There would have been no 'bubble to prick' if the Government had done its job right, writes Bill Hobbs
In the lifecycle of family businesses, it’s said the first generation starts the business, the second builds on it and the third destroys it. Fianna Fail’s third stage economic mismanagement may well result in the diminution of Ireland’s economic sovereignty so tellingly warned of by Richard Bruton last week.
In rightly highlighting the risks inherent in the economic integration required to retain EMU membership, Bruton was accused of reckless endangerment by Fianna Fail’s party historian Minister Michael Martin.
Attacking Bruton was rather silly. Corporate investment decisions are not informed by the cut and thrust of political debate no matter what the minister would have people believe. The EU will demand change which may include tax harmonisation whatever protection the Minister says Lisbon protocols offer.
In six years time this nation may well celebrate the 1916 centenary stripped of fiscal independence. The Minister would have been better to offer a cogent reasoned rationale for ceding fiscal sovereignty - for remaining within the European Monetary Union. The Germans want their money back with interest and Minister Martin and his colleagues will sign off on a €100bn+ mortgage to repay them. It’s a debt singularly created by his and his party’s economic mismanagement and bad leadership.
During RTE’s Frontline programme last week, Martin fingered poor advice from the guardians of financial stability, the central bank and regulator, in an attempt to absolve himself, his party leader and his party from primary responsibly and accountably. He said we had to learn how to safely “prick bubbles”. He ignored one brutal fact – were it not for Fianna Fail laissez faire economic policy, Anglo Irish Bank and INBS could not have leveraged off cheap EU funds to fuel a property ponzi scheme. And AIB and Bank of Ireland would not have followed suit and funded a consumption boom. There would have been no “bubble to prick”.
Fianna Fail policy to expand domestic consumption beyond sustainable levels was reckless endangerment. Unsustainable consumption, fed from cheap abundant credit provided largely through EMU membership, artificially swelled Government coffers creating the illusion of wealth. As manufacturing output declined, competiveness was squandered through uncontrolled income inflation which even saw Minister Martin’s salary reach obscene levels. Domestic service inflation soared as gouging the consumer became a national pastime. Anyone with a modicum of understanding of economics knew something had to give – all that was needed was a trigger event, a tipping point after which the system would rapidly spiral into crisis. That trigger, when it came, was not the Lehmans collapse – Ireland’s bust was well under way by then. The tipping point occurred in late 2006 when a statement by PD Minister Michael McDowell on stamp duty caused the runaway property market to falter. By early 2007 the property bubble began to hiss air and rapidly deflate well before Lehmans collapse.
Minister Martin’s self-absolution was a prelude to the 7000 word turgid apologia delivered by Brian Cowen to his favourite audience – the Dublin business class. Gone was the rousing patriotic jingoism that peppered previous speeches. Instead he attempted to sanitise his unique role in what really went wrong. During a subsequent interview on RTE, Brian Cowen answered searching questions not with reflective responsiveness but with one word “nonsense”. Is it nonsense to suggest that he should have known better? Is it nonsense to suggest that he should have been acutely aware of reckless endangerment inherent within an overblown property bubble, runaway income inflation and Rip of Republic? Is it nonsense to suggest that he should have been aware of the risks in banking’s explosive balance sheet expansion? It seems as Minister he relied on “advice” alluding to the IMF and OECD whom he and Minister Martin would have us believe are the real villains. During recent Oireachtas committee hearing into the banking crisis a senior civil servant, when asked what advice was provided to Cowen when Minister for Finance, declined to say and cited it was convention not to divulge the advice given. Will the two enquiries into the banking crisis uncover the advice provided? Did Brian Cowen ever listen to disconfirming information that would have told him the credit boom could come to a crashing halt?
Listening isn’t easy. It’s hardest when you are faced with information that disconfirms your world view. Great leaders not only listen, they actively seek out dissenting voices. They are aware of their own blindspots. Did one mans’ blindspot, his indecisiveness, his inability to listen and respond to dissenting information lead to economic ruin? Probably not, but as Finance Minister, Brian Cowen did have the levers to “prick the bubble” in his hands.
The ability to sense when something is wrong and guard against group think is a hallmark of great leadership. It includes questioning the status quo, being mindful of sycophantic advice - keeping your ears and eyes open. It also includes a humility and ability to admit to mistakes and the integrity to stand down when compromised.
Leadership is also about inspiring hope, defining purpose and providing a reason for people to follow. Apologies should be frank, unambiguous and free of blame. Accepting errors requires integrity and grace to acknowledge a fundamental reality – were it not for economic policy mistakes there would not have been an asset bubble. Leadership also requires high ethical standards. Regretfully many Irish politicians consistently behave as if they are above standards of decent dignified leadership behaviour.
In a fit of pique Fianna Fail Senator Leydon angered at the scuffle at the gates of parliament, abused privilege and accused an eminent journalist of inciting a riot, which is a criminal offence. Senator Leydon also provided a unique insight as to why the Greens should cross the floor of the house. Defending his outrageous allegation he left the cat out of the bag. He spoke of a Fianna Fail government supported by the Greens and independents.
If it waddles and quacks like a duck it probably is a duck. Is it time too for the Greens to cross the floor? Authentic leadership demands no less.
A version of this article appeared in the Irish Examiner, Business Section, Monday 17th May 2010
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