The Quiet‐Loud‐Quiet Politics of Post‐Crisis Consumer Bankruptcy Law: The Case of Ireland and the Troika

Date01 September 2018
Published date01 September 2018
DOIhttp://doi.org/10.1111/1468-2230.12365
AuthorJoseph Spooner
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The Quiet-Loud-Quiet Politics of Post-Crisis
Consumer Bankruptcy Law: The Case of Ireland
and the Troika
Joseph Spooner
A decade after the Global Financial Crisis, many developed economies continue to strain
under excessive household debt. This article presents evidence suggesting that the failure of
policymakers to enact debt relief measures may lie in the superior influence of the coordi-
nated and concentrated financial sector over legislative processes, as compared to the diffuse
and disorganised interests of consumer debtors. Post-crisis popular interest in technical issues
of personal insolvency law created only a narrow space of political opportunity. Soon these
questions returned to the domain of technocratic actors and corporate influence. The article
examines this situation through an inter-disciplinary case study of consumer bankruptcy re-
form in Ireland under ‘Troika’ supervision. Proposals initially billed as assisting over-indebted
households developed into increasinglycreditor-fr iendly legislation in ‘quieter’ stages of techno-
cratic decision-making. The stark implications of these findings highlight obstacles to resolving
household debt problems and consequent risks of economic and political instability.
INTRODUCTION
Have we wasted a good crisis? A decade after the Global Financial Crisis and
the beginning of the Great Recession, advanced economies continue to strain
under the burden of excessive household debt.1Radical post-crisis activism has
over time been joined by mainstream commentary in highlighting the negative
effects of these unduly high debt levels.2International institutions line up to
illustrate how ‘debt overhang’ is stifling economic growth, and to urge national
Assistant Professor of Law, London School of Economics and Political Science. The author thanks
participants at workshops at LSE and Brooklyn Law School (the latter sponsored by the American
Bankruptcy Institute), as well as at the Household Finance CRN of the Law and Society Association,
where earlier drafts of this paper were presented and discussed. The author also wishes to thank for
their particular insight, advice and encouragement Iain Ramsay, Stephanie Ben-Ishai, Susan Block-
Lieb, Ted Janger,Jason Kilborn, Jay Westbrookand Henr ietta Zeffert. The author workedas Pr incipal
Legal Researcher on the Law Reform Commission of Ireland’s project on Personal Debt Management
and Debt Enforcement, and contributed to the World Bank Report on the Treatment of the Insolvency of
Natural Persons. All opinions, errors and omissions are the author’s own.
1 Inter national Monetary Fund, ‘Gaining Momentum? World Economic Outlook April 2017’
(2017); Bank for International Settlements, ‘The Global Economy: Maturing Recoveries, Turn-
ing Financial Cycles?’ (2017).
2 For example, ‘debt refusal’ campaigns featured amongst the activities of the post-crisis Occupy
movement, while other debtor activist and civil society groups have also developed in recent
years: see, for example,T. Gitlin, ‘Occupy’sPredicament: The Moment and the Prospects for the
Movement’ (2013) 64 British Journal of Sociology 3; E. Hoekstra, ‘Andrew Ross on the Anti-Debt
Movement’ in D. Hartmann and C. Uggen (eds), Owned (New York, NY: W. W. Norton &
Company, 2015) ch 7; J. Montgomerie and others, ‘The Politics of Indebtedness in the UK’
Goldsmiths University, Public Interest Report (2015) 31–36. For more mainstream conversion
C2018 The Author.The Moder n Law Review C2018 The Modern Law Review Limited. (2018) 81(5) MLR 790–824
Published by John Wiley& Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
Joseph Spooner
policymakers to enact extensive household debt relief policies.3In the UK,
now that household debt is returning to pre-crisis levels, the Bank of England
is forced to remind us with increasing urgency of the risks this involves.4The
pressure this debt burden places on households, alongside failures to ‘bail out’
financially struggling households while governments and taxpayers rescued the
financial sector, have contributed to inequality and accompanying political un-
rest.5It appears that after the cr isis ‘the Great Conversation that many were
expecting never took place’;6reforms that seemed inevitable remain unre-
alised; and economies still depend on unsustainably high levels of household
borrowing.
