Monthly Archives: February 2013

Downgrading Irish University Libraries

I have noted previously the hollowing out of the academic sector in the non replacement of professors who have left the Irish univeristies.  Now we also see this in action in the university library sectors.

Courtsey of Deputy Peter Mathews who solicited these data via a PQ we see in the first table the number of persons by grade by university who have left that university library since 2009. The second table shows the replacements. What do we learn from this?

First, there are a bewildering array of grades in the irish university library system. I understand that there is a table of equivalencies somewhere.  Some rationality might be usefully brought to bear on this. Even within the old NUI system there are clear differences as to grade nomenclature. This may seem petty but the more opaqueness there is the easier it is to hide change.

Second, we see a tendancy for little replacement in the larger university libraries. These are the larger but then they are also the ones that support Irelands research intensive universities. But that support must now be creaking.

University libraries are not in general the physical books at this stage. They are the core nodes for the organisation and distribution of research knowledge. In a very real sense a university is its library, its information holdings that are accessible for knowledge creation and dissemination  If we do not have  sufficient, or sufficient qualified professional staff to assist in the collation, organisation, dissemination and retrival of information we cannot do research. There is another story to be told on the holdings of journals and databases in Irish universities  but for now we are pretty well situated. But if we cant find them or the students cant find them, or researchers cant find them, then they are no use. There is little point in Sean Sherlock unveiling hundreds of millions of research grants, no matter how welcome they are, if over the course of the grant the ability of the researchers to access the frontier of knowledge is degraded.

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What gets measured gets managed – so how can we manage research without measuring it?

measurementThis is an expanded version of the “Left Field” column published in the Irish Times.Over the last couple of years there has been a growing feeling amongst all stakeholders – government (supposedly representing the people), the administration (Department of Education and HEA), and the higher education sector that there is an increased scrutiny on what exactly academics do. Nobody is quite clear where the impetus comes from, just as nobody is quite clear what it is that the answer might be.Much of the heat has come on the issues of contact hours and how much research (and of what kind) is of any “use”. Some consider that universities and indeed all third level is merely secondary shcool for adults, and that time spent in the classroom, sorry, lecture theatre, is the only thing that is worth rewarding. These usually also show breathtaking ignorance about the process of scientific investigation, with the extreme suggesting that we should only fund reserach whose results we know in advance…..Yes, that SFI grant into Academic Clairvoyance was a good idea. But, in essence its a debate about value for money. Leaving aside the fact that not every thing that has a price has value and not everything that can be valued has a price, we can and should accept that it is simply good management practice to attempt to find out how efficient and effective our work processes are and how they might be improved. Its even more useful when the inputs, money and academic resources (although seemingly not administrative) are in scarce supply.

serendipEfficiency is a technical concept – its about the transformation of inputs into outputs. For a given level of inputs (academics) can we get more outputs (graduates, googles, whatever). Effectiveness is a little more fuzzy, about how well we achieve our goals. In the former case we have cost and technical issues which can and should be investigated. In the latter we need to have clarity and stability about these goals in order for them to be assessed. And, in most cases we cannot even begin to measure effectiveness for years, if not decades. Plus, directed research, chasing imposed metrics, simply is not the only way to do business. There is a very long tail and a very long halflife to both “good” teaching and research. James Clerk Maxwell published in 1873 some equations he had worked on in 1865 which were abstruse and remote. That they later formed the theoretical basis of the Wireless in the early 1900s was not a directed outcome. Boole’s pamphlet on mathematical logic in 1847 had to wait for the best part of a century until the information revolution to be seen as the transcendental work that it is now seen to be. Wohler synthesised urea, closing the gap between organic and inorganic chemistry, in an accidental discovery Perkins work on dyes and the subsequent growth of synthetic organic chemistry came from a nearly discarded experiment in the synthesis of quinine. Atomic clocks were designed to test relativity and now form the basis of GPS satellites There are hundreds of examples of transformative products that emerged as byblows, serdips or sheer accidents, from basic research. In a wonderfully lucid essay in 1939 Flexner noted the importance of curiosity, serendipity and generally pootling about.

