If you want to study the economic crisis of the last few years, Theodore Dalrymple says, go to Ireland, where you will find it in its purest form:
The madness that gripped the country can be gauged from a few examples. A 25-acre piece of land on the edge of Dublin on which a derelict factory stood sold in 2006 for $550 million. After the banking collapse two years later, it was valued by the National Asset Management Administration, the public-sector organization set up to handle the banks’ toxic assets, at $80 million, a sum itself arbitrary in the absence of a flourishing market.
The Anglo-Irish Bank, which eventually collapsed and left taxpayers a legacy of approximately $40 billion of debt, lent an average of $1.7 billion to each of six property developers; it lent more than $650 million each to another nine. A house in Shrewsbury Road, Dublin, sold for $80 million in 2005 but, now standing empty, is on the way to dereliction, and no house on the road — a millionaires’ row — has sold for the last two years, despite a fall in prices of at least 66 percent.
During the boom, taxi drivers and shop assistants would tell you about the third or fourth house they had bought — on borrowed money, of course — and of their apartments in Europe, from Malaga to Budapest to the Black Sea Coast of Bulgaria. It was not so much a boom as a gold rush, or a modern reenactment of the Tulipomania.
All this would not have been possible were it not for the insouciance of foreign banks. The Royal Bank of Scotland alone lent $50 billion in Ireland. German banks extended $140 billion in credit and the British banks as much again. The champions, on a per capita basis, were the Belgians, weighing in at $57 billion. (The cautious Americans lent only $70 billion.)
The gross external debt of Ireland is just a fraction less than half a million dollars per head, that is to say, more than $2 trillion in total. It is not difficult to see why a rescue was needed, or who was being rescued: not the Irish, but all of us.