Ireland can teach us some valuable literary lessons

As Ireland's institutions crumbled, writers and artists kept their good name – and are now courted by the state.

We're in a small harbour-side courthouse on the far western edge of the European Union. One national flag, and another that bears the EU's ring of stars, flank the magistrate's bench. The public seats are packed. A trio of witnesses – all detectives, after a fashion – rise to tell us in graphic detail about terrible crimes covered up and blamed on (likely) innocents who died to hide the guilty. An untamed countrywoman who worked as a prostitute, and had children by seven wealthy, married men, is savagely killed; a friendless farmer hangs for it. Another framed loner dies on the gallows after the murder of a judge's daughter. A resented foreign woman, with her hapless servant, goes on trial for witchcraft...

The little courtroom in Bantry, a pretty and peaceful town on one of the deep bays where County Cork slides gently into the Atlantic, would not usually play host to such sensations. Each of these real-life cases has prompted a novel, and their authors – visitors to last week's West Cork Literary Festival – took the stand to explain them. The life and death (in 1940) of "Foxy Moll" McCarthy in New Inn, Tipperary propelled Carlo Gébler latest novel, The Dead Eight (see page 29). North of the border, an almost-certainly innocent man was hanged after a young woman's murder in Newry in 1961; Eoin McNamee's Orchid Blue (Faber) investigates the miscarriage, and returns to the scenes and people of his earlier The Blue Tango. As for the alleged witch Alice and her maid Petronilla: they faced gruesome torture at the hands of ecclesiastical judges in the Anglo-Norman town of Kilkenny in 1324, as Hugh Fitzgerald Ryan recounts in The Devil to Pay (Lilliput Press).

From David Mitchell to Michael Morpurgo, Hisham Matar to David Soul (Hutch without Starsky, who presented a flamboyant one-man show inspired by the poetry of Pablo Neruda), Bantry welcomed a richly cosmopolitan gang of authors. But there seemed something symbolically new-Irish about that night in court. A state space was given over for a spell to the unsparing revelation of sexual hypocrisy and family trauma, of the abuse of the law and the persecution of outsiders. These true, and tangled, histories fit with uncanny precision the moulds of a literature that seeks to do belated justice to all the victims. For Eoin MacNamee, "These cases have an architecture to them that would be implausible if you made it up".

To the authors, that true-crime architecture carves doorways that lead straight from then to now. As Carlo Gébler put it, "The past is a way of getting to the present." And everything about that scandal-studded history now can and must be said, both to banish the old demons and to shed light on the way we live now. "The modernity of it fascinated me," said Hugh Ryan, drawing lines to link the inquisitors of medieval Leinster to Guantánamo or Abu Ghraib. "It was so like the war on terror... Society coalesces when it identifies an enemy."

As for Gébler – whose mother, the taboo-busting novelist Edna O'Brien, ruffled feathers in 2002 when she too transformed a harrowing murder case into fiction with In the Forest – he traced a connection between the lies and cover-ups of Ireland in the 1940s and more recent events. The deceits behind The Dead Eight exposed, he said, the "total and utter indifference of the elite" to the sufferings of those without voice or rank. The descendants of that ruling clique, he argued, drove fellow-citizens into the economic catastrophe that last November led to an 85 billion euro EU-IMF bail-out and a four-year plan of eye-watering austerity. "They have improved a little – they no longer hang people – but not by very much."

If you suspect that this sounds like another gloating rehearsal of Ireland's current woes from the other side of the water, please think again. The republic's extreme-sports version of boom-and-bust did indeed trigger plenty of patronising coverage in Britain. But you might read that courtroom session in quite another way. Ireland's writers have had to keep their eyes unblinkingly open, and to unpack the most painful secrets, as one by one the pillars of society have crumbled. It began, of course, with the fall of the Church after paedophile scandals and their suppression; then continued with the disgrace of the "Celtic Tiger" bankers and developers, and of the crooked machine politicians who fixed their deals.

You might even view the past few years of Irish history as evidence of a kind of multiple organ failure in the body politic. That's certainly how the abrasive historian-journalist Fintan O'Toole reads events in his acid-tongued critique, Ship of Fools, and in Enough is Enough (Faber) – his manifesto for a "new republic" with a reinvigorated ideal of "public morality" now that, from Catholicism to nationalism, "so many of the old landmarks have disappeared".

But the authors, and artists, have not failed. They have – at their best – told the truth and shamed the devils. Last autumn, shortly before Ireland's leaders threw up their hands and let Brussels and Berlin steer economic policy, I talked in Dublin to novelist Paul Murray (Man Booker-longlisted for the tragi-comic Skippy Dies). He memorably quoted writer-director Neil Jordan, who will film his book. For Jordan, the creators were "the one element of Irish life that hadn't let people down. We hadn't betrayed people."

