I rang the doorbell on Joan Burton’s modest semi in the Dublin’s North inner suburbs, between Stoneybatter and Cabra. I had been at a conference at Maynooth, and she agreed to an evening interview to save me a second trip from Galway. She answered the door herself and insisted I rescue my wife from the car. She ushered us into the family sitting room. It was cluttered and informal, looking out on the small garden. Her husband supplied us with tea and snacks. The TD for Dublin West asked for a glass of white wine, but this was put aside, un-drunk, in her eagerness to respond to questions.
Have you always been interested in politics?
I think I was always interested in debate and discussion and I suppose I had an unusual background in that I grew up in Dublin City Centre in Stoneybatter and Oxmanstown Road which is now very fashionable but was deeply unfashionable then. I had been adopted at the age of two by the Burtons when they lived in Rialto, and then we got a house in the Northside near my mother’s family through the artisans’ dwellings. I liked school and I was always I suppose conscious of looking around me. Nobody in my family was really involved in politics, I mean, obviously, they had political opinions and the one thing they did was to talk and talk and talk! They were all great natural musicians, performers and craftsmen of the old style l. I wasn’t a musician or singer so I think I became a talker so that might have directed me in the way of politics.
Imagine that we had a Labour-led government and you are Minister for Finance. What would be your priorities?
I think that the major priorities would be to restore a balance to the tax system. Because I have a background as an accountant, I have never been convinced of the value of high marginal rates of tax. I’d prefer to have lower marginal rates but real effective rates which allow people to contribute proportionately with income taxes that are not excessively high.
The second thing at the moment would be to find a way of having a stimulus programme for people who have become unemployed.
The Department of Finance is notoriously conservative. How would you avoid being dominated by the standard Finance agenda and would you avoid going native?
One thing that somebody who has the honour of being a publicly-elected member of government has to have is a clear set of priorities that they wish to see being implemented – because if they don’t, then senior civil servants will fill in that gap and I think it is a question of trying to have a running start. Clearly the department, in recent years, has had some extraordinary powerful ministers, particularly Charlie McCreevy who basically told the civil servants what he thought. I don’t see why the department therefore would not be equally open to people who come from the left of centre having very clear ideas.
James Carville said he would like to be reincarnated as the bond markets because everybody would be afraid of him. Are you afraid of the bond markets?
Was it Marx who says “Capitalism is not patriotic, it has no home other than profit”? Globalisation in terms like derivatives and in terms of the flow of information has so speeded up that political structures are simply lagging far behind. Yes I think you should respect the bond markets but I think it would be foolish to be too afraid of them and as a consequence feeling helpless. I would like to believe that I am a realist, but that I am not particularly fearful.
Do you support a Tobin tax to slow the excesses of global finance?
Yes. There was in the 2006 Budget a proposal to introduce a 1% stamp duty tax, same as the stamp duty on share transactions, into stock exchange transactions in relation to specially contracts for difference. Funnily enough, I had a discussion with the current Taoiseach, Brian Cowen. I thought the tax was a good thing and I supported it. There was a lobby, a short sharp lobby and Cowen withdrew it. In saying so at the time and getting advice from various people they were kind of warning me off in that this was not the appropriate thing to say. I wasn’t to know but that that was one of the vehicles for what happened with Quinn Insurance.
In terms of the Tobin tax, yes the party of European Socialists has a kind of standard position now advocating that – a Financial Transactions’ Tax.
Building on that, what ideas does Labour have for stiffening the regulation of the Irish banks?
My view of regulation is probably very old-fashioned, I think that regulation is about the detail, but it is far more about integrity and the courage to eyeball people who are perhaps very very rich and say what you’ve done is wrong and to be a regulator as opposed to a cheerleader. I mean obviously light-touch regulation failed dramatically partly because the people at the very top of the regulation and Central Bank system, thought that part of their job was to applaud Irish banking and IFSC transactions.
Do you think there is a Golden Circle in Ireland?
Yes. The Golden Circle was that Anglo Irish was a specialist developer’s bank. Those specialist developers were all Fianna Fáil supporters. The bank was growing at a phenomenal rate so the bank funded the developers and the developers funded Fianna Fáil. That was the relationship and nobody was prepared to say stop.
During the NAMA Debate, the Labour Party came out in favour of nationalising the banks. What are the advantages of this?
In March, 2008, when Anglo’s price fell and the highpoint of the boom was over, the Oireachtas Finance Committee actually met the US Fed. They were kind of saying we don’t know where this is going to end. The people in the Treasury terrified me totally as they asked us had we any insights to offer. So my feelings when I went outside the door was, my God if they are asking us for our advice, things must be really bad.
