Writing in today’s Irish Times, Stephen Collins takes the following from the Nyberg report:
It is probably no accident that some of the cheerleaders of the boom have now turned into leading prophets of doom. The same reckless, gambling instinct that fuelled admiration for Seán Fitzpatrick also underpins the “burn the bondholders and damn the consequences” philosophy.
If there is one lesson from Nyberg it is the need for prudent economic management in the years ahead, with careful weight being given to the views of the European Commission and our EU partners.
I think it’s worth echoing Kevin O’Rourke’s previous warning about Mr. Collins and his history lessons. Mr. Collins thinks the lesson we should learn from the crisis is “Don’t be reckless. Be prudent.” However, this isn’t a very useful lesson. I’m sure that Bertie Ahern, Charlie McCreevy and Brian Cowen all believed that their policies were prudent. They were running budget surpluses and their “prudential regulator” told them they had some of the best capitalised banks in the world.
For me, the real message of Nyberg’s report is that Ireland’s economic and political establishment exhibited an extreme form of groupthink during the housing boom. Nyberg’s report brings up groupthink time and again. He describes the phenomenon as follows
Groupthink occurs when people adapt to the beliefs and views of others without real intellectual conviction. A consensus forms without serious consideration of consequences or alternatives, often under overt or imaginary social pressure.
And the report is very clear about the role played by groupthink. For example
The generally held belief in a soft landing outcome, which was quite common even as late as 2008, can also be seen as a consequence of groupthink.
Now let’s take a step back from current economic events and try to ask whether there has been a groupthink element to policy making in the period since the bubble burst. Mr. Collins lashes out at those who wish to “burn the bondholders”. However, these people have had no influence whatsoever on the conduct of economic policy.
Instead, economic policy of recent years has been dictated by the idea that, however difficult things may seem, our situation is “manageable” and that all Irish bank and sovereign debt can and must be paid back.
Those who espouse this vision, including many with weekly opinion columns, backed the September 2008 bank guarantee and also supported whatever incremental measures the government produced as “the final solution” to our banking problems, for example via their backing for the NAMA plan. They have also regularly warned us not to “scare the horses” by suggesting debt burdens might not be manageable.
If anything, it has been this viewpoint, backed by Mr. Collins and many others, that has become the new groupthink. It is not at all impossible to imagine a future Nyberg-style report into the reasons for an Irish sovereign default focusing on the “manageability doctrine” as perhaps the key reason why Ireland failed to avoid default.
What we need now is more respect for dissenting voices, not weekly smackdowns of those who dare to disagree with the prevailing orthodoxy about what constitutes prudent economic management.
101 replies on “Stephen Collins and Groupthink”
This couldn’t be the same Stephen Collins who wrote numerous positive spins on the last government’s management of the economy? If I recall Brian Cowen’s problem was that he had the ‘bad luck’ to takeover as the economy was falling off a cliff.
Karl Whelan says,
Take for instance, Charlie McCreevy and de-centralisation. It is probably, on balance, the right solution. But it is the implementation of that solution which is the difficult part, having come up with the solution in the first place. I will not deny McCreevy credit for identifying a solution and trying to implement it. But he failed in the implementation through lack of ambition and vision. Possibly, the politics of the time were not right for its implementation. We may have more success now. All the conversation in Ireland at the moment – Journalists, please go off and check yourself out on this, you are far too comfortable sitting there up there in Dublin waiting for press releases from our central government, for your own good – is all about reform in central government on the island of Ireland. The conversation should switch to how we achieve some measure of balance in central government and cabinet, with regards to a new regionalised, efficient, smart vision for our island.
The simple truth is, we will not achieve that realisation in the current elected government. They don’t have it. So expect some pain and suffering because of that. The current generals don’t yet know how to interpret the modern battlefield, and foot soldiers will march into the firing line as a result. Before any generals can emerge, who do understand the reality on the ground. There was one thing that Sean Quinn did correctly, and that was he was focussed on regional development. Tight, efficiently, communicative and rapid regional development. Sean Quinn for all his faults, represents a brief picture of what the modern Irish general will look like, when they finally emerge. They will be people not a million miles away from the Mick Wallace’s, the Ming Flanagans or the Healy Rae’s. They will be people who are not beholden to any strict central party responsibility. They will not be people beholden to their own parish pump either. They will be people who are able to walk that area in between the two, where you derive benefit from both centralisation and de-centralisation. McCreevy was a born centralist, and such a person, even if they came up with the correct solution, could never in a million years know how to execute the battle plan properly. BOH.
Here, here, Karl! (On both posts).
In any event, the Nyberg group-think story does not go very far. As an explanation of the crisis, it is about as useful as saying that a flood was caused by the concentration of a large volume of water in one place. A bit obvious. The more interesting question has to do with where the water came from and how it was directed to its destination. And the ECB may have had something to do with that.
Ignore the Harpy songs.
But getting back to the McCreevy years – I seem to recall Ruairi Quinn who has connections in the banking world calling for more Goverment defecits back them – at the time I was sceptical of that postion but now I understand more on how the monetory system works it was a reasonable postion.
Anyhow we had a flood of outside credit into this country perhaps because we were seen as a better credit rating then Iberia – but alas debt used unproductively is a millstone.
Then Cowen and co decided to swim out into the deep ocean……….
Ps more thought should be given to the SSIA subsidy and its effect on bank lending – would had it not been better to offer a high rate on a Post office bond back then.
“Now let’s take a step back from current economic events and try to ask whether there has been a groupthink element to policy making in the period since the bubble burst.”
Some random examples of groupthink (by establishment herds):
– Cannot burn bond holders
– Ireland must not default
– Ireland has a weak negotiating hand
– Cannot claw back excessive bonuses and pensions (but min wage can be rescued)
– Must keep bank(s) in public ownership
– Debt forgiveness is not possible (except for big developers)
– Bailout will work
– Croke Park is only game in town
– Corporation Profits Tax cannot be touched – for alternative view see http://www.planware.org/briansblog/2011/04/changing-corporation-profits-tax-rate-is-a-red-herring.html
Groupthink, or whatever variant of this term one owns (ie. worships), is the default setting for humans. Exactly because it requires the least exertion of one’s neurons and cognitive processing. Ever wonder why humans are expert at some tasks, and awful at others? Pre-programming and constant use in recurring situations in the former, but conscious and meaningful engagement over an extended period with the latter. Coasting downhill v trudging uphill.
Attempting to change groupthink attributes is akin to asking humans to abandon 5 million years of evolutionary development. Leave alone.
We have to have agreed rules. And serious consequences for departures therefrom.
How about Gov ministers are mandated to publish (or at least have available for reading) all their current correspondence? Genuine Freedom to Information. keep things simple. Solar radiation does illuminate somewhat.
BpW
Poor old Stephen Collins could be used as an example of cognitive error in journalism, yet he remains the political editor of the country’s newspaper of record.
In this case Stephen is exhibiting “confirmation bias”, he is a political conservative (codename “prudence”) and he wants to see evidence that a lack of political conservatism brought us to our sorry state.
The fact that Nyberg’s report states (not implies) that the exact opposite problem was the case makes it a particularly glaring example of cognitive error but also a nice illustration of how the political and economic dogma that got us here remains deeply embedded in the Irish establishment (except, of course, in the field of economics) and will not be shifted by what we in the reality based community call “recent history”.
cf: How can a policy dependent on the same optimistic economic outlook as the one that almost ruined us fail to get us out of it?
I was a dissident voice during the bubble and dissent is welcome.
A pattern during the bubble and currently is that individuals who get media attention can make proposals or arguments on issues without fearing challenge and the risk of exposure as idiots.
There is a market for fear now as there was for sunshine in times past and then the proprty boosters were able to peddle their snake oil without challenge or need to caution on downsides. Today, unilateral default has often been presented as a remedy without downsides. Leaving the euro is another simple remedy.
As to groupthink, it is evident on this forum that issues of changing the broken systems that were a big factor in the crash, elicit little response compared with threads on foreign responsibility for the crisis. That of course isn’t scientific but it taliies with an impression of the national situation.
Perhaps the prevalent groupthink is that national banks are necessary to the proper functioning of the economy. This belief has underpinned both the government’s response and objections to it. The intellectual dance has been around how to save the banks, not whether those banks are required at all.
hogan says,
@KW
+1 This piece of journalism annoyed me. The ‘new dominant discourse’ annoys me. It is a cold anger ……. need to add some ‘cognitive’ and some ‘real action’ ………..
“GroupThink” is a useful concept to generalise all the profligate, self-serving, incompetent, and power-maintaining particulars within the Irish upper-echelon elite/golden circle that has not changed one whit in terms of its ongoing influence on Irish economy, society, & psychological well-being. A particularly useful ‘projection’ for the Golden Cirlces within this society, for the Paper of Record, the Dinny O’Brien Press, and others who cheered during the ‘boom’ and who now preach ‘prudence’ as a panacea for the indentured servile serfs.
This group maintains its money, power and influence while simultaneously socializing the fruits of its profligacy and incompetence on the lower orders of Irish citizen-serfs into future generations. In this, it is ably assisted by the Irish system of Law, barristers/solicitors/courts [senior counsel advises agains etc] who act as the guardians of this ‘circle’ against any attempt to either hold this circle in any way ‘Accountable’ whatsoever or to reduce its ongoing unconscionable ‘take from the state’ in its enrichment.
