In 2006 Ireland was riding on the back of the Celtic Tiger phenomena. The country was booming. The sky was full of cranes, unemployment was the lowest in Europe, everyone seemed to be driving a new car, and shopping trips to New York seemed normal. Fast forward to the end of 2011 and the country is in a very different place. One of the biggest banking busts globally led to the country being bailed out by the troika of IMF-ECB-EU and the effective loss of economic sovereignty. Unlike most of the rest of the global financial crisis that started to unfold in 2007, Ireland’s economic crisis was not tied to the packaging and reselling of complex financial derivatives linked to sub-prime loans in the US. Rather it was a good, old fashioned property bubble grossly inflated by access to global inter-bank lending, very poor financial regulation, tax incentives, laissez faire planning, and greed. Ireland’s banks, hungry for profit and growth, started to believe the rhetoric of developers hungry for capital to buy land and build property, and lent out massive sums of money. Risk assessment, due diligence and basic market analysis were pushed to one side. The result was huge profits, high stock price, massive lending way in-excess of deposit books, and enormous over-exposure to property. As the global financial crisis started to bite, the Irish banks and their lending came under scrutiny. Large institutional shareholders, investors and depositors started to get nervous. Share price dropped, money flowed out of the country, and investors wanted repaying. A run on the Irish banks seemed likely. The Irish government stepped in with a bank guarantee scheme, offering a national guarantee to all deposits and investments (to the tune of €440 billion). Next followed a calamitous set of decision-making that ultimately led to recapitalisation and nationalisation of the banks, the formation of NAMA, effectively a state bad bank, and the country being bankrupted. Bankrupted being the right word, since by tying the state to the Irish banks through the guarantee, the country was wedded to their dwindling fortunes.

Anglo Republic tells this tale through a forensic examination of Anglo Irish Bank. Anglo was the financial darling of the Celtic Tiger years. It grew from a small investment bank to become the third largest bank in the state. Each year it posted record profits and its share price grew accordingly. And more than any other bank its growth was tied to the property sector. Analysts were flabbergasted at its performance. Rather than questioning its business practices, they instead invested. Here was a bank that had seemingly found a magic formula. As Simon Carswell’s book reveals, however, it’s success was built on poor foundations and dodgy practices. Anglo was dependent on persistent high growth in the Irish economy to keep its house of cards upright. As soon as the economy started to slow, it started to fail. And it started using all kinds of tricks to keep the cards in place, including shifting money on and off the books when accounts were being audited and lending money to borrowers to buy shares to keep the share price up. If things were bad in the bank, things weren’t much different outside with the financial regulator, Central Bank and Department of Finance all working to keep a dying entity alive. Anglo was viewed by the Irish government as a systemic risk to the state and could not simply wound down. Its balance sheet was equivalent to 60% of Irish GDP (Lehman Brothers was 7% of US GDP), and represented a fifth of the banking sector. Globally, no bank that represented such a large proportion of a country’s banking balance sheet had failed before. All told, an entire year’s worth of tax receipts were pumped into Anglo and promptly written down, never to be seen again. When Carswell chose the subtitle, ‘Inside the Bank that Broke Ireland’, he was being literal.

Anglo Republic is a fascinating read for anyone interested in the present Irish crisis and how it unfolded from a wider banking perspective and within a single financial institution. Carswell has amassed amount of information on the company and how it operated, included access into board meetings, email between key players and dozens of interviews. He does a very good job at putting a shape to all this information, producing a compelling narrative that details what went on in and outside the bank. Crucially he manages to weave the main characters, their motivations and actions, into the story to lift the book up out of a rather dry history. Sean FitzPatrick, David Drumm, Sean Quinn, Pat Neary and Brian Lenihan all figure prominently. What is particularly interested is the ways in which FitzPatrick, Drumm and Quinn schemed to try and save themselves and their personal fortunes whilst trying to keep a sinking ship afloat. Where the book is a little thin is with respect to wider analysis and judgement. Carswell describes in great detail Anglo’s rise and fall, but does little to explain it; he shies away from commenting on the legalities and moralities of actions taken; and he fails to state how he thinks the system needs to changed to stop such a situation arising again. Overall, a book heavy on factual narrative that provides a very useful descriptive analysis of a banking and state failure. It’s also a book that should perhaps come with a health warning: ‘likely to make your blood boil’.