When I talk to Eoin McNamee, he endorses Jordan's case but warns against a pious reverence for the superior wisdom of the arts. "I'm inclined to be suspicious of artists making hi-falutin' claims," he says. During the Celtic Tiger frenzy, "we were taken in as much as anyone else". Yet the crisis may return writers to their core mission. He reports a conversation with fellow-novelist - and author of fearlessly artful portraits of small-town folly and fantasy – Patrick McCabe. They agreed that, thanks to the crash and its aftermath, "You might find a way back to what started you writing in the first place": the sense that "there's a poverty about what's going on around you. So let's try to investigate it."

McNamee, who has lived in Sligo for 15 years, grew up in the North, in County Down, amid the lingering Troubles. He reacted then against the detachment of writers who sought "to keep the flame burning in dark times. I never felt that was enough. You had to find a way to illuminate" that darkness.

His own route took him into the emotional archaeology of Northern Irish society, exposing its repression and corruption on the brink of bloodshed. Hence, the value, he argues, of art that delves into recent history to understand the present: "Perhaps the problem is the stories that went untold in the past – how we got into this state."

This determination to anatomise the past, and so liberate the present, has relevance across the Irish Sea. For the implosion of the Rupert Murdoch empire, and the sudden willingness of politicians to stop grovelling to it, both deepens and quickens a sense of institutional paralysis in the UK as well. From press to parliament to police, authority in Britain also suffers from a deep crisis of trust and respect. Could authors here match the untarnished truth-telling esteem of some of their Irish counterparts – and, if so, how might they put it to use?

Paul Murray, also a guest in Bantry, believes that post-crash governments in Ireland have woken up to the one national asset – culture – that suffered no write-downs. "In the past six months," he tells me, "the kinds of value attached to the arts have really shot up as the value of everything else has plummeted." Now the new Fine Gael-Labour coalition, which won power in February, refers to "our artists". As a "crystallisation" of regime change, Murray cites the old Bank of Ireland offices on College Green in Dublin – once the HQ of a shattered bank, but now earmarked as the site of a planned National Literary Centre.

Although "the star of the arts has risen", and patronage will follow, Murray adds that "I don't think that artists will necessarily want to be the emissaries of the Irish government." He thinks that new funding opportunities will leave creators on "a bit of a tightrope", having to balance between the lure of state approval and the autonomy that first won respect. During the Celtic Tiger's roaring years, "What stopped artists being sucked into the vortex was this massive indifference. There wasn't any danger of being tainted by money!"

Now, politicians register the value of the arts as aids to recovery in brutally pragmatic terms. Last year, former Taoiseach (PM) Brian Cowen argued that "Ireland is a brand," which has the capacity to beef up the nation's "competitive advantage in a globalised world" – and that even Irish poets have a role in getting the nation "back on track". Derek Mahon, one of the finest, scorned this call as "dense and philistine".

No matter: a belief in literature and the other arts as a high-status spearhead for renewal has official traction now, in what Murray calls "a big push to spread the word about Irish culture" abroad. In an interview (with Grainne Rothery), Eugene Downes – chief executive of the state agency Culture Ireland – lauded this year's "Imagine Ireland" promotion across 40-plus US states. He noted that: "Even before the crisis hit, about two thirds of all positive coverage of Ireland in the NewYork Times was culture-related." Speaking of the artistic armoury in "the battle for Ireland's reputation", Downes calculated that "the equivalent advertising value of that cultural coverage in just the key New York-based global media would have been in the order of $20m. per annum."

Beyond the realm of state patronage, Ireland's creative strength can be re-interpreted as fuel for new growth. Toby Scott, once a policy-maker at the Department of Culture in London, is now Ireland director for Pentacle, the "virtual business school". He advises Irish businesses and organisations, aiming to show that what artists do and know - their special ways of thinking and working - might benefit them.

For ailing enterprises, Scott finds, "They're not much interested in talking about 'creativity'. It frightens the horses. But they do know that what they've been doing doesn't work." So recession opens doors and minds. He can use this "window" of doubt and confusion to plant the idea that Ireland's artistic achievements, and the modes of thought behind them, might offer a template for change: "The pill is being swallowed at the moment – because we are in absolutely dire straits." In a time of "profound self-examination", he finds people receptive to culture as a means to build "resilience" into communities in flux.

In Waterford, Scott notes, the collapse of the historic glass works in 2009 "was like the heart being ripped out of an entire area. We cannot rebuild that sort of industry." But rent-free office space in the town centre now hosts "a non-stop programme of activities". It may offer, says Scott, "a model of artistic resilience in difficult times." That resilience, he argues, "doesn't come from the infrastructure, but from the people, and their ability to manage change. And one way we can assist that resilience is by investment in creativity."

There's a thumping paradox at work here, of course. In a pickle, the powers that be – political or commercial – draw on the undimmed prestige of the arts. Yet that credit rests on frank and bold visions of reality that often stem from a sceptical view of those powers.

A hard-won independence from the lies and crimes of the mighty has left Irish creative artists free to serve as witnesses, even as prosecutors. But if the scandal-scarred authorities really do wish to recruit them as unblemished figureheads of "Brand Ireland", they should take care to stay out of the dock. Eoin McNamee, for one, will not be crossing the floor any time soon: "The job of the artist in the current climate is to subvert, I would think."