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How the Irish Bubble Burst by Theodore Dalrymple - City Journal

The Emerald Isle’s story is a microcosm of the global economic crisis.
23 February 2011

If you want to study the economic crisis of the last few years, go to Ireland, where you will find it in its purest form. Ireland is a small country, with a population of just 4.4 million, and the connection between clientelistic politics, bankers’ cupidity, and the mass psychology of bubble markets is easiest to comprehend there.

Dotted around the country, outside of almost every town and sometimes in the middle of nowhere, are housing estates—completed, half-completed, and never-to-be-completed—which are unsaleable, will almost certainly never be inhabited, and are destined to fall into graceless ruins. Some 300,000 new dwellings now stand empty in the Irish Republic, a number whose equivalent in the United States would be approximately 21 million.

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.

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