euknowHow we are moving in Ireland is towards the introduction of workload models and key performance indicators. Key performance indicators however are inherently political. The EU “knowledge triangle” suggests that higher education trades off between supporting business, education and research. Like all policy triangles it is in fact a trilemma- it is difficult if not impossible to excel in all three domains. Note that this is not to say that it is impossible to be active in all three- just that. And In Ireland we have tried for that. We have two sectors which, if they were to be closely examined have historical and natural affinities with two legs- the IoT sector has historically been orientated at teaching and business support, the University sector at teaching and research. If we require an increased emphasis on research from the IoT without additional resources, or on business support from the universities without additional resources we will degrade one or other of the existing strengths. And anyhow, how would we know what was being done was good?

manyhatsPart of the problem in the assessment of what we academics to do is that they seem to do lots of things. We teach we supervise we design courses we examine we sit on committees we hunt grant money we reach out to the community…. Most workload models try to fine-tune these to a faretheewell allocating points for this and that. But in reality we do one thing – communicate knowledge, be it to the academy (research), students (teaching) or to business and society. And here is where the problem is. How can we measure these activities so as to allow managers to allocate resources and to reward those who outperform norms and expectations?

pacioliWe can measure business impact in a crude fashion by patents gained and monies raised and spinoffs that rival google created. This is the dominant metric now obsessing the government, seeming to treat the universities as machines for the creation of the next FaceGoogle and wondering why there hasnt been a patent that morning. J C Maxwell or Faraday or Antonie van Leeuwenhoek would probably not have been funded by SFI. We can measure teaching eficiency in a crude fashion by how many hours an academic is in class. In the Institutes of technology there is a class contact norm of typically 16h per week. That is not the case in universities, leading to the assumption that as university academics teach less they do less. Nothing alas could be further from the truth. The key difference between the modal IoT lecturer and the modal university lecturer is the expectation and requirement of research activity. And that takes time.

passageoftimeIt is a reasonable question to ask about the impact or import of the research even if we cant realistically answer– what is not reasonable is to assert that research is in some way less difficult or less timeconsuming than teaching. Research is akin to venture capital. We need to do a lot to get a little output. Success is rare and failure the norm. Publication in toptier journals is exceedingly rare and more than one as fleeting as a shy higgs boson in a ghillie suit on a heather covered hillside. Acceptance rates (success) in decent journals or in gaining leading research grants is often less than 10%. Research grants can take literally months to complete with no guarantee of success. And doing a paper takes time. It takes typically in excess of 100 hours of work to get a finance paper to a stage where one is happy to put it out for even working paper review. And then it takes a long time to get it published. It can take between 6 months and 6 years to get a paper from initial submission to final acceptance in finance and economics and other social sciences. In fact, in finance, economics and political sciences where the papers are usually data driven this time requirement is perhaps on the low side for social science generally. In the arts and humanities there can be literal years with “no output” as monographs and books are chronovores of enormous appetite. During that time the paper is usually under review at symposia, conferences etc and further hundreds of hours are input in refining and tweaking. The total time requirements for publication of a single article in a set of leading journals in finance were estimated to average over 1600h in a 1998 study. Meanwhile for younger academics, those seeking promotion or permanency, or seeking to move to sunnier climes they require publications so this process starts in PhD times and continues with up to a dozen projects in various stages of the pipeline. None of these times are captured in crude workload measurement approaches. to somehow assume that academics in universities engaging in research are idle is to display a gross ignorance of the scientific process – eureka moments are few and far between. If genius is 99% perspiration and 1% inspiration adequacy is 99.9% perspiration and .1% inspiration. A further aspect of research for those who are research active is peer review and editing . Typically a paper gets published after a couple of anonymous referees have commented on it. Doing this referee job is time consuming – typically 4-5h reading and writing per paper. If one does 12 reviews per annum that’s 60 hours, or the best part of two working weeks. Imagine the editor of a journal receiving 300+ papers per annum, each of which has to be read through prior to sending for review and we see another hidden time cost of research. Teaching also takes time beyond the classroom. For every hour spent in the class you take 3 to prepare, review, reflect and redo the work. Even if one has a stack of slides and a good strategy its imperative to do a mock runthrough (that takes about the same time as teaching) noting as one does what is outdated, what is wrong, what doesn’t flow etc. And then one redoes the slides and delivers, finding that in the class there are new issues to be incorporated, new questions raised, issues that seemed pellucid actually as muddled as a government jobs initiative…. So a 16h class contact in the IoT doesn’t leve a lot of time in teaching term to do any research even if one were so interested. Of course, there’s always the evening and weekends but the many IoT staff who wish to be research active typically use the summer breaks to do it –Christmas and easter are usually taken up with marking essays and so forth.

