thanks for leaving the comment.

That is to say, McCreevy’s interference seemed on the surface to look a lot clean-er and more modern. Like the phrase from the movie Ocean’s Thirteen when the gang wanted to turn off the power supply to the casino, they were accused of being ‘analogue players in a digital age’.

Sure the Bertie/McCreevy administration was a little more sophisticated in how it approaches things. But it still represented an undue interference by a public office into something of the private sector. At the start of the building boom in Ireland there was a small urban renewal project spear-headed by Charles Haughey and later on Laura McGahy got on board as a young project coordinator. It was called Temple Bar

Temple Bar Properties, the quango set up to administer development of a couple of small ‘land banks’ previously belonging to the state bus company to build a bus terminal ran into opposition with it’s neighbour in Wood Quay, Dublin City Council. What Temple Bar was doing was independent of DCC to a certain degree and they resented that.

It is the same with the Dublin Docklands Authority. It has no real friends in Wood Quay and possibly visa versa. DCC interfered a lot in the end with the plans of Temple Bar properties. That whole debacle and much of the ‘Bertie projects’ which followed afterwards is a very interesting history.

That book has not been written yet.

It is a pretty wide scope and revolves mainly around the fact that the Irish political appartus always gets too heavily involved in projects where it shouldn’t. Take the new rugby stadium at Thomond Park as an example. It happened without too much problems. People simply got on with the job. It was built at the height of the construction boom, but built within a very tight budget.

Maybe, if an investigation into a banking crisis were to happen, perhaps this is where it would take us. It is a pretty wide scope. But there are a lot of folk around, involved at various levels, I have spoken to. They all tell a very interesting story of how things operate in Ireland.

“It’s not so much two tiers as a battle between two cultures, maybe call them traditional v modern or pre v post independence mindset.”

Have a look at Warren Bennis’s classic book on management, Leaders, strategies for taking charge. I was reading the section, Meaning through communication in which Bennis develops something he calls Social Architecture. He developed the phrase to consciously use an alternative to ‘culture’. Because culture can be defined in so many ways.

For the purposes of business and strategic management he finds the social architecture concept more useful. From the book, Bennis says,

“Perhaps most important, though, is that ’social architecture’ implies change and tractability and that leaders can do something about it, whereas ‘culture’, as ordinarily used, implies an unbridled rigidity or intractability”.

(From page 103 of Bennis’s book)

very well said Pat.

The conclusion I have come down - bear in mind, it is biased by the fact I think from the viewpoint of the construction industry - but basically, the bankers and politicians were both riding on coat tails.

Think about Irish history for a second. Think about every time someone who ‘did well’ abroad in the construction industry and then decided to come home and start a project on the ‘old sod’ - what has ended up happening?

You’ve guessed it. A combination of politicians and bankers have managed to sabotage the whole entreprise. But the next question to ask is why? Why? One could surmise it was to do with plain begrudgery. That is quite a powerful motive.

But probably it comes down to one thing. Politicians and bankers combined find themselves in a position to see the ‘plays’ happen and intervene. I mean to intervene, to add some slant or some indirect ‘play’ which nets from a large figure of money.

Without having to do anything more importantly. Without having to do anything. Shane Ross is correct. There is a circle which does need to be broken. Only someone Shane Ross could describe the ‘circle’ as well as he does. But if we simply take the triange of politician, banker and builder for a second.

I believe in that equation, the builder is the only party with some kind of output. The other two players are only jostling their way into some kind of position for the ‘big take’. As a trout fly fisherman I understand this, because the best locations in the stream are always occupied by the largest fish. The best ‘food stream’ for the least about of effort. That is the privelege of being big and awesome.

I only worked for Liam Carroll for two brief years, but in that time I had begun to attract attention from both politicians and financial people, like never before. A lot of it was semi-genuine. But people ask me why was Carroll a shy-coon. I would have to say, judging by the attention working in the property business attracted to myself, from anyone politically connected etc, I began to get some sort of picture of the ‘circle’ that Ross described in his writing.

Yeah, it needs to stop. Not because it is bad or seedy. But because you are there trying to get your work done and do your job properly. And you keep getting bother-ed an pester-ed by this guys, who are little more than jumped up trouble-makers.

I recommended someone for a little bit of consultancy work once. He told me he was hard up. It was the height of the property boom. I thought nothing of giving the guy a dig out. I recommended him at work and left it at that. I mean, I didn’t follow it up or anything. But then I received a tap on the shoulder and learned that my friend had landed a bill on our company for the most of 100k.

Needless to say, the relationship was cut short before any work commenced. But I often wondered about it afterwards. I wondered why did a guy like that submit a bill which was over 5 or 6 times what the consultancy work should have cost? I wondered what kind of dodgy under world I had stumbled into.