Rob Kitchin

It’s a year on from Fintan O’Toole’s damning critique of the Celtic Tiger model of development in Ship of Fools and his analysis of the political and economic decisions that sailed Ireland onto the rocks.  In Enough is Enough he turns his attention to what he sees at the core problems at the heart of Ireland’s present woes and what needs to happen to rebuilt a new republic fit for purpose in the twenty-first century.  Split into two parts, in the first half of the book he argues that there are five myths that shape how Ireland functions – these are 1) that Ireland operates as a Republic, 2) that people are politically represented, 3) that the Dail functions as a parliamentary democracy, 4) that every decent service was delivered by charity and through the church rather than by the state, 5) that Ireland is a wealthy country.  In each chapter, he reveals through polemical argument how each of these supposed truths are in fact self-delusions; that there is in fact deep flaws in the nature of Irish political democracy that require fundamental redress.  In the second half of the book, he sets out five ‘decencies’ that should underpin the ideals of new republic.  These are the decencies of security, health, education, equality and citizenship.  In an appendix he sets out 50 suggestions for immediate actions.

Enough is Enough is an engaging read.  O’Toole writes with passion and at a level that is easy to follow.  The argument is polemical and forceful, and he makes good use of sources and data to back-up his contentions.  Perhaps unsurprisingly, it does feel a little rushed, but clearly this is a book trying to tap into and react to the zeitgeist.  And he makes a convincing case that there are a number of problems with how the Irish political system functions and the ideals that underpin its operation that do need revisiting and revision.  However, whilst he sets out the ways in which he would like reform, it is often at a quite conceptual or abstract level.  Where there are specific suggestions, these often lack sufficient detail as to what changes would need to happen and their consequences.  At a more general level, it is also not clear where the impetus and drive is going to come from to enact the kinds of changes he feels are necessary – it is certainly unlikely to come from the present political classes.  In this sense, the book sets out a broad vision that provides a framing for a more detailed debate, but does not quite set out the road map he wishes for in his opening chapter, nor the mechanisms needed to shift citizens from the present map to his new one.

More broadly, politics and ideals, only gets us so far.  Building a new republic will not simply consist of reconstituting the political base of society and hoping all else flows from that process.  It is clear, to me at least, that we also need to rethink the Irish economic model predicated as it is on a form of neoliberalism.  In other words, the book would have been more powerful if it had been widened to re-envisioning the broader political economy of the country.  Clearly, setting out such a new vision would have been a more challenging task, but one that we undoubtedly need to undertake.  That said, the book is nonetheless an important and timely contribution to the on-going debate about Ireland’s future and it deserves to be read and debated.

Rob Kitchin

 

Wasters is an account of the misuses of state funds, poor governance, organisational failure and cronyism in public bodies in Ireland.  It includes chapters on the growth of semi-state agencies, cronyism and political patronage, ministerial expenses, FAS, HSE, CIE, DDDA/NAMA, PPPs and other ‘bad deals’, and social partnership.  It’s often fascinating, but suffers from a sense that one is reading little more than a name and shame list.  In fact, there is very little narrative beyond an indignant list of issues and their cost to the taxpayer, and the ordering of chapters seems to be somewhat random (in fact, they could be re-ordered and it would have little effect on the read).  At one level this is fine, and provides a useful service, but at another it is a significant shortcoming.