UpperEchelon Continuity stat sig******************************
Unsustainability of Toxic Banking system debt stat sig ***********************************************************
Dissent, default, and be damned with this golden circle.
@Hganmahew
Since the banks are providing little credit – one of their primary functions is no more.
I would suggest that Brinks could hold long term deposits such as Goverment securities now while commercial banks could still provide checking account facilities.
The term deposits transfered to the post office could run this country for years
Remember banks really don’t need deposits to give credit anyway – they just have legal reserve requirements.
I believe the situation to be a farce – lets make it official.
Excellent post.
There is a danger here though of overusing this ‘groupthink’ concept. Decisions are always socially influenced. In a sense, there is only ever groupthink, and it is not some pathological phenomenon. We (by some definition of that difficult concept) mismanaged the economy. Defining that ‘we’ will probably not be possible.
But wholehearted support for the suggestion that we provide an ear to alternative opinions! The ‘move along here now or you’ll spook the markets’ chant that we heard ad nauseam from Lenihan has had its time.
@ Michael Hennigan
I admire your gnarled and incremental approach and refusal to join in the groovy gang.
“individuals… …on issues without fearing challenge and the risk of exposure as idiots.”
I think a lot of people have been exposed. Not so much as idiots as lacking foundations. Just because these people are still talking doesn’t mean as many people are listening.
However, on the microenomics post you went off to analyze and come up with suggestions – did you get anywhere?
I am also interested in the pragmatic translation of the ideas on this website into actual change in the world – where I support them of course – other than through a general sense of perculation.
Or rather, how do you yourself stop being a hurler on the ditch and take the responsibility of being a player?
PS what is the purpose of legal reserve requirments if all debt is socialised ?
Lets socialise the deposits so – its the only logical response is it not ?
@Karl,
“What we need now is more respect for dissenting voices..”
Many thanks for taking time out of the holiday weekend to provide some fodder for the ‘commenting contingent’ 🙂
But you can’t be serious. Those you have some knowledge or experience of the economic policy or regulatory matters where of they speak and express dissent – based on evidence and analysis rather than just opinion – at best are treated as cranks and obsessives and ignored or ridiculed and at worst their professional integrity is traduced and their livelihoods threatened or restricted.
When, eventually and almost inevitably, the wheels start to come off and their dissent is proven to have some substances, they are hated even more for being closer to the mark than those smothered by denial and groupthink.
It is the same everywhere, but it seems more virulent in Ireland, perhaps because the place is too darned small and incestuous.
Secure academic tenure may provide the security to express dissent (as evidenced by some here – and for this much thanks), but it appears as the exception that proves the rule. And for those without this security, the reality of expressing dissent is pretty bleak.
Gavin Kostick says,
Nice way of wording it Gavin. There are quite a number of people in Ireland at the moment, who are wondering how they ever lost their megaphone as rapidly as they have done. And even where the megaphone is still in their hand, the crowd has somewhat dispersed. BOH.
@The Dork of Coirk
“I believe the situation to be a farce – lets make it official.”
Absolutely. The state will overpay for its retail franchise and clearing system (the money it has put in so far) and any other bits of the banks that are necessary. Happy Easter senior bondholders, you’ve just inherited the rest…
As I’ve said from the start of the crisis, the low deposit:loan ratio works in favour of liquidation of the Irish banks.
Groupthink is not unique to Ireland but why was/is it so dominant and so prevasive that the results were really perverse? Eventually, in other groupthink cultures a check or a break or a whistleblower sometimes calls a halt. There are, I think, a number of features unique to ourselves
1. The average quality of the groupthinkers. Low. They really are not that bright. Stepehn Collins is the political editor of our paper of record. How good is he relative to his global peers? Ask the same question of our cabinet, out bank directors and our civil servants. We venerate mediocrity and mistrust excellence as something of a British plot.
2. (Following on from 1.) They never ever exposed themselves to clever people. Do not understimate the anti-intellectual culture that runs through irish banking in its entirety and most of the civi service/public sector. Never ever recruit a smart arse or somebody that could remotely challenge you.
3. The objective of the game. Insiders will tell you that the money is only really a means to an end: the objective is to get the T-shirt that says ‘biggest cute hoor in town’.
4. Absolutely nothing has changed. 1, 2 and 3 are the dominant culture. In most cases the people are the same. This is the truly incredible thing. Nothing has cahged
@ All,
I believe, one of the bodies who can be most accused of group think both during the bubble era, and in the post-bubble era, are the journalists in Ireland. But that is not really the journalists fault. It is the institutions in which we teach the journalists, both educational institutions and the media organisations. Many of the ordinary folk of Ireland, who are looking for their voice, simply adopt what they read in print in newspapers. Ireland is a country that is very influenced still by the printed media, moreso than in other countries. I do not believe that television or radio media has had a deep impact in Ireland. It may be because of our pub culture. But whatever gets printed in our newspapers, gets re-cycled into pub conservation, and most other conversation within hours. I am not convinced that it supposed to work that way. Rather than our newspapers prescribing what the Irish people should say to one another, maybe the newspapers and journalist community should offer possible starting points from which real debate and conversation might begin. But in my experience in living in Ireland, the newspaper view seems to represent more the end of the conversation, instead of a beginning. Politicians on the other hand, have simply adapted their language and their message to this unhealthy newspaper-public population relationship. Even the dissenting voices such as economist Brian Lucey, have described themselves as using the newsprint media to speak to their own elected government. This should worry us all. Not from the point of view of restriction of access to government, but also that dissenting voices such as Lucey, have this unhealthy relationship to the newspaper media. There is too much voice in Ireland given to journalists. Not enough to ordinary people. For instance, how many TV crews or journalists were in secondary schools in 2011, interviewing the young teenagers, asking them their opinion, on the taxes their are saddled with for the next few decades? Theirs (the teenagers), is a voice we have not heard, amongst all of the clatter from print journalists of every shade and persausion. Now more than ever, is a time in Ireland, in which we should consider givinng young people the vote, and encouraging those in the 18 year old bracket to exercise their right. BOH.
@ Paul Hunt
You say:
“Secure academic tenure may provide the security to express dissent (as evidenced by some here – and for this much thanks), but it appears as the exception that proves the rule.”
Not caring about money also provides the same.
I’m not sure in what sense you’re using that metaphor.
http://en.wikipedia.org/wiki/Exception_that_proves_the_rule
All the best.
SC says “A way will have to be found to ease the massive overhang of debt…but it can only be done in co-operation with the EU and the ECB”. That is not “groupthink”, it is common sense, a common sense which the “Frankfurt or Labour” brigade have very quickly accepted after having won an election on a cynically populist “burn the bondholder” platform.
Respect for dissenting voices?? Shane Ross has a complete free hand every Sunday to promote the “unilateral burn the bondholders on the back of a referendum” fantasy. SC has done us a favour in exposing how shallow Mr Ross’ claims are to being an astute analyst of our banking crisis.
@Brain Woods II
‘… an astute analyst of our banking system’. Lovely word that ‘astute’ … can visualise all those ‘cute hoors’ now reconstructing themselves into ‘astute cute hoors’ …. nearly as good a feeling as having the mobile number of an SC on 24 hour call in case of an intrusion from the great unwashed …. ASTUTE CUTE HOORS RULE OK …. sums it up really … neat upper-echelon-group tinkle to it …
I wrote above,
I recall one story of Adolf in the 1930s, when a man challenged him by saying, I will never follow your party. Adolf calmly replied to that man, Don’t worry Sir, your’e children are already signed up. This is why I believe the media the the political system in Ireland has a duty to listen to the voice of the youth in Ireland. Something it has failed to do in great measure. BOH.
@Brian Woods II
My memory is not the best but I believe a decade ago or even less Ross was praising Seanie boy and the rest of the energetic go get them few.
To be honest its almost impossible to crash a bank given that they can produce credit but somehow such power always goes to ones head.
Anyhow this debate goes far beyond burning Bond holders or even term accounts – it goes to the very nature of the monetory system itself.
The Nyberg “Figure 2.11 Funding Gap – Excess of Domestic Lending to Residents over Deposits” suggests to me that that monetary behaviour- -policy was not conservative- -prudent – the rate of borrowing to deposits went off the scale.
Also, given that context of the economy being flooded with borrowed equity, which would seem to be a cheat policy on the common currency that would likely tend to wreck any currency – but then perhaps our then policy makers belong on an island – I should think that if (they) “Bertie Ahern, Charlie McCreevy and Brian Cowen all believed that their policies were prudent.” because budget surpluses occurred, they must have been exercising zero higher brain activity. (I could certainly accept that this may have been so in the case of one of them, indeed that there was not a higher faculty with which to address the issue, but the others are another matter).
I think it is important to regard the Rep. of I. as a very minor factor in this Irish disaster and that it must be addressed, indeed _we_ must address it, first and foremost as an EU level issue; it is time to see ourselves, albeit belatedly, as part of a community.
I would also suggest that the boom was long up and running before borrowing went off the scale. I would also be inclined to think that alarm bells were ringing in government years before the Sept 08 guarantee- -bluff – hence the sensitivity of some to any public statements to that effect.
I see it as being largely a culture based disaster and that is the solid ground from which to proceed. (Perhaps we need to unravel back to 1932 as Germany once had to do).
The immediate solution is pretty simple – just seperate deposits from all commercial banks – let the bond holders have the assets.
DO NOT PROVIDE CREDIT.
