed to supply the housing to meet this growing demand. At the height of the boom in 2006-2007, approximately 90,000 new dwelling units were built in Ireland. In the UK in the same year - with a population 13 times the size of Ireland - the number was just 120,000. When all this was revealed as unsustainable, Country Leitrim was found to have three housing units for every resident.

The experiment ended in confusion. The Irish weren’t sure who or what to blame for their economic collapse. The ‘who’ became the ever popular bogeyman, ‘bankers’, the ‘what’ became fiscal austerity introduced to balance the budget. In reality the ‘who’ should be the politicians and European leaders who took Ireland into an unsuitable and unsustainable currency arrangement, letting economic reality get trampled in the rush toward the dream of “ever closer union”. The austerity is a consequence of this disastrous decision.

And it also ended in irony. There is a certain historical symmetry about the fact that the last German handout to Ireland, a boatload of rifles which found their way to the bottom of Cork harbour in 1916, were sent to aid Irish independence, to accomplish Pearse’s dream. The current one is intended to do exactly the opposite.

The last foreigner ‘invited’ to Ireland to sort the country out was Henry II of England and his descendants ended up staying for 700 years. Given the rumours surrounding the state of Portugal, Spain and Italy’s finances, you wouldn’t bet on the chaps from Brussels sticking around that long, although, if a bungalow in Leitrim tickles their fancy, there will be plenty of places for them to stay.

But given Ireland’s history of bloody struggle for its independence, we can ask whether it was all worth it. Commenting on Eamonn De Valera’s typically impenetrable alternative to the treaty with Britain, ‘External Association’, one participant in the Dail debates commented “For centuries men have been willing to fight and die for the cry of ‘Up the Republic!’ I can’t imagine many dying for the cry ‘Up External Association!’”

Indeed, would Tone, Emmett or Pearse have died and caused so many other deaths for the right of Irishmen and women to have their fiscal policy dictated in Germany? What would Thomas Davis write now? A Province Once Again?


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