I left the employment shortly afterwards. Something didn’t feel right. Because the guys bill had been as large as that, some people at work wondered if I had been looking for my slice of the 100k. As I said, I had only done the ’social introduction’ and left it run its course. It run its course alright and I resented the guy I introduced for doing that. Because he must have known I would come out of the arrangement looking fairly soiled also.

I later learned he was very anti-developer community oriented. He thought of himself as a shining light of ‘resistance’ against evil developers. But he often kicked up a tantrum to try and rub the developer’s face in it. Look it, I know what it’s like. These are the kinds of ludicrous sums of money floating about. That is what I mean about politicians (even the shining lights of hope, good ones) sticking their nose in where it is not needed.

All we knew was we follow a simple contract with all stakeholders to deliver something that the market requires at a certain place at a certain time. No more. Anyone else can build that into something more or less as they wish. But I have come to learn that some people in the political sphere have rather active imaginations.

I venture to suggest this is why many of those who were just as aware of the disaster as he was but did not warn the likely victims. They were busy making money supporting the klptocrats making hay. Since there is a chance that this form of income will become available, they decline to point out the obvious. They are complicit by their silence and the great voting victim cannot awake and save itself! By having a quasi monopoly of authorized wisdom, these faint hearts, filled with greed, are helping to teach us all a few lessons!

@John the optimist: ‘It wasn’t the construction boom driving the economic boom. It was the economic boom driving the construction boom’:

I doubt it was a causal relationship at all, rather a reciprocal functionalist relation: econ boom driving construction boom and vice-versa, with neither relation being more determining than the other.

I felt that in the second half of the nineties when the FDI strategy really started to take off that the modernist culture was starting to come to the fore. With the construction bubble everything swung back the other way. The internationalist dimension of FDI forced us to behave ourselves and clean up our act, the localised nature of the construction boom made a virtue out of knowing the right people.

Yes, that will have effects but one would expect for new capital to be created over the medium to long term and this acts as a counterbalance to the loss of capital from the fallout of the crash. Right now there is a lot less capital around in the wholesale markets but this is exactly what one would expect given the events of the past few years, it shouldn’t be taken to be a new market norm for the medium to long term.

Cearbhall O’Dalaigh hinted about a two tier system, a black economy in this post here:

http://www.irisheconomy.ie/index.php/2009/12/21/what-kind-of-banking-inquiry-and-why/#comment-29093

In fact, Colm McCarthy indicated in the original blog entry that Ireland may be creating the conditions, whereby fiscal adjustment is difficult to deliver. People aren’t satisfied there is a story they can believe, so they can get on with the process of re-build-ing in the aftermath.

The thing is, Ireland always depended on a two tier system, it always existed. Or to put it more accurately, people wanted to believe that a two tier system existed and you had to get on the right side or be left stranded. Why else would people invest so much in a piece of property?

If you purchased a piece of property, sure you might have a 40-year mortgage that drained all of your life away. But at least, that reality was better than an alternative, whereby you were stuck on the wrong side of the two tier system.

But it didn’t only apply to purchase of property. It also applied to your choice of employment. It was important, almost crucial to some, that your employer was on the right side of the two tier system also.

There has been reporting done in the Irish newspapers recently about senior banking officials who were also sizeable property owners. They basically owned empires worth of property. All over Ireland. Not just in a specific area. There were great networks of partnerships and amalgamations of ownership and shares. It was difficult at times to understand where the banking system ended and the property system began.

Indeed, in the recent ‘Prime Time Investigates’ program on Irish television, economist Morgan Kelly notes: We know exactly what each and every Irish politician owns. That is declared before they take up office in Dail Eireann. But what we don’t know about, is their exposure to property loans.

I was interviewed on national radio myself, during the Liam Carroll high court case in summer ‘09. We exchanged some general conversation prior to the interview. To iron out which things I was allowed to say and what I couldn’t say. But in the process of talking about the situation, I could glean the fact, that prominent journalists and broadcasters in Dublin city, were genuinely concerned.

Because they had earned a lot of money during the good times and were genuinely having second thoughts about their decisions to have invested in Dublin property.

In other words, this was not just another story. This was also personal, they were invested in the entire scheme. I had to thread lightly, and not be as flippant as I normally would be. People, and broadcasters included were all very concerned for the future.

I think the clearest example of a two tier system I encountered was a fellow who worked as a structural engineer. His knew his stuff about reinforced concrete. He gave up that job. Instead he worked for a middle-of-the-league property developer. (Refer to my point earlier about the need to work for an employer who is on the right side of the Irish two-tier system)

Now, he was a guy I know was capable. He could have applied his engineering qualification and skills to all manner of things. He was naturally very bright. Like so many people the country of Ireland is so blessed with.