This article presents evidence suggesting that policymakers’ failure to address
household debt problems through debt relief measures may lie in the superior
influence over the legislative process of the coordinated and concentrated fi-
nancial sector, compared to the diffuse and disorganised group of consumer
debtors.7The article’s findings suggest that only a narrow space of political
opportunity was created by post-crisis popular interest in technical issues of
personal insolvency law (and financial regulation more generally), before these
to this view, see, for example, P. Bunn and M. Rostom, ‘Household Debt and Spending in the
UK’ Bank of England Staff Working Paper No 554 (2015) 554. S. Lo and K. Rogoff, ‘Secular
Stagnation, Debt Overhang and Other Rationales for Sluggish Growth, Six Years On’ BIS
Working Papers No 482 (2015) 10; International Monetary Fund, ‘Fiscal Monitor - Debt: Use
It Wisely’ (2016); Bank for International Settlements, ’Global Economy’ ibid, 48–50; Bank of
England, ‘Financial Stability Report: June 2017’ (2017) 1–49. The scholarship of Mian and Sufi
has been particularly influential in disseminating this realisation: see, for example, A. Mian and
A. Sufi, House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent
It from Happening Again (Chicago, Ill: University of Chicago Press, 2014).
3 See, for example, International Monetary Fund, ‘Dealing with Household Debt’ World Economic
Outlook 2012 (2012); International Monetary Fund, ‘Fiscal Monitor - Debt: Use It Wisely’
(2016).
4 Bank of England n 2 above;A. Brazier, ‘“Debt Strikes Back” or “The Return of the Regulator”?’
Institute for Risk and Uncertainty, University of Liverpool, 24 July 2017 at http://www.
bankofengland.co.uk/publications/Pages/speeches/2017/992.aspx (last accessed 6 April 2018).
5 See, for example, M. Blyth and M. Matthijs, ‘Black Swans, Lame Ducks, and the Mystery of
IPE’s Missing Macroeconomy’ (2017) 24 Review of International Political Economy 203; I. Ramsay,
Personal Insolvency in the 21st Century: A Comparative Analysis of the US and Europe (Oxford: Hart
Publishing, 2017) 10; European Central Bank, ‘Financial Stability Review’ (ECB,2015) 148; I.
Martin and C. Niedt, Foreclosed America (Stanford Briefs, 2015) ch 4.
6 D. Graeber, Debt: The First 5,000 Years (Brooklyn, NY: Melville House, 2012) 381.
7 By ‘consumer debtor s’, this article refers to individuals and households in financial difficulty
due to debts incurred for personal finance and/or small business purposes, as opposed to traders
and investors who borrowed to fund high-end business activities. This latter category may
be disproportionately represented in media coverage and even in bankruptcy literature, given
how several high-profile businesspeople of the Celtic Tiger economy fell from grace and into
insolvency litigation, sometimes as ‘bankruptcy tourists’: see, for example, Irish Bank Resolution
Corporation Limited vQuinn (2012) [2012] NICh 1; C. Paulus, ‘Shaping the Contours of a Hybrid
Concept - Mr Quinn’s COMI: Irish Bank Resolution Corporation v Quinn [2012] NICh 1’
(2012) 25 Insolvency Intelligence 75. This article examines primarily the political influence of the
large minority group of financially troubled debtors who fell into mortgage arrears after the
crisis – a group of relatively lower incomes, employment and familial stability, and educational
attainment: Y. McCarthy, ‘Disentangling the Mortgage Arrears Crisis: The Role of the Labour
Market, Income Volatility and Housing Equity’ Central Bank of Ireland Research Technical
Paper 2/RT/14(2014) 6–9. The interests of this group diverge at times from those of consumers
more broadly, as discussed in text to notes 229-243 below.
