With the release of his new book, The Good Room, David McWilliams chatted with the TheJournal.ie’s Christina Finn on why Ireland needs to stand up for itself.
MOST ECONOMISTS LOOK at the likes of GDP and inflation, but they actually don’t matter. The only thing that matters is people’s lives. Every little decision that people make, add them all together and that becomes the economy.
My new book focuses on this new way of looking at the economy. It is written through the eyes of a pregnant 32-year-old teacher, Olivia Vickers. I came up with the idea last October in a coffee shop in Dublin. I saw a pregnant woman come in and she seemed quite hassled at the time, but she seemed very happy too. She was patting her baby bump and almost seemed like she was chatting to her new baby.
We are in a baby boom at the moment and I couldn’t help but think that the people that are most in trouble are the people that are having kids. I interviewed a lot of people and the most important thing I found is that life goes on – people fall in love, people have kids, but if you listen to people talk about the economy, it is as if the world has stopped still, as if people’s lives stop. But the world never stands still, people’s lives go on despite it all. The book is really about the triumph of life and the defiance against the cold economics of it all.
The Good Room
The Good Room, which is the title of my new book, is an Irish thing. My granny had a good room and it was was a tabernacle where everything was to be untouched. The idea is a metaphor for how Ireland positions itself and negotiates in Europe. We don’t stand up for ourselves the way we should, because collectively the leadership, not the people, don’t have the self confidence to see ourselves as equals. Years ago, when I was working in the Central Bank during the negotiations on the euro and the Maastricht Treaty I used to watch how other countries like the Danes, similar small nations and population, they would always be arguing and saying “well what about Denmark, why is this good for the Danes,” and in the end they decided to not go into the euro. Other Scandinavian countries were the same. They stood up for themselves and they said “hold on, this isn’t right for us”. While we are like, “Oh thanks very much, thanks for letting us get into the good room – which is Brussels”. Now that is very evident, more so than before.
There is a huge disconnect with life on the ground for the people of Ireland and the people who are in the negotiating position for the country. As long as we play the good room game, the more we say, “don’t worry about us over here in the corner”, then the more suffering the people are going to go through. It is a bit like my granny, where she pretended that we ate off the good china all the time, that is not the reality of the situation.
Politicians say that we shouldn’t say certain things in case we damage the perception of Ireland abroad. It is all about reputation. But when a country is in an IMF situation, you don’t have a reputation – that is why the IMF is running the country.
80 per cent of of tracker mortgages given out over three years
The extreme urgency of now is a great expression to define where we as a nation are now. People have to get up and feel that tomorrow is going to be better than yesterday. They need hope but our leaders are all talking about four or five years away. Life goes on and it goes on quickly. Think of the the demographic of the people that read TheJournal, they are not reading newspapers anymore and are probably between the ages of 20-35. They are likely to be in terrible negative equity and these people cannot wait, they cannot wait indefinitely.
Ireland’s major issue is the mortgage debt crisis that is building up. There are over 120,000 people in arrears and 400,000 on tracker mortgages. 80 per cent of of tracker mortgages were given out between 2004 and 2007. The majority of those are in negative equity. When these interest rates rise, and they will, there is going to be a another wave of massive mortgage defaults and that could come in about four or five years time. In 2003, I said that the housing market was a scam, although not everyone believed me at the time. There is no evidence anywhere that austerity works, that is why I called it the scam of austerity. So if you are embracing policies that have never worked it is like being diagnosed with heart disease and prescribing chemotherapy.
I said that the housing market would fall, but it didn’t crash until a few years later in 2007. I think we have to prepare for this in advance rather than waiting for four years time and saying we should have done something. I can guarantee that is going to happen, I guarantee that if we don’t do something about it now we are going to wake up on the centenary of the 1916 Rising and have mass mortgage default on tracker mortgages.
The anxiety of the people is what is being discussed around the kitchen table at night, not about whether Facebook is going to set up its headquarters here. People are talking about how much they have and what they are going to do to get by. Years ago, my father lost his job in the late 70s, around the same age that my own son is now. I remember listening at the top of the stairs, when my parents thought I was in bed, to my parents having really worried conversations about money and what they were going to do next and where he was going to find another job. That has had a lasting impact on me. Can you imagine how many of those exact same conversations are taking place every night around Ireland?
Hope is what we need. It is really what binds us all together. The character of Olivia is an amalgamation of people I have met and her story ends up being a hopeful one. It is a risk to write a book that is half economics and half fiction, but I think it is an uplifting story. Her child is born and life goes on. It is only money at the end of the day – unusual to have an economist say that, but it is only money.