Has Fianna Fail destroyed the Irish middle class? If the answer is yes, then this recession will have considerably more dramatic lasting effects than even some of the most realistic observers suggest. The reason for asking this question is that the huge debts incurred by the broad middle class in the property boom can’t be paid. And with no coherent mechanism for individual mortgage default, the Government is putting bondholders before mortgage holders.
Fianna Fail has placed the middle classes in a ‘debtor’s prison’ and, what is more egregious, it has given the middle classes the bill for the mistakes of Fianna Fail’s developer mates because it is obsessed with keeping the banks afloat in their present crippled state.
This ‘debtor prison’ approach to financial mistakes will bankrupt the middle classes. Today the average Irish family owes €132,000 to the banks. This huge debt overhang, taken together with tax increases and cuts in real wages plus the prospect of families supporting their unemployed children who are living at home, and what we are looking at is nothing less than the shattering of the Irish Dream.
The Irish Dream, like the American Dream, is based on the notion of a progressive conveyor belt of prosperity whereby each generation becomes better off than the generation that came before them. It is an idea rooted in the expectation of progress and the hope that aspirations can be translated into real results, traditionally with the help of increased family investment in education.
As Irish families moved from being predominantly single breadwinner to two income households, we didn’t get richer, we got more indebted and this debt made us feel rich. Feeling rich, we borrowed more and more, cheer-led by Fianna Fail.
This was the Ahern/Cowen conveyor belt. The deal was simple: we Fianna Fail, will keep the house party going and you will feel richer, safe in the knowledge that the next generation will be able to afford the silly prices because the unregulated banks will make the cash available to them. You just vote for us and take the cream. The banks will get the cash because we are in EMU and we will never again face a credit constraint.
This is how the middle classes started to become enfeebled. It began in 2001/2 and went into overdrive in 2004. The Irish Dream of prosperity was a sham and worse still there was no Plan B. No one thought about how we would react when or if the money stopped flowing. Would we have provisions for the inevitable default? Who would come first in the crisis, the people or the banks’ creditors? Without a coherent plan, the same Fianna Fail Government just stumbles from crisis to crisis, hoping the middle class who voted it in has infinite resources to pay for the mess.
But we don’t. We are broke. The middle aged, middle classes are rocked by the sudden unemployment of their children (30pc of our under-25s are unemployed) and the collapse in value of their second home. On top of that, their pension funds — which were invested by charlatans in the shares of Irish banks — are now worthless (and after the nationalisation of the big two, they will be wiped out altogether).
So the “two income”, middle class family in Ireland — as in the US — ends up on a knife-edge. The only way it can maintain its status and ensure that its children have a better opportunity is if Ireland finds a new economic blueprint to kickstart employment. But we are stagnant at best, going backwards at worse.
Without significant job opportunity and income opportunity, the middle class has only two other avenues to maintain its living standards. The first is to sell its assets and the second is to borrow more. But it can’t sell its assets because its assets are houses and these will continue to fall for a few years.
Selling now, even if it saves money over the longer term, will crystallise the losses and leave the average family with a huge debt to the banks. So the natural tendency is to hope that something will turn up. But what if it doesn’t?
The other option is to go back to the Ahern/Cowen model of borrowing to get rich. We know that doesn’t work and anyway it has been supplanted by the Cowen/Lenihan model of the State borrowing in order to try to protect the already decimated shareholders of the banks. This leads to NAMA and the errant folly of betting the country yet again on the hope that the property market will recover to make the bad balance sheet of the banks good again.
But even looked at from first economic principles, for the Fianna Fail plan to happen, the banks have to lend out money. But the middle classes don’t want their money (even if the banks had it) because they are stuffed with debt anyway. In short, the broad middle classes still think that if we do the right thing, things will turn around.
But what if they don’t? What if the middle classes of the likes of Korea, Malaysia and Poland compete with us in a way they they didn’t in the 1990s? What if they are as educated as us and are half the price, hungrier and, most crucially, without the useless debts we have built up?
What happens to the Irish middle class then? It shrinks is what happens. It gets weighed down by unpayable debts, living in a “never-never land” of an overvalued currency and insurmountable debts, tied to worthless assets (houses) in a place where the working population is falling. Given that the middle class provides ballast to society, this is a dangerous thing.
