In Tuesday’s Irish Times, writing about the recent announcement of the closure of Postbank, Fintan O’ Toole suggests that the Irish Government has a “strange definition of ‘systemic importance’”.  Contrasting the apathy with which the impending closure of Postbank (jointly owned by An Post and BNP Paribas) has been met, with the €30 billion of taxpayers’ money pumped into embalming Anglo’s corpse, he writes:

Let’s consider this proposition. Postbank has deposits of €450 million and 170,000 customers. It has 70,000 savings and 35,000 current accounts, 90,000 insurance policy holders and 10,000 credit-card customers. It does what banks used to do – provide financial services for ordinary people in their own communities.

Because it operates through a thousand post offices, it is particularly important in towns, villages and working-class urban areas that have long since been abandoned by the main banks. More importantly, in any sane approach to the banking collapse, Postbank would have been an important part of a new strategy of creating sensible, community-based banks for individuals and small businesses.

But none of this is of systemic importance to the economy. To achieve that enviable status and become immortal, Postbank would have had to do certain things. It would have needed a chief executive who was on first-name terms with the taoiseach and who delivered regular lectures to the nation on the evils of social welfare and regulation.

He goes on to list a number of other ‘credentials’ such as “cooking the books” and bamboozling its investors. “If it had concentrated on these goals instead of getting stuck in the pathetically old-fashioned rut of helping ordinary people manage money, it would have been systemically important”.  O’ Toole makes a reasonable point about the contradictions in this rationale, which he views as indicative of political cronyism and corruption.  Brian Lenihan’s strong assertion that “as a country we cannot have the message going out that we will let a bank fail”  is now not so important it seems.  The fact that the promise of state support, received by those banks closest to property and investment markets, is not being extended to Postbank could be explained in terms of the clientalism of Irish politics, as O’ Toole does here and elsewhere.  However, it has also to do with broadely more structural problems to do with the Irish political system: namely that Irish politics is characterised by a cloaking of ideological positions by politicians and political parties attempts to always straddle the middle-ground, and by a subsequent lack of long-term forward planning.

As suggested elsewhere on this blog:

For the past decade Ireland has exported its development model, a kind of hybrid American neoliberalism (minimal state, privatisation of public services, public-private partnerships, laissez-faire planning, low corporate and individual taxation, light to no regulation, clientism) meets European social welfarism (developmental state, social partnership, welfare safety net, high indirect tax, EU directives and obligations).

Neoliberalism as a political practice rarely exists in any sort of form close to ‘pure’.  Any number of examples of such policies in action will testify to the fact that neoliberalism does not involve minimal state intervention in the market so much as a reallocation of the types of intervention.  The Irish banking crisis is a clear case in point.  Successive deregulations (or the elected avoidance of enforcing regulation) in the banking sector allowed the market free reign to run their own affairs.  This was taken into overdrive with all sorts of outlandish schemes designed to stack up ever increasing profits and for a time the Irish banks were able to keep themselves aloft on the thin ice on which they were skating by the sheer force of momentum.  When the credit crunch hit and the property market burst, the whirling stopped, the ice cracked and the banks fell heavily into the sea of debt they had created for themselves.  After years of minimal intervention the state was then called in to mount the rescue mission, turning tax payers’ money into life buoy bailouts and the good raft NAMA on which the debt soaked banks could be kept temporarily afloat.

Moreover, neoliberalism is arguably imbued with more inherent contradictions.  David Harvey, in his A Brief History of Neoliberalism sees the neoliberal political project essentially as a device designed to restore class power to an established elite.  Looked at in this way, such a radical departure in the organisation of society has a fundamentally conservative agenda; to retain power and influence within a given sector of society.  The Irish case reflects this contradiction clearer than most.  The Irish economic model is viewed as a poster child for the supposed benefits accrued through neoliberal deregulation – fast growth in economic and social standards – and has been taken on tour to espouse these values.  Yet in the drowning days of the Celtic Tiger, the state has thrown all its resources into building a flimsy raft to save an elite circle of bankers and builders from sinking in the sea of their own economic ineptitude.  Within a political logic that was truly neoliberal, only the strongest swimmers would make it back to shore.  A bank like Anglo would have been left go to the wall.

