April 4, 2011
Last Friday, I sat in the Palace Bar on Fleet Street in central Dublin, listening to a wonderful rendition of Flann O’Brien’s play, Faustus Kelly. It was the anniversary of his death, on April Fool’s Day 1966.
This celebration, called Mylesday, will go some way to rehabilitating the life and times of one of our literary greats. Given the April Fool’s joke that has just been played on the Irish people, maybe Myles na gCopaleen would have had something to say about this.
Faustus Kelly, which was written in 1943, is a skit on the provincialism of Irish politics.
Kelly is the chairman of an unspecified urban district council who does a deal with the devil before the local by-election.
He makes a pact with the banks and the local big-wigs, and sees this as the be-all and end-all of politics.
When Kelly and his gombeen friends enter the real world of high politics, they are simply unable to leave the local behind.
For example, when discussing the great ideological wars of the time – and remember, this is 1943 – Faustus Kelly contends: ‘‘I believe that man Stalin is a black Protestant. He looks like an Orangeman to me.”
Rather than see the big picture and the interests of the general population, Kelly does deals with the local bankers and landowners because this is the world he sees.
When we examine the April Fool’s bank bailout, we could ask ourselves if we have changed at all. Do we still see the world like this?
Nearly 70 years after O’Brien wrote Faustus Kelly, our politicians are still making pacts with the banks that will impoverish the young working population of Ireland.
A generation is being forced to pay for the whole country and, ultimately, this won’t work, because it is not right.
Back in 2007, I wrote a book called The Generation Game. It focused on what the future would hold for the subjects of my previous book, The Pope’s Children, and why this generation – mine and younger – would pay for the delinquency of the boom.
We would pay in negative equity and higher taxes and we would have to fork out for the banks, which were, back then, bang out of order.
The book predicted that all bank equity would be wiped out and that Anglo would go bust.
The only problem with that prediction – which at the time was ridiculed by bankers – was that it wasn’t pessimistic enough.
The book also suggested that, in terms of national comparison, we would end up like Uruguay – a former Latin American champion that grew rapidly, borrowed too much and fell to earth.
At the time, the mere suggestion that we might compare Ireland to Latin America was regarded as off the wall. I can now say that I was wrong. We are not Uruguay. We are worse than Uruguay.
From a generational perspective, it is worth noting the age group of most of those people who are saying that there is nothing we can do about the banking crisis other than stumping up all this cash to keep these banks alive. Most of these are from the generation that actually won’t be called on to pay.
When I turn on the TV or radio and listen to the debate, it strikes me that the men – and it is only men – who are toeing the establishment line are older and greyer than the majority of the population. These middle-aged chaps in suits, fast approaching the end of their careers, are deep in the establishment and really have nothing to lose.
Equally, they can’t get their heads around the fact that the world has changed and that the old certainties are over.
Now, I know this is a gross overgeneralisation and I don’t want to offend anyone, but there is a clear generational divide on the issue of the banks.
When a state decides to borrow loads of money for something, the generational deal is simple: the ruling generation gets the benefit and the future generation pays.
The greater the debt, the bigger the future burden, and the assumption is that the future will have the wherewithal to generate the cash.
Now, if the investment increases the productivity of the future generation – as for example education does – this will be the makings of a contract between one generation and the next. But if the borrowing does nothing for the future generation – for example, putting money in bankrupt banks, which does nothing for future productivity – then we just have one generation robbing the next.
This is important because the legitimacy of any policy has to be based on fairness, not just between the rich and the poor, but also between the young and old.
What would a banking policy framed by a member of the generation that will have to pay for the banks for the rest of his or her working life look like?
It would certainly involve putting all the banks into examinership, not receivership. An examinership is the Irish version of Chapter 11, and this law is on our company law statute. It is designed to keep a business open, to find a new buyer and is based on the simple capitalist rule that the old debt is never honoured in full. The receiver assesses the liabilities and the assets, and pays out what is there to creditors who line up in order of priority.
All creditors except ‘‘trust creditors’’ – depositors – take a huge haircut.
A new buyer is found for the business after this restructuring and we start again.
So who might buy the Irish banks from the examiner? Maybe not European banks which might hold Irish bank bonds and will have lost money. Why not Chinese banks? The three biggest banks in the world are Chinese and they are looking for exposure to the eurozone.
They could buy an overvalued (and soon to lose out) French or German bank, or they could buy a cleaned-up Irish bank.
We could put into the deal a kicker for the cash we the Irish state have already invested, so we could get our money back as the bank recovers with the economy.
This would gain us few friends in the European elite, but would save our younger generation from having to pay the staggering bill of the older generation.
The world has changed. China is the world’s banker now. We have to see this and drop our European provincialism and our genuflecting to the ECB as the only buyer in town.
There is a world that wants to invest in Ireland, but we have to drop our Faustus Kelly approach to finance and see that shafting our young to protect our old and curry favour with the ECB is nothing more than an April Fool’s joke.
And we are the fools.