Fianna Fail is well on the way to destroying the very class that put it in power in the past three elections. Extraordinary times demand extraordinary solutions but more of the same has been advocated. Like the Irish Home Rule Party in 1916, denial abounds and a vacuum emerges.
It is not just the Irish Middle Class, who have been attcked it is UK too
but with Ireland & the Celtic Tigers hype-who permited all those Brazilians to be invited so to work for a meat processing company & so controll a small Irish town, then to fail within 3 years ! Ministers Civil Servants etc Politicians etc have alot to answer as do Anglo Irish Bankers too current and past!!
Why isn’t there any talk of harnessing wind, water, wave, oil and gas? We also have billions worth of gold below ground, as well as zinc mines. We have fertile land, so can sell food to the rest of the world. We can also sell water to the world, especially to Africa and China. China is going to have serious water shortages in the future and we have too much of it. All I keep hearing is constant moaning. I’m beginning to detest my own people. We have become fat, lazy, greedy and spoilt. Personally, I plan on becoming a… Read more »
The idea of there being such a thing as a bond in Irish debt is a joke! Those houses, offices and apartments will never sell. There will never be a profit made on these toxic debts by NAMA yet the bond-holders will have to be paid interest. As the unemployed immigrant population grows here so will the dole bill, further reducing our cash reserves. In the middle of all this property madness we still have a situation here where the tax-payer is propping up the price of rent via government subsidised rent payments totaling half a billion euros per year!… Read more »
Nonsense. FF did exactly what any political clique would do. Same occurred in Britain under New Labour. Same occurred in Spain under the Socialists. Same occurred in Greece under the centre right. Same occurred I actually think the media are more complicit than anybody else. FF are just another colleciton of political opportunists who know nothing about economics, and who love to hop on and mount the rest of society. The FF patronage system, and it’s little brothers the ILP patronage system, the PD patronage system, and baby brother, the GP patronage system are stiffling our societies. This much is… Read more »
Renewable energy products are capital(not labour ) intensive and will create little employment.Allowing eastern europeans unlimited access to the Irish labour market seems crazier by the day.Why would any employer spend time and money training a schhol leaver/grad, when they can get experienced staff from across the globe @ half-price?.The internet is doing a good job @ wiping out middle class jobs across the globe.As ever ,the process is deeper and more wide ranging in Ireland.
Death Dor Ado – I have recently being referring sons and daughters of clients who are in ‘consumerable debts sans asset ‘ and who have no jobs , to their solicitors so they can be made bankrupted ‘ outre mer’ – in another country.Otherwise it is Suicide for them.
Fianna Fail are populated by criminals . No use calling them goombeens or crony capitalists , that is just a clock that the Irish like to hide behind . They are criminals and their supporters are either stupid or in for what they can get out of it . In a couple of years time we will all discover the real truth as to why they are saving the banks at all costs . ( actually we know already but don’t want to admit it ) Fianna Fail are up to their necks in property syndicates and dodgey loans from… Read more »
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Very dissapointed with FG and Enda Kenny. He sat back and let FF win the last one and he is doing very little to get FF out of office now. The Greens look all smug with their new pastures. Gilmore is the only one who seems angry with all of this mess. The country should get behind him and frighten the pants off the other parties in the polls.
I still think FF have a lot to offer, even if they’ve lost a lot of the middle class. There are still loadsa votes to be won among the middle class for so called “tough on crime” policies, which involve giving our corrupt and incompetent police force extra powers to deal with “scumbag” drug dealers in sink estates in west Dublin and Limerick; sink estates that were created through the corrupt planning decisions of politicians elected by the same middle class that despises the lower orders and want to see them pushed as far as possible from the leafy suburbs.… Read more »
It is not so much Fianna Fail destroying the middle class, this is a global phenonmenon (intrinsically linked to neoliberalism) been going on for 30 years, just accelerated with economic crash. In time there will be the extremely wealthy, the working poor and those below the poverty line. Just means the concentration of production, wealth and political decision making in the hands of the few and more poverty now that the economy has tanked, especially with the masses of unemployed who will remain such unless they take dramatic action (i.e. leave the country). More social conflict, more aggressive police state… Read more »
Great article David, its time for the gloves to come off and land a few hard ones on our corrupt rulers.