But instead of doing something useful with his life, he studied the 2000 Planning and development acts from cover to cover. That is one of the dullest and most pointless things you could do with your intelligence and your time. But he done it anyhow.

Within time, he became an indispensable component of the middle-of-the-league property developer’s arsenal. Any questions or confusion about planning, social affordable housing commitments etc, my friend the structural engineer looked up in his book of the Planning Acts.

I often did wonder why this guy, brighter than myself, younger than myself and blessed with a young wife and excellent physical/mental well being, would be bothered his a*** wasting time with an old codger like my boss - a middle-of-the-league property developer.

It has only been in the last couple of days, reflecting in a casual manner upon Colm McCarthy and Cearbhall O’Dalaigh’s comments about the two tier system than it struck me out of the blue. In Ireland, it has always been more important to work for an employer who is considered to be on the right side of the two tier system.

More important in fact, than working for an employer you want to work for, or working for yourself. In our small back room at our workplace, pinned to the wall (instead of a sacred heart) was an A4 colour print out, a photo of our boss hand-shaking with then, Taoiseach Bertie Ahern in the Galway Tent.

I didn’t understand any significance of this photograph back in the years 2005/06 when the picture appeared on the wall. Call me innocent, but I just thought it was a nice novelty to have. A picture of our boss with the Taoiseach. I have grown up a little since then.

The point is, this is a real life human example. The young structural engineer in question is years behind the progress he should have made as a professional in his career and in his life. The latest news I heard (I left that employment a couple of years ago) was the young structural engineer had been fired - the boss had no use for him. The tent had been dis-assembled permanently.

I wish to contradict both Colm McCarthy and Cearbhall O’Dalaigh. I don’t think we are in the process of building a two-tier anything. I don’t think we have to. The trouble with using the economist’s point of view, is we may come to the conclusion that a two-tier system is a result of the property crash and the banking crisis.

I believe that to be a vast over-simplification, and it avoids the all-too-real fact that the tragedy of the Celtic Tiger, has been the two-tier system which existed all along. It was a two-tier system that ordinary folk, who were otherwise gifted with talent and ability, desperately wanted to cling to.

Because, for them, in their own warped way of looking at the world, the two tier system, being on the right side of it, represented the only way to salvation in this small country of ours.

The final thing I have to say, is that Liam Carroll, Bernard McNamara, Derek Quinlan (even Sean Dunne for that matter) and all of the other ‘builders’ as featured in Frank McDonald’s book of that name - were excellently capable people and construction genius(es). They didn’t need the banks, they didn’t need the politicians.

Indeed, it was a sad day they ever bothered to waste their time with a set-up here in this country. They should have applied their talents elsewhere and I would not blame them if they did that exclusively going forward. Who the heck needs Ireland, or would want anything to do with it?

At Keynes said, it is all a question of who is left standing when the music stops in Musical Chairs, or who is left with the Old Maid in the card game Beggar My Neighbour. Its all about Getting Out in Time.

Usually, the Ponzi schemer absconds with his loot, or goes to gaol (like Bernie Madoff). Here, it is a case that there was no single schemer, but everyone fooled themselves. So the game is to make someone feel resonsible & make them pay the price, or use your influence as a “big player” to save yourself … in this case the taxpayer & the low paid are bearing the burden.

He went off on one in this thread - http://www.irisheconomy.ie/index.php/2009/12/22/inflation-in-2000/#comments
about the rising cost of living in the last decade, how it didn’t matter given the economic growth experienced and that, anyway, the cost of living was falling rapidly. I confronted him with some relevant Eurostat data and it seems to have given him some pause for thought and reflection.

@ yoganmahew

Contrasting the widespread fear, uncertainty and vaporising of wealth, with the optimism of 2000, there is hardly a contest.

Better roads, hospitals etc. is hardly an offset for most people.

Why are you so sensitive? I agree there is a valid case for anonymity, and it does not automatically follow that there will be multiple personalities or that any post will be insincere. I think Simpleton, an anonymous poster, has a great idea in establishing identity even if only tongue in cheek. We do tend to give ourselves away, especially if we are not as smart as we think we are and provide too many clues!

B Peter W

Cantillon was an incisive analyst, and his story deserves more publicity. Keep up the quotes! Sad to say, the whole credit scam only works when people like some of our anonymous FF supporters decide to tell others that it is different this time!

It is always the same and the economic ignorance of those who say that Irish banks will soon be awash in capital and lending freely, justifies the existence of this blog even if nothing else does!

A little light relief perhaps?

Pádraig O’Sullivan
What about destruction of capital? Does this not have a few effects? I fear Kelly is right on the money, honey.