So when it came to the guarantee at the end of September 2008, and that was the famous night John Gormley was out of contact – his bicycle was locked up in his shed and all his phones were switched off! – Éamon Gilmore was phoned and I was phoned as well. The next day we went in and had a number of briefings from officials. Basically, I said I only had 2 questions, Anglo Irish and Irish Nationwide. What I couldn’t understand in terms of government strategy was why were they are part of the same strategy and the same guarantee that included the 2 mainstream banks, AIB and BOI.
Basically the officials’ and the government’s view was that all the banks are in this together. I recommended to my colleagues in the Labour Party that if Anglo and Nationwide were the centre of the guarantee, we should not support it. Now we had on the day and evening of the emergency legislation quite long discussions. I made my particular recommendation and not everybody was of that view, but I just said, look you know it is crazy to give Fianna Fáil a blank cheque. It was intimated to me that Michael Fingleton was some kind of an economic genius in terms of running a building society and that – who would replace him and his close counterparts ? My view was well…
This was in the context of your discussion inside the Labour Party?
No, this was in the briefings. So my view was, hold on, if I am being told that this guy is a financial genius, then ok, he may be a genius but he doesn’t deserve to be bailed out in this kind of way.
Fingleton as a genius, was this the official government position?
To a certain degree, they seemed very taken that he was the main man and that this building society had strengths compared to some of the other institutions and also that Sean Fitzpatrick similarly had a kind of almost religious relationship to his particular bank. These were the 2 institutions where, particularly in the city of London, people were talking about Nationwide as the crack cocaine kind of financial institution of Ireland. They were talking about Anglo Irish in kind of Pinocchio terms.
So I recommended very strongly to my colleagues, as did Gilmore, that we shouldn’t support the guarantee. I was stunned and we were all stunned to find out in the days following the guarantee that the subordinated debt was included in the guarantee and the bond holders were included in a kind of primary way as well. All the officials and, particularly, the Regulator said that the fundamentals are sound.
That is a red flag these days – if you hear the fundamentals are sound.
I know but all these guys came in and I recall a group of bankers that came in from AIB, Anglo and BOI and I remember shaking hands with them after coming in to tell us how sound their fundamentals were. One of them, I remember his hands were dripping. I was going, I don’t like this!
Should the government renew the guarantee in September?
I have never been in favour of the Fine Gael term of “burn the bondholders”. However, I think the subordinated debt should be dealt with. I think it can be negotiated with as a lot of it is on sale for huge discounts. In relation to the bondholders I would say that if, for instance, an institution like the NTMA went at it quietly as a negotiating position, I would think they would avail of very large discounts as well. I don’t like the term “burning” or “defaulting” because I don’t think it is appropriate.
What would Labour do with Anglo Irish?
In my view, there should be an orderly wind down of Anglo. I think it is toxic as a brand and I think its continued existence as a brand is damaging reputationally to Ireland.
Your nationalisation proposal included the eventual intention, once the banks have been placed back on their feet, to reprivatise them. Why?
Bank rescues are extremely expensive and there would be a legitimate objective which would be to recover a fairly high value for the State. I also think as well that that would have happened over a period of time.
I also have preference for the retention of some kind of building mutual society in the sense that it is an identifiable brand in Ireland where traditionally people like public servants invested savings for the purpose of buying a house and I still think that makes a lot of sense.
Do you see such an institution as a semi-state institution potentially?
Well, it could be but one of the difficulties in the crisis situation was that it seemed to me that our Department of Finance was terrified of directly running a financial institution and they were really hostile to doing that, uncertain of how to do it.
Certainly the private sector has proved itself unable to run things.
Yes, but at the same time, any bank rescue including nationalisation was going to become costly. The strategic investment bank that the Labour Party has proposed, partly based on the old ICC, would give the State a presence in making capital available for infrastructure and for SMEs.
You talked about the need for a stimulus earlier, but isn’t that incompatible with the Labour Party’s acceptance of the Government’s target of €4bn cuts in the budget?
No, because I do think that one of the enormous themes if Labour was in government again is a reform agenda in the public service. If it is done properly, it could be quite liberating, because a lot of the reform is of extra layers of administration and bureaucracy which people find quite stultifying whether in the Health Services or maybe in some of the third-level institutions.
The emphasis on public-sector reform seems to be more about giving managers more power to use the broom on the rank and file. How would Labour avoid that?
Yes I think that that is a really big challenge for the Left in the broadest sense of that term, the Labour Party, trade unions and people who are progressive. I always remember one of the people I worked with when I first became involved in politics was Noel Browne. I always remember him saying to me “work is for horses”. Now if you can do things smarter and faster and with less bureaucracy, I think that is liberating.