phrenolBy all means therefore lets look at metrics of activity. But lets recall that these metrics typically measure output, not input and therefore cant be used as such for the measurement of efficiency or still less effectiveness. That’s not to say we should not measure research output. We should. Perhaps the issue is that we are scared of what we will find. Academics are terribly resistant to being managed and by extension to being measured. But we need to accept that without open transparent measures of research we will not allow the universities to show the extent to which they are engaged with the second leg of their historic mission. Measurement of research output is a crude proxy for research activity and even more so for research excellence. But like patents and so forth it is measureable. We don’t do this in Ireland. We have experience in the UK of several generations of research measurement. Many of us have been involved in these as assessors or as units of measurement. We can and should design a model builds on these and improves upon them, that measures research output, across units and the sector. This will show that there are many who simply do not engage in research (as measured). Every academic knows of people who simply turn up, teach and disappear. This puts an unfair burden on those who do research, and it is they who should be shouting loudest for such a metric. We have some example beyond the UK. Ontario has just done a similar exercise, and there are many measures of research activity for individual disciplines in Ireland, notably business and economics. What these all show is that there are many many academics that do not come onto the research activity radar. One can only wonder what it is that they do all day. Conceivably they are engaging with business and society but most who work in the sector would smile ruefully at that idea.

Until universities and the system managers (HEA and DES) determine what the role is of universities in relation to the trilemma we cannot however begin to reward or discipline academics or the sector for resource misallocation. What gets measured gets managed. By definition a poor measurement system will deliver poor management. But we are not measuring research in any manner in Ireland. Perhaps we should start.

Ollie and the Rehnation of the EU….

img_pod_2402-olli-rehn-news-conf-RTR2YAW5This morning on Morning Ireland there was an interesting interview with Ollie Rehn, the EU commissioner for economic affairs. He dismissed the notion of coordinated austerity as being a problem, dismissed the ruination of the social compact, and generally displayed a chilly technocratic aloofness that shows the paucity of leadership we have now. He even invoked confidence fairies in regard to Italy…. He was asked repeatedly what was the aim of the continued austerity programme, now that we had some headroom from the “resolution” of the anglo promissory notes. He, not surprisingly, rejected the calls for slowing down of the process. He repeatedly stressed that the aim here was to enable Ireland to “return to the markets”, in other words to exit the troika programme and to borrow on our own account.

On his webpage he states his aim as “The first and foremost priority for me as Commissioner for Economic and Monetary Affairs is growth and jobs, in the context of macroeconomic stability. He is head of the economic and monetary affairs in the Commission, who state   “DG ECFIN reports to the Commissioner for Economic and Monetary Affairs, Olli Rehn. It strives to improve the economic wellbeing of the citizens of the European Union”

In his interview Ollie shows he simply doesn’t understand his brief. It is NOT an aim to get back to borrowing. That is a tool to enable a state to fund itself. Other tools include tax, transfers, the sale of natural and other resources, pillage and foreign aid. In elevating a tool to the status of aim Ollie shows the final capitulation of the EU under its FANGS hegemony to being simply a tool for the financial system. Perhaps he should read the preamble to the Treat of Rome which states

AFFIRMING as the essential objective of their efforts the constant improvement of the living and working conditions of their peoples

Right now its hard to see how this is being achieved.

(how) Should we spend the anglo savings?

money.This is a version of an opinion piece published in the Irish Examiner.So the Government has a deal on the anglo promissory notes in hand. There was an unseemly crowing from them and from much of the mainstream media when the deal was announced, the merits (some) and demerits (many) being lost in the laudatory glow. The deal was politically necessary for them – having staked their reputation on not paying the 3.1b this year they could do no other than produce some formula that would allow that. A key aspect of the deal is that it gives some breathing space. Many, myself included, have criticized the payment of any taxpayer money for private debts, but the fact remains that the government is in a better cashflow position now than it had expected to be when the present budget process was put in place. This raises the question of what to do with the savings. Lets leave aside that the savings are, for the future, dependent on the Central Bank holding onto the bonds, and concentrate on the here and now. The savings amount to approx. 1b per annum for the next number of years.

