Now is not the time to concentrate on the good news

BUSINESS OPINION:If we paper over the cracks, we will never get to the bottom of where we went wrong

AMONG THE more intriguing ideas currently floating around is the suggestion the media’s reporting of the economic downturn is contributing to the problem and and actually making things worse.

The argument found its voice last week in a piece in this paper by David Bloch entitled “Bad news brigade in media doing Ireland down”. To paraphrase Mr Bloch, the relentless negative coverage of the economy, and economic statistics in particular, by the media is sapping consumer and business confidence, and as a result accentuating the downturn.

Mr Bloch, to be fair to him, is not suggesting that the media should not report bad news, instead he seems to be arguing for a more positive approach, in particular to very tentative signs that the economic slump may be bottoming out.

It is a relatively simple job to counter Mr Bloch’s arguments both from an economic standpoint and also from a media standpoint. And indeed a number of the readers who posted comments on Irishtimes.com do just that. It is well worth having a look. (http://www.irishtimes.com/newspaper/opinion/2009/0506/1224245988575.html)

The counter-arguments fall into two broad camps. The first being that the problems facing the economy are so large that consumer and business confidence are going to take a battering regardless of what the media says. There can be very few people in Ireland at this stage who have not been touched by what is going on. If they have not had a pay cut, they have had a tax increase; maybe they have lost their job etc. Their own personal experience will far outweigh anything they read or hear when it comes to confidence.

The other arguments are more navel-gazing in nature and revolve around the idea that there really is no such thing as “the media”.

But what is far more interesting than the arguments made against Mr Bloch is that by my count 11 out of the 25 people who felt strongly enough about the issue to post a comment agreed, or at least partially agreed, with Mr Bloch. He himself says he has the support of 200 or more senior business people for his position.

What this says about the level of denial that still exists as to the extent of the mess we have got ourselves into and the task involved in getting out of it is quite staggering. It is also quite frightening. If the economic boom taught us anything it is that we have quite a capacity for dangerous self-delusion.

There may be some signs of a slowdown in the economic collapse, but to suggest we may be on the cusp of recovery is actually dangerous. The Government has shown itself almost incapable of making hard decisions. As yet the banking crisis remains unresolved and real questions have to be asked about whether the current administration has the mettle to make its proposed solution – the National Asset Management Agency – work. Equally, there is also doubt about their appetite to reform public expenditure, which has been long-fingered until next December’s budget. The very real fear is that they will avail of any piece of half-positive economic data they can to avoid making hard choices that are necessary to rescue the national finances but are in effect their political death warrant.

There is another, more philosophical reason why we should be in no rush to play down the extent of our current predicament, even if there was any reason to believe it would help rebuild confidence.

We have not really even scratched the surface of the real systemic reasons for why we went from boom to bust in such a dramatic fashion. We understand the proximate causes; an overheated property market and badly-run and -regulated banks forged an unholy alliance with a Government hooked on unsustainable property taxes. The result was a bubble which burst at the worst possible moment in the global economic cycle and credit markets.

But what we have not yet got to grips with is what it says about the way we do things here that created the conditions for this. It’s pretty fundamental stuff to do with our dysfunctional political system, public ethics, the planning system, the regulatory system, our business culture and the like.

By minimising the size of the problem at this stage you remove the conditions that might bring about real fundamental changes – such as the genuine and widespread public anger with both the Government and the banks – and in doing so you invite disaster a second time.