SOCIALISM is dead. Capitalism is seriously devalued by the global crisis. But it would appear that another 'ism', around as long as democratic politics, is still alive and kicking: populism.

In the US, uber-populist Scott Brown won a Senate seat against all the odds and Barack Obama has reacted to this setback, and his falling popularity, by going all… well… populist. The president's macho attacks on banks and lobbyists are no doubt what many in the public want to hear, but is this what the great hope of 2008 – so calm, cool and considered – is reduced to?

And it seems that back home Fine Gael and the Labour party are intent on going down the same populist road. How else can the nonsense coming from the two parties' leaders on the Order of Business last Thursday morning be explained?

Both Enda Kenny and Eamon Gilmore opted to kick up a storm over reports that Permanent TSB Bank was considering an increase in mortgage rates and demanded that the finance minister take action.

"Is the Minister for Finance prepared to call in the banks today?" thundered Enda Kenny.

"There is no Nama for householders who find themselves in negative equity," declared Eamon Gilmore, determined not to be outdone by the Fine Gael leader. "We cannot have business and politics as usual in this house while families throughout the country are faced with the type of news they got this morning."

There is no question that their outbursts would have struck a chord with tens of thousands of mortgage holders across the country. But that doesn't mean that what they spouted has any credibility.

It is certainly not the intention of this column to defend the banks (although it is only fair to point out that Permanent TSB has not received any money from the state and has not applied to join Nama). In the main, the banks have behaved quite recklessly over the past decade and, in doing so, have done enormous damage to the economy and to the lives of hundreds of thousands of people.

It is galling that we, the taxpayer, will have to underwrite the sector and fork out billions upon billions of euro to pay for this hubris and incompetence. And it must be doubly galling for those caught in negative equity who are struggling to make their mortgage repayments.

But appealing and all as the notion is of them being dragged in by the finance minister of the day and being told what they can and can't do, any calm and rational assessment of the situation would immediately show this is a recipe for exacerbating the economic crisis.

Like it or not, we need the banks to recover if the economy is to ever get back on its feet. And, like it or not, the banks will never – repeat never – recover if the government of the day is able to veto commercial decisions.

The reality is that, in many cases, the banks are paying more to borrow money on the inter-bank money markets than they receive from their mortgage customers. That is simply not sustainable.

It will be of little consolation to those householders facing an increase in mortgage rates, but efforts to stop the banks raising rates, however well meaning, will do a lot more damage not just to the banks but to the whole economy.

Enda Kenny and Eamon Gilmore both know this. And if they were in government there isn't the remotest possibility they would carry through on the kind of action they were advocating last Thursday. (And if Fianna Fáil was in opposition, it would be doing exactly the same as Fine Gael and Labour did).

All of which suggests that whatever about the banking system learning from its mistakes courtesy of a banking inquiry, there seems to be little prospect of the political system doing so. Because without doubt the type of populism on display in the Dáil on Thursday caused much of our economic and fiscal crisis today.

The governments led by Bertie Ahern were nothing if not populist. Everything was geared towards the next election and that meant saying 'no' as little as possible and saying 'yes' as often as possible. Every interest group was indulged. Money was thrown at every problem. Tough decisions were shirked. It was government by focus group. Give the people what they want regardless of the consequences.

It was this approach that gave us the benchmarking fiasco, the fudge on numbers in the HSE after the abolition of the health boards, the hugely costly and unnecessary farm waste management scheme and annual double-digit percentage increases in spending that were wholly unsustainable. In short, it was this approach that has landed us with a €20bn-plus budget deficit and made the country totally uncompetitive.

And yet, amazingly, the lessons appear not to have been learned. Last Thursday's Order of Business Dáil debate was the best argument yet for not nationalising the banks – imagine the pressure on the government of the day to meddle in the affairs to the state-owned banks.

But it is also worrying that the two parties almost certain to form the next government are opting for such a populist tack at a time when what the country needs is cold-eyed realism.

scoleman@tribune.ie