When a government has money it can do two things – spend it or save (pay off/accumulate less debt) it. There is an undeniable fact that regardless of the deal we are still in deep financial trouble. We are on target for 10b plus in deficit this year – the excess of government spending over income. While the meme has been fostered that “we are borrowing to pay the public service” the reality is that government money is fungible. Tax and borrowed money is deployed to pay for state sevices and to pay for the interest on borrowed money. No tax head is earmarked “teachers salaries” ; no bond is raised “for the guards overtime”. It all goes into one big pot and is spent as an when needed. It is fungible. And it is that fungible nature that is important here.

The reduction in planned borrowing can be put to the more rapid reduction of the overall likely burden of the national debt. That is a good way to spend it. It would give a return equal to the cost of borrowing, some 5% on the debt at present. But all government funding should be evaluated on a cost benefit basis. That is not the same cost benefit as would be used in a private company – the government has a social as well as economic payoff to take into account. While not building up a debt is a good thing, the question now is – is there an alternative use of this money, were it to be borrowed, that would generate a higher marginal (social and economic) return than not borrowing it and retarding debt accumulation. Having planned to borrow it, and having made budget and austerity decisions on the basis of that, might they wish to continue borrowing it even though it is no longer needed for the original planned purpose?

The call has been made to borrow this and to invest in capital. But the question is what kind of capital? The CIF would no doubt wish to see large scale engineering projects. But we have a decent, if needing some completion, motorway network and there is no crying need for any pharonic bertibowls in the near future. Much capital spending is of dubious longterm economic benefit. SIPTU has urged that the savings be used for job creation, but there is a lack of evidence that government helicopter money yields significant job creation. We need to think outside the box if we wish to borrow this money and use it

Two forms of capital rarely get mentioned – social and political. Take the latter – the reality is that we will still face into increased taxes, more taxes, reduced services and more expensive services for the next three years. But the governemtn is a coalition and FG is itself a well discuised coalition. Political capital has been squandered for two years in continuing to row back on or drive coaches and horses through promises made. If the government want to bring the population along with them for the next half of their tenure they need to show that the pain has been of some benefit. Modification of the fiscal adjustment to the relative benefit of lower and middle income earners via some part of the savings would yield political capital now to be spent in the future on truly transformative and thus disruptive changes to how we run the economy

Social capital, the glues that bind us as a society, have a complex but ultimately powerful impact on economic growth. As the recession has advanced we see that large parts of the country are in danger of eroding the social capital base. People in unsalable pyrite mansions, in developing sink estates, in rural areas that are poorly served with transport or modern IT, in far exurbs that demand hours of commuting, or in negative equity so deep that they can more easily move to ajob in Dubai than Dundalk are almost by definition going to be eroding their social capital. If we wished to use the money well we could do worse than dealing with some of these problems. We should invest in a proper national fiber broadband system, solve the most egregious mortgage issues, and deal with the issue of extreme commuting in so fare as we can. At the very least we should not reflexively recoil from borrowing in horror. At some stage this depression will end and the economy will stabilize. We need to start planning, something we are not good at doing, to build the kind of society we want to have. Because we live in a society not just an economy.

Why we should keep and abolish the Seanad ; Sean(s), Science and Senators

Sometimes a debate comes along in the upper house that is worth listening to. Usually, and this is I think, down to the (limited) franchise, this comes from the university senators.

Last week Senator Sean Barrett (TCD) moved a series of amendments to the Industrial Development (Science Foundation Ireland)(Amendment) Bill 2012. This bill is in essence to extend the remit of Science Foundation Ireland to allow it to fund not just basic but also applied research. Now, lets leave aside the research on how hard it is for government to “pick winners” (actually, lets not…see this very balanced research paper) the bill like all bills goes through the process of the Seanad reviewing it. Bear in mind that the bill is for a multibillion euro process which will convey enormous power and clout on a quango. No matter how good a quango or how optimal its solutions may emerge as being, its surely a good idea to have many views on the design.

Sean Barret proposed a series of amendments. They are as below. Not one got to be incorporated in the bill. Not one. In many cases (See the debate here)  the minister , Sean Sherlock, agreed with the spirit or the wording of the amendment but in essence told the upper house to trust him/his advisors/SFI. Apart from Sean of the total 60 senators only three others spoke, all to praise Sean B, but not to actually offer any insight or views.

