Here’s why Angela Merkel insists on being tough:
Author: Cormac Ó Gráda
In these gloomy times, here is an update on two socio-demographic trends that give some cause for some cheer, and which do not receive due attention. These trends, previously described for earlier years in a piece in the Economic and Social Review, persisted during 2007 and 2008. They are [1] evidence that the long rise in the proportion of births occurring outside marriage was leveling off, and [2] signs that the number of Irish pregnancies aborted in England and Wales had peaked.
The leveling off in the proportion of extramarital births, which continued in 2007 and 2008, is described in Figure 1.
]. Probably more significant, though, is the continuing downward trend in teenage births. Teenage births surged from 1.6 per cent of all births in 1960 to 6.3 per cent in 2001, but fell off thereafter to 4 per cent in 2005 and 3.7 per cent in 2006. In 2007 and 2008 the shares were down to 3.5 and 3.2 per cent, respectively.
The share of extramarital births to mothers aged less than 25 years has also continued to fall. Between 1998 and 2006 it plummeted from 58.2 to 40.6 per cent; by 2008 it was down to 37.4 per cent (Figure 2). This is important since, presumably, a higher proportion of the births to older single mothers were planned, and thus less costly for mother, child, and society at large.
Abortion remains a controversial and divisive issue in Ireland. A decade ago, the proportion of all Irish conceptions terminated in England and Wales exceeded one in ten. The proportion peaked in 1999-2000, and has declined slowly since then. In 2007 and 2008 the percentage of all pregnancies terminated in England and Wales continued its unheralded but remarkable decline to 6.2 and 5.7 per cent. Nor does the diversion of terminations to the Netherlands—sometimes mentioned as a factor—account for the decline. The number of women giving Irish addresses at Dutch abortion clinics fell from 451 in 2007 to 330 in 2008.
Another feature noted earlier was the striking reduction in the number of terminations by young women as a proportion of the total (Figure 3). Their share has virtually halved, from 6.3 per cent a decade ago to 3.2 per cent in 2008. The proportion of teen pregnancies ending in terminations remained high, averaging 22.2 per cent between 1997 and 2006. In 2007 and 2008 the percentages fell to 18.1 and 17.4, respectively. For older women the share ending in terminations also fell. These declines may be partly due to compositional shifts, but improved sex education and increasing use of the morning-after pill are probably more important factors.
So far, so good. But will these trends survive the recession?
A few years ago, when Ben Bernanke’s appointment was ushered through the US Senate with hardly a murmur, Michael Evans—author of a once widely-used textbook called Macroeconomic Activity—quipped, ‘Macroeconomics, unless it messes up, doesn’t matter very much any more’. Macro is no longer passé, however, so TCD’s Antoin Murphy is lucky in the timing of his The Genesis of Macroeconomics (just out, Oxford University Press).
As Antoin points out the term ‘macroeconomics’ was coined by Ragnar Frisch in 1933. Frisch also invented ‘microeconomics’ and ‘econometrics’, as well as some other terms that never caught on. But ‘macroeconomics’ was still unfamiliar enough in 1945 for an article in the American Economic Review to use it with the ‘macro’ bit in inverted commas. It might never have caught on but for the Great Depression and Keynes’s General Theory. Ironically, though, Keynes himself does not seem to have keen on the term. Who was the first Irish economist to use it?
If JSTOR is to be trusted, the first use of the term in an academic journal was by Jan Tinbergen in 1936 (in ‘Sur la determination statistique de la position de l’équilibre cyclique’, Review of the International Statistical Institute, 4(2) (1936): 173-188). Tinbergen, by the way, shared the Nobel Prize with Frisch in 1969. The term was slow to catch on: one JSTOR ‘hit’ before 1940, three in 1940-44, and forty-four in 1945-49. The story thereafter, as reflected in JSTOR, is summarized in the accompanying table. Will these ‘interesting times’ reverse the apparent downturn in usage?
| Year | ‘Hits’ |
| 1935-9 | 1 |
| 1940-4 | 3 |
| 1945-9 | 44 |
| 1950-4 | 149 |
| 1955-9 | 217 |
| 1960-4 | 436 |
| 1965-9 | 959 |
| 1970-4 | 1639 |
| 1975-9 | 2806 |
| 1980-4 | 4429 |
| 1985-9 | 6385 |
| 1990-5 | 7368 |
| 1995-9 | 8028 |
| 2000-4 | 7186 |
Lots of readers will have seen this:
How much the collapse of Anglo-Irish Bank was due to insider borrowing remains unclear. There seems to be much more to it than that, and perhaps in the end Seanie Fitz—and other insiders, yet unnamed—will repay with interest the millions they owe the rest of us.
However, in the (happily few) sensational failures like Anglo’s in Irish banking history, secretive insider borrowing has been a big part of the story.
The potential conflict of interest for bankers short of capital has long been obvious. For this reason, eighteenth-century Irish banking legislation banned merchants engaged in foreign trade from being bankers. The restriction, alas, led to undercapitalized banks.
Joint-stock banking met that problem, and produced the relatively stable banking system that lasted from 1825 to 2008. However, there were some failures along the way, and it may be worth recalling that the two most famous stemmed from the abuse of insider borrowing privileges.
In early 1856 the Tipperary Bank collapsed when it was discovered that its leading light, John Sadleir M.P., had committed suicide on Hampstead Heath. It soon emerged that he owed his own bank nearly £300,000 (something like €30 million in today’s money).
In 1885 it was the turn of the Munster Bank, laid low by the cronyism of a coterie of Cork merchants. For an account of that episode see http://irserver.ucd.ie/dspace/bitstream/10197/441/3/ogradac_bookchap_pub_068.pdf.
In the cases of the Tipperary and the Munster, unsuspecting but relatively well-heeled shareholders bore the brunt of the directors’ swindling. Like Anglo shareholders last week, they protested loudly, but they certainly did not expect the government to bail them out. In addition, the banks’ depositors were also badly burnt.
History says that insider lending may be work in highly unusual circumstances. On this the classic work is Naomi Lamoureaux’s Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England (Cambridge, 1996). But Lamoureaux’s yankee banks may be the exceptions that prove the rule. In general insider lending is dangerous, and a bad deal for both customers and shareholders.