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The development of Ireland
The 2008 crisis was far from the first primary recession Ireland has experienced as an independent state. The 1950s saw a predominantly agricultural and locally oriented economy on the verge of collapse, with high unemployment and emigration. The shift to a trade-oriented economy has led to an increase in agricultural exports, the decline of domestic industries, and a strong and persistent focus on attracting foreign direct investment (FDI). the “modern” welfare state, the expansion of participation in education, adjustments in the family circle and gender relations, and Ireland’s accession to the European Economic Community (EEC) in 1973.
However, in the 1980s a new crisis arrived. Driven by government borrowing and reasonable foreign financing in the late 1970s, Ireland’s political economy played a part in the external debt crisis of the early 1980s. With a further increase in emigration and unemployment, the limits of Ireland’s economic progress and social transformation were clear. Female labour force participation remained incredibly low and the overall employment rate in the economy was the lowest in the EU. Despite gigantic flows of foreign investment, most of Ireland’s population remained dependent on the state, either for employment or social benefits; worse, even in such an underdeveloped economy, inequality was among the highest in the Organization for Economic Cooperation and Development (OECD). and incorporated into state policies (Breen et al. , 1990).
Introduction
The Irish banking crisis occurred on several levels. More precisely, it was a local crisis, produced basically through Irish banks and developers oriented largely towards the national economy. More generally, it was a case of a broader crisis of economic liberalism. Many of the situations that made the local crisis imaginable There were intrinsic elements of market liberalism: the limitation of public regulation and the rejection of the political orientation of the economy, the weaknesses of personal regulation to ensure the common good and the structural importance and the discursive privileges of markets and, in particular, finance.
The last bankruptcy discussed some other very vital detail of the Irish crisis, which links in combination those express and universal characteristics of the crisis. These are transnational organizational and institutional connections that have reflected the local and global characteristics of the crisis. Most important in the Irish case was the set of connections that enabled Irish banks to raise large sums of financing around the world between 2001 and 2007, an era during which the asset bubble was largely financed by channeled external budget through major Irish banks. . The role of credit rating agencies in creating this dating has already been discussed, whether in terms of their role in transforming bubble-era progressive loans into “investable” or increasingly “liquid” entities. ” and his own reliance on general assumptions about market power to aid his judgments. More generally, these agencies played a vital role in the link they made possible between the system of Irish banking and real estate expansion and the broader regional processes of financialization and Europeanization.
Ireland’s political economy evolved between the 1990s and 2000s. But who made this replacement and how? The following chapters explore the role of EU dynamics and national policies. However, our story begins with the key actor in the political economy during the last two decades of liberalization and financialization: capital.
At first glance, the Irish currency crisis is a very local crisis. The subprime loans and securitized credit products that played a central role in triggering the US crisis have been much less vital in the Irish case, where loans to developers and emerging space costs have been much less significant in the Irish case. more vital (Connor et al. , 2012). While lending practices declined in the 2000s, the crisis was not due to loan defaults (although they have become vital elements in the evolution of the crisis).
However, other facets of the Irish crisis were more widely shared. As Connor et al. (2012) point out that Ireland shares with the United States characteristics such as an “irrational exuberance” among market participants, a “capital bonanza” (easy access to reasonable capital for banks, in the Irish case thanks to foreign loans) and problems in terms of regulation and “moral hazard. ” Furthermore, the crises of the current era are connected through increasingly tight monetary integration: the US crisis of 2008 was the turning point for the collapse of the Irish banks and interbank liquidity was very temporarily depleted. a broader task of economic liberalization in recent decades.
Introduction: The challenge of national political economies
As the latest bankruptcy showed, Ireland was part of an organisation of countries facing a set of unpromising situations in managing the economic flows, credit booms and economic bubbles that were most likely to emerge in the euro area. In the Mediterranean countries, Ireland lacked the social compacts that underpinned the fiscal field in the continental and Nordic economies. However, this does not mean that the fiscal crisis that emerged in Ireland in 2008 was inevitable. National politics continued to play a key role in explaining the speed and magnitude of the crisis and how it spread so temporarily and dramatically from the economic sector to public finances. Indeed, national political economies would arguably be even more vital in the era of economic and economic union, given the rather stringent constraints on economic policy speeds (Lane, 2011). Weakened at some speeds, national politics has become even more vital in others, such as fiscal policy and the orientation of investments towards productive rather than speculative objectives.
Ireland has therefore faced a significant challenge in managing the financialization procedure in the context of social institutions and negotiations that are regularly linked to gigantic budget deficits. However, although in the 2000s Ireland had recorded budget surpluses and its public finances gave the impression of being in good health, the extent of the collapse of its public finances after 2008 was dramatic. Its budget deficit increased from 0. 9% to 15. 5% between 2007 and 2011. As we will show in the next chapter, this is largely due to the fact that public finances bear the debt burden of personal banks . However, even leaving this aside, the government’s annual budget had a giant number one deficit. Understanding the situations that can produce such fiscal fragility is a key detail to understanding the Irish situation. surrender to.
The arrival of the hidden crisis in Ireland
During the summer of 2008, discussions continued in Ireland about a conceivable slowdown in growth, with many rumors of a “soft landing”, which would result in a painful but transitory adjustment of the Irish economy. These discussions ended abruptly in September of that year, when the magnitude of the Irish banking crisis became evident and the Irish state insured most of its liabilities. The guarantee was extended to a potential total amount of two to three times the GDP at that time. In recent years, several commentators had warned about the unsustainability of the Irish economic bubble. Some have warned of declining competitiveness, others have focused on the broader weaknesses of a liberal economic model, while others have warned in particular about crises in the asset market – and have warned less about disruptions to the economy. banking formula (Kelly, 2007). . Many of the key elements of the Irish crisis have been highlighted by various observers. In many cases, these observers have been ridiculed by the media and mainstream politicians. However, when the Irish crisis hit in the late summer of 2008, the severity of the banking crisis and the extent of its spread across a variety of interrelated spaces surprised almost all observers and elites. policies.
The Irish crisis began in the monetary sector, but temporarily extended to the fiscal, economic, social, reputational and political spheres (NESC, 2009; Kirthrough & Murphy, 2011). Each of these crises arose from an underlying structural weakness that, in all cases, was masked by an overall positive trend in the 2000s (see Table 6. 1).
Ireland and the Great Recession: of liberalism or liberalism betrayed?
In early 2013, when I completed this manuscript, the Great Recession was in its fifth year. The surprise of the acute crisis of 2008 had given way to the popularity of the chronic and long-lasting nature of the recession. The outrage of the first months of the crisis has turned into a deeper erosion of the acceptance and legitimacy of private and public institutions, accompanied by a depression in the ability of public or private institutions to achieve recovery. economic, not to mention reconstruction.
Europe was in the midst of the crisis, its economy as a whole doing at least as well as others suffering in responding to the recession around the world. However, Europe’s disorders went deeper than particular economic problems and touched on the discoveries of its socioeconomic system, while the euro hung by a thread and the European mission fractured in the face of crisis and economic divisions. policies. In the midst of this wider regional crisis, Ireland was one of the countries that found itself in the middle of the economic storm. Not long before celebrated as the “Celtic Tiger,” Ireland was now experiencing one of the most internal and protracted crises in Europe and beyond. After at most five years of recession and austerity, the Irish economy remained mired in an economic crisis, with only fleeting glimpses of economic growth, burdened by bank and public debt and facing serious solvency and sovereignty issues. As a “poster child” of austerity in Europe, Ireland found itself on a knife’s edge, between potentially unsustainable debt and the rising social and political prices of recession and budget consolidation.