And let the new goverment deposits find the true cash price of assets.
The entire thing would seem like just a bad dream withen a few years.
The only problem with this solution and it is a major one is outside actors with credit on their side could buy up Ireland – yes capital controls are nasty but may be nessary but not on money going out so much but on money coming in.
Anyway the central lesson of this debacle is that globalisation otherwise known as private credit creation does not work for anybody other then those who have access to the global credit spigot.
Peter Kinane wrote,
I would agree with that. At least a whole generation of Irish professionals and business men and women had grown up inside the new Irish economy, before the same began to move its focus onto easy borrowings and leverage, as opposed to that which it came up with – hard work and committed/sustained performance. This is what attracted me most of all, to the graph of the three Irish bank stock prices over a ten year period. I posted a link to Constantin Gurdgiev’s blog at the link below. My question is, how did such a behemoth as Anglo emerge, from the early part of the boom, where much of the growth had been sustained as opposed to disruptive. Anglo appears to have been a disruptive business model, which at some stage sucked much of the market share out of the grasp of the existing incumbents. BOH.
http://www.irisheconomy.ie/index.php/2011/04/19/nyberg-report-on-banking-sector/#comment-142026
@simpleton: I hate to say it, but +1.
@Karl: the default setting at the Irish Times is to suck up to the establishment of the time, whoever they are. Right now they are in Frankfurt and Brussels.
As for reckless gambling: when a bankrupt state pays back the private creditors of private banks, while at the same time imposing cuts not just on people responsible for our problems, but on people who had nothing to do with them…that strikes me as the ultimate in reckless gambling, not just economically, but politically as well.
BOH,
Yes, I fully agree with you that you raise a very interesting point about the emergence- -development of Anglo, which is what I was implying in my reply to you in that thread. (I don’t have an opinion on the answer- -analysis, however).
@ DoC/BWII
Fine Gael’s Alan Shatter has taken issue with rival candidate Senator Shane Ross over his claims in his election literature that he had ‘‘a 15-year record of challenging bankers’’.
The Dublin South candidate accused Ross this weekend of making exaggerated claims on his past role in challenging the banking sector.
He said the senator ‘‘was a cheerleader for Sean FitzPatrick and Michael Fingleton, contending that all bankers should be more like them’’, a few years ago.
‘‘Whilst praising the banking enterprise of these two banking buccaneers in the period 2000 to 2007, Shane reserved his criticism of bankers for AIB and Bank of Ireland and celebrated the enormous profits earned by Anglo and Nationwide,” said Shatter.
Shatter previously wrote to Ross querying the claims made by him for his Dáil candidacy in the Dublin South constituency.
‘‘Surprisingly, he has still not responded to me. Rather than being a new broom sweeping clean, his election literature has been littered with the old style discredited politics of smear and false promises,” Shatter said.
Ross wrote articles in the Sunday Independent on April 27, 2003, March 28, 2004 and December 19, 2004 that singled out former Irish Nationwide and Anglo Irish Bank chiefs Michael Fingleton and Sean FitzPatrick for praise.
In his piece ‘Fingers sidelines a sorry Soden’, Ross outlined Fingleton’s ‘‘cracking set of figures. Michael Soden’s Bank of Ireland bored us all to tears with another trading statement’’.
The article goes on to compare the results. ‘‘The building society is on the verge of sale. The figures were sparkling. Members with adequate savings or mortgages are in for a €7,000-plus bonanza.
‘‘Fingleton’s return on total average assets at 2.03 per cent was far superior to Soden’s at 1.22 per cent,” Ross wrote.
‘‘He even leaves superstar Sean FitzPatrick’s Anglo Irish standing, with only 1.54 per cent. All Fingleton’s figures are spectacular.”
Ross praised Fingleton after a meeting of a rebel group of shareholders in 2003. ‘‘Fingleton’s stewardship can be criticised.
Sure, he needs more heavyweights on the board.
Sure, he has been overzealous in his pursuit of defaulters. Sure, he earns an awful lot of money (€835,000).
Sure, he has been less than transparent. But Fingleton, for all his faults, has delivered the only thing that matters in business: profit.”
http://www.sbpost.ie/news/ireland/shatter-critical-of-ross-election-claims-54658.html
… at least not beyond my theory above about the role of culture – perhaps a culture of eroding standards; no-standards standards.
@ Peter Kinane,
Yeah, I spotted your reply there a few minutes ago. I must have missed it. I don’t have a clue as to the answer myself, and I don’t think many people have. I think it would be a field for further analysis.
I will however, offer one hypothesis, which may be totally off the wall. It seems as though credit in a very general sense, was like a new found commodity within the Irish republic, as of the early 2000s. We seemed to consume credit like we consume bread, electricity and transportation fuels. Anglo Irish bank seemed to be the main distribution system for that new kind of credit in the 2000s. Perhaps so many people took the bet on Anglo, because they believed they were buying into the new version of a supermarket or something. A supermarket for a brand new consumable, without which the Irish population could not function in the 2000s. I would use the analogy of mobile phones, and how the Irish population, having gotten used to that new technology, wondered, how did we ever cope without this? Except mobile phone technology didn’t bite us back, the way that Anglo’s product did. In fact, there were a lot more health warnings about mobile phones in the early days, than there ever was about Anglo’s wares. Too much of the analysis (and it is considerable in volume now), of Anglo Irish bank, appears to be about its demise. But not nearly enough accredited research has gone into Anlgo’s emergence as a force. Like all disruptive innovations, Anglo Irish and its product seems to have evaded the radars of the incumbent Irish banks, through much of its emergent phase. What I am saying is that the period of the 2000s was one, in which so many technologies and innovations which didn’t exist before, became embedded and absorbed into society and lifestyle. That is why Anglo Irish bank did not scream trouble as it grew up. But someone aught study this properly, and not necessarily Irish researchers either. BOH.
@EWI
Ha ,the man is a great speaker but ………..
Anyhow large profits in ALL Utilities are by defination extractive – its the nature of the system.
Its a bit like chopping down trees and destroying a ecosystem – the wood may keep you nice and warm for a while but sooner or later the primative banker will run out of food and fuel.
Luckly there are even more primative tribemen who will shoulder the loss through hunger and cold.
You see Bankers are special , very special.
political commentators may be adept* at providing political analysis of the events of the day.
It does not follow then that when those events are economical that they are able to provide good economic commentary.
This is a problem across the board in the Irish media. Anyone who dares to question the action/lack of action of the govt. immediately is dubbed as some crank.
Collins et al. have played their part on that.
*and imho Collins is not much good at political analysis.
@ Wow
“This is a problem across the board in the Irish media. Anyone who dares to question the action/lack of action of the govt. immediately is dubbed as some crank.”
The Irish Times is not the sum total of the Irish media. Try reading the Sindo. From its editor Angus Fanning to Shane Ross to Gene Kerrigan et al it is unremittingly simplistic anti government, anti EU, anti bondholder, anti German etc. etc. Murdoch’s rag is not much better. And as for RTE, Miriam is simply in thrall to David McWilliams.
Wow has a point.
We have a high tolerance for chancers in this country.
No different in the commentary than in politics or governance..
Brian,
Your forgot Sinn Fein Brian – didnt you realise that the IRA caused the bailout. Its true I read it in Eohgan Harris’ article and Willie o’Dea agreed.
Indeed as you note the Sindo is simplistic drivel as is sadly RTE which functioned as a FF mouth piece for many years.
An awkward truth but one that people should face up to. Miriam my brother Jim is FF’s legal adviser o’Callaghan notably showed her colours with former min. Hoctor. Check it out on youtube if you cant remember that particular interview.
Public service no – FF service most definitely.
@ BOH,
I have posted again in the other thread.
Just to say, I think we are expressions of our environment and I’m inclined to the view that where we are now is an expression of the culmination of a culture.
@Paul Hunt Of course it is telling that the Croke Park proposals for universities do not seek to address the ratio of administrators to teachers or restore this to 1990s levels. The main proposal of the mouthpiece for overpaid Presidents is to eliminate academic tenure!
More generally I think there has to be a greater commitment to openness to facilitate dissenters. Data needs to made available, for instance things like a register of house prices would allow debate on the facts and not opinions. Similarly statistics on numbers employed, salaries etc in the public service should be readily available in a format where increases in budgets can be identified.
@ Peter Kinane,
On the other thread you mentioned, I think that rapid trade liberalisation as is currently fashionable is froth with danger.
There is something we can observe from that period in Ireland of trade liberalisation. ( 1 ) Consider the Eircom share launch in Ireland as an early but viable exhibit of the Group Think, in Ireland, before that which applied to property consumption trully got started. That is to say, in media and in public discourse, anyone who didn’t throw their lot in with the Eircom floatation was deemed to be some kind of fool. It is like an early indication of what was to come. But bear in mind, that teenagers threw in their communion money, and old age pensioners threw in their meagre savings, only to see it all disappear in a puff. ( 2 ) Move on then to the awarding of the public license in Ireland for the second mobile phone operation. Unlike the Eircom floatation, the general public may not have had the same opportunity to become involved in the Esat Digifone story. But what we do no, is that strategically placed, and astute investors did come out of that episode in Ireland’s communications industry with a handsome reward. ( 3 ) Now here is the really odd part of my story in relation to Ireland and communications. Consider the story of Smart Telecom, which was sold for €1.00 some time, not so long ago. I had friends who invested in that too. But the interesting part about Smart Telecom is that intelligent young people were taking out multiple automobile loans to pay to acquire share positions in Smart Telecom. Some people I know are still paying for cars they never owned as a result. The lending institutions were those such as Anglo Irish bank. I just think it is really interesting to compare and contrast, this speculative instinct on the part of Irish people, in areas outside of the property industry per se. Simply put, there is something in the Irish that likes to have a gamble, no? BOH.
