2009 will go down as one of the darkest chapters in Irish economic history. It started with the decision to nationalise Anglo – an admission, if there was need of one, that the bank guarantee had spectacularly backfired.
The Government then announced a scalding round of public sector pay cuts in a desperate bid to halt the widening crater at the heart of its finances.
The year saw a calamitous deterioration in employment and tax revenue, the chief barometers of economic health, a signal the deepest recession in decades was now inescapable.
However, 2009 also has a claim to fame as being the year that income inequality fell to its lowest level on record, well before Thomas Piketty published his magnum opus on the subject.
The finding was made by the Economic and Social Research Institute (ESRI) in a report on income distribution during the crash, released at a seminar on Thursday.
Using the Gini coefficient, a standard economic measure of income inequality, the report, perhaps surprisingly, shows inequality remained stable throughout the boom and the bust.
Except in 2009, when it jumped about a bit – not wildly, but more than it had done before. The reason given was unexpected.
In a bid to get hold of the State's rapidly changing economic circumstances in 2008, the then minister for finance Brian Lenihan pushed forward the budget to October instead of December. On the basis of the variables he confronted – moderately rising unemployment, weak but not horrendous tax revenues and still relatively strong inflation – he increased taxes and lifted welfare rates.
However, in the final quarter of 2008, tax revenues flatlined, unemployment accelerated and inflation crashed. Essentially, the Irish economy had hit the wall, making the decision to raise welfare appear unwise. Inside of 24 months, the State would be forced into an international bailout and Ireland’s economic meltdown would be complete.
The obvious conclusion is that Lenihan would have rolled out a completely different budget back in October 2008 had he any inkling of what was coming down the tracks.
Of course, this would have denied us the most redistributive budget in living memory, and the Gini would have been kept firmly in its bottle.
* this piece was amended on April 28th - for the purposes of clarity