Re earlier post. The European University would be wholly (fees and all) funded by the EU and its raison d’etre would be to bring together the brightest students from all member states — purpose being to sow the seeds for a European network of excellence into the future. OK its also to utilise the excess supply of land and buildings; and we would have to go to the EU cap in hand and ask them to help us out — we used to be really good at that! (Jesus I regret joking a few years ago that FF had a… Read more »
PhilRussi –
FG/FF – ‘sharing the common ground’- means the distance that it takes to secure and crystalise the pensions of ALL the Politicians so their rule is to ‘compromise and agree on almost everything’. It is only Joe Behan that is a man among the pack ( as per Tim ) ;
The difference between a FF and a Criminal is that you always knew a Criminal would steal from you .
Dermot Gleeson ( AIB) almost got Egg in his face .Look what Berlusconi got?
The Stuyesvant Town Property Ponzi Scheme in NYC went into crisis on Monday. AIB is exposed. Along with two US banks. Total exposure is 3Billion USD. AIB are saying nothing about the scale of their exposure. Nada. It all sounds very suspicious. Even more suspicious is the Media. A full 48 hours after the news broke, not one media outlet in Ireland is covering the story. The Irish Media seem to behaving in some sort of conspiracy of silence. Which proves that the media are just as complicit as the bankers. Or maybe their motives are concern for “our advertising… Read more »
Hi Lorcan,
I agree fully: spiritofireland/
is the best idea we’ve had sofar.
An awful lot of the middle classes bought not just a second property but fueled by taking loans against other properties a ‘property portfolio’.
The children were sometimes set up and started their own property portfolio which like their parents ones were in effect built on sand.
There is no bail out for these individuals (nor should there be). As rents go down, rental demand goes down and even worse still as interest rates rise , more and more will be in bigger trouble.
Anyone intersted in setting up a new political party for reform and change. Its as good a time as any
{ But what if they don’t? What if the middle classes of the likes of Korea, Malaysia and Poland compete with us in a way they they didn’t in the 1990s? What if they are as educated as us and are half the price, hungrier and, most crucially, without the useless debts we have built up? } That is our most frightening reality – and it is squaring up to us. And nobody in Ireland is prepared to admit it. This is our country’s predicament. FF promised that everybody could be middle class. Unfortunately, we do not have the economic… Read more »
Perhaps I’m just a bit jaded, or perhaps I’ve been watching this situation grow, unfold, and crash, for quite a few years now, and just feel legitimately disenchanted with things at the moment. I’ve watched the medias of 3 countries, and when they’re not in outright denial (the UK is the most extreme, in my view), they’re so far behind the curve as to almost qualify as purveyors of history. There are reasons for trying to get to the bottom of what’s gone wrong: There is of course a natural desire for justice, but there is also the very practical… Read more »
I have a problem with the notion of a middle class in Ireland (same for England and Spain). I claim it iwas always a lot smaller than perceived – at least from an educational and professional point of view (yes, snob that I am, I do believe the educational quotient in this country is poor and leads to a population easily led by media & FF led sensationalism.) Were it really bigger – had we more people in industry (non-financial/construction) FF would never been in power. The “real ” cushy middle class own the media and the high up positions… Read more »
We are the latter stages of a slow motion train crash. Everyone is flying through the air and generally out of control. There have been a few casualties so far but the visceral bits have yet to come.
Without cynicism or sarcasm, I am frightened (even though my exposure is negligible). I believe Cowen and Browne had a few days off with the shenanigans up north. I think they are scared as well.
