Saturday, September 01, 2007

The Irish Media and Economics

Professor Michael Buckley

My attention was recently grabbed by the news that Michael Buckley former Chief Executive of AIB Bank, has been appointed as adjunct (an associate or assistant of another - one of the definitions in Merriam-Webster) Professor of Economics at University College Cork.

I had 35 lecturers during my six years at UCC and only two were not cures for insomnia. Bryan McMahon, son of renowned Listowel writer Bryan McMahon was one of them as then lecturer in European law and the other was a non-academic, Richard Haslam who was then Limerick County Manager. As a lecturer in the subsidiary subject of Public Administration, Haslam had the ability make subjects like the Public Health Act of 1878 interesting. As for the rest, one of them, a lecturer in economics, who had a style not that different from my father when he stumbled on something interesting in The Cork Examiner and began reading aloud, told me on one occasion that he had given up on economics years before. His speciality was microeconomics - exciting stuff of course like the elasticity of demand curves.

I saw Buckley once on television being interviewed on BBC's Newsnight by Jeremy Paxman after news of the Rusnak currency fraud scam broke. Resembling in appearance, the late brilliant Scottish actor Alastair Sim, Buckley is no Cicero but it would be some change if a former Irish bank CE provided an honest appraisal of Irish public policy issues rather than the default role as well-fed yesmen on company boards. Buckley started his career as a civil servant becoming Chef de Cabinet to the President of the European Court of Auditors, Luxembourg between the years of 1977 and 1981 and subsequently was a senior official in charge of public expenditure at the Department of Finance.

Economists have become more ubiquitous since I graduated and in the private sector most positions are in financial services. Basically that role is a hybrid of public relations and economics. If you cannot glean a silver lining from the darkest cloud, your career prospects would be pretty limited. The long term horizon for such economists is two to three years at most.

"Although the media are doing their best to put the fear of God into consumers by talking about a huge slump in the economy over the next couple of years, the underlying fundamentals continue to suggest that, outside the housing sector, things are still going well," said Bloxham Stockbrokers Chief Economist Alan McQuaid according to the Irish Independent.

Yes indeed! Haven't we heard of "fundamentals" for six months from the time the subprime crisis broke last February? The line from the vast majority of financial industry spokespeople was that there would be no contagion from a relatively small segment of the US mortgage industry. Now undaunted by having been proved so wrong and with their bonuses on the line together with their company stockholdings at risk, the clarion call is for the Fed to cut rates steeply again - which had some unintended consequences the last time the course of action was taken in 2000 and 2001.

The main Irish media organisations have economists who generally provide a balanced presentation on economic events. There are of course scary headlines at times but what should be expected in a democracy when the countervailing force is often self-interested spin from politicians and industry folk with an eye on their wallets.

The principal problem is that economics is a niche area and journalists without a knowledge or interest in the area, are manna for the spin of politicians and others.

The stamp duty debate, which began a year ago this month when the new leader of the Progressive Democrats Michael McDowell proposed its abolition or reform in respect of house purchases, as a measure to alleviate pressure on the "coping classes," is a great example of how the media fell for the spin.

The Sunday Independent had most of its columnists write about the pernicious system over several weeks. What was so bizarre about the debate was that the related issue of the VAT tax of 13.5% on the cost of new houses (there is no VAT applied in the UK) was ignored as was the corrupt land development system that makes multimillionaires of farmers near Irish towns.

Is the resultant cost for house buyers a direct tax and the inflated cost of roadbuilding because of a sweetheart deal with farmers, an indirect tax?

Michael McDowell later presented another wheeze on RTE Radio 1's Morning Ireland programme. The old age pension would be raised to €300 per week during the lifetime of the following government.

He spoke of course about pensioner poverty but wasn't asked about the causes of such poverty - the fact that almost a half of the workforce have no occupational pensions compared with the gold-plated ones for his then profession should have been raised.

As most journalists are economically challenged or have limited interest in the area, spin still wins out despite the pleas of the spinners about negativity in the media.

A postscript to the stamp duty debate is that economist Marc Coleman who promoted stamp duty reform in his last months as Economics Editor at The Irish Times, has moved to The Sunday Independent.

He is unlikely to have the same freedom in his new perch at The Sunday Independent and last Sunday offered some crumbs of hope to the spinners in an interview on a forthcoming book: "As I said I'm an optimist and although I have no problem talking sense into the economy, I never talk the economy down like some others do. Last week ECB President, Jean Claude Trichet, intervened to steady nerves just as financial markets were losing their grip. In my own small way, I think of myself as doing the same for the Irish economy. Commentators have to remember that someone else's job may sometimes depend on what they say."

I wish these people had the cojones to name the baddies who "talk the economy down."


Irish Economy - Many short-termists silent on likely challenges in medium to long-term