Ship of Fools Read online

  Table of Contents

  Also by Fintan O’Toole

  Title Page

  Dedication

  Acknowledgements

  Glossary

  A Note on Sources

  PROLOGUE

  Chapter 1 - El Tigre Celta

  Chapter 2 - A Patriot for Me

  Chapter 3 - Ethitical Banking

  1 I’m Not There

  2 Cayman Ireland

  Chapter 4 - Our Own Gentry

  Chapter 5 - The New Feudalism

  Chapter 6 - Kings of the Wild Frontier

  Chapter 7 - Off-line Ireland

  Chapter 8 - Unknown Knowns

  Chapter 9 - Fair Play to You, Willie

  EPILOGUE

  Index

  About the Author

  Copyright Page

  Also by Fintan O’Toole

  SHAKESPEARE IS HARD, BUT SO IS LIFE

  A TRAITOR’S KISS

  WHITE SAVAGE

  To JOHN O’REILLY and JOHN CONNOLE,

  better builders

  Acknowledgements

  I would like to thank Dr Jim Stewart and Professor Justin O’Brien for help and advice with parts of this work, though neither of them is responsible for my use of those gifts. I am also grateful to Geraldine Kennedy, editor of the Irish Times, and her predecessor Conor Brady, for allowing me to express many of the ideas that are developed here, even when they were badly out of kilter with the mood of the times. Paddy Smyth and later Peter Murtagh on the opinion pages have been particularly patient and supportive.

  This book would not have been undertaken without Neil Belton’s support and perhaps misplaced optimism, and would not have been possible without Charles Boyle’s acute work on the text. I am also grateful for the work of my agent Derek Johns.

  My debt to Clare Connell is, as always, both incalculable and inexpressible.

  Glossary

  Dáil - the lower house of the Irish parliament

  Fianna Fáil - the dominant party in Irish politics since 1932

  Fine Gael - the largest opposition party

  IFSRA - the Irish Financial Regulatory Authority, established in 2003 as the separate supervisory arm of the Central Bank; it was subsequently known as The Financial Regulator

  Progressive Democrats - a small but highly influential neo-liberal party formed in 1985 and wound up in 2009

  Protestant Ascendancy - the governing and landowning class, adhering to to the Protestant state church, that dominated Irish society from the seventeenth to the nineteenth century

  Tánaiste - the deputy prime minister

  Taoiseach - the prime minister

  TD - member of the lower house of the Irish parliament, Dáil Éireann

  A Note on Sources

  Since this book is intended as a polemical, rather than a historical or academic work, it does not have an apparatus of references and footnotes. All of the facts and statistics used here are, however, easily available on line from the relevant Government departments, the Revenue Commissioners, the Comptroller and Auditor General, the Central Statistics Office, the reports and transcripts of the McCracken, Flood and Moriarty tribunals, the DIRT inquiry, the reports of the all-party Oireachtas Committee on the Constitution, the National Competitiveness Council, Eurostat, the OECD and the International Monetary Fund.

  References to contemporary events are drawn from the archives of the Irish Times, the Sunday Tribune, the Sunday Business Post, the Irish Independent, the Sunday Independent and the Irish Mail on Sunday.

  PROLOGUE

  Three Ships

  1

  In July 2004, the property developer Seán Dunne celebrated his second marriage, to the former gossip columnist Gayle Killilea, in a seventeenth-century villa on the Italian Riviera. The guests, as Ms Killilea’s newspaper gushed, were ‘a fascinating sample of Irish society: bankers and footballers, designers and theatre directors, not to mention, given the groom’s background, political deal-makers’. The only notable absentees were the serving Taoiseach, Bertie Ahern, and his Minister for Finance, Charlie McCreevy.

  Ahern had been due to arrive for the wedding, flying straight from the National Day of Commemoration ceremonies to honour Ireland’s war dead, and to stay as a guest of the property magnate at the Hotel Splendido in Portofino. When news of his plans to travel to Italy was leaked to the press, he decided not to go. During the speeches, however, a phone call from Ahern was played on speakers to the guests: ‘Dunner, you and I go back a long way. I wish I could be there,’ he said. ‘I’m sorry I couldn’t come but I would have been more trouble to you than I’d be worth.’ The Taoiseach, Killilea explained to the Sunday Independent, ‘didn’t want our wedding to turn into all being about him. Then Charlie McCreevy said he better not come either.’