@ Peter Kinane,
Here’s a neat artifact to add to the above collection. An old interview between Constantin Gurdgiev and Tony O’Reilly about buying Eircom company at one stage, amongst other things, at Business and Finance magazine. It’s funny how paths tend to cross so much, with the big investors in Irish business. Lowry organises rentals for Eircom, O’Brien establishes Esat, O’Reilly buys up Eircom, O’Brien buys up Independent news and media. It’s like Lanagan’s ball! There’s poor old Constantin in the middle of it all, conducting the interviews! Does anyone feel confident, that we have the standard of dance moves required to really get the most from our remaining family silver? It would be cheaper to pay O’Brien, O’Reilly, Desmond etc, to assist us to get a decent payback this time (no insult intended to Mr. McCarthy). BOH.
http://www.businessandfinance.ie/index.jsp?p=164&n=395&a=1560
“It is probably no accident that some of the cheerleaders of the boom have now turned into leading prophets of doom. The same reckless, gambling instinct that fuelled admiration for Seán Fitzpatrick also underpins the “burn the bondholders and damn the consequences” philosophy.”
Collins gets this quite wrong because he doesn’t get the idea that Fitz’s reckless gamblers were not regarded as such at the time. The herd was with them and it was those who took the opposite view who were regarded as reckless gamblers – and worse.
The herd is with the incrimentalists currently – so everyone else is dangerous or fails to fully appreciate the situation. Yawn.
Please forgive for the length of this posting.
@Brian O’Hanlon
Too much of the analysis (and it is considerable in volume now), of Anglo Irish bank, appears to be about its demise. But not nearly enough accredited research has gone into Anlgo’s emergence as a force.
+1
Oh yes indeed, the problem with Anglo was not that it failed but that it became hugely successful, in a similar way to the problem of the property crash actually being a problem with there being a property boom (something that has yet to really sink in).
My naive understanding was that Anglo grew so quickly because it grew so quickly. It was the sinful circle of stock market feedback.
Anglo was apparently profitable, thanks to a daring and innovative approach to accounting, and it also had an increasing market share because of its go getting business ethos, best exemplified by its refreshingly optimistic attitude to risk analysis.
No doom or gloom for Anglo, they talked they country up and not down, Boston not Berlin, and so on and so forth.
The other banks then felt compelled to follow Anglo into the gutter, if the animal spirits became displeased with their comparative performance they would lose out on funding and face the possibility of take over.
So really it was just a small problem with market liberalism, the use of the stock market to measure value and the operation of modern capitalism.
@simpleton on the problems particular to Irish group-think.
1. The average quality of the groupthinkers. Low. They really are not that bright. Stephen Collins is the political editor of our paper of record. How good is he relative to his global peers?
Who knows how intelligent Stephen Collins is? The story of the global financial crisis is significantly the story of smart people in large numbers making very poor decisions. The system did not understand the world.
There is no doubt that toadying is substantial part of political commentary and journalism in Ireland but it is considerably worse in other countries (the US springs to mind). This problem is at least partially because politicians have become much more savy in how they dispense access and inside information, leading to a kind of “journalistic capture”. The precarious financial position of much of the newspaper industry is another factor – they simply can not afford to confront the establishment and they employ and narrate accordingly.
Lastly, I promise, Ireland has a small pool to pick its’ commentators and its politicians from and it faces a challenge in that the UK and the US exert a powerful attraction for the bright, ambitious and anglophone.
I wonder if we might benefit from a more formalised and inclusive structure for debate, analysis and decision making to try and make up for our small size with more intense and public deliberation?
@Shay Begorrah
Some very good points.
My take on Anglo Irish is they latched on to a money maker using the arbitrage of borrowing short and lending long. For years this proved to be highly profitable and success built on success as risk piled on risk. The staid stalwarts came under pressure from shareholders and their boards of directors. AI over there is growing its loan book at an exponential rate and profits are booming as share values soar. So the paragons of virtue, sobriety as well as being risk averse waded into the AI swamp and got their boots filled. The quote by a Citibank executive “We had to dance as long as the music played.” has relevance.
Banks go bust at the rate of dozens per week around the world, in the US at the moment the rate is half a dozen per week. The depositors are usually protected up to a published amount ($50,000- $100,000) and the bankrupt banks are wound down by the regulatory agency or its appointee. Essentially they go into receivership and are sold off. Any value salvaged is doled out to the bondholders according to their position on the risk hierarchy, the shareholders usually finish up with nothing. Simple and efficient but it cannot be done in Ireland be cause as you stated Shay the talent pool is shallow and there were not enough competent people in Gov’t, the regulatory agency, the Central Bank or the retail and commercial banks.
What is relevant is where are the competent people now. As far as I can see we are fumbling and bumbling along the same twisting road where the journey began in 2007. Destination Sovereign default followed or preceded by bank bankruptcies. Hopefully small depositors will be protected. The present gov’t has demonstrated that it is weak and divided and is simply not capable of managing a smooth exit from the deficits and debt that are increasing as each month goes by. Interest rates are trending up around the world the Euro will not be immune which means Ireland will not be immune.
As for our reputation, do we still have a good reputation. I will be in Frankfurt and Berlin next month where I will hear it from the horses mouth.
As a (Welsh) outsider the thing that surprises me most is that a country where nationalism is supposed to be so important is supine before EU institutions pushing their own interests. The ECB demand that bondholders be protected has nothing to do with helping Ireland. It simply reflects the fact that the ECB has unwillingly and perhaps unwittingly become a bondholder.
For some reason senior economic policy makers feel excused from the normal rules of honesty. No one believes that Greece can pay back its debt on time, yet all respectable institutions say that it will. It’s left to the market to tell the truth and when it does the Greeks call in Interpol.
Europe’s banking problems come from fundamental failures of banking supervision, with the central banks themselves being prime culprits. Yet now those same central banks are being treated as if only they can lead countries out of the mess. People often say that private bankers get rewards when they do well and do not suffer when they mess up. Just the same can be said about the central banks.
@ Gavin Kostick
Few nations can look in the mirror and address inconvenient truths. The contrast is striking between Germany and Japan in dealing with responsibility for human carnage on a gigantic scale.
In FF dominated independent Ireland the machine politics model that gave the Irish control of the large American urban areas in the latter half of the 19th century, was adopted with patronage and cronyism a central aspect of governing.
We can quibble with issues like groupthink but not with facts: resigning on principle is almost non-existent in the Irish system. It’s striking that all the insiders took the first benchmarking payment; no manager at the Central Bank saw anything that merited taking a stand on principle. Even to this day, trade union leader David Begg who sat at a big table in Dame Street for 15 years, can publicly criticise bankers but disavow any responsibility as a central banker.
I contacted the CB in 2006 to check if data on interest-only loans was collected. The answer was no, at a time when BoI was boasting how popular its 10-year interest only loans were for the buy-to-let market.
Niall Crowley, the CE of the Equality Agency, resigned on principle because his agency was working according to its mandate and was targeted in an act of political revenge.
As to being a player, I’m a citizen and absent a safety net, I’m currently working on a new service to earn a crust.
I did leave the security of a multinational company to have independence other than just of the monetary kind.
As with others, the wisdom of experience including preparing a company for a war situation, can help to provide a particular angle on issues.
Most people with experience in business leave the arena to commentators who may have a limited experience of the world. On a micro level, here are some views on jobs policy:
http://www.finfacts.ie/irishfinancenews/article_1022135.shtml
@Shay B
“Who knows how intelligent Stephen Collins is? The story of the global financial crisis is significantly the story of smart people in large numbers making very poor decisions. The system did not understand the world.”
It’s not good enough to say that we just made the same mistakes as everyone else. That’s the truth but not the whole truth.
Why did we we make the same mistakes, but on an exponential scale and, most imporantly, why are we still making them when so many other countries have moved on?
My (partial) answer is (a) the mediocrity of our decision makers (b) those decision makers have not, by and large, been changed and (c) where they have been changed they are still mediocre.
@ Michael Hennigan
Thanks for the considered reply and the link, which I have read with interest.
Lots to think about and some to develop, but perhaps best left to a more approriate thread.
@SbG: “I wonder if we might benefit from a more formalised and inclusive structure for debate, analysis and decision making to try and make up for our small size with more intense and public deliberation?”
Absolutely. What we have to fashion is open access: to the media (internet is ‘safe’, for now anyway)and not just the letts-to-ed cols. To politics: townhall meetings – if you could exclude (or perhaps tone down) the ‘riff-raff’ who would attempt a Tiger Kidnap of same. Constitutional recalls for individual TDs; entire constituencies and even the Dail. No big legal impediments here. Just plain unwillingness to reform. Local gov is a complete shambles. If you can ‘nail down’ the political end you have some hope. Otherwise its hopeless.
Lots and lots we ‘could’ do, or perhaps ‘should’ do. Leadership is absent – and and for very valid reasons. Simpleton’s moving in on the problem. Indecisive decision makers and ignorant experts. Vacuous, ill-tempered, ill-informed, intolerant.
