Last Friday’s 9.55am train from Limerick pulled out on time, hurtling towards the ‘Junction’. As we sped past the waterlogged land on a beautiful morning, commuters on the train were going about their business as normal, reading about the treacherous Thierry Henry in the paper and chatting to friends on the phone.
As we arrived at Limerick Junction – a bleak enough place which hasn’t changed an iota since the early 1980s – a talkative grandmother cornered me to discuss the ‘‘situation’’. I regretted having the last pint in Limerick’s wonderful White House the night before. It probably wasn’t absolutely necessary.
The Cork train arrived just in time and I settled in, gazing out the window and thinking about how normal the country seemed, even though we are nearly bankrupt. Is this how it will be? Will we meander on as if nothing is happening, until we wake up and realise that the credit taps have been turned off?
When you look for real signs of the massive fall in our income, when you look for signs of the €20 billion-odd budget deficit, it is easy to convince yourself that these things are remote. But as you travel through the countryside ,you slowly begin to see the trauma. Every town the train passes through has the same ‘ghost estates’ on the outskirts – desperate places that are worth nothing, or next to nothing. How will these mortgages ever be paid?
At Thurles, the guy opposite me got chatting about how he’d lost his job in April. He was a young accountant, and he was going to Dublin to do his fourth interview since then. He had expected to bounce back in May or maybe June, but having scoured the papers since then, he was beginning to sink. He’d expected dozens of interviews and was confident that, having finished the first year of training, he’d be fine. But six months on, nothing was emerging. He was 24.
We nattered away until Heuston Station and, as we came closer and closer to Dublin, more and more ghost estates appeared.
From Kildare to Dublin, all we saw were rows and rows of empty housing estates, which were beginning to suffer from what has been called the ‘broken windows theory’.
This is when a neighbourhood begins to falter. A window is broken here and there, and soon the place starts disintegrating. If the windows are not fixed straight away, it sends out a signal that it is fine to break windows. Then the rot sets in.
In time, rather than being ‘worth something’, the houses begin to cost the owners. But the owners might have lost their jobs, so they don’t have the cash to fix up the house and, in short order, the places become quasi-ghettos. This has happened in many parts of the US. It could well happen here.
The key to the ghettoisation of our ghost estates will be the rate of unemployment.
If unemployment continues its upward trend, these places will be abandoned – and might ultimately be pulled down in a crime prevention move in the years ahead. The one thing that will drive crime in the years ahead is youth unemployment (but more on that later).This all sounds radical now, but the lesson from this crisis is that what sounded radical last year is now mainstream, and what sounded mainstream last year just sounds silly.
If we look at the chart from the US, we can see a clear correlation between the rise in unemployment and the number of properties that are being foreclosed on.
While there are outliers like Florida, where foreclosures seem to be running way ahead of unemployment – probably due to defaults on the huge amount of holiday homes in the state – the trend is pretty much as you’d expect.
In Ireland, we will see a similar pattern emerging. I expect unemployment to rise significantly next year as the financial industry contracts. This will mean large layoffs in our banks and insurance companies.
As well as this, the public sector will contract after the budget cuts, and retail employment will fall away after Christmas under the twin pressures of higher taxes and charges, and the strong euro driving thousands over the border to shop.
If we look at our unemployment figures, we see a potentially explosive rise in youth unemployment, which has not been properly documented yet. According to the CSO’s quarterly national household survey,12.1 per cent of our 15to 19-yearolds were unemployed in July 2007.This has jumped to a terrifying 36.4 per cent. Think about it – more than a third of our youth who are not in education are unemployed.
In the next age group, the 20to 24year-olds, the figures are equally frightening. When this government came into power, 8 per cent of this group were unemployed. This figure stands at 23 per cent, or close to one in four, today. In the key 25-34 age group – the ‘Pope’s Children Generation’ -13.4 per cent are out of work now, as opposed to 4.7 per cent the month that this government won the election.
The three-fold rise in unemployment in the 25-34 age group is why defaults will increase dramatically. These are the first time buyers who were shamefully cajoled into getting on the property ladder. Now they can’t repay their loans. Many thousands will simply walk away from their houses, hand in the keys and turn their backs on yesterday’s false dream.
When these houses become vacant – with no one to rent them, because you need jobs to have a healthy rental market – these estates will become classic breeding grounds for marginalisation. Some of the 35 per cent of those between 15 and 19 who are idle won’t be long finding these estates to hang out in. This is the way it goes.
The gardaí will eventually stop patrolling the estates, and the places will fall apart. Again, we have the evidence from US cities which, in the 1970s and 1980s, were allowed to deteriorate. The people who live in these estates will try to maintain standards, but they will eventually flee in the face of constant crime.
Many of the young men like the guy I met on the train will just head off if they can’t find jobs, and try their luck in the likes of London, Sydney or Boston. We are just witnessing the tip of the iceberg now.
We are living in extraordinary times, and we need extraordinary policy changes. Thus far, we are just seeing incrementalism because we have been lulled into a false sense of security by the calm before the storm. However, to get out of this mess, we will need to entertain extraordinary remedies. Otherwise, a country with close to 30 per cent of its youth under the age of 25 on the dole could become very, very angry.
Source: David McWilliams Blog
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