Director says ESRI economy warnings ignored

 

SUCCESSIVE GOVERNMENTS deliberately ignored warnings from the Economic and Social Research Institute about the dangers of an overheating economy, according to its director, Prof Frances Ruane.

Prof Ruane yesterday defended the independence of the ESRI and the accuracy of its forecasting in the face of trenchant criticism last week by departing staff member Richard Tol.

Making her first remarks since the controversy unleashed by Mr Tol’s remarks, she rejected his claims of politically influenced research and government interference in its work.

Prof Ruane said she had “no idea” what Mr Tol had in mind when he alleged that politically unacceptable messages had been suppressed.

“Institute researchers have produced messages for decades that were deemed to be unacceptable and unpopular by governments and by other bodies.

“People sometimes get upset but we stand over the research and the right to publish.”

Prof Ruane said the institute started warning about the dangers of expansionary fiscal policy and the excessive growth of the housing sector from the early 2000s. “The associated risks were highlighted again and again in institute publications and this has been documented clearly in a range of documents, including the recent Nyberg report.

“Clearly the scale of the global downturn was not something that any forecasters, including the ESRI, predicted. In the Irish context, the interconnection between credit and the construction boom was not recognised early enough. So it was not that the government were not aware of the messages – they decided to ignore them.”

As for Mr Tol’s claims of xenophobia, nepotism and favouritism at the ESRI, Prof Ruane responded: “What has been said in this regard is something I simply cannot relate to – it does not match the world we live in at the institute.”

Some 16 per cent of staff were non-Irish, from 11 different countries.

“We operate best practice recruitment and promotions systems and all senior appointments involve external members. We have policies in place in all of these areas and also complaints/grievance procedures.”

Prof Ruane said there was “no question” of any interference preventing the institute examining Government spending on research and higher education, as alleged by Mr Tol. The institute wanted to do more research in the area but unfortunately it had been unable to persuade the relevant departments and agencies to fund it.

Asked why the ESRI employed no expert in banking, she said the current Central Bank governor, Prof Patrick Honohan, filled this role in the 1990s before leaving. Attempts were made to hire a macroeconomist with banking expertise but they were very scarce on the ground and very expensive to hire.