March 14, 2016
The elderly, weather-beaten women are dressed in black and glorious purple, the traditional Caribbean colours of mourning. They file up to pay their respects at the beautiful St John’s Church on the savage Atlantic coast of Barbados. The low murmur of the shuffling throng is punctured by the squawk of the rooster who stands, sentry-like, at the door of this magnificent church. No one seems to notice him as he clucks, pecks and flaps around.
The scene is pure rural Caribbean, except for one thing: dotted among the black mourners – descendants of slaves – are some white people. Well, not so much white, as whitish!
These whites are not the affluent, chino-wearing, golf-playing whites of upscale Barbados. These are poor, very poor whites. As I watch them line up solemnly at St John’s, where a church has stood since 1630, they all display the universal tell-tale sign of poverty: rotten and missing teeth.
These people are the last of the ‘red legs’, the distant demographic echo of Irish slaves sent to Barbados by Cromwell. It is thought that between 1645 and 1660, 40,000 Irish captives were sold into Caribbean slavery from Ireland, via Liverpool and Bristol to Barbados and beyond. As with all slave trades, the people were sold via middlemen. They didn’t walk willingly to Waterford port. They were traded. They were driven off their land in Ireland, huge tracts of which were given to Cromwell’s victorious NCOs, and then sold by the gombeen men to slave traders.
Four thousand miles away, as their fair skin blistered and burned, they became known as ‘red legs’. In barren eastern Barbados, the red legs toiled in the sugar plantations on the margins of society, rejected by the local white English aristocracy and the black slaves.
It’s amazing to think that slavery was legal, isn’t it?
Over the years their numbers have shrunk to just a handful of small communities, desperately poor pockets of poor white Irish red legs.
In the past two generations they have begun to intermarry with the local black population. The most famous product of such a marriage is Barbados’ biggest star, Rihanna, who tells of being slagged by local black kids, her mates, for being too pale and, worse still, being part red leg. Rihanna’s father was a mix of black and red leg.
I am sitting in Martin’s Bay in western Barbados where the Atlantic, driven by the African trade winds, smashes into the first piece of land since Sierra Leone. This side of Barbados is a world away from the sandy beaches, jet-skis and offshore banking of the sheltered Caribbean side. This is the windswept and exposed last stronghold of the red legs.
Sandy Lane it is not.
As I considered the future of this tiny Irish tribe, the ‘assets’ Cromwell’s middlemen traded for pennies, the words Colm O’Rourke declared last year came to mind: “The reality is that Nama is, with official blessing, overseeing the greatest plundering of Irish assets since the Cromwellian plantations.”
I realise he was being a bit over the top, but the notion that Nama is the modern-day equivalent of a 17th-century middleman who is trading assets isn’t too far removed from reality.
In the past eight years, huge tracts of Ireland have been sold by Nama at deep discounts to vulture funds. This went on under the radar, in effect transferring enormous wealth out of Ireland to foreigners. Maybe it wasn’t the Cromwellian plantations, but it is hard to think of another country whose own government sanctioned such a fire sale of national assets.
For the past few years, having bought up the assets, the vultures have been hovering over their prey, but now they are ready to swoop. As this paper reports today, the vulture funds are now moving against the former owners, squeezing the last few quid out of their Irish assets.
Here’s what’s happening. European interest rates are below zero because Europe’s economy is a mess. The euro is plummeting against the dollar.
So if you are an American vulture fund, what do you do?
You borrow in euro, even though you are American, and you watch your borrowing costs fall as the euro exchange rate falls. Then you take this ‘free’ money and you go to Ireland, where the locals have no credit, and you buy up bundles of loans from their government – the very people who are supposed to be protecting the financial interest of the Irish people.
Remember Nama – an agent of the state – was supposed to get credit going? Well, it is getting credit going all right – but it is foreign credit. We are middlemen in the global credit cycle. The vulture capitalists know this, but are too clever to admit it and the Irish political class are too stupid to realise it.
Most vulture funds have a rule called the three-thirty rule.
This means they buy and hold for a maximum of three years and once they make 30 per cent, they are out. This is their twist. Now they are moving to get the most out of the assets before they sell.
Initially, the vultures bought up the glittering swanky office prizes in Dublin – and with various geniuses heralding their brilliance even though it was nothing more than having the access to capital at a time when our country was on the canvas. In the past year or so, the vultures delved deeper into the economic carcass.
Deep inside the financial entrails are the loans of small and medium-sized businesses, the property loans of petrol station owners, publicans and undertakers. The vultures love this type of soft tissue.
Thousands of small businesses are now under the control of vulture funds.
The strategy of the funds is to buy as cheaply as possible and sweat the asset until the yield on the property rises. Once the yield or the income of the property rises, they can re-rate the price of the property upwards. In finance, this is almost formulaic. But in reality it is far from a formula.
Re-rating the property value upwards at a time of low inflation will involve putting up rents, squeezing the owners – who are pretty much bust and may have one business (a pub, say) which is throwing off just enough cash to pay the interest on the property. Now the vultures are using the Irish courts to come after the other assets of the unfortunate owners. So if the ‘loan’ for a house was secured against a pub, for example, both the pub and the house are now being claimed by the vultures.
In the next few months, the courts will decide how many of Ireland’s small businesses will be handed over to these funds. This transfer of assets is taking place right under our nose. It is a disaster for the country, for the society and for the capital base of the economy, and yet it is legal.
But then again, so too was slavery – once.