The Mark of Cain
The ESRI’s first forecast pointing to any contraction in the Irish economy was made only at the end of June last year.
This morning’s reports on the institute’s spring quarterly economic commentary (see story here) makes for ghastly reading. A 9.2 per cent shrinkage this year. A 14 per cent contraction over the next three years. Unemployment to reach almost 17 per cent next year. That’s what it was like at the worst period in the 1980s. It’s even gloomier than that, says the ESRI. The landscape it paints is that of an arid dustbowl somewhere in California in the 1930s.
Observation 1: How did the ESRI get it so horribly wrong? What’s the point of the ESRI producing quarterly reports if they bear no relation to reality. What was the major flaw in its prediction model that led to it failing to predict anything fundamentally wrong with the Irish economy until ten months ago.
It’s instructive to look at its summary from the end of June, and the fact that it was still projecting growth in 2009 at that stage.
“The downward revisions this time are such that we are now forecasting a contraction in the economy in 2008, with both GNP and GDP falling by 0.4 per cent in real terms. Thus Ireland will experience a recession for the first time since 1983. For 2009, we expect an upturn with real GNP expected to grow by 1.9 per cent and real GDP expected to grow by 2 per cent.
We now expect consumption to grow by just 1 per cent this year and by 2 per cent next year. These figures represent significant downward revisions from our last Commentary. We anticipate a decline in investment of almost 15 per cent in 2008 and of 4.5 per cent in 2009. We expect exports to grow by 4.8 per cent in 2008 and by 4.4 per cent in 2009, well down on the 2007 preliminary growth figure of 8.2 per cent.”
The gloom is getting gloomer, to reverse the mangled phraseology of our former Taoiseach Bertie Ahern, forever known in the annals of the jammiest Taoiseach of all time. As I write, Valerie Cox of Pat Kenny’s show is doing a piece on hordes of mé-féiners going across the border, some of them going to score cheap booze (not much cutting back on alcohol consumption it seems).
On days like this, it seems we are caught in a tailspin of desperation from which we can never escape.
In the Dáil Richard Bruton of Fine Gael is challenging Brian Cowen during Leaders Questons on the lack of a coherent strategy for recovery.
Politically the Government can be accused of some indecision and of having taking wrong options (there are growing question marks about the advisability of the NAMA approach). But I have argued that its strategies have been at least as sanguine, at least as decisive, as most other governments.
We have seen all the angry commentators (journalists, economists, business leaders, union representatives) berating the Government for not doing what Gordon or Barack or Angela or Nicholas did. And then a week later we find that the German or British or French of Yankee silver bullet was a dud that shot only blanks. And many of those non-politicians who are angriest now were often the most complacent during the good times, or even the most enthusiastic exponents of the proposition that the good times would last for ever.
Observation 2: Media culpability in all this has not been adequately analysed.
Observation 3: The internet makes just about every person who comments publicly accountable for what they have said in the past. Unfortunately, not enough parsing has been done of comments made form 2000 to 2008 that will enlighten us all on where everybody stands.
Observation 4: The citizens too must bear some of the share of responsibility. In the pie-chart of blame, I have a slice especially reserved for ‘we the people’. Sure, it’s a much smaller slice than those nasty bankers and the Government. But it makes my blood boil when people assume no personal responsibility for their actions or the civic implicatons of same, and lazily blame others for all the woes. Okay, the Government facilitated it, the banks facilitated it, the media hyped it up, the unions demanded a bigger slice of the cake. So did estate agents and phone companies and everybody else who jumped onto the gravy train. We all bought into it. We were suckered sure. But we suckered ourselves to some extent, allowing a little bit of greed, a little of denial, creep into our thinking.
And the Mark of Cain. Yes, I have argued that the Government strategy is flawed but is no more dicky than any other European country.
And yes, I have sympathy for Cowen. Bertie handed him the keys of the car. He forget to tell him that there was no petrol, the tyres were bald, and the spare had been stolen. And as Cowen freewheeled it down the hill, he thought he heard a faint shout saying somethign: “Oh, and I forgot to mention that the brakes aren’t working properly.”
But ultimately, in the court of public opinion, Cowen deserves little sympathy. Sure he was dealt a lousy hand. But it’s not exactly as if he was a newcomer to the table or that he was particularly short-stacked.
And, politically, the only thing that matters is this: The Fianna Fail-led government was responsible for leading the country into the current mess.
It’s as simple as that.They’ll pay a heavy price for it.
Earlier this year, Cowen told his party that he would get no thanks for any of the ruthless measures he takes to save the economy. How right he is. He was there during the good times. He was Minister for Finance during the good times. He was the selfsame minister who injected addedinflationary heat into the economy in December 2006 to allow FF win the election. He was one of the two Ministers for Finance who refused to close property tax shelters and loopholes. Those incentives made an infinitesimally small percentage of the population rich (back then) and led to an orgy of unnecessary commercial construction around the country.
I often wonder: Exactly how many spas were built and how many of them were a financial albatross from day one?
And you look at the Cabinet of 15 and you think Soviet Politburo. Six of the Ministers have been there since 1997 and even the new ministers, Batt O’Keeffe and Brendan Smith, also have the look of being around forever. So have many of the main opposition figures. But the difference is that they have not been in government.
In fact, if you look at their pre-2007 election manifestos, Fine Gael’s policies were possibly worse than the Government’s in hyping up the property market. The difference was that they weren’t in Government so can’t really be held resonsible for them now.
Observation 5: Natural successors more often than not disappoint, especially if they have been waiting around for a long time and their predecessor has been successful. They fail to meet expectations. More often than not, too, their leadership coincides with a downturn.
And so it is with Brian Cowen. He has the mark of Cain. He has disappointed as Taoiseach. He has not been the natural everybody said he would be. And there was more of a grain of truth in all the bile and bitterness in John McGuinness’s criticisms last weeek.
The first anniversary of Cowen becoming Taoiseach will fall on May 7. The question is: how long more will he last? Albert Reynolds and John Bruton were taoisigh for periods of little over two and half years. My own guess is that Cowen may outlast them, but not by very much.