The game is up. The great unravelling is commencing. http://money.cnn.com/2010/01/27/news/economy/Roubini_Davos/
The problem in Ireland is not that “educated” people got rich its precisely the opposite. The gombeen mechanic was on 40k for charging you 25e to fit a 2 euro bulb, while graduates with M.Sc degrees were getting 19k a year in “entry level” positions that there was no further level in. There were thousands of really dumb people just charging more and more for basic services – because they could. And because they couldn’t see a point where the pyramid scheme would collapse. There are still lots of clueless, ignorant people out there and they are taking a long… Read more »
SYTLES OF GOVERNMENT — Switzerland V Ireland How many Swiss politicians does it take to change a lightbulb in their Assembly? Answer: None. The lightbulb was changed by the House electrician who was immediately available; and he is now performing the optional additional service of replacing aging wiring which he deems to be sub-standard. How many Irish politicians does it take to change a lightbulb in the Dáil Chamber? (If you are not one of the sheeple you will rephrase the question as follows: “How many Irish politicians does it take to NOT screw in a lightbulb when a new… Read more »
[…] How FF put middle class deep into ‘debtor’s prison’ […]
For what’s worth I posted some ideas here
Fianna Fail hit on a simple formula for electoral success back in the 30s, when they first came to power. They initiated a social housing programme that was to win over tens of thousands of voters that would normally vote for labour. This is what got the construction industry going and ever since then, they’ve become one and the same. Interestingly, on last Monday’s front line – social housing has become top of their agenda, and now that they’ll own thousands of houses through NAMA, it won’t be difficult for them to implement this policy. It’ll be win,win for them… Read more »
Landlords and Bankers in the Forfas report on the high cost of doing business in Ireland (surprise! Wages are not the real problem!)
http://www.progressive-economy.ie/2010/01/oh-those-landlords-and-bankers.html
Folks, “The 5s” are still developing on the Etherpad.
All here should feel free to contribute:
http://etherpad.com/OwNzsgQpSa
Humanity splits along many other divisions, apart from class divisions. Therefore it is too simplistic to talk about the demise of the Middle Class. Let’s list a few other, easily recognised, dissimilar types of people. Skilled and unskilled. Convivials and teetotallers. Graduates and leavers. Healthy and illness prone. Married-with-spouse and others. Credulous and skeptics. Independent and dependant. Devout and dissolute. Stayers and emigants. Smokers and non-smokers. If the question being considered here is about how do we individually cope with this economic mess, then we need to first of all take a close look at ourselves, decide on exactly where… Read more »
Nice work David, You talk about the middle classes; well I’ve got news for you there will be NO middle class in the country in a few years time With so much debt sloshing around and the total control of the news media we the people are being fed lies and dam lies by the powers that be! I could comfortable include my family to the “Middle Class” only a few months ago. Now experiencing the Dole life, for the first time in my 33 working years, I am shell shocked at 54 years the system now leaves me to… Read more »
Me thinks its time to sell our souls to the Chinese.
Sean_Kelly is right – David’ McW blueprint for a new Irish model has to be built around our natural resources.
The food market is strong here both at high end and mass market end. Lets work on that.
How about this for a possible idea ??. Who or what means the most to Brian Lenihan ?? Why not brian Lenihan and for argument sake Micheal Martin withdraw their support from the government ?? along with members of other political parties thay can start an emergency national government.. Every td in the dail can vote for what they think will improve the country.They will think hard and concentrate as their results willhave a definite bearing on whether or not they will get re-elected. Who knows how tds would vote if there was not party whip forcing their hands? I… Read more »
Yep, great article by David yet again. Its mostly the group of young mortgage holders in their twenties/thirties and forties who’ve been scammed big time by the banks and Fianna Fail and who will continue to pay into the future as FF heap further cuts/levies/cutbacks on this cohort to pay for the mistakes. Its the above cohort that require rescue, not the banks! Not even a voluntary group of builders, one soldier, one innovative idea to deal eg with their housing estates to finish the seeping sewage problems. FF have abandoned them! How about a national emergency committee to finish… Read more »
It’s not just Ireland, and it’s not just Irelan’s politicians. It’s simply because we get taxed for working and saving (creating real wealth) and rewarded for speculating in real estate (blowing up bubbles).
Until we change the signals given by our revenue systems http://www.theiu.org/films/glasgows-stolen-birthright.html it’s going to continually repeat IMO.
Ah But FF spin Doctors are on over time this week so
The News today is about ? ….
Yes the rise in Head Shops ,.God we can’t be having these places !
This shows again how Stupid Middle Ireland really is , if they opened their eyes and took the heads out of their arses , they could see be allowing not just these Head Shops but also allowing legal use of Marijuana, we could tax it and save on policing .
But not our Church going F.F bouys ,
The funny thing Bryan is Cannabis is a plant, and when you say to the church boys it was put on the planet by God, it grows here naturally, how can you ban it?, The Church boys say “its an evil plant, the devil put it there, to tempt us”. So they ban it, and they’ll continue to ban every little vice we find if they deem it unholy or bad.