C2018 The Author. The Modern Law Review C2018 The Modern Law Review Limited.
(2018) 81(5) MLR 790–824 791
The Case of Ireland and the Troika
questions returned to the domain of administrative actors and corporate in-
fluence. While pro-debtor positions gained momentum in early ‘loud’ public
policymaking stages following the crisis, they were supplanted by pro-creditor
positions developed in the ‘quieter’ stages of bureaucratic and technocratic
decision-making. These findings are consistent with Olson’s classic logic of
collective action, and its core idea that small groups with converging interests
can use superior organisation to influence policymaking more effectively than
large groups holding diverging interests.8The results suggest that notwithstand-
ing the turmoil of the Global Financial Crisis, this time was not so different,9
and core ideas of collective action theory remain intact. This is despite recent
literature that poses challenges to this classic position. Certain studies stress
how the influence of concentrated interests is inversely related to the political
salience of an issue,10 with authors using this insight to argue that the shock of
financial crisis has allowed diffuse groups to outbid concentrated interests in the
policy market.11 Another perspective, argued recently by Trumbull, is that the
key to shaping consumer protection policy lies not in a group’s ability to organ-
ise, but rather its capacity to present its preferred policies as publicly legitimate
(in the sense of benefitting a wider constituency or the ‘public interest’).12 This
study suggests that such insights do not undermine the continuing relevance
of the traditional logic of collective action, at least when supplemented by
Culpepper’s nuance that business influence is strongest in times and spaces of
‘quiet politics’.13 Final legislative provisions developed bureaucratically were
much more favourable to creditors than the extensive debt relief promised in
early public stages of the personal insolvency reform process.
The article reaches these findings through a detailed case study of Irish per-
sonal insolvency law reform. The second section of this article shows how
this study offers particular insight due to the unique status of personal insol-
vency law as an institution offering debt relief routinely and as of right. Few
other societal institutions address more directly the issue of how to deal with
8 M. Olson, The Logic of Collective Action: Public Goods and the Theory of Groups (Cambridge, Mass:
Harvard UniversityPress, rev ed, 1974). Existing bankruptcy literature supports an understanding
of policy change founded on collective action theory: see, for example,D. Skeel, Debt’s Dominion:
A History of Bankruptcy Law in America (Princeton, NJ: Princeton University Press, 2001); I.
Ramsay, ‘Interest Groups and the Politics of Consumer Bankruptcy Reform in Canada’ (2003)
53 University of Toronto LJ 379; M. Dickerson, ‘Regulating Bankruptcy: Public Choice,
Ideology, and Beyond’ (2006) 84 Washington U L Rev 1861.
9 C. Reinhart and K. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton,
NJ: Princeton University Press, reprint ed, 2011).
10 B. Farrand, ‘Lobbying and Lawmaking in the European Union: The Development of Copyright
Law and the Rejection of the Anti-Counterfeiting Trade Agreement’ (2015) 35 OJLS 487.
11 See, for example, L. Kastner, ‘"Much Ado about Nothing?" Transnational Civil Society, Con-
sumer Protection and Financial Regulatory Reform’ (2014) 21 Rev Intl Political Economy
1313.
12 G. Trumbull, Strength in Numbers (Cambridge, Mass: Harvard University Press, 2012) 22–
32. Trumbull echoes earlier supply-side views of the regulatory market, which emphasised
politicians’ need to form large heterogeneous coalitions behind policies: J. Q. Wilson, ‘The
Politics of Regulation’ in J. Q. Wilson (ed), The Politics of Regulation (New York, NY: Basic
Books, 1980) 361.
13 P. D. Culpepper, Quiet Politics and Business Power: Corporate Control in Europe and Japan (Cam-
bridge: CUP, 2010).
792 C2018 The Author. The Modern Law Review C2018 The Modern Law Review Limited.
(2018) 81(5) MLR 790–824

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