by Conor Friedersdorf
As long as Michael Lewis keeps parachuting into foreign countries to explain how their particular economies imploded I'll keep linking. His dispatches from Iceland and Greece were fascinating. His latest installment is from Ireland.
Across the financial markets this episode repeated itself. People who had made a private bet that went bad, and didn’t expect to be repaid in full, were handed their money backfrom the Irish taxpayer. In retrospect, now that the Irish bank losses are known to be world-historically huge, the decision to cover them appears not merely odd but suicidal. A handful of Irish bankers incurred debts they could never repay, of something like 100 billion euros. They may have had no idea what they were doing, but they did it all the same. Their debts were privateowed by them to investors around the worldand still the Irish people have undertaken to repay them as if they were obligations of the state. For two years they have labored under this impossible burden with scarcely a peep of protest.
A fascinating anecdote that illustrates how easy loans could be got in a country where the cheap labor was largely Polish:
A few months after the spell was broken, the short-term parking-lot attendants at Dublin Airport noticed that their daily take had fallen. The lot appeared full; they couldn’t understand it. Then they noticed the cars never changed. They phoned the Dublin police, who in turn traced the cars to Polish construction workers, who had bought them with money borrowed from Irish banks. The migrant workers had ditched the cars and gone home. Rumor has it that a few months later the Bank of Ireland sent three collectors to Poland to see what they could get back, but they had no luck. The Poles were untraceable: but for their cars in the short-term parking lot, they might never have existed.
And some figures that explain what fueled the boom and bust:
...more than a fifth of the Irish workforce was employed building houses. The Irish construction industry had swollen to become nearly a quarter of the country’s G.D.P.compared with less than 10 percent in a normal economyand Ireland was building half as many new houses a year as the United Kingdom, which had almost 15 times as many people to house. He learned that since 1994 the average price for a Dublin home had risen more than 500 percent. In parts of the city, rents had fallen to less than 1 percent of the purchase pricethat is, you could rent a million-dollar home for less than $833 a month. The investment returns on Irish land were ridiculously low: it made no sense for capital to flow into Ireland to develop more of it. Irish home prices implied an economic growth rate that would leave Ireland, in 25 years, three times as rich as the United States. (“A price/earning ratio above Google’s,” as Kelly put it.) Where would this growth come from?
The whole piece is great, save one inconsequential false note:
The politicians in Ireland speak Gaelic the way the Real Housewives of Orange County speak French. To ask “Why bother to speak it at all?” is of course to miss the point.
There are a lot of status symbols in The OC. Peppering conversations with French isn't one of them. Still, you get his point.