BpW
If political leaders and their advisers really believed that 30% annual credit growth when inflation was 3%, was prudent while foreign borrowing by the banks was surging and growth in the tradeable goods/services sectors had stalled since 2000, then they were simply unfit to run more than a parish council.
Just consider the major ‘reform’ of the FF-PD years – decentralisation – and one should get a flavour of the governane system at a time when the Exchequer was awash with cash.
The plan to move 10,000 civil servants out of Dublin was straight from the Tamanny Hall playbook.
It was a barefaced political stroke that even Haughey hadn’t tried with locations decided in a ministerial lottery.
Politics trumped economics and there was no concern for prudence. In Sept 2006, the new PD leader Mkchael McDowell began the auction politics early for he 2007 general election with a proposal to abolish smap duty on
Last line should read: to abolish stamp duty on residential property purchases.
The government was collecting too much money.
@Gavin & Michael H,
Happy which ever ancient spring festival or none you’re happening to celebrate.
I realise I generated a bum steer in my ‘exception that proves the rule’ as I was trying clumsily to hit two targets.
First, very few of those who have the security that academia confers – and among these even fewer who might have something useful to say on the topics addressed here – give voice to dissenting views. Personally, in a society and economy that is going through traumatic times, I believe that those who have knowledge and intellectual capability, who are recognised by their peers as having such and who have been awarded commensurate status and reward by society should be prepared to speak out and to engage with a sullen, confused and fearful citizenry and to confront the extent of failure in political and economic governance. But the vast majority don’t; and it is in this snese that those that do, here and elsewhere, are the exceptions that prove the rule.
But why do so few speak out? Some may feel their particular expertise does not equip them to contribute, some may fear the calumny they might attract and the distraction from their academic work, some more again might feel conflicted by existing or previous public positions or appointments, while some may consider that by keeping their heads down it might secure future advancement and, I suspect, all might fear a vindictive government wielding a knife over public funding. But I also sense that many take the view that expressing dissent serves no useful purpose and this leads to my second point.
Once a government is settled upon a course of action (developed behind the scenes by ministers, their advisers, senior officials and tame consultants, broken down into a simple party-line message for the Dail lobby fodder and spun furiously in the media), there is little in the domestic scene, short of a major backbench rebellion, that will force a change of course. In this sense, dissent is futile. There is no debate. Any ‘debate’ that takes place, in the Dail or elsewhere, is either posturing or a dialogue of the deaf.
So again, perhaps in this sense, those who express dissent, and continue to express dissent, are the expection that prove the rule – the rule being that dissent is futile.
Karl wishes to see more respect for dissenting voices. But is is much more than respect. Dissent that is advanced by those with knowledge and experience – and based on evidence and analysis – should be tested in adversarial disputation in an appropriate forum. And more importantly, government proposals, actions and inaction – against which most dissent is directed – should be tested in a similar manner in such a forum. In matters of public policy the appropriate forum is properly resourced and empowered Committees of the Oireachtas.
What I wish to see is the principal contributors here (and others with appropriate knowledge and capability) confronting ministers, their advisers, senior officials and tame consultants in adversarial dsputation, testing and contesting the evidence supporting government proposals, advancing relevant evidence that might justify changes in government proposals, with opportunities for rebuttal and counter-rebuttal before Oireachtas Cttees.
Until this reform is made, we’re at nothing.
@Paul H
“First, very few of those who have the security that academia confers – and among these even fewer who might have something useful to say on the topics addressed here – give voice to dissenting views. Personally, in a society and economy that is going through traumatic times, I believe that those who have knowledge and intellectual capability, who are recognised by their peers as having such and who have been awarded commensurate status and reward by society should be prepared to speak out and to engage with a sullen, confused and fearful citizenry and to confront the extent of failure in political and economic governance. But the vast majority don’t; and it is in this snese that those that do, here and elsewhere, are the exceptions that prove the rule.”
I make no claims to anything here but some experience. Its not one I would wish to repeat for a whole pile of reasons bt one I am glad I did. And yes, I agree 100%. Its astonishing how few of the professoriate have spoken. Astonishing.
@Brian,
Thank you. But you are merely confirming the validity of my premise – that dissent under current arrangements is futile and that the vast majority who could usefully give voice to it are discouraged – but you appear reluctant to follow through to the logical conclusion. In public policy, as in science, progress is made when propositions are advanced, and they are tested, using theory, evidence and experience, in adversarial disputation until a position is reached that will provide a basis for policy implementation – until further evidence or experience emerges to force changes. And all within the democratic process. It is a never-ending process. In some respects I see it as an attempt to replicate the blind forces of evolution.
Blogging, op-eds, media appearances all have their uses, but, in general, they secure no traction in the process of democratic governance. All who have something of use to contribute in the public policy sphere should be focused on reform of the process of democratic governance to ensure effective adversarial dusputation on public policy.
@ Brian Lucey
We possibly suffer from excessive politness in Ireland.
The individual who distuingishes a professonal critique from the personal side is rare.
So people avoid causing offence.
The ESRi has got some back teeth in recent times but there should be a lot more of the approach it used in respect of the Poolbeg incinerator – present the facts and defend them and take on the inevitable flak that it was tailoring a report for its commissoner.
Progress will be on the horizon if for example some insider in the research establishment brakes ranks and questions the misuse of scarce public funds. However, he or she will have to be prepared to be deported to Coventry and treated as a pariah by colleagues happy with the manna from heaven coming their way.
Brian and Paul,
I commented on Irish Economy to the effect that it was time to move from analysis to action for reform to happen.
Since then we have had an election and what seems to me to be a pattern by the establishment of ‘killing the game’ and maintaining control. I can accept that the originators of this site are not part of that pattern but by neglecting to give either stimulus or feedback they are unwitting accomplices. In my experience reformist blogs and sites are a necessary part of the debate, but are not conducive to action.
I am involved in various voluntary and community activities in Cork, as well as maintaining contact with reformist groups. The acknowledgment of the need for reform is stronger on the ground than it is given credit for. It is not hopeless
Any action entails risk. It will almost certainly be insufficient and require feedback and modification: that requires trust. Trust comes from meeting people and building sufficient resilience into the feedback to give support for action. My experience is that it takes at least 3 meetings before one can say that there is trust. Not neccessarily liking, just confidence that feedback will come and that it will be civil and be truthful.
This is my eamail if you want to continue this line of thought cmobrien eircom net
Thank you.
@Michael H,
“However, he or she will have to be prepared to be deported to Coventry and treated as a pariah by colleagues happy with the manna from heaven coming their way.”
I think you realised – as soon as you had written it – that this ain’t going to happen. There are only a few clowns like us – who strive to keep our independence and suffer the inevitable commercial hits – who are determined to speak out.
I suppose the benefit is that, if we keep doing it, others may feel emboldened. But it sure as hell doesn’t butter any parnsips.
@Colm O’Brien,
In relation to the reform of the process of democratic governance that I advance, the focus has to be on TDs. On 25 Feb. the people of this country delegated to them their ultimate power and authority to discharge in the Dail in their interests until the next time of asking. We have given them our power – and to no one else; make them use it in our interests. I’m afraid all other ‘grass-roots’ or philanthropically-funded efforts – however well meaning – will simply raise and dash hopes.
Ironic that the study of group think was partly based on the thought process that led the US to the bay of PIGS.
What about group think in Frankfurt?
Why hasn’t this been picked up on
http://www.independent.ie/national-news/ecbforced-run-on-our-banks-led-to-bailout-2628449.html ?
We were not alone in this. Too many people are using this crisis to indulge their own superiority complexes. A new class of landlords lackies is emerging. People all too willing to line up with the new oppressor and dig the boot into their fellow country men.
@all
More ‘groupthink’ …. mild dissenters in the main – Sean AIB O’Driscoll excepted ….
http://www.independent.ie/business/is-it-time-to-default-on-our-loan-or-is-there-an-alternative-2628263.html?from=dailynews
@Brian Lucey Paul Hunt
Performance of the ‘Professoriat’ has been truly ABYSMAL ….. as I’ve noted previously a few times on this blog – Breakfast Under the Silent Tables on Pluto sums it up …. performance of the servile supine muddle class students isn’t much better …. is there a correlation?_or is the great mass simply a supine, mediocre, time-serving, possessive, conservative mass of ontologically challenged neo-positivists?
@Colm McCarthy
Take a break! Chill out on the wild side for a while …
Shay says,
There are a number of people from the world of business schools, rather than economics per se, who have looked carefully at a number of companies down through the years, that emerged from nowhere and disappeared as quickly again, leaving nothing but destruction behind them. But there are also companies that emerged from nowhere and went on, over the decades to become the incumbents themselves. Many of the Japanese companies that we know today, fall into that bracket. It is interesting to note, that Anglo Irish bank was being recommended by many external analysts, as the role model to follow, only a few years back. It would be interesting if someone was to really research this. It wasn’t only Irish folk who had noticed Anglo Irish and were singing its praises. I read a blog entry of Stephen Kinsella’s a while ago, and I wrote something in response to Stephen, which I recorded also, as a blog entry of my own. See link below. It comes again, from that world of business school theory, as opposed to the serious economic analysis, that contributors to Irish Economy blog would be more used to. I liked this quotation from Albert Foer in the US, which I felt has some resonance, with the Anglo Irish debacle here in Ireland. BOH.