Sean asked for nothing wild : to have SFI take on the views of external professional bodies, to have SFI grant holders not be allowed to buy out of teaching students, to ensure that a value for money element was enshrined into the grant review, to make provision for new areas to be brought into the ambit of SFI if science dictated, to curtail the power of the minister to overrule science in favour of politics.  Mention was made of the exclusion of botany and mathematics from the priorities. His remarks were learned, witty, historically informed and cogent. They were exactly what you would expect from a member of an upper house, agree with them or no, and were there more like this then there would be a case solid as a rock for keeping the Seanad.

This set of amendments is hardly scientific Jacobism, but as these amendments were “not invented here” Sean Sherlock didnt take them on board.   Mathematicians can jolly well find some project to support, as can botanists. Teaching is not his concern its an SEP (someone elses problem).  Everything we do is subject to the ruthless rapier scrutiny of ….the Department of Finance…We have a priority list and that is a list of priorities we chose as priorities. We cant ask the Chartered Engineers for their views on a scientific project as then we would have to ask the divil and all, maybe even the Irish Texts Society. And so on. By turns dismissive, patronising  supportive without actioning, Sean S did his duty which was to steer the bill through.

If we are to have an upper house then both the members of same and the government must respect it. That means that they dont automatically not accept amendments from uppity outsiders, and that when the future of the scientific underpinnings of the state are being discussed people bother to turn up and debate the issues (even if like Sean B they know that the government will not bother their barney with paying the blindest bit of attention). If the government wont take on even motions that they agree with and if senators cant be bothered, then we should dispense with the pretence and drop the Seanad.  In the meantime, trust Sean.


Entrepreneurship research in ireland

So with all the government fuss about the innovation island and the innovation economy, with all the (lip service?) paid to empowering entrepeneursip and with the push to make Irish universities into powerhouses of entrepreneurial enablement, nobody seems to have looked at the question : are we doing any research in the area.

A caveat : of course research publications are not in and of themselves sufficient for the fostering of an area. But  they are, I contend, necessary. If we didn’t have engineers, somewhere, in the country researching in and publishing on nano tech or bio tech or whatever tech is the fancy de jure of the Department of Hoping to Stumble on a new Google, we would not have companies in these areas. So also with any other area. A vibrant ecosystem of academic, applied and basic research is a prerequisite for a healthy growth.

So then onto looking into entrepreneurship and related. I looked at all papers published in the areas of Entrepreneurship, Innovation and   Small Business Management. The journals selected were those identified in the Academy of Business Schools. They are below, with their “ranks” – 4 is world class, 3 pretty good, 2 good and 1 ok. There are of course a myriad of other journals and the ABS is but one ranking. That said, it’s a generally accepted qualitative ranking of over 800 journals in 20 areas of business school activities.

Journal ABS Rank
Creativity and Innovation Management 1
Entrepreneurship and Regional Development 3
Entrepreneurship, Theory and Practice 4
European Journal of Innovation Management 1
Family Business Review 2
Industry and Innovation 2
International Entrepreneurship and Management Journal 1
International Journal of Entrepreneurial Behavior and Research 2
International Journal of Entrepreneurship and Innovation 2
International Journal of Entrepreneurship and Innovation Management (IJEIM) 1
International Journal of Innovation Management 2
International Small Business Journal 3
Journal of Business Venturing 4
Journal of Enterprising Culture 1
Journal of Entrepreneurship 1
Journal of International Entrepreneurship 1
Journal of Product Innovation Management 4
Journal of Small Business and Enterprise Development 2
Journal of Small Business Management 3
Journal of Techology Transfer 1
R and D Management 3
Small Business Economics 3
Social Enterprise 1
Strategic Entrepreneurship Journal 3
Technovation 3
Venture Capital: An International Journal of Entrepreneurial Finance 2
World Review of Entrepreneurship, Management and Sustainable Development 1

From Scopus I extracted over 8000 records – journal articles published in these journals from 2001 to 2012 inclusive. After cleaning up and a whack of macros in excel, I extracted records for the nationality of over 16000 authors. Many papers had one author, some had 10…. Bear in mind that Scopus, while excellent, is not 100% comprehensive and the more so as one goes back in time. Nonetheless it is the most comprehensive and accurate database that is available. So, take the data below with some salt, and I am happy to share the (very large) raw files with anyone who can build and improve on this. And, this is a blogpost not a peer reviewed article… 

Not surprisingly the USA leads the field in research. But, we don’t do too badly.  The first column of data are the number of authors published, the second these weighted by the ABS journal weight. The Average column is the ratio of these and represents a crude estimate of average paper quality;  in terms of authors we rank 22nd, in terms of average 26th. Not bad but the standout small countries in this list include Finland for numbers and Singapore for average quality.