Not merely becuase there is less capital around, but because those who control it will move it to places where the reuturn does not depend upon such a small pool of borrowers. What capital that still exists will also move to protect unwise investments that have yet to be sold off and where leverage must still be covered. Many of us expect the $US to remain strong simply because they must repatriate good money from Ireland et al, to pay off bad debts! After the US banking collapse and loss of reserve status, that will be less of a feature but boy will there be problems with the $US then!

What has been the total peak to trough fall in GNP?
And what do you think the total peak to trough fall in construction will be including commercial property?

This doesn’t sit well with me for two reasons:

a) It takes an extremely pessimistic view of Irish bank’s ability to raise funds in the wholesale markets in the medium term. This seems to come from extrapolating their current difficulties forwards but this seems to be a bit silly since 2009 was an extremely bad year in general for the Irish economy and Irish banking in general and wouldn’t necessarily be a new “norm” for the market.

b) It seems to assume that there would be no capital inflows if there was abundant investment opportunities in this economy going unfunded which seems to run against basic economics here if one is looking at a medium to long term view. Yes, in the short term market conditions might mean that very little capital will flow into the country but we’re in (or just exiting) a global recession so the level of risk aversion would logically be expected to decrease over the medium to long term.

Irish banks will most certainly be forced (to varying degrees) to shrink their balance sheets but a prediction of a return to deposit only funding or close to it, seem a little extreme to me.

“guess the people behind the anonomous posts.”

You do realise the idiotic irony there right? The whole “you’re posting anonomously and so therefore lying” meme is getting just a tad boring. As is the rather sad innuendo and suggestion you’re more than happy to lead with without actually making a concrete assertion. Grow a set, debate the facts or just shut up.

There’s clearly been a property boom and bust here, but there’s also been a lot of real economic growth, productivity and progress underlying, or perhaps even causing, much of it. As previously mentioned, 20% GDP loss and 80% house price falls, both of which have been predicted by Prof Kelly, are considered so extreme and borderline hysterical as to allow questioning of many of his other assumptions and predictions that he makes.

You would vote for FF because of their policy on the North? Which one?

1960s. FF founds the IRA
1970s. FF adopts policy of turning blind eye to IRA (including not asking for extradition of people for interview about Dublin / Monaghan bombs.
1980s. Ditto but with pub nationalist edge of CJH
1990s. ‘You don’t have to give in to the terrorist organisation we founded: We’ll do it for you’.

My limited anecdotal evidence is that even previously prudent people were being urged to borrow up to the maximum they could “credit will never be this easy again”, “it’ll never be as cheap”, “capital appreciation is a cert”, “GDP is growing strongly, so your income is bound to grow”…

Who gives a monkey’s if GDP was growing? GDP includes washers, buttons, and buffered analgesics. GNP is not much better. I’ll tell you what’s important - employment is important, purchasing power is important, security of employment is important, future prospects are important, public services are important. Those are the things that matter to people. They are all worse than in 2000. You can argue all you want about what model or metric to use, but you neither convince nor fool.

“WELL members use a consistent login name when posting messages, and a non-fixed pseudonym field alongside it. The pseudonym (or pseud in WELL parlance) defaults to the user’s real name, but can be changed at will and so often reflects a quotation from another user, or is an in-joke, or may be left blank. The user’s real name can be easily looked-up using their login name. WELL members are not anonymous.

There is a time-honored double meaning to the WELL slogan coined by Stewart Brand, “You Own Your Own Words” or (”YOYOW”): members have both the rights to their posted words and responsibility for those words, too. (Members can also delete their posts at any time, but a placeholder indicates the former location and author of an erased or scribbled post, as well as who scribbled it.)”

The WELL may not be what it was, but the logic endures.

Mary Lou McDonald’s research assistant?

How about an ex-stockbroker? Used to work in Dublin? At a firm beginning with N?

Anybody else want to play?

I have a feeling Ireland is about to find out the answer to that question towards the end of 2010.

Perhaps you should restate your question but base it on GNP performance? I’d also suggest that you include national debt growth and projections for the next couple of years in your question.

Irish GNP did grow since 2000 but is now in rapid decline. Commercial borrowing underpinned a significant portion of this GNP growth but unfortunately for us, this borrowing wasn’t sustainable and the resulting debt is now being transferred to the state (via bank nationalization and/or NAMA).

Here’s another (slightly related) interesting read- http://trueeconomics.blogspot.com/2009/12/economics-17122009-end-of-recession-in.html

AFAIK, Year 2000 Gen Gov receipts were 37bn. In 2009 Gen Gov receipts might hit 33bn. So over the same period GDP is + 30% yet receipts are -11%. Do this fit your case?

To me, this suggests measuring anything by Irish GDP is wonky. A lot of GDP and GNP aren’t too enriching to the locals and government. The credit fuelled construction sector is a high calorie element of our GDP. The sector is a lot more like lettuce.

Happy Christmas.