The rise of Sinn Fein (and the broader Left in Irish politics) is the result of three clear, interlinking economic factors. These are a growth model that has not benefited everyone, a worsening housing crisis that has created intra-generational and social class conflict, and a decade of austerity that has led to a decline in public services and public infrastructure.
This is the third election since the great financial crash in 2008. It is the first time in Irish history that the governing centre-right parties of Fianna Fail and Fine Gael have received less than 50% of the first preference vote.
In the decade before the crisis, Ireland was governed by Fianna Fail and experienced a massive house price bubble that burst spectacularly during the financial crisis. This property bubble was underpinned by loose and reckless bank lending, and years of Fianna Fail income tax cuts.
When the property bubble burst, house prices fell significantly and the Irish state was left with a major recession. This meant cleaning up the balance sheet of the banks, increasing income taxes and cutting public spending.
Almost a decade of austerity ensued. House building - particularly social housing - practically came to a standstill.
In 2011, which was the first election following the crisis, the electorate massively punished Fianna Fail. They rewarded the opposition, Fine Gael and the Labour party. Between them, Fine Gael and Labour had one of the largest governing majorities in the history of the state. But while the colour of government changed, the austerity policies remained the same.
From 2011, the government developed a raft of policies aimed at selling off distressed residential real estate and commercial land. Various tax policies were designed to encourage international investors to buy up these distressed assets at knockdown prices. Big real estate investors flooded into the market and bought the assets with gusto.
But they hoarded these assets until prices started to rise again. House prices increased rapidly from 2014 onwards, quickly pricing a new generation out of housing. Those who could afford to buy new homes were pushed further and further away from the city, with poor public transport links, creating car dependence and long traffic congested commutes.
During this same period, Ireland experienced massive amounts of inward investment from big tech multinationals. The tech sector began to boom. This enabled the Fine Gael/Labour government to continue with its austerity measures. Tax receipts from higher income earners and the corporate sector rose.
This boom in foreign investment and multinational exports provided the conditions for an economic recovery, which really began to take off from 2014. But this headline recovery was only really felt in the high-tech multinational sectors of the economy. Most of the workforce did not experience it.
In the 2016 election, the electorate massively punished the Fine Gael/Labour government. Labour went from 33 to seven seats. Fine Gael went from 76 to 50. Fianna Fail won 44 seats, while Sinn Fein won 23. It was an election that nobody really won. The outcome was an Fine Gael-led government with some independents propped up by a confidence-and-supply arrangement with Fianna Fail. For most of the electorate, it was perceived as an Fine Gael government with a quasi-coalition with Fianna Fail.
From 2016 onwards, under the stewardship of the centre-right Fine Gael government led by Leo Varadkar, the economy continued to grow. But it was also becoming obvious that a large part of Irish growth was a result of being a tax haven. Irish GDP is €324 billion. But modified gross national income is €197 billion. This represents the real size of national income, and it is €124 billion smaller than GDP.
Equally, the stock of foreign direct investment in Ireland is around €850 billion but IMF research shows that nearly three-quarters of this is phantom. It is large multinationals shifting capital assets around their various subsidiaries to reduce their tax obligations.
All of this has made the economy look better than it actually is.
Housing and cost of living
There has been significant employment growth in Ireland, putting pressure on housing and public services. The higher-income, high-tech jobs are increasingly located in the cities of Dublin, Cork, Limerick and Galway. It is estimated that there are around 50,000 jobs associated with the tech sector, of which 75% are located in Dublin.
This growth of higher-income jobs in a context of constrained supply of housing has led to skyrocketing rents and unaffordable houses. The cost of living has increased significantly, particularly housing, childcare, insurance, healthcare and education, making Dublin one of the most expensive cities to live and raise a family in Europe.
The majority cannot afford these rising costs. About 80% of the Irish population have gross incomes of less than €50,000 a year. High rents, along with limited public and social housing has led to a significant growth in homelessness. Housing and healthcare provision was consistently cited by Irish voters as the key issues in the 2020 election.
Vote for change
The 2020 election was a vote for change. It was a vote against Fianna Fail/Fine Gael and the centre-right policy consensus that has governed Irish politics for decades.
Economically secure voters concerned with quality of life issues increasingly turned to the Green Party. But Sinn Fein generated a powerful narrative that it is the party that represents working people against the privileged. Its manifesto committed to taxing big tech, banks and the rich. It also promised to invest heavily in public services and engage in a mass public house building programme.
The economic feasibility of these promises is important but besides the point. It was a narrative that resonated with a large chunk of the population. Given the legacy effect of austerity, and the inequality generating effects of Ireland's growth model, the rise of Sinn Fein can be understood as the dog that finally barked.
Author: Aidan Regan - Lecturer/Assistant Professor in Political Economy, University College Dublin