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Thursday, August 20, 2009

Irish Economy: A banking crash inquiry?

UCD Economist Colm McCarthy

Last Monday, UCD economist Colm McCarthy who chaired the so-called "Bord Snip Nua" report, which recommended more than €5 billion in public spending cuts, said in a radio interview that a televised inquiry should be held by the Oireachtas on the reasons for the banking crash.

McCarthy said the “real bailout” was a bailout of depositors to prevent “a complete financial collapse.”

That meant that the taxpayers were going to end up footing the bill to some degree.

He said the general public still had not had a “thorough explanation” for what went wrong with "the Irish banking system.”

He said he believed an inquiry along the lines of the Dirt inquiry, by an Oireachtas committee for example, would greatly enhance public understanding of what had gone wrong in the banks.

Where should one start? — from where the fish rots: poor governance with limited accountability in a multi-seat system with clientism and pandering to vested interests dominant, in a culture where plundering the public purse is far from a vice; political parties relying on soundbites, rather than detailed policies and then in government outsourcing on grand scale to the consultancy industry while responding to events only when there a crisis, or more often than not, a dire crisis; cronyism; Victorian era secrecy benefiting the insiders; a culture where the supporting cast within the system, keep their heads down, accept benchmarking whether its is viewed as a sham or not - - a few years later in 2007, partake in another pay bonanza with the Secretary-General of the Dept of the Taoiseach getting a 25% rise.

It is worthy of note that despite the reckless mismangement, nobody saw fit to resign on a point of principle from the ranks of the senior civil service or the Central Bank.

Within the official circle was the State broadcaster RTÉ - - the political leaders’ preferred route to the public. The ineffective format of the Dáil, coupled with 2-minute door step interviews and a compliant RTÉ management coasting on an advertising bonanza, meant that there was never a risk of having to give what could be termed a forensic interview - -unless it was a self-serving response to a tribunal leak.

As regards economists, the academic economists may have had a disdain for the some of the prominent financial service economists, who were essentially well-paid PR men for the moneychangers, but these people provided the “intellectual” support for the boomsters.

In 2004 Bank of Ireland’s Dan McLaughlin had declared a “Golden Age of Construction,” at a construction industry dinner and then in 2007, said “there are a number of economic viewpoints about the Irish economy which are often voiced but have little in the way of support from the facts. One often hears that growth is unbalanced but a glance at the data from 2001 to 2006 shows average GDP growth of 5.3%, with all components growing in a 4.5% - 5.5% range.”

A year before, the myopic economists at NCB had produced their 20/20 Vision report, and again underpinned the fantasies of the politicians.

In June 2006, I wrote the following:
  • Foreign companies were responsible for 87% of Irish exports in 2005
  • Dell and Intel are Ireland’s biggest exporters. 2. Irish investors ploughed €30 billion into local and overseas commercial property in the past 5 years
  • Investment of €133m has been made in 75 Enterprise Ireland supported companies since 2001
  • One in five Irish private sector workers are dependent on construction and more than 100,000 will become unemployed within 10 years
  • No Irish-owned company has floated on the Nasdaq Stock Exchange since 1999. 5
  • Most workers in Irish-owned companies have no occupational pension.
  • The Irish Government awarded special pay increases to all current and retired public sector workers, including politicians, in return for a benchmarking performance system. Targets introduced are basically unmeasurable and aspirational
  • William Prasifka, the chairman of the Competition Authority, recently said that “in too many areas, Ireland has not willingly embraced competition.”
  • New Irish housing units are among the most expensive and the lowest quality in the Developed World
  • Since the end of 2003, output per worker in Ireland has been almost static. 10. Most foreign companies will have relocated from Ireland by 2025
  • In 1970, Ireland’s national debt was as healthy as it is now: just ten years later it was one of the worst in the world

BaNama Republic, NAMA and "long term economic value" as "demographics" is disinterred from bubble wreckage

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