A hub landlord, the most anti-social species of dominator, “eschews control of the network and instead pursues control of value extraction alone,” providing little new value to its network, leaving a “starved and unstable” ecosystem around it.
http://designcomment.blogspot.com/2011/02/access-management.html
@Michael Hennigan
We possibly suffer from excessive politeness in Ireland.
There is no “possibly” about it, I’ll repeat myself a little from a thread in December, 2010
The Irish establishment just does not have it in it to kick the Irish establishment. This excessive collegiality is not restricted to CMcC and it is remarkable how the grandees from all political traditions, transcending civil war politics, have stood by the government even as they drove us off a cliff.
It is easy to see how this unwillingness to offend evolved.
Ireland is a small country and the divisions between political life, polite society and wider family structures are not well defined. Given that political careers are long (and frequently have offspring) you face the risk that if you offend, for example, the Lenihan clan, you could be faced with real personal and political problems for however many generations until the problem is solved by intermarriage or another civil war.
This is not all bad of course, the same complex network of relationships that keep us from offering offence also engenders at least some sense of a wider community. If we could just expand the idea of Irishness to include the idea of a commitment to a more forthright and honest argument we could have it all.
Paul Hunt says,
There is a lot of wisdom in that paragraph, and it provides a sound template from which to move forward, for so many people in Ireland today. Thanks. I do wish to address something, in response to your paragraph, which I do not believe is addressed enough in conversation. That is, the fact that Ireland is like a mini version of the European Union. Germany has interest rates which are too low at the moment, and has linked itself to the Euro currency, which is too weak. Ireland has interest rates which may get too high, and is linked to a currency which is too strong. But we can also find these problems on the island of Ireland itself. Dublin and the eastern seaboard region of Ireland is a zone which moves according to a different pace and dynamic to the western seaboard. The midlands are caught there in middle, with their own measure of problems, for trying to be like the Dublin region, without the proximity or the infrastructure. The northern border regions would be better off tying themselves back into the Northern economic region, and that was the key insight of Sean Quinn. The southern regions have a different story again. The problem in Ireland, during the boom, was that the regions outside of the Dublin saw the success that Dublin was having through property, and decided the best thing to do was to ‘ape’ that behaviour as best they could. When you have thirty-eight spread out, small, local authority bodies in the country, there isn’t enough critical mass there to pose a dissenting view of what is happening in the greater Dublin/eastern region, and come up with a plan for Laois/Offaly/Roscommon and North Tipp (NAMA-land), which is different to the strategy executed for the Dublin/eastern region, but is more appropriate to the region, which we now know as NAMA-land. What Sean Quinn did, was that he devised within the private sector a blueprint which was specific to his region, and did not take on the shape, of something that was only a third-rate attempt to do ‘Dublin’. Unless we evolve some kinds of regional administrations with enough critical mass in themselves to counter-balance the dogma of the Dublin region, we can never implement good policies in Ireland. Never. There will always be group think, because McCreevy made the components of de-centralisation so small and insignificant, that it was impossible for regions outside of the Dublin/eastern seaboard, to evolve along their own lines. It is similar to the frictions and conflicts we experience today at the European level, between weaker and stronger regions or states. I elaborated on this in Kevin O’Rourke’s recent blog entry on Trilemmas. BOH.
http://www.irisheconomy.ie/index.php/2011/04/15/a-tale-of-two-trilemmas/
Shay Begorrah says,
For my grand theory, refer to my response above to Paul Hunt. I suppose my analysis comes out of an interest or understanding of organisational management theory. That is, the problem of media and politics in Ireland being far too centralist, with no counter balancing regional point of view. BOH.
@Michael H
Breaking ranks in Ireland leads to marginalization. A toxic body must be expelled from the system. In a country with a much larger population, contrarians can expect some safety in numbers, a small critical mass. There are several public intellectuals but they risk burn out by hawking themselves around the media with opinions on every topic under the sun. Of course, in the broader commentariat, awareness of nice people and the side of the bread with butter on it often act as restraints on opinion formation, let alone expression.
BTW: the best reform suggestion I heard recently was that all those appointed to quangos by the outgoing government, should resign and offer themselves for reappointment. No doubt these ‘public servants’ will rush to pen their resignations – in the national interest.
Simpleton,
If I may, I would like to utter a defence of this “still mediocre Government.” It consists of a coalition of political parties out of power for a generation and unsurprisingly a little unwilling to jump off the deep end so soon. It is in receipt of advice from all quarters. On the one hand, its own officials and its Euopean “friends” tell them to maintain the status quo which I would define crudely as honour your obligations and implement they programme agreed with the troika. Now the problem with this constituency is that the domestic adherents of this policy are a) closely allied with the ancien regime who promoted them to high office in many cases b) have been associated with past policy failure -the GS of DOF was in charege of Banking policy in 9/2008 and the CEO of the CB is the last banking CEO still in situ.
The problem with our friends in Europe are that they are a little conflicted. Many of them are happy for the periphery to take the fall for their policy mistakes. LBS seems to want the irish taxpayer to pay the bondholders because the institution on whose council he sits would be insolvent if WE defaulted. From the govt’s perspective none of the above merit the term trusted adviser.
Now lets turn to those a) offering an alternative or b) offering no alternative but just saying the current policy is doomed. There are several problems with this cohort.
a) some were cheerleaders of the boom-SC does us all a service by pointing out Deputy Ross’s record. Others held high office for part of the boom and were lucky to be gone by the time le merde hit the AC. A recent protest in Cork advocating burning bondholders featured a developed owing Anglo 20m …go figure.
b) some advocating an alternative failed to spot the train coming. Again not much help here.
Some of the solutions are not guaranteed to work or may boomerang against us. Unilateral default of some guaranteed or non guaranteed obligations may cause a worse outcome than the policy currently being pursued. What pol really want to take a risk that the PS saleries cant be paid or the Widows mite has to be cut or explain why the ATMs do not work.
The only hope for the govt is that some sane voices are starting to emerge. On tihs score it is worth reading the contributions of such as Slattery of State Street, O’Dricoll of Glen Dimplex and Coveney of Greencore in the article that DOD provides a link to. NOne of these are mediocre people.
How come it takes an American in an interview in Thailand to see that in this situation, crazy is the new sane?
John Mauldin recently made it very clear what he believes, when he told me that in such a topsy-turvy world, only the Irish people are crazy enough to do the sane thing and “tell Jean-Claude Trichet to kiss off” – http://www.youtube.com/watch?v=8kLmupfC0MY
This blog is groupthink.
Fact – the well-being of 4 million peripheral inhabitants is not a major concern for the Europeans.
We are tiny and expendable.
But poltical disharmony in Europe should nit be underestimated. We will be back printing punts by 2014
@Tull
I suppose it depends on what you mean by mediocre. I define it too mean the absence of wisdom. Our cute hoors never had the good sense to employ a cadre of experts underneath them. that’s typically how it works in other cultures. The winners have enough wisdom too know how good they are 9or are not) and employ technocrats to do the hard work. Our cute hoors just emply other wannabe cute hoors.
And when they try to appoint experts, they don’t have clue. Why would they? They have no experience of it.
Just think about the appointment of he-who-must-never-be-anything-other-than-venerated, our vey own Prof Honohan. Good bloke, very bright: of course. Out of his depth? Absolutely.
Has Ireland ever had a finance minister who knew what he was doing?
@ Paul Hunt
And a very happy Easter/Passover, etc to you. Whatever one’s take on it, it is a time, I think, of hope and the possibility of rebirth.
As the threads are shutting down now for a few days, and in response to your comments and the excellent BBC radio doc posted by Mickey Hickey on the other thread – a general observation.
The fact that Brian Lenihan was specific that the public was excluded from the discussions on the bailout (as he felt his hand in negotiations would be undermined), and your concentration on the importance of parliamentary deomcracy has made me think that:
The ghost of Edmund Burke should be laid.
Burke, in his notorious address to the electors of Bristol, said that the electors should be excluded from the final decision:
‘where those who form the conclusion are perhaps three hundred miles distant from those who hear the arguments.’
This has been generally been taken as the idea that the elected representative should be elected on his/her qualities, and be relatively free to exercise their judgement on behalf of the electorate who are otherwise occupied.
This is all very well, but:
(a) The party system (after Burke), fo good or for ill, makes the manifesto/whip system dominant over personal decision making. The political world Burke lived in has changed.
(b) It means that the individual person, who self-perceives as doing their best for the whole, is essentially anchorless, as their ultimate response to that electorate is, I did my best, and in doing my best it was necessary to exclude you.
Having done a bit of representation in my time, I think it is better to go to you constituency (broadly defined), explain what it is you want to go out and do, do it, and come back and explain, if necessary, why what happened is not quite what was agreed.
If ‘explaining this’ out loud to the constituency (in this case the people) means says things that the, as ever nebulous, markets will be skittish at, then so be it. As one never has a single voice from ‘the markets’, I’m free to speculate that the markets would be happier with an honest, outspoken, elected negotiator, than a person who is content to keep their own constituency in the dark, whilst being more concerned with crafting a massage than steering a clear course.
The reports indicate that a single article The FT spooked Governor Honohan into action. The populace may as well have been in on it.
It’s a much stronger position to be negotiating with the articulated will of the people behind you and in front of you, than with the superiority complex of ‘knowing better’, implicit in Burke’s address.