This begs the question of just to who exactly it is that “as a country we cannot have the message going out that we will let a bank fail”?  In a previous post on this blog, Enda Murphy suggested that now “the ‘national interest’ means Ireland Inc, not the general population”, as the state pander to a perceived group of international investors and speculators.  It is presumably to this imagined group that Mr. Lenihan is referring.  But even still, the argument is not self-evident.  Banks have been let go to the wall in the US, and in the UK, Sweden and Finland the state has taken such significant shareholdings in banks so as to effectively nationalise them.  So why would similar actions in Ireland be perceived in such negative terms?  The answer is perhaps they wouldn’t.  However, this is not the Government’s only objective here.

In the same post, Enda makes the point that the ‘hard decisions’ currently being made by Government are at heart deeply conservative; “‘making hard decisions’ means that systems of private power, in particular, are never really threatened. In fact, power and privilege are protected and consolidated at all costs”.  This again reflects the conservative core of the neoliberal project, but also the Government’s unwillingness to take a definitive stance on many issues.  Mr. Lenhian’s ‘hard decisions’ on the banks are indicative of the government’s approach generally to the crisis: if we throw enough money into the same flawed system we can get it working again.  The aim has been to fix the cogs in the system.  There has been little consideration of the possibility that the system itself is faulty.  While attempts are made to restore order to the system, these simultaneously take the form of anxious offerings made to appease the gods of the global market.  In reality, Mr. Lenihan’s supposed commitment to the banks is characterised by a typically Irish response that aims at a political middle-ground between restoring the same system that has just crashed and trying to convince international investors and speculators that we have learned from our mistakes.

Such seemingly contradictorily measures are not part of a long-term strategic plan for economic recovery but are short-term and reactive.  When Mr. Lenihan inferred that no Irish bank would be left go to the wall, what he should have said was ‘we won’t be letting these particular banks go to the wall this week’.  The fact that Postbank’s impending dissolution contradicts the Minister’s previous commitment is hardly surprising.  Over the past twenty years, the Irish political landscape has been characterised by such ideologically non-committal and short-termist policy actions.  Even the ‘economic model’ that has since been toured the world over is better described as a series of disparate policies, deals, and actions that were rationalised after-the-fact, rather than as a ‘plan’ per-se.  Now that the Government is more obviously in crisis-management mode, this lack of coordination and long-term planning is more visible.  Without the prestige of (at least illusory) economic growth, the magic trick falls apart.  What we are now seeing is the sight of the cards falling from the magician’s sleeve as he takes his bow.  This magic show is being scripted on the spot.  Ladies and Gentlemen, we still don’t have a plan.

Despite the fact that Ireland has been viewed internationally, in Seán O’ Riain’s terms, as a “shining star of neoliberal orthodoxy”, its presence within Irish politics is often invisible.  After all, at the tail end of the widespread deregulation of the Irish economy under his leadership, former Taoiseach Bertie Ahern could publicly declare himself a socialist.  While this statement caused much mirth at the time, Ahern had perhaps only encroached slightly into the zone of unacceptable Irish political behaviour.  Over the period of the Celtic Tiger, neoliberal reforms were introduced in ways that folded them into the contingent contradictions entrenched in Irish politics, which has always lacked a clear ideological stance and had short-term (primarily economic) goals.  Economic policy was considered an economic and not a political matter.  In large part this continues today.  There has been very little public debate about the ideology (conflicted as it may be) that underpins the Irish economic model.  In many ways, neoliberalism has been naturalised to such an extent within the actualities of Irish economic policies that it isn’t viewed as ideology.  The inherent logic of the model is assumed to such an extent that it is natural to fix what is broken in it, rather than ask ourselves the question: how did such a model come into being and what are its goals?  These goals cannot be merely the mending of the economy in the short-term.  They need to stretch beyond this to encompass a long-term view of not only economic prosperity but also social sustainability.  This reflects points I have previously made on the blog.  There needs to be a national debate not just about economic recovery but about what sort of nation and what sort of society we want to recover into.

Cian O’ Callaghan

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