Recently, I had an opportunity of meeting people from IBM in my own constituency. They say to me the concept of a multi-national corporation is now obsolete. They see themselves as a global corporation in which they have development plans, research centres in perhaps 50 different points in the world. If Ireland wants to compete, it needs to be one of these points.
Everybody is talking about competitiveness. Do you think this is a proper aim for policy, for all kinds of policy, even education policy?
In a globalised economy, a small country like Ireland has to find niches. I do think though that we also have to keep up to date and keep upping our game. I think there is a difference between that and being very directive in a bureaucratic way. I think that, for instance, the debate about education is often about training people to a certain set of skills whereas the traditional classical notions about education were preparing people to think. Now somewhere between the two of these we have to reclaim a particular space.
I think there is a kind of grievance amongst Left academics that when the Labour Party holds a forum, they tend to invite the most conservative economists. I know of one recent forum that Alan Ahearne and Brian Lucey were at. Why is that?
That was at the early stage of the financial crisis. Basically, when people wrote articles, I phoned them up and asked them to speak. I do think that people like Paul Sweeney also spoke at those forums. I have to say that I was and am on a learning curve.
I always think as well that until the crisis broke, there was not a strong tradition among economists in Irish educational institutions to speak out. I think that the Irish Economy website and the TASC website have performed a tremendous public function of basically being prepared to discuss and talk about the financial crisis and financial issues. What I think as well is that a Labour Party audience should be challenged. So if you actually look at the make-up of these forums, you will always find that there are people from both sides of the argument.
There seems to be a feeling within the Party that compassion is an essential element in the formulation of policy, but the expertise really lies with the conservative economic establishment. I was told when Ruairí Quinn became Minister for Finance, he went and got tutorials from Dermot McAleese. He could not have found a more conservative economist.
I can’t speak for Ruairí Quinn. I simply don’t know. I did know that in the areas that I was involved in, when I was in Social Welfare, I looked to Australia. I also looked to a small degree to the UK. I looked at areas where I saw, if you like, hopefulness in terms of helping people. If Labour was in government, I would like to establish a Council of Economic Advisers which would be broad-based.
There isn’t enough public discussion. I recall at one stage being at a lunch with bankers and at the end of it I very discreetly mentioned the name of Morgan Kelly. The people practically levitated because he was public enemy number 1 as he had suggested there was going to be a bust. I saw at the Kenmare School at the economics forum that when he presented there, no less a distinguished person than the current columnist of the Irish Times on economics vociferously objected to his presence.
Vincent Browne has accused the Labour party of being insufficiently concerned about the rising inequality in Ireland. Do you think that is justified?
I think it is remarkable that Vincent also retains a very high degree of approval for Fine Gael which, as it were, was his original political thinking. I think the Labour Party in government has always been a mix. It has always been broad church, social democratic, it’s rural, it’s urban, it’s trade union, it’s small businesses and it is a mosaic.
I think that, as the Labour Party has not been in government since 1997, it is a bit unfair of Vincent to kind of down the party because look at the areas that Labour was most connected with, social welfare reform, and bridges and transitions to work.
Do you think it was a mistake for Ireland to join the Euro?
No, I think from a historical perspective, our engagement in Europe, right from our membership, has let us develop a bipolar focus which took us out from our ancient obsession with everything that went on in the UK and allowed us develop a much broader identity.
From 2000, all the cheap Euro billions came available from the German banks. I don’t think most people understood that the Irish banks were borrowing and that it would be the ordinary Irish citizens that would end up paying for that. I still think is it a good idea fundamentally but obviously it will have to be fixed.
Before we wrap up, I’d like to get your opinion on the Croke Park Deal.
Well, I heard a number of clarifications today which I thought were very helpful. I think it is a matter for the people in the unions to have a debate and decide on balance what the best thing to do is. That is basically the Labour Party’s position.
I certainly think that one of the consequences of events in Greece is that the government is already committed to a programme and there is now an onus on Ireland to comply with the programme. Pre-budget, it was possible to reach a lot of the cost saving measures by agreement rather than by dicttat! That remains our view.
Do you think you will be Minister for Finance?
Yes, I hope so. I think it is appropriate that the Labour Party brought in the very first modest surplus under Ruairi Quinn. We also ushered in a period when employment was growing. I think it is possible but with a lot of difficulty to return to that period. If I had the honour, I would relish the challenge. I am up for it!
Terrence McDonough is Professor of economics at NUI, Galway. Cambridge University Press has recently published his edited Capitalism and Its Crises: Social Structure of Accumulation Theory for the 21st Century.