  The party cost €1.5 million, but it was merely the prelude to a longer, more lavish nuptial celebration. The couple had hired Aristotle Onassis’s old yacht, the Christina O, venue for the wedding receptions of Onassis and Jackie Kennedy in 1968 and of Grace Kelly and Prince Rainier in 1956. Forty-four guests were taken on a two-week cruise around the Mediterranean. The cost of chartering the yacht is €65,000 a day, not including food, drink and fuel. The fuel charge was €575 an hour.

  But the real cost of the Christina O was borne by a couple of million people in Ireland, who probably did not know that they had paid for much of it. The Christina O Partnership Limited is registered in the Cook Islands but owned by a consortium of Irish businessmen, who purchased it in 2000. It cost them €65 million to buy and refit the yacht in lavish style, including a bronze-bordered swimming pool inlaid with mosaic frescos of ancient Crete that, at the push of a button, could be turned into a dance floor.

  The expense was largely borne by the Irish taxpayer. Under Ireland’s beneficent tax regime for the rich, the wealthy businessmen who put up the cash got most of it back from the state. In November 2008, the Revenue failed in a court case in which it had challenged the right of one of the investors, Pino Harris, to claim back most of his outlay on the Christina O. Harris had put up €14.3 million and got €9.12 million of it from the state in the form of tax refunds. Assuming that the other investors got back the same proportion of their investment from the tax authorities, the Irish taxpayer lavished about €40 million on the Christina O. It was money well spent - a state in the throes of a demented property cult needed somewhere suitable for its new aristocracy to disport itself in style.

  Less than a year after his epic epithalamion in the Mediterranean, Seán Dunne pushed Irish property prices to new heights by buying the Jurys and Berkeley Court hotels in Ballsbridge, Dublin, for €260 million, with the intention of demolishing them to build a new high-rise city quarter to rival London’s Knightsbridge. He paid €53.7 million per acre for the land; the previous record was €35 million. He then bought a small adjacent site, Hume House, for the equivalent of €195 million an acre - believed to be one of the highest prices paid for a piece of real estate ever, anywhere. In all, he spent €379 million on his Ballsbridge site.

  In August 2009, Ulster Bank, a subsidiary of the Royal Bank of Scotland, moved loans it had given Dunne to buy the Jurys and Berkeley Court site into a new ‘quarantine’ division for dodgy assets, a prelude to eventually offloading them to a British or Irish state ‘bad bank’ for toxic debts that were unlikely ever to be repaid in full.

  The Christina O sailed on.

  2

  At two o’clock on the morning of 11 September 2008, twelve miles west of the island of Belle-Ile in the Bay of Biscay, the bilge alarm sounded on the Irish national yacht, the Asgard II. The brigantine was the successor to and namesake of the original Asgard, on which, in 1916, the nationalist revolutionary Erskine Childers and his wife Mary ran a consignme
nt of German guns into Howth harbour and delivered them to the Irish Volunteers. The original ship was enshrined in nationalist mythology and eventually preserved in the national museum. The Asgard II, the state’s official sail training vessel, inherited some of its aura as a symbol of the nation. Its masthead was an image of the sixteenth-century ‘pirate queen’ Granuaile, who had defied Elizabethan encroachment on her West of Ireland coastal fastness.

  The sound of the alarm that morning meant that the Asgard II was taking in water. The captain gave the order to abandon ship, the crew was evacuated, and the Asgard, her decks awash, sank sadly to the bottom of the bay. There was some hope that she might be raised, but in February 2009 the government decided that there was not much hope of salvage. Nor was there much prospect of building a new boat to symbolise the nation. The government was so broke that it quietly pocketed the €3.8 million in insurance money and left the Asgard to its watery fate.