We also need to get rid of the Church and all forms of organised religion, with their outdated “Ghost sotries” Revolution is most defintely going to be bloody..
David.
The middle classes i think is a concept which as soon as one puts it under the microscope it starts to crumble.
Joyce covers this mirage in the desert in Ulysses extensively.
The class system seen through the mind programming is not what one may initially believe to be.
For example, there are people living in crumlin who are wealthier asset wise than people living in rathfarnham yet we all know who is determined to be working class.
The overall socio economic system is a jig saw puzzle.
David.
I rather think the people who will end up in the debtors prison are going to be the people who share a similar mindset as opposed to a socio economic category.
The mind set itself i figure will be variations on a theme and i reckon the theme is the following.
An infantile refusal to ‘delay gratification’.
David.
I think your article is picking over some uncomfortable truths we all need to face into regarding accountability and reckless spending and excessive consumerism and so on.
The banks got away with drowning people in debt because people signed the dotted line.
The big question here is, i think, did people come under the influence of coercion and fear tactics to take out mindless debts, i think this is the million dollar question here.
Tim –
Aye Aye Aye
We want :
New Fianna Fail
then your 5’s policies can be initiated . Dont hesitate.
Debtors Prison David you have explained this very well .There is another prison too that perhaps might have been more important and that is the ‘Ethics Prison’ .This is a lesser known factor to the public domain .I am referring to malicious conspiracy by a Regional Manager and two other senior management staff of Bank of Ireland who knowingly killed the rightful messenger while he was attempting to prevent a crime .When the Garda Commissioner found the truth after the trial he carried out a criminal investigation into the bank officials in 1993 and sent his files to the AG… Read more »
I find it rather remarkable when alcohol and cigarettes have for centuries wrought havoc among our people, filled our A&E’s for three to four straight days every weekend, led to violence, injury and death yet now (and the timing is interesting) people and the media get excited about ‘the herb issue’ – it is quite astonishing. On RTE NEWS there were two ‘parents’ peering into a herb shop as if it was an Al Qaeda training camp, no such peering into pubs and bars which do far more damage, no attacking the drinks lobby for all their shennigans with alco-pops,… Read more »
John ALLEN I know exactly where you are coming from John, Firstly I commend you for you for having done the “Right Thing, having followed your conscience And more than likely you would have had to pay a heavy price personal, and financially no doubt! I too had a similar situation, but mine was in the Hotel Industry, I was a senior manager in one of Dublin’s Top Hotels; I had a large number of managing staff under me One day, one of my line managers came to me and asked me to investigate “deductions “from his salary After going… Read more »
Bankers Crime : At the time I was a registered auditor reporting verbally a perceived serious crime that was not compelled on me to do so by all professional institutes that I was a member of.To safeguard the negligence of senior management of the Bof I and after they had written to me to sue the Gardai for negligence , they subsequently committed perjury .Tongue in the cheek Directors ignored the affair . It was strange that everyone believed me then including the best barristers and judges in Dublin and the banks were allowed to continue their culture of Crime… Read more »
Amazon Fly – if the strength of the displaced air from the wing flapping of the small fly causes the distruction of the might of the powerful thousands of miles away then worship the fly and kill all your mights.
Jurisprudence : How can we legislate to penetrate the abuse of the priviledged in ivory towers ( Bankers) under licence from the Minister and thus stop causing the the maelstrom of incestual discourse against the common good and State Public Policy? We need to create a Forum to allow Civic Minded Citizens to have their voices heard in public to preserve democracy .Bank of Ireland claims to support democracy outside their own walls but its mandate to represent its customers / citizens within the democratic process has little basis.Banks need to be legislated to protect the stakeholder …the customer….the good… Read more »
The banking system is a tool to make credit provision for the community. It can be either put to function as a tool or put to function as a weapon. It depends on the tool user at both ends how its use actualizes. At both ends there are those who use it accordingly to it s tool function and at both ends there are those who use in in non compliance with its tool function. The weapon / tool users as opposed to the tool / tool users must be put under inspection and their machinations in all of the… Read more »
Would somebody please start a New Irish Government and a New Irish Bank?
It’s blindingly obvious the ones we have dont work.