Criticism by departing staff member places institute under intense scrutiny


ANALYSIS:The institute failed to predict the crash, but was it the result of kowtowing to government?

IT WAS a parting shot par excellence. On a quiet news week in the new year, shaggy-haired Dutchman Richard Tol took aim as his former employers in the Economic and Social Research Institute as he packed his bags and left for Britain.

The institute lacked independence because of its dependence on government funding, the departing economist alleged. Its researchers were “muffled” and were leaving in significant numbers.

In an extraordinary stream of tweets, Tol fired off further volleys; the institute was home to “nepotism, xenophobia, paper tiger strategies, evidence-free policy, antiquated use of technology”. No one “kept an eye” on the banks. The institute was “not allowed” to scrutinise government spending on research and higher education.

His remarks sparked a vigorous debate. It was clear the institute failed to see what was coming, but was this a venal failing or the result of a deliberate kowtowing to the interests of government?

The institute, whose director Frances Ruane makes her first comments on the affair in The Irish Times today, has rejected his allegations.

Meanwhile, the response from fellow economists has been mixed. Many will miss their straight-talking, unconventional colleague but there was little in the ensuing hullabaloo to back up his choicer allegations.

One prominent economist, speaking anonymously, backs his criticisms. The institute is “useless and spineless” and it functions as “a tame consultancy for the Government: they take the money and do as the client says”, he says.

He goes on to describe the quarterly economic commentary as an inaccurate “shambles”. “They actually congratulated themselves a few quarters ago that, for the first time in several years, they had not revised their forecasts downwards.”

Alan Barrett, on secondment in Trinity College from the think tank and now a member of the Government’s fiscal advisory council, has recalled how government intervened when he authored a pessimistic economic commentary before the bailout.

The Department of Finance called his boss, Ruane, and said it was uncomfortable with his analysis. She called Barrett in and asked if he could stand over what he had written. “I said ‘yes’. She said ‘fine’. That was the end of the story . . . I was being told that ‘as long as you can stand over what you’re saying, that’s okay’.”

Liam Delaney, another former staffer now working in a Scottish university, had a similar experience when he wrote a “fairly critical” paper on horse-racing funding.

“The then director was supportive despite the potential for controversy, with the caveat that ‘just make sure you can stand behind it in terms of facts’.”

Delaney says many university staff would find the environment in the institute tough compared to an academic one. “As much as I enjoyed working there, it is not an academic environment in the sense that you can work on what you like. You work on projects mostly that are commissioned by funders and therefore in a sense the funders do shape the research topics addressed if not the answers.”

The institute wasn’t alone in failing to predict the scale of our current meltdown. More pertinent is whether it allowed itself to be used by government to downplay the approaching cataclysm.

A quarter of the ESRI’s funding comes directly from the Department of Finance and much of the rest is earned from State contracts.

How does this dependence on State funding affect the work that staff carry out and the findings they reach? Tol says it did issue warnings about policy during the Ahern years, but did not do so loudly enough.

In 2007, in one of its quarterly reviews, the institute published an article by Morgan Kelly, the UCD economist credited with forecasting the crash most accurately. In it, Kelly predicted the property bubble would burst.

Since then, however, the practice of publishing research articles in the review has virtually ceased. Sources say this was because of “confusion” resulting from non-ESRI staff writing for an ESRI publication.

The governance of the institute has also attracted negative comment. Its council is chaired by former banker Laurence Crowley and other members include Central Bank governor Patrick Honohan, representatives of the Department of Finance and other government agencies, and Ruane herself.

Former lecturer Paddy Healy, who convenes the Council for Academic Freedom, claims the council is a “self-perpetuating establishment club” whose members “pre-approve” new members.

In 2005, Healy tried to join the council, having been proposed for a vacancy by his employer, the Dublin Institute of Technology.

However, his nomination was declared invalid because it was not approved by the existing council members. The academic freedoms available to university employees are not enjoyed by institute staff, he claims.

The institute says vacancies on the council are filled by nominations made by its 300 subscribing companies and individual members.