Recent weeks have seen a procession of events that reminded us of the financial crash of 2008. The State sold down the last of its shares in AIB and then put PTSB up for sale, moving to end its long involvement as a shareholder in the banks. The special liquidators of the Irish Bank Resolution Corporation – set up to take on the loans of Anglo-Irish Bank and Irish Nationwide – put its final property asset on the market.
Meanwhile, this week the Government published the fourth in a series of housing plans to try to deal with a crisis that has its genesis in the collapse of investment after the crash.
Ireland’s economic history over the past 50 years has been a roller-coaster of ups and downs, but the crash was a defining moment. And as well as its more visible manifestations, it has had hidden costs.
The banking sector may again be profitable, but supervisory rules and management caution make it reluctant to lend at scale to the domestic economy and particularly to the construction sector. In turn, this sector has never fully recovered from the fall-out of the crash, with a shortage of medium-sized and larger builders posing a challenge to the new housing plan.
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There are two lessons here for policy. One is that the systemic weaknesses that persist need to be tackled. The State can step in and finance housing construction, but without a fully-functioning banking sector and a vibrant building industry it will be battling against the tide.
The second is the high price of an economic downturn, which goes well beyond the lives blighted in the immediate aftermath. Breaking the boom to bust cycle is vital. There will be ups and downs caused by the international economic cycle, but building resilience to handle these is vital.
History rarely repeats itself. Banks and households are in a much better position than they were in 2008. But the fact that we are, 17 years on, still undoing the mess shows the value of preparing for the next shock. In an unpredictable world, that shock will never be too far off.
