Putting developers' heads on spikes is no business of the asset management agency, writes JOHN WATERS
I CAME across a couple of tut-tutting references in the media during the week to an interview with Peter Bacon, the architect of the National Asset Management Agency (Nama), in which he stressed, in response to a question about the moral basis on which the Nama will operate, that he is “an economist, not a moralist”. I imagine this statement caused one or two curates to pause midway through their boiled eggs to make pointed notes for their Sunday sermons.
Bacon was touching on something that stretches far beyond the remit of the Nama: the inability of our public discussion to make a distinction between the mechanical aspects of an economy and the human desire for something popularly known as justice.
It is interesting to observe this widespread and sudden regression to moralism after years of what appeared to be a general acceptance that economics is a technocratic phenomenon that operates dispassionately for the greater benefit of the greater number. Certainly since the late 1990s, it has been a matter of pubic faith that the economy should be left to its own devices to ensure that the functioning of the market was not impeded by interventionist thinking, however well-intentioned.
For years, for example, prudent analysis of the housing market was indicating the necessity for an intervention to cool things down, but such proposals received little succour from a population then in the throes of getting what it fondly thought of as rich. The moment we emerged from this bubble of what I will loosely call thought, we forgot we had been in it. Suddenly, we were thinking again about economics in terms of “justice” and “fairness”, concepts often difficult to distinguish from the self-interests of the contributors. The general thirsting for justice has expressed itself, too, in a search for scapegoats, which has rendered most radio programmes unlistenable. The mob renders itself hoarse issuing demands that the measure of our response to the present crisis be the extent to which “pain” is shared equally, the “most vulnerable” protected and the “guilty” punished.
It should be obvious that, if it is to have any hope of success, the operations of Nama will have to be governed by realism, rather than the kind of moralistic desire for retribution currently dominating the public mood. The point of the exercise is not to punish developers for the collapse of the Celtic Tiger dreamworks factory, but to maximise the State’s investment in what are already defined as bad debts. There is a well-founded tradition where bad debts are concerned, whereby they are, ipso facto, in accountancy procedures written down or discounted, for good and simple reasons not unrelated to an understanding of the relationship between turnips and blood. This is implicit in the idea that the State will “buy” the debts at less than their book value.
Moreover, Nama, if it approaches its functions from the perspective of the State rather than the mob, will not seek to punish those into whose affairs it will be obliged to delve. It will not, in other words, regard “developer” on the same level as “paedophile”. It will have to be mindful that, in any future resurgence of the Irish economy, property developers, including many of those on Nama’s visiting list, will be a vital component of the recovery process.
This may not seem “moral” but it does represent a kind of tough-love principle that, in the long run, offers more hope to the general population than any proposal of the current popular intelligence. No Junior Certificate student of economics could expect more than a D-minus if he failed to approach the subject in the knowledge that, here, private virtues become public vices, and vice versa. An economic system that applied the moralism to be heard on, for example, Liveline, would not be fit for purpose, because the engine of a modern economy depends on the idea of inequality, on one citizen competing with others to do work in return for reward. This implies different treatments of different individuals on the basis of the roles they play. The economy, for example, “needs” developers differently to how it “needs” private mortgage holders, and therefore has an interest in seeing them differently.
No matter what the Government seeks to suggest by way of appeasing the mob, Nama will be much more about mercy and understanding than heads on spikes. Its main purpose, as a septic tank for the banking system to ensure that normal business can resume, has been achieved by virtue of its establishment. After that, anything is to be regarded as a bonus. My own belief is that it will become to the next decade what tribunals were to the last. It will eventually collect a small proportion of the debt it has inherited on behalf of the State but will spend far more of the taxpayer’s coin seeking to collect the uncollectable. Along the way, it will stage a few show trials to placate the mob and will itself be written off as an idea when things get sufficiently better, or sufficiently worse, to enable it to become, one day, an anachronistic nameplate on a door needing a coat of paint.