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Irish ironies

Above: How ironic it is that the first body anywhere to constrain bankers explicitly by law had been ‘the old House in College Green’.

There are a number of ironies for Ireland in this whole story, including:

1. The impact of refrigeration
The foundation of the Land League and the arrival of the first cargo of refrigerated meat in England from Australia both took place in the same year, 1879. Gladstone’s initiative led to ownership of most of the land of Ireland by those who worked on it, but the invention of refrigeration progressively made that land less valuable to them until the coming of EU subsidies. Meat from the Antipodes and South America could now compete with Irish produce on the British market. This made the years after the boom of the First World War lean ones for Irish farmers, even to the extent that many of them found it hard to pay their land annuities.

2. Banking discipline
Given that the root cause of the present crisis is that bankers were allowed to escape from unlimited liability, in the process giving Ireland one of the highest levels of both private and public debt in the world, how ironic it is that the first body anywhere to constrain them explicitly by law had been ‘the old House in College Green’. As early as 1721, the Irish parliament enacted that anyone who dealt in money was personally liable for his losses without limit. Further, from 1756, merchants trading in commodities were not allowed to do banking business as well. Even when the same parliament allowed limited partnerships in 1782 (something which did not come to England until 1908), bankers were explicitly excluded from the privilege.

3. Auditing failures
The third irony relates to the failure of the auditors in the banking crisis. By the turn of the nineteenth century, the accounting profession had achieved enough influence to be able to persuade the government to allow it to regulate itself. This ended up with its members operating to significantly lower standards than those prescribed by law. Crucially, their rules allow them to consider bankers’ loans to be completely secure until they actually fail. The result was that audited accounts of banks that were actually losing money on a huge scale were signed off as showing profits. A British House of Lords committee has recently delivered a scathing condemnation of this behaviour of the auditing profession, which allowed the true state of Irish banks, particularly of course Anglo Irish, to be concealed over many years. How many people know that auditing is the one aspect of Irish affairs that has continued to be formally governed from London after close on a century of political independence? The Accounting Standards Board there makes the rules for the profession in both countries.

4. Repudiation of sovereign debt
Fourthly, when an Irish government vehemently claims that the country would never default on any of its sovereign debt it overlooks the precedent for exactly this. The 1921 Treaty provided for continuing payment of the land annuities to London, but in 1932 the Fianna Fáil government defaulted on this obligation. Britain retaliated by refusing entry to Irish cattle in what was called the ‘economic war’ here, and it took many years for Irish agriculture to recover from the damage caused by this default.