  There was something almost too neat about the symbolism. A fortnight later, the Irish banking system, awash with waves of bad debts owed by property developers, collapsed. The great Irish economic miracle of the 1990s and early twenty-first century was over and the global Cinderella was returning to rags and ashes. The Asgard had never functioned quite so eloquently as an image of Ireland.

  3

  A joke:A magician gets a job on a cruise ship. The captain keeps a talking parrot to amuse himself and his passengers. At first, the magician is charmed by the parrot’s smart-arse repartee. When he gives his show, however, the parrot hangs out of a light fitting above his head. When the magician makes a dove disappear, the parrot squawks: ‘It’s up his sleeve.’ When he makes a playing card vanish, the parrot shrieks: ‘It’s behind his ear.’ When he makes a rabbit evaporate into thin air, the bird screeches: ‘It’s in his hat.’

  The enraged magician can’t take any more and he starts to swipe at the bird with his cane. Just then the ship hits an iceberg. The magician is nearly trampled in the rush for safety and he has to dive into the water and swim. As he finally drags himself into the lifeboat, the parrot, perched on the stern, looks him in the eye and says, ‘Okay, you’ve got me. How did you make the ship disappear?’

  1

  El Tigre Celta

  ‘un “american dream” à l’européenne’

  - Le Monde on Ireland

  In Tegucigalpa, at 7 p.m. on the evening of 19 February 2009, members of the Honduran National Business Council filed into the 700-seater La Concordia ballroom of the Marriott Hotel. They had paid $150 a head to hear a lecture about the Irish economic miracle and how it could be emulated by those still wallowing in the swamps of underdevelopment. Its title was El Tigre Celta: Modelo Irlandes de Desarrollo (‘The Celtic Tiger: The Irish Model of Development’). The speaker was the former Taoiseach, Bertie Ahern, described in the promotional literature for the event as the ‘driver of the Irish economic model’.

  The speech so impressed the right-wing Honduran National Party that it quickly issued a statement proclaiming its close affinity with Ahern’s inspiring leadership: ‘The development model followed by Ireland to become the “Celtic Tiger” coincides with that promoted by the Nationalist candidate Porfirio Lobo Sosa, nationalist leaders said after meeting with former prime minister of that European country, Bertie Ahern . . . The nationalist leadership knew all about the development programs implemented by Ahern when he served in office between 1997 and 2008 which allowed him to place Ireland at the head of the wealthiest nations of Europe at present’.

  It was perhaps as well that, for most Hondurans, Ireland is a faraway country of which they know nothing. Back home, on the day after Ahern’s speech about the Irish model of development, it was disclosed that the newly nationalised Anglo Irish Bank had over the previous few years given €225 million in loans to its own directors, chief among them its chairman, and Ahern’s good friend, Seán FitzPatrick.

  During the same week, it emerged that Anglo Irish had lent a secret consortium of investors €300 million to buy the bank’s own shares. The European Commission in Brussels publicly rebuked the Irish government for failing to control the public finances during the boom years. Social welfare officials were warning that they couldn’t cope with the wave of benefit claims from the newly unemployed. Ahern’s highway to development was looking increasingly like a road to nowhere.

  Ahern’s speech on ‘the Irish model of development’ had been greatly in demand, not because he had any oratorical skills, but because the globalised Irish economy had itself become a global brand. He had delivered the same script in both Korea and Ecuador in October 2008 - reportedly for a fee of €30,000 each time.

  Sadly, this source of income dried up as news of the collapse of the Irish economy finally reached distant parts. In early August 2009, the Celtic Tiger speech was quietly dropped from Ahern’s portfolio by his agents, the Washington Speakers Bureau. The Irish model of development had come to seem more like a threat than a promise.

  By then, Ireland was outstanding in the global economy, but not quite in the way that Ahern’s listeners might have been led to believe. The International Monetary Fund was predicting that Ireland’s Gross Domestic Product (GDP) would shrink by 13.5 per cent in 2009 and 2010 - the worst performance among all the advanced economies and one of the worst ever recorded in peacetime in the developed world. Government debt almost doubled in a year. The level of debt among Irish households and companies was the highest in the European Union. The country’s gross indebtedness was larger than Japan’s, which has thirty times the population. The average Irish person owed €37,000.

