The doom merchant whose warnings don't seem so far-fetched anymore


He was a thorn in the paw of the Celtic Tiger, and is a fierce critic of Nama, but though his irascible style has won Morgan Kelly few friends, his analysis of the economic crisis has proved to be spot-on, writes LOUISE HOLDEN

Morgan Kelly’s read-through-your-fingers opinion pieces became truly apocalyptic in 2008, when he began to talk of civil unrest and the tearing of Ireland’s social fabric as a result of economic ruin. However, Kelly began his crusade against economic orthodoxy much earlier and is credited as the first economist in Ireland to sound the alarm. The recession is coming, he said in 2006, and it’s a lot worse than we thought.

Politicians and other economists, especially those speaking on behalf of the banks, were quick to write him off as some kind of crotchety corner boy muttering from the margins. “Morganomics” emerged as a term for Kelly’s brand of commentary, a sort of “self-fulfilling economic modelling”, as one irritated reader put it in the letters page of The Irish Timesin 2007.

Kelly would disapprove. Never a man for minting, or mincing, words, he hasn’t bothered with the Breakfast Roll Men and Yummy Drummies of populist neology. Notwithstanding some very colourful language in his media writing, the Trinity and Yale-educated Dubliner, schooled in Terenure College, bases his projections on large-scale analyses of global recession patterns and always has the figures to back up the vitriol.

A recent academic publication, The Irish Credit Bubble, has been widely read beyond academic circles. Whether he seeks to or not, Kelly brings considerable prestige to the UCD School of Economics and embodies the ideal of the academic whose works attracts the interest of the lay reader. His name pops up all over the place as a byword for fiscal realism: on property websites, in countless opinion pieces and even in court.

Last September ACC Bank enlisted the professor’s expertise to support its case against the Zoe Group’s bid for High Court protection. At a recent symposium of the Royal Irish Academy, Frances Ruane of ESRI name-checked Kelly as one of the lamentably few intellectuals to query accepted thinking and make effective interventions in public debate.

Mr Justice Frank Clarke based his assessment of Zoe’s long-term prospects on Kelly’s economic modelling and his assertion that property values will end up at 50 per cent to 66 per cent below peak levels. Pronouncements like these have put Kelly on the radar of thousands of jittery property hunters and homeowners. He’s a household name in the truest sense of the word.

He is not, however, a national sweetheart. Kelly has a disdainful, irascible style that has intensified as he gets more and more fed up with the Irish economic commentariat. His contribution to last October’s Dublin Economic Workshop in Kenmare, when he described Nama as “cash for trash”, raised heckles.

“My concern was not with the content of the speech,” says one former banker. “Rather that Kelly used it as an opportunity to lecture rather than workshop. He didn’t circulate a paper in advance, unlike the other contributors. He’s not interested in anybody’s views.”

Pat McArdle, formerly of Ulster Bank and a contributor to The Irish Times, took particular exception to Kelly’s address on the day, but wrote about it in more favourable terms later, describing it as “the most provocative and entertaining presentation of the conference”.

Kelly may not intend to entertain but his withering commentaries are worth a read whether you care about house prices or not. He has reserved particular scorn for Minister for Finance Brian Lenihan in a characteristic foil to prevailing opinion. While most commentators seem content to ring-fence the brave Minister from blame, Kelly has described him as a “corpulent tooth fairy” and a “buffoon”, amongst other slights.

“The effortless miscalculations, the assured non-sequiturs, the lofty indifference to facts: all reveal Brian Lenihan as a master of what Princeton philosopher Harry Frankfurt defined succinctly in his 1986 paper, On Bullshit,” Kelly wrote in this paper last March.

Lenihan hasn’t taken the barracking lying down. In January he publicly challenged the accuracy of the professor’s appraisal of the bank guarantee scheme.

Within Government ranks, there is a grudging respect for Kelly, but some question his current high status.

“He certainly brings plenty of prestige to UCD, and he’s a bit of a zeitgeist at the moment,” said one Government insider. “It’s dangerous to make heroes of people; you can’t build fiscal policy around one individual position. True, Kelly was unnecessarily vilified in 2006, but I think he’s over-egging now. Not everything he says is right – his assessment of the banking intervention in Sweden and its relevance to Ireland is not accurate.”

To others, it’s just nit-picking. Sen Shane Ross has described Kelly as the “hero of the meltdown”. Jim Power, the Friends First economist who stood with the ranks of Kelly-bashers in 2006, publicly switched allegiance last year. Prof Brian Lucey, TCD’s genial finance pundit, regards Kelly as a sage.

As the reach of his pessimism extends further and further into our futures, Kelly’s name is likely to ride out this recession. He started as pariah and quickly became messiah.

We are already talking about how right he was: one can only hope that we are not saying the same in five years’ time from the desolation of our slum estates, zombie banks and Nama-induced penury.

Apocalyptic vision

“By 2015 we will have seen what happens when jobs disappear forever . . .Ireland is at the start of an enormous, unplanned social experiment on how rising unemployment affects crime, domestic violence, drug abuse, suicide and a litany of other social pathologies.”

– December 2009

“One response to large-scale home repossessions that will be attempted is to buy ghost estates for public housing to accommodate evicted home owners, providing ample opportunities for good, old-fashioned petty corruption.”

– December 2009

“The destruction of the Irish commercial class, who we might have hoped to be an engine of export-led recovery as they were in the 1990s, is likely to prove one of the most enduring and costly legacies of the property bubble.”

– October 2009

“The reality is that, because of our surfeit of empty housing, there will be almost no construction activity for the next decade. Empty apartment blocks in Dublin will eventually be rented, albeit at rates so low that many will decay into slums.”

– July 2009

“The fiscal capacity of a state with only two million taxpayers, and falling fast, is frighteningly thin. Ten billion here, and 10 billion there and, before you know it, you are talking national bankruptcy . . . Nama will ensure a crushing tax burden for everyone in Ireland for decades.”

– July 2009

“There is a massacre about to happen in the IFSC that is going to make Dell look like a birthday party.

– January 2009

“We have spent the last five years learning to believe that exports and competitiveness do not matter, and that we can get rich by selling houses to each other. We are likely to spend a painful few years as we unlearn that lesson.”

– December 2006