Media-savvy economists playing both sides against the middle
ONE OF the more interesting phenomena of the crash years has been the emergence of the celebrity economist.
The collapse of public trust in politicians and the many institutions of government created a space in the public debate which was filled by a handful of media savvy and articulate economists. In a matter of months university professors nobody had heard of became household names, apparently talking truth to power as the government blundered from one expensive mistake to the next.
From the bank guarantee to the Anglo Irish promissory notes they sang their siren song, the constant refrain being: “trust us, we are economists not politicians.” Given that their alternative proposals, by and large, involved the painless magicking away – via the dark arts of finance – of whatever problem the nation was wrestling with, they received plenty of airtime.
Their star has waned a little over the past year or so as the new Government has regained some of the ground lost by the previous administration with at least some of the electorate coming round to believing they know what they are talking about, or at least are not blatantly lying.
But superstar economists remain a force in the land, as confirmed by the minor controversy caused last week by Sinn Féin selectively quoting from some of them in its anti-fiscal treaty campaign literature.
The lengths that the Government went to in order to demonstrate that not only were the economists misquoted, but they actually supported a Yes vote speaks to their latent power.
Shame on you Sinn Féin for twisting the words of these national treasures.
The story also confirms that the economists remain as publicity hungry as ever as they participated in the resulting furore.
The third – and arguably most important – truth confirmed last week is that being good economists the superstars have an inherent tendency towards ambiguity and hedging their bets.
Consequently, it was not that hard for Sinn Féin to find quotes supporting their anti-treaty position among the superstars’ many thousands of published words.
Take the the following quote from Karl Whelan, professor of economics at UCD. It is a prime example. The fragment used by Sinn Féin is in italics.
“All that said, although I think the economics of this treaty are pretty terrible, on balance, the arguments favour Ireland’s signing up to it.”
Similarly Colm McCarthy, also of UCD and one of the most influential of the economic rock stars, was quoted by Sinn Féin as saying the following: “As an exercise in addressing the euro zone’s twin banking and sovereign debt crisis, the fiscal compact makes no worthwhile contribution”. But in the same article – and overlooked by Sinn Féin – he states: “If there has to be a referendum, the electorate would be well advised to swallow hard and vote Yes, notwithstanding the inadequacies of the proposed treaty.”
Despite the shocking revelation that economists still like to have their cake and eat it, it appears that the superstars will still be a feature of the coming campaign.
But the paradox of course is that having achieved a certain amount of influence on the back of their independent critique of Government policy, they seem to be falling into line and supporting the new orthodoxy when push comes to shove.
None of them seem to be seriously advocating a No vote even though the fiscal compact is the logical and ideological end point of so many of the policies and positions they so trenchantly opposed – from repaying the Anglo Bond holders to endless austerity.
Instead they have tucked themselves in behind Prof Patrick Honohan, governor of the Central Bank, and his qualified endorsement of the treaty as a sort of least worst option.
The extent to which consensus has suddenly broken out among the radical economics fraternity rather neatly answers the question as to where they were in the run-up to 2007, when the seeds of the economic catastrophe were being sown. Or even more pertinently, when we signed up for the euro in the first instance.
They were, of course, pretty much all fully signed-up members of the “on balance there will be a soft landing” school.
The interesting question now is whether or not what one might be tempted to call the “economic spring” is over, given that the tendency to consensus and conservatism that is a feature of all such groups has reasserted itself?
The answer is probably not. Because the superstars have a taste for the media spotlight and the propensity of paper to not refuse ink remains.
But we may look back on the last few years as something of a golden period for the dismal science.