  Irish house prices had fallen more rapidly than any others in Europe. With a fifth of its office spaces empty, Dublin had the highest vacancy rate of any European capital and was rated as having the worst development and investment potential of twenty-seven European cities. The Irish stock exchange had fallen by 68 per cent in 2008 - a much more dramatic collapse than in other developed countries.

  The average Irish family had lost almost half its financial assets, whose worth had fallen from €95,000 at the height of the boom in 2006 to €51,000 in mid-2009 - not counting the steep decline in the worth of its house. Unemployment rose faster than in any other Western European country, increasing by 85 per cent in a year. Ireland also ended up establishing a massive bad bank, the National Asset Management Agency (Nama), to take over €77 billion in loans to developers from banks that would otherwise be insolvent. (The State was consciously paying much more than the loans were now worth - shelling out €55 billion for loans worth no more than €47 billion.) This was another global number one for Ireland: Nama will hold more assets than any publicly quoted property company in the world, dwarfing giants such as GE Capital Real Estate and Morgan Stanley Real Estate, which own assets of €60 billion and €48 billion respectively.

  In its rise and fall, Ireland made Icarus look boringly stable. The relationship of its recent past to its present was that of party to hangover - the headache was in direct proportion to the indulgence that preceded it. But the reversal of fortune in which the Celtic Tiger became a bedraggled alley cat was not simply an Irish concern. As Bertie Ahern’s untimely posturing on the world stage demonstrated, the Irish economy was, for a full decade, the poster child of free-market globalisation. It was understood, not simply as the story of how one small and peripheral European country moved from relative poverty to prosperity, but as a moral tale with a happy ending for all those who learned its lessons. For most of the twentieth century, Ireland had struggled to be like other countries. But between the late 1990s and 2008, other countries were told they must struggle to be like Ireland. This, ironically, was particularly true in the years when the Irish economy was most like Humpty Dumpty - bloated, fragile, sitting smugly at a great height and headed for a fall.

  The Republic of Ireland is a small place. Its population grew rapidly in the boom years to a peak of 4.5 million, placing it somewhere between Kentucky and Alabama. In terms of GDP, its economy is com
parable in size to that of Nevada or Maryland. It was not, even at the height of its success, all that rich in American terms. In 2002, when the boom had been under way for a decade, Ireland’s GDP per capita was somewhat higher than that of Mississippi or Arkansas, roughly similar to that of Florida and Oregon and about half that of Connecticut. Even in 2006, by the more accurate measure of gross national product (GNP), Ireland would have been the sixth poorest US state.

  So why all the fuss about a small European country becoming richer than Arkansas? What made Ireland interesting to people around the world was not so much its destination as its journey. Its story had a Hollywood-style narrative arc. It was a tale of misery, struggle, transformation and triumph. And it came with a ready-made moral: neo-liberal globalisation works. The magic of the market had turned Europe’s Cinderella into a glittering princess. It was, as a briefing paper for the right-wing Heritage Foundation put it in 2006, ‘hard to believe the Ireland depicted in the film The Commitments even existed 15 years ago’.

  Instead of being a small place with very specific circumstances, Ireland came to stand for a formula that could be applied anywhere from Armenia to Zambia.

  In 2005, the official government publication Lithuania in the World announced that ‘Lithuania is keen to repeat the economic growth story of Ireland, the Celtic Tiger’. In 2006, two centre-right Latvian parties, Latvia’s Way and Latvia First, promised the electorate that they would follow the Irish path and raise living standards to Irish levels within a decade. In January 2007, the government of Trinidad hosted a seminar on ‘The Irish Model of Economic Development - Lessons For Trinidad and Tobago’. The following August, the Americas Society and the US/Uruguay chamber of commerce heard a presentation on Ireland, concluding that the ‘Irish model is a strategy that can work for other countries, irrespective of time and place’. Even as late as February 2008, the first minister of Scotland, Alex Salmond, was pledging that ‘we will create a Celtic Lion economy to rival the Celtic Tiger across the Irish Sea’.