There is very little attempt to explain why the present state of affairs exists beyond a general lack of appropriate governance and oversight, cronyism, corruption and propensity to establish semi-state agencies and public entities.  Analysis is left purely at the level of the implicit and empirical.  I was not expecting a detailed academic explanation of the operations of the Irish state, its political economy, and its underlying ideology – this is after all a general readership book – but I did expect some attempt to make sense of the situation (as with Fintan O’Toole’s Ship of Fools, for example) and to provide a nuanced portrait of the public sector.  In Ross and Webb’s account all public bodies exhibit the same poor governance, and the same levels of waste and inefficiency.  This is clearly not the case.  There are plenty of examples of bodies that do a very good job on limited resources, where senior management have a sense of responsibility and desire to deliver quality services, and do not treat the entity as their own personal piggy bank and jolly expense account.  They also display the same level indignity for all expenses, regardless of whether they are legitimate or not, and the scale of expenditure, with scorn poured equally on a couple of euro for a coffee as for millions of euros on inappropriate property ventures where there are clear conflicts of interest.

More problematic in many ways is that the book makes no suggestions as to what should happen to address the various problems that they identify.  It is simply not enough to say ‘here is the problem and its scale, and it should be dealt with’, as if there is one, obvious solution.  In my view Ross and Webb needed to conclude, not with a sideswipe at the Office of the Comptroller & Auditor General, but rather with a path forward that they would like to see implemented to address the various inter-related issues.

From my own reading, I think the following should happen:

  • There should be a full audit of the total number of public bodies; their role, staffing, costs and benefits (and I know that there’s been the Local Government Efficiency Review Group and An Bord Snip Nua reports.  For a list of public bodies see here).  This is about getting a sense of the size and shape of a public sector that has accreted over many years in odd, contingent ways without necessarily tidying up in the wake of new formations, rather than being the lead in to a simple slash and burn exercise.
  • Where there is duplication or significant overlap in organisation mission and operations there should be mergers and appropriate re-profiling of staffing
  • There should be fully accountability and freedom of information availability for all state-funded entities, including NTMA, NAMA, Dept of Finance.
  • The renumeration of senior staff grades within state agencies and entities should be reviewed.  No public sector salary should be in excess of a government ministers.
  • The awarding of bonuses in the public sector should be scrapped
  • Fees and rates to consultancies and external service providers, including the legal profession, should be reviewed and appropriately capped.
  • All boards should consist of members appointed through a competitive process.  That is, no board should consist of any direct political appointees, but by people best suited to the job because of their experience and knowledge who apply for the position and are interviewed by an appropriate appointment panel.
  • All members of boards associated with public bodies should receive no or very limited renumeration based on ‘real hours’ contributions and expenses should be at cost, based on receipts.
  • There should be no conflicts of interest between board members and other entities they work for or also represent.
  • The expense claims of all employees and board members of any public body should be signed off by an appropriate line manager who is suitably qualified for that task; individual claimants should be legally libel for any mis-use or mis-appropriation of state funds.
  • There should be no business or first class flights for public sector employees and board members and there should be a ceiling on accommodation/food per diems that cannot be exceeded by any state employee or board member.
  • No member of family should be travel on the state’s tab; no exceptions.

These are all relatively straight-forward and easy to implement and do not involve any excessive introduction of an audit society which is often counter-productive, but rather they set parameters and the conditions of good governance.  There are clearly other alternative ways to tackle the issues that Ross and Webb identify and if they had had a go at setting out what they would like to see changed their suggestions would, no doubt, be different to mine. I suspect they would include more about re-inventing some entities, getting rid of some public bodies in their entirety, and introducing rigorous systems of accountancy, oversight, management and governance in terms of key performance indicators, goals and milestones, and the like.

Overall, Wasters fulfils a role in setting out the governance and accountability issues that affect a number of public bodies in Ireland.  Some of the examples will make your blood boil and Ross and Webb provide a great service by exposing some of the excesses and waste.  As a read, however, it really lacks a narrative that seeks to explain why such a system exists and how it should be changed.  In that sense it is a missed opportunity.

Rob Kitchin