I am not saying Ireland should ‘do an Iceland’, but their Icelandic willingness to put the issue to their own people, remains, to me, inspirational.
@Eureka
Agree this blog is definitely a Groupthink. It is cheerlead by a lot of those that write the leading articles or post up the latest report/figures/article with comment biased towards their own thinking. A lot of the Groupthinkers believe that if you keep criticising/blaming/whingeing/moaning that somehow that this will solve our ills as a Nation. For most of the rest of us ordinary people who see the way forward as moving on in our lives/occupations/businesses in an environment we have not created or indeed like but staying in a time warp is not for us an option most definitely.
@ All,
Flashbacks to a different era? Look at the conference line up. BOH.
http://www.fig.net/news/news_2008/dublin_oct_2008.htm
@ Tull MacAdoo/Simpleton
I wrote this some time ago: Historian Roy Foster says in his book Luck and the Irish: a brief history of change from 1970, that in December 1977, Trinity College professor of economics, Martin O’Donoghue, who was then minister for economic planning and development, promised an ‘everlasting boom.’ In 1978, a public spending fuelled boom in Ireland resulted in a budget deficit of 17.6 per cent of GDP (gross domestic product) – – a record for developed countries according to the International Monetary Fund (IMF), for the period 1970-2008. In the realm of political reform, in the interval, conservative Ireland has left intact and virtually unchanged, what it inherited from the British. Economic reform has been excruciatingly glacial with little progress in opening up the non-tradable service sector to competition, while a culture of Victorian era secrecy protects insiders, be they in the public or private sectors.
Foster terms O’Donoghue, the Mephistopheles to his taoiseach Jack Lynch’s Faust but apart from the beginning of a period of reckless economic mismanagement, 1977 marked the entry to Irish national politics of Bertie Ahern, Charlie McCreevy and Mary Harney. Two decades later, on assuming power, the words of Frenchman Prince Talleyrand about the Royal Bourbons, were apposite: “They have learned nothing and forgotten nothing.”
It’s too early to lose hope about the new government; FDR had from early Nov 1932 until March 4, 1933 to prepare a programme of government but he did appreciate the impact of firing thunderbolts at the headlines from day 1.
@ Paul Hunt/Shay Begorrah/The Alchemist
Those who go with the flow usually win because there are always a lot more white swans than black ones.
In 1838 in the US, Senator Henry Clay said: “I would rather be right than president.” An opponent retorted: “Don’t worry, you will never be either.”
I would prefer to be a contrarian despite the risk of wasting my sweetness in the desert air.
However, I do believe that half a loaf is better than no bread.
@simpleton
‘Has Ireland ever had a finance minister who knew what he was doing?
Ever hear of Mick Collins?
Actually Simpleton, we have had plenty of competant minsters and civil servants during our short history as an independant nation. As recently as 1995-7 we had Ruairi Quinn in the DOF. In the permanent govt we had such visionaries as TK Whitaker and effective administrators such as MAurice Doyle and Sean Cromien. In the last period of maladministration under CJH in the early 1980s many academics such as McDowell, Mccarthy and Geary were scathing in their criticsm of govt policy andintrumental in changing it.
In contrast this time, the academics were largely silent, Morgan Kelly apart, when they needed to be noisy and the Civil Service had given up on saying no to ministers. Their reward for toeing the line were some of the highest salaries in the developed world.
I disagree with your contention that we do not have respect for intellectuals, pragmatism or competance in this country. It is just that in the last decade those that you relied of for these skills proved not up to the mark. It is a bit like the current Arsenal football team, everything looks good on paper it is just the execuion that is crap.
If ever there was an example of this it is the appointment of St Patrick to the CB. On paper this was a great appointment-brain the size of a planet, experience to boot, good track record in spotting the problem. Utter failure as Governor. He has not changed the culture of a failing organisation and he clearly carries no weight where it matters.
@simpleton
“Our cute hoors never had the good sense to employ a cadre of experts underneath them. that’s typically how it works in other cultures. The winners have enough wisdom too know how good they are 9or are not) and employ technocrats to do the hard work. Our cute hoors just emply other wannabe cute hoors.
And when they try to appoint experts, they don’t have clue. Why would they? They have no experience of it. ”
You are too kind. There’s an organisational tipping point of stupidity that institutions can reach. Stupidity starts off as a small cell of incompetence that is astute to office politics. It spreads like a pyramidal cancer as the politically effective but stupid get promoted through seniority, stupidifying the levels beneath them as they cascade their stupidity down. Eventually a point is reached where a majority, or just an active minority (i.e. in the active roles) is stupid. At this point you can say the organisation itself is stupid.
You can probably say this about the Department of Finance, The Financial Regulator and the Central Bank. You may be able to say it about the ECB too.
The IMF, without its permanent membership (lots of ex-IMF people around) manages to largely avoid it, I think. This is why IMF medicine is always harsh. Not, in my view, because they demand it, but because they work through institutionally stupid organisations – they set the numbers, the organisations decide that the best way to meet those numbers is to start at blind, one-legged, orphans payments with big spend items last to be touched…
So there you have it. It is not Taleb’s mediocristan, it is not an inability to see tail risk, it is CS Lewis’s Duffers – too stupid to be left to their own devices, yet invisible and threatening. It is stupidistan.
@Gavin,
Thank you. I expect this may linger in the ether, but so be it. Karl kicked this off by arguing for more respect for dissent (presumably to lessen the marginalisation he feels), but I argue that it is much more than this and goes to the heart of the democratic process in terms of robust and adversarial disputation and scrutiny of public policy, of those who implement and administer public policy and of those who exercise economic and politcial power beyond the agencies of goernment.
(It also links to the democratic accountability of the ECB in the previous thread which reveals a major democratic governance deficit in the institutions of the EU. In that instance I would argue that the ECB found itself as the only EU body with some immediate capability to address the crisis; that it was forced to exceeed its legally defined remit, that it sought to limit the extent this remit was being exceeded and that it operated, to the extent it could, on a ulitarian principle – the greatest happiness of the greatest number. It is a matter for regret that previous serious failures in governance placed the small peripherals outside this greatest number. But it places an onus on the EU to reform its governance to ensure this never happens again. But this onus is redoubled on the small peripherals in terms of internal governance – which place them outside in the first place.)
Citizen engagement is all the rage now (and various initiatives are surfacing which are likely to raise and dash hopes), but citizens would be engaged, and, more importantly, entertained, if Dail Ctttes commissioned independent experts and reports to scrutinise and contest government policy proposals, to assess the performance of the various high-ranking functionaries, to conduct these in a public and adversarial context before the Cttees. There is no better than a bit of redicule to prick the pomposity of those who think they are too important to explain themselves or their actions to the great unwashed.
But you can be sure the ‘shrinking violets’ who exercise so much power whispering in ministers’ ears or who run the quangos will fight this tooth and nail. And ministers are actually afraid of them because they rely on them so much. It is for TDs to establish the procedures that will enforce the required extent of scrutiny – and for voters to demand that they do. Yes, TDs are elected, in part, to elect a government, but this government is not elected to govern the Dail. It is time for backbench TDs of all factions or none to reclaim the Dail on behalf of the people who have elected them and hold government (and the entire government machine behind it) to account.
Paul, you really are not going to be in the running for a nice little “pissing out” appointment talking like that!
Don’t you understand that “government” and “advisers” first and foremost have to come under the category of “people like us”.
Nobody likes a smart arse.
The CAB detectives, if they produced a report into the banking collapse
along the lines of the Nyberg Report, would be laughed out of court
http://wp.me/pBbF3-eI
Lol
@ Grumpy: “Nobody likes a smart arse.”
Very true, most especially if the bloke (or really especially if he is a she!) in question happens to be a tad intelligent, erudite and persuasive as well. The market for indecisive decision makers, crapola spinners and ignorant experts is bottomless! Where in Gods’s name do we get them all from?
At least I have the internet and can access those ‘smart arses’.
BpW
Groupthink and herd mentality is endemic in Irish institutions supposed to provide alternative views and these were brought onside by FF.
The unions ,the universities and the media still speak with one voice on issues that many ordinary citizens have been extremely concerned about for many years.
For example concern or opposition to mass immigration is slapped down immediately ,usually by being tagged racist or xoenophobic .
Until recently xoenophobia was regularly used to tag opposition to the EU by mainstream media.Now ,however this is changing but its generally an emotional response rather than a reasoned one.Hence the Sunday Indo’s recent depiction of Germans as the ‘Master Race’ by its editor Aonghus Fanning.
The universities unanimously campaigned for the second Lisbon treaty to be passed.The herd mentality afflicts all those who work for third level institutions.
Similarly most ,if not all unions campaigned for Nice 2 and Lisbon 2 even though this resulted in mass immigration from Eastern Europe .As labour has but one card to play,the withdrawal of that labour ,it was monumental stupidity on their part to agree to a treaty which provides limitless labour .
Munchau of FT is not being kind to EU Finance Ministers and their advisors.
http://www.ft.com/cms/s/0/0304c204-6e9b-11e0-a13b-00144feabdc0.html#axzz1KbKcX58k
Google- The Eurozone’s quack solutions will be no cure
I notice the link is behind a pay wall.
Sean
Afaik the universities per institutions were neutral on Lisbon, they are so on all matters of political national electoral politics
And, also it’s simply false to say that all academics were pro Lisbon.
