Joseph Spooner
The quiet-loud-quiet politics of post-crisis
consumer bankruptcy law: the case of
Ireland and the Troika
Article (Accepted version)
(Refereed)
Original citation: Spooner, Joseph (2018) The quiet-loud-quiet politics of post-crisis consumer
bankruptcy law: the case of Ireland and the Troika. Modern Law Review. ISSN 0026-7961
© 2018 The Modern Law Review Limited
This version available at: http://eprints.lse.ac.uk/87265/
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1
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 coordinated 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 reform in Ireland under ‘Troika’ supervision.
Proposals initially billed as assisting over-indebted households developed into increasingly creditor-
friendly legislation in ‘quieter’ stages of technocratic 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
Assistant Professor of Law, London School of Economics and Political Science. The author thanks all
participants at workshops at LSE and Brooklyn Law School, 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, Jason Kilborn, Jay Westbrook and Henrietta Zeffert. The author worked as Principal 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.
2
excessive household debt.
1
Radical post-crisis activism has over time been joined by
mainstream commentary in highlighting the negative effects of these unduly high debt
levels.
2
International institutions line up to illustrate how “debt overhang” is stifling
economic growth, and to urge national policymakers to enact extensive household debt
relief policies.
3
In 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.
4
The
pressure this debt burden places on households, alongside failures to “bail out” financially
1
International Monetary Fund, ‘Gaining Momentum? World Economic Outlook April 2017’ (2017); Bank for
International Settlements, ‘The Global Economy: Maturing Recoveries, Turning 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 e.g. T. Gitlin,
‘Occupy’s Predicament: The Moment and the Prospects for the Movement’ (2013) 64 The British Journal of
Sociology 3; E. Hoekstra, ‘Andrew Ross on the Anti-Debt Movement’ in D. Hartmann and C. Uggen (eds),
Owned (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 to this view,
see e.g. 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’ (IMF 2016); Bank for International Settlements, 'Global Economy' n 1 above,
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 e.g. 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
(University of Chicago Press 2014).
3
See e.g. International Monetary Fund, ‘Dealing with Household Debt’, World Economic Outlook 2012 (IMF
2012); International Monetary Fund, ‘Fiscal Monitor - Debt: Use It Wisely’ n 2 above.
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 visited 6 April 2018).
3
struggling households while governments and taxpayers rescued the financial sector, have
contributed to inequality and accompanying political unrest.
5
It appears that after the crisis
“the Great Conversation that many were expecting never took place”;
6
reforms that seemed
inevitable remain unrealised; 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 financial sector, compared
to the diffuse and disorganised group of consumer debtors.
7
The article’s findings suggest
5
See e.g. 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 (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 (Melville House 2012) 381.
7
By “consumer debtors”, 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 e.g. Irish Bank
Resolution Corporation Limited v Quinn (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.
4
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 questions returned to the domain of administrative actors and corporate
influence. 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.
8
The results suggest that
notwithstanding 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
8
M. Olson, The Logic of Collective Action: Public Goods and the Theory of Groups (Revised, Harvard
University Press 1974). Existing bankruptcy literature supports an understanding of policy change founded on
collective action theory: see e.g. D. Skeel, Debt’s Dominion : A History of Bankruptcy Law in America
(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 (Reprint edition,
Princeton University Press 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 e.g. L. Kastner, ‘‘Much Ado about Nothing?’ Transnational Civil Society, Consumer Protection and
Financial Regulatory Reform’ (2014) 21 Rev Intl Political Economy 1313.
