The crisis and the loss of virtue

Via The Skeptical Doctor, a blog tracking the publications of Theodore Dalrymple, we learn of a speech the good doctor gave at The Iona Institute in Ireland on the subject of the economic crisis there (and throughout the Western world).

It is classic Dalrymple, philosophical and factual, but it stirs the soul and provokes the mind.
I have worked it out from figures published in the Financial Times that the gross foreign debt of Ireland is approximately $486,000 per capita. (Here I must enter a caveat: having become used in the 1980s to billions, we are now being asked to think in trillions, and it is easy to get one’s orders of magnitude wrong with so many zeros in a calculation.)

Let us be generous and suppose that Irish foreign assets are $186,000 per capita; that means that our family of four has a gross foreign debt of $1,200,000. Let us suppose that interest rates are 5 per cent: that meant that the family has to find $60,000, or 40,000 Euros, before it has a cent of income to itself. I leave you to draw your own conclusions, bearing in mind that the average household income in Ireland is about - 35,000 Euros.
Dalrymple blames the crisis on the west on all three parties in it: governments, the financial sector as well as the public. He argues that what these three have in common is the loss of virtue. Prduence and temperance in particular
I am not an economist, or even a businessman; does one, however, really have to be either to know that it might not be a good idea to do what the Northern Rock did, that is to say extend mortgages of 100 and even 125 per cent of the then value of houses, moreover in an area with high structural unemployment and a public sector that accounted for up to three quarters of all economic activity? Does one have to have a Nobel Prize in economics to realise that to build on credit one new house for every six people in the country, as happened in Ireland, might be imprudent? Perhaps, indeed, one needs a Nobel Prize in economics to be able not to understand it.

And temperance, as I have said, went the same way as prudence. Many people, I won’t say all, were seized by the notion that there was no such thing as enough; that the sky was the limit as far as their desires were concerned, and furthermore was within their grasp, and that he who consumed stratospherically was stratospherically happy, or stratospherically more important and clever and wise than he who was content with what he had, or wished only for gradual accretion rather than a rocket-like ascent into that stratosphere.
If you have a little time to kill this weekend, you can read the entire speech here (pdf). I think it well worth it.


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