Try facts: they’re refreshing
@grumpy,
If that were my ambition, I would never have posted a comment on this board in my own name. ‘Tis the quiet pig that eats the meal 🙂
@brian Lucey,
”..the universities per institutions were neutral on Lisbon, they are so on all matters of political national electoral politics..”
The following is from UCD’s website dated 28/09/09..
”…University Presidents call for “Yes” vote in Lisbon Treaty referendum
The Presidents of the seven Irish universities have expressed their strong collective support for Ireland’s positive engagement at the heart of the European Union in the run up to the Lisbon Treaty referendum….”
@brian Lucey,
”…And, also it’s simply false to say that all academics were pro Lisbon…”
Brigid Laffan , a UCD academic ran a high profile campaign for a yes vote in the Lisbon treaty referendum.
Bearing in mind my earlier points and this threads subject is Groupthink and the lack of dissent please name academics who publicly ran campaigns or publicly came out for a No vote.The fact some academics were not pro Lisbon but would not come out publicly and say so is the point.
@brian Lucey,
”…Try facts: they’re refreshing..”
I guess this statement is self referential.
@EW1
In defence of Shane Ross, Anglo was assumed to have the carte blanche of government and regulator, had not yet begun the €600 m Suisse helicoptering or BB funny money transfers, I blog about here referring to the Kathleen Barrington journalism, http://wp.me/pBbF3-eI , Shane has a distinguished record or attacking malfeasance in the banks and as of yesterday attacking Nyberg whitewash Sunday Business P8 listing the names and identities of the 14 Nyberg investigators who came variously from backgrounds in the IMF/Irish banks and Dept Finance. As I say above, give me 5 detectives from CAB and small group of economists, extend the reference of CAB and follow the money from deep trawl interviews of less than 50 people who got loans in the various categories, you’ll have a report in a few months that would not be a sanitised coverup, and we would know where the money came from and went under whose guidance and names would be mentioned for follow up charges in the courts. We’ve had three pig in a poke reports on the banks, time someone went in and produced a good one, not one for gombeens.
@all
Fintan O’Toole on the Upper-Echelon’s highly competent incompetence in protecting, and promoting, itself.
Corporate Goverenance: No Change stat sig ***
Upper Echelon Continuity: stat sig***
http://www.irishtimes.com/newspaper/opinion/2011/0426/1224295457992.html?via=mr
@ DO’D: “Upper-Echelon’s highly competent incompetence in protecting, and promoting, itself.”
Yep. Known as Skilled Incompetence: The Paradox of the CEO
[Chris Argyris – may have been in Harvard Bus Rev. early 1990s or so.]
Shamlessly re-cycle old ideas! Maybe FO’T just made it up on his own. No matter!
Change has to originate at the ‘top’. If ‘they’ are unable (or most likely stolidly unwilling) – what hope?
BpW
@Brian Woods
And, of course, this elite is ably assisted by the legal profession – the Guardians of the Golden Circle … and in the space previously rented by McQuaid …. ‘senior counsel advises against etc’ as the new theology of the upper-echleon ideology and also links to Argyris’ notion of ‘resistance to change’.
Mick Clifford’s take on this here:
http://www.irishexaminer.com/features/power-of-legal-profession-bad-for-society-152333.html
@Colm Brazel
“Shane has a distinguished record or attacking malfeasance in the banks”
Er, yes, he’s very good at closing stable doors.
Quite good at enticing horses out of buildings with carrots too…
@M.Hickey
munchau offers nothing in that article other than Greece does not need to default yet. however the markets seem to think differently with 2 yr at 24.25%. So much for them returning to the market early next year.
Sean
a) the IUA is a private company the owners of which are the presidents of the universities. Believe me, they DO NOT speak for “universities”. Nobody does or can
b) Ill take your Dr Laffan and raise you ooh, people like Andy Story. Your point is that you think that there is some deep dark conspiracy. There isnt. There may well be groupthink but the notion that all academics in the country can agree on anything is laughable. So..hahah..
@All
In terms of Groupthink as far as I can see nobody has challenged the most obvious issue that is costing us all billions at the moment – the current school of thought regarding the appropriate level or size of the Core Tier 1 Capital Ratios in our beloved banks.
The assumption is (and not in anyway challenged) is that more is better.
Well can I put it on record that I believe this to be utter nonsense. Capital buffers in a bank are required to be at their largest, insofar as history would suggest, at the top of the economic cycle. Why the current CBI feels the need to run counter to this well held belief is still a mystery to me.
There is zero evidence as far as I can see that the so called better capitalised banks performed any better going in or coming out of the current crisis.
The ratios of the Irish banks were low by international standards going into the crisis but given the size of the bust in the Irish banks, the size of capital required would have had to have been north of 30% of Risked Assets to cater for the losses. Capital requirements of this size would have given rise to such poor returns investors would have walked away years beforehand.
One of the weakest Core Tier 1 ratios recorded going into the epi centre of the crisis in 2008 was recorded in Barclays (Core Tier 1 ratios c6%) and as far as I can recollect they were forced by the UK Govt to boost their Capital Ratios during the crisis but at no stage were Barclays ever believed to be bother (they subsequently bought Lehmans and were requested to buy them prior to Lehmans going down).
Nor as far as I can recollect were they forced to take any UK or Govt bailout – the question for me is did the additional capital they were forced to raise really provide any additional ‘comfort’ to the market or depositors at the time?.
For me the answer is a definite no. At the time size, geographic spread and business diversification were and are the reasons Barclays survived nothing to do with Core Tier 1 ratios at 8% versus 6%.
Its worth nothing what the CBI and Regulator have requested the Irish banks to do over the past couple of years – sell their international businesses, sell their non ‘core’ businesses and concentrate all their focus on Ireland Inc.
Exactly 180 degrees opposite to what ensured Barclays survived and thrives today. By the way I’m not in amy way promoting Mr. Diamond and his bank but just observering that following the flow and doing what looks and sounds right is often not the case.
Groupthink in Dame Street would suggest that the promise of additional capital in the Irish banks today should somehow comfort deposit holders – well from where I sit the ‘comfort’ of deposit holders is not being reflected in their actions – as cash is not flowing back into the system as Michael Noonan would have you believe.
Amagerbanken, the Danish Bank which went bust back in Feb recorded a Core Tier 1 ratio based on its Sept 2010 accounts at 13.9% – the number was released to the market in the last week of Oct 2010 and yet 4 months later the bank was gone with Depositors taking a 40% haircut.
But we’re led to believe that more is better. 13.9% is significantly more than even the most conservative estimate required under Basel III by 2019. Hmmm..
But more Core Tier I Capital is better because the chaps in the CBI et al now know what to do. Cobblers.
In the Regulators own words – ‘show me the evidence’ that better capitalised banks perform their duties any better than their less well capitalised brethern over the cycle?
You won’t find any.
I seem to recollect reading that in the late 1880’s as many as 25,000 US banks went bust and from records at the time it suggested that in most cases equity held represented more than 25% of the loan book and it made little or no difference to the ability of the banks to survive the economic landscape at the time.
What’s also worth remembering is that poor Regulation at the bottom of the market is every bit as damaging as the dire state of Regulation we had at the top.
So Groupthink insofar as challenging this mantra seems to me to be almost completely absent and it’s assumed Messers Elderfield and Prof Hon. know their stuff. Repeat – I’m not a believer.
For what its worth the only long term metric in my view that conveys anything secure about a banks stability is its Loan to Deposits Ratio. A figure less than 100% has nearly always been a bank in good long term financial shape – Capital Ratios of any description come a very poor relation this basic banking metric.
@Colm Brazel
Agreed – the Nyberg report which heaped the blame on the taxpayers in much the same way as the bank debts had already been heaped on them, amounted to the addition of insult on top of the previous injury. It was not useless – it was far worse than that.
We needed this man!
http://en.wikipedia.org/wiki/William_K._Black
Brian Lucey@
”..the IUA is a private company the owners of which are the presidents of the universities. Believe me, they DO NOT speak for “universities”. Nobody does or can…”
The UCD website I quoted above makes no distinction between the IUA and the Universities. The website is explicit in equating the Universities views and its Presidents.
Also 55 members of Staff, including the President and Vice Presidents, of NUI Galway took out a one page advertisement, nine days before the Lisbon referendum, entitled ‘Staff at NUI, Galway will vote yes for Lisbon’.
Your assertions above are therefore false.
@brian Lucey,
”..Your point is that you think that there is some deep dark conspiracy..”
This is your characterisation ,however its not what I wrote and is false.
There is a groupthink amongst acadamics in general regarding certain subjects ,an example of which is their support for the Lisbon Treaty.In a vibrant organisation dedicated to freedom of thought and expression one would expect more dissenters than there are in the Irish universities.This was my central point.
@brian Lucey,
”…but the notion that all academics in the country can agree on anything is laughable. ..”
agreed.Your own research for a mortgage company concluding further growth in the property market was at variance with other academic economists.
@ Yields or Bust
This seems like a great point.
Would love to know if it could be discussed here. Would also love to know if Elderfield is doing more harm than good – in effect triple locking the stable door and rendering said stable unusable after the horse has bolted
@ AMcG: Prof W. K Black?
Now that’s like asking for Attila! He’d (Black) savage them. They would be unable to deal with his withering criticisms. They would have to resort to ad homs! Bring him on! He IS real good!
BpW
BW
You know someone is in the right when they resort to the Ad Homs….Bring Bill!