Life in Ireland now is surrounded by a constant, low-level awareness that things don't quite add up. There is a gap between the upbeat, boom-time atmosphere and the nagging feeling that the frantic, almost hysterical insistence on how rich we all are is a case of protesting too much, writes Fintan O'Toole
We see the evidence before our eyes - the houses, the cars, the Prada handbags, the designer clothes. But the great unspoken question of contemporary Ireland is "how can they afford that?"
How can people with relatively ordinary jobs afford €1.5 million houses and two cars and creches and two foreign holidays and private schools? And the answer, the thing that fills the gap between appearance and reality, is a four-letter word: debt. We stuff the breach between the way we think we ought to be - cool, fabulous, on top of the world - and the way we really are with borrowed banknotes.
Debt is a measure of an insecurity that is psychological as well as financial. It is the monetary expression of the neuroses of a money-obsessed society, the rational, numerical articulation of a great absurdity. For almost without comment, our attitude to debt has changed in a fundamental and wildly paradoxical way.
Before the boom, we understood debt as a mark of poverty. If you had to borrow to make ends meet, you were in a bad way. Now, we are faced with a peculiar irony: the richer we've become, the more money we owe. In the 1980s, the State was in the red and the citizens were mostly in the black. Now, the State operates mostly at a surplus and the citizens have taken on the current budget deficit. Debt, like so much else, has been privatised.
For the first time ever, total household debt now exceeds total disposable income in Ireland - by about 20 per cent. Ten years ago, debt was 48 per cent of disposable income, now it's 120 per cent. The red tide is turning into a tsunami. At the end of 2003, we had personal debts of €68.5 billion. At the end of 2004, the figure was €91 billion.
The obvious explanation for this is that the property price boom has saddled many people with huge mortgages, but in this case the obvious explanation is insufficient. The need to service big mortgages ought to mean a degree of frugality in other aspects of spending. But in fact mortgages accounted for less than half of the increase in private debt last year. Private non-mortgage debt grew twice as fast last year as it did in 2003.
Most of this money is spent on keeping up appearances. In the recent ESRI/IIB survey of personal debt, 60 per cent of borrowers admitted that they needed the money for "financing my lifestyle". It is not about the single mother in Gurranabraher or Darndale borrowing from the money lender for her daughter's communion dress. People with the most money are borrowing most: 51 per cent of those on incomes of more than €65,000 are in debt compared with 15 per cent of those on incomes under €15,500. And a lot of the borrowing is completely irrational even in its own terms. The maddest way to borrow money is through credit cards, at effective interest rates of about 12 per cent. Yet, if you exclude short-term credit card transactions that don't involve interest payments, there was, according to the Central Bank, about €1.3 billion in personal credit card debt outstanding at the end of last November.
Things are actually much worse than all of this implies. There is one form of what is effectively debt that doesn't come into the Central Bank or ESRI figures: borrowing from one's own future. Of a workforce of nearly two million people, 900,000 have made no personal pension provision.
Essentially, they are taking money from their later years and spending it now. They will either have to repay this money in the form of very high pension contributions in their middle years or resign themselves to relative poverty in old age. If this enormous deficit is added to the mountain of personal debt, we are looking at something of Himalayan proportions.
Why are we behaving like this? The basic reason, surely, is because we believe the hype about ourselves. We have delusions of grandeur, created by the constant stream of assurances about how rich we are and fed by the insecurity of a consumer society that measures wealth by expensive display. We forget that our incomes are rendered somewhat illusory both by the very high cost of living here and by the fact that we pay through the nose for basic social provisions. In the IIB/ESRI survey, for example, nearly 20 per cent of people cited childcare costs as one of the reasons for their burden of debt.
The same survey also noted in deadpan tones that "Irish consumers' financial situations have not improved as much as might be expected" from the big macro-economic picture. If politicians and commentators borrowed fewer hyped-up clichés about the Celtic Tiger, the rest of us might be less inclined to buy the hype with borrowed money.