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Fintan O’Toole: The kids who were knowingly impoverished by austerity policies will pay the price for decades

After the great Irish banking and property crash of 2008, the sinners got three Hail Marys but the innocent had to stay on their knees for five years

Those of us who were raised as Catholics will remember the Act of Contrition: “O my God, I am heartily sorry for having offended Thee, and I detest all my sins…”

The most consequential interference of religion in Irish politics in this century had nothing to do with the church. It was the Act of Contrition otherwise known as austerity.

After the great Irish banking and property crash of 2008, the instruction from Brussels, Washington and Frankfurt was: do penance and give up your oul’ sins. It was the old ritual of redemption through suffering, religion dressed up as economics. And it was pernicious nonsense. The worst suffering was imposed on people who had contributed least to the disaster. The sinners got three Hail Marys; the innocent had to stay on their knees for five years.

Worse still, most of this was not merely unnecessary but actively counterproductive. Sucking money out of a deflating economy made a very bad situation worse. Don’t take my word for this – listen to those who devised and enforced this penitential regime. For if you pay close attention you can hear a mumbled half-apology.

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Last week, Leo Varadkar, who becomes Taoiseach again today, mused on the period of austerity in an interview with Business Editor Ciaran Hancock in The Irish Times: “I often wonder had a different approach been taken 12 or 14 years ago when the financial crash happened would we be in a better place now. That wasn’t possible, of course, because the shots were being called from outside and we lost our sovereignty.”

But, he lamented: “So many jobs were lost at that time, so many businesses closed and, in areas like construction and banking, they never really fully recovered. It has certainly brought me around to the view that, on balance, a more interventionist approach from government would have been better.”

Varadkar was, as minister for transport, a full member of that Fine Gael-Labour government. It seems a pity that he didn’t “wonder” at the time about the pain he was helping to inflict on Irish people.

Next there’s the view from Brussels. In September, Paolo Gentiloni, a former Italian prime minister who has served as EU economy commissioner since 2019, told The Irish Times’ Europe Correspondent Naomi O’Leary that “I think it was a mistake, the – you can call it austerity, of course”.

Likewise, last month a senior European Commission official, speaking off the record, acknowledged to O’Leary that austerity had been wrong-headed: “Member states, they cut back massively on expenditure, but the investment part of that was hit the hardest…the political logic of it is very understandable, but the economic damage that that has done is just enormous.”

As for the view from Washington, the International Monetary Fund (IMF) has long since acknowledged that the approach to the Irish crisis was deeply misjudged. As early as 2013, Ashoka Mody, former head of the IMF mission to Ireland, told RTÉ: “The decision then was the entire reliance would be on austerity and clearly the experience, if experience was needed, has demonstrated that reliance on austerity is counter-productive…complete reliance on austerity was the wrong way to go.”

Varadkar is willing to acknowledge the truth now because the wind is blowing in a different direction than a decade ago. The “common sense” of the austerity years has now been turned upside down.

It is easy to go with the flow. But leadership surely consists in being able to go against it when the flow is a river of toxic sludge. Or, at the very least, to be more searchingly self-critical when you know you got things wrong at enormous cost to other people. It’s hard to see that awareness in Varadkar’s verbal shrug of the shoulders.

There was a character in a British sitcom, played by Windsor Davies, whose catchphrase was “Oh dear. How sad. Never mind.” That seems to be about as much contrition as we can expect from the incoming Taoiseach.

One of the worst policy failures of the century so far is now a matter for wistful wondering and melancholy musings. There is no accountability, no taking of responsibility, no real reflection on how the most basic interests of ordinary Irish people were sacrificed to an economic orthodoxy that made no sense.

This is a “mistake” that cost hundreds of thousands of people their jobs (unemployment tripled between 2007 and 2013). More than 300,000 people emigrated from Ireland when austerity was at its height, four in 10 of whom were aged between 15 and 24.

In 2012 more than one quarter of the population experienced two or more types of enforced deprivation. Vulnerable children were deliberately targeted for punishment. Child benefit and one-parent family allowances were cut in both 2011 and 2012. Unsurprisingly, by 2013, 30 per cent of Irish children were experiencing deprivation.

The consequences of child poverty are lifelong. The kids who were knowingly impoverished a decade ago are adults today, and they will be paying the price for decades to come.

Just as long-lasting is the effect on housing supply and other vital infrastructure. With interest rates falling near zero and huge numbers of unemployed construction workers, this was the perfect opportunity for the State to step in and build homes. Instead the ideology of austerity decreed that almost nothing got built in those years – creating a deficit that is now Ireland’s greatest social and economic problem.

We were also required to ritually abase ourselves before the gods of austerity by voting in a referendum in 2012 to endorse an idiotic euro zone “fiscal compact” that essentially sought to outlaw Keynesian economics. It made no sense, but it showed that we were duly chastened and were determined to be the best boys and girls in Europe. We earned a pat on the head from Angela Merkel for setting an “outstanding example” to the other delinquents.

This fiscal compact is now officially accepted in Brussels as “ineffective and counterproductive”. But – and this is what we need to reflect on – there was a very powerful political and media consensus at the time that all of this was right and proper. We were in TINA time – there was allegedly no alternative.

This consensus was almost as stultifying as the one it replaced – that the “fundamentals were sound” in the Celtic Tiger economy. The economic and political establishment merely swapped irrational exuberance for irrational sadomonetarism.

And now it’s all just “oops!” Shouldn’t have impoverished those kids, should have built those houses. Oh dear. How sad. Never mind.”

Is that it? Is that all we get from the incoming Taoiseach?

Surely we’re due, at the very least, another Act of Contrition – this time for the foolishness of right-wing economic orthodoxies that deepened and prolonged an already grim recession and left Ireland with a very painful hangover.

We won’t get it of course. Penance is for the little people.