Country Authors Weighted Average
USA 4303 13471  3.13
UK 2230 5989  2.69
Germany 996 2739  2.75
Netherlands 934 2687  2.88
Canada 902 2632  2.92
Spain 790 1984  2.51
Italy 632 1659  2.63
Sweden 604 1658  2.75
Australia 469 1155  2.46
Taiwan 421 1206  2.86
Finland 388 909  2.34
France 387 928  2.40
Belgium 327 964  2.95
Denmark 233 591  2.54
Japan 210 588  2.80
Switzerland 201 562  2.80
China 191 549  2.87
Norway 187 471  2.52
NZ 175 380  2.17
Korea 166 462  2.78
Austria 148 390  2.64
Ireland 144 365  2.53
Greece 129 313  2.43
Portugal 112 262  2.34
Singapore 93 303  3.26
India 88 200  2.27
Turkey 80 236  2.95
Israel 75 211  2.81
Kong 66 196  2.97
Brazil 62 159  2.56
SA 59 149  2.53
Slovenia 53 125  2.36
Chile 45 114  2.53
Malaysia 39 80  2.05
Nigeria 36 108  3.00
Mexico 34 74  2.18
Croatia 31 61  1.97
Thailand 27 72  2.67
Luxembourg 25 65  2.60
Liechtenstein 22 41  1.86
Estonia 22 44  2.00
Cyprus 22 47  2.14
Poland 22 47  2.14
Hungary 18 54  3.00
Fiji 13 17  1.31
Lebanon 13 33  2.54
Latvia 10 23  2.30

Where are we publishing? There’s a spread. We author a lot in the areas of small business and technology related ; not so much in r and d and the behavioral type journals.

Journal Irish Authors
Journal of Small Business and Enterprise Development 23
Small Business Economics 16
Technovation 16
International Journal of Entrepreneurship and Innovation Management 12
Journal of Technology Transfer 10
International Journal of Entrepreneurship and Small Business 9
Entrepreneurship and Regional Development 8
Journal of Product Innovation Management 8
International Small Business Journal 7
Venture Capital 6
International Entrepreneurship and Management Journal 5
Journal of Small Business Management 5
R and D Management 5
European Journal of Innovation Management 4
International Journal of Entrepreneurial Behaviour and Research 4
Industry and Innovation 3
Entrepreneurship: Theory and Practice 2
Journal of Business Venturing 1

And where does this come from? In total there were 95 journal articles that had one or more Irish affiliated authors. The institutional affiliation is below, again with an ABS weighting and an average. For what its worth, I have some papers in the set, papers in Small Business Economics.

Irish Institution Authors ABS Weighted Average
UCD 34 92  2.71
UL 30 76  2.53
DCU 18 41  2.28
NUIG 14 39  2.79
UCC 8 16  2.00
TCD 6 14  2.33
UU 6 13  2.17
DIT 5 15  3.00
DKIT 3 8  2.67
TIPP 3 6  2.00
WIT 3 6  2.00
ABBOT 2 6  3.00
ERINI 2 6  3.00
QUB 2 7  3.50
SKYTECH 2 6  3.00
CIT 1 3  3.00
DLIATD 1 3  3.00
IRC 1 3  3.00
ITT 1 3  3.00
MAYO 1 1  1.00
NUIM 1 3  3.00

One thing stands out very clearly – UL is producing significant work in this area and at a good standard. Another is that the Institutes of Technology are not. Again the caveat – a publication in an entrepreneurial or innovation journal is not proof of entrepreneurial activity or engagement. Not is lack of same evidence of lack of such. But we would, if we wished to see a thriving innovation economy and a fostering of entrepreneurship in Irish higher education graduates, want to see evidence of academic involvement all along the way – from the very applied to the very academic. Right now that is not evidently the case.

Nor can we turn academics with interests in areas other than entrepreneurship and innovation into people capable of mentoring students and publishing work of the highest world standard. Much more involvement of clinical (but with research expectations) and adjunct staff in the area is going to be needed, along with significant investment in the human capital of business and other schools. Finally, we have some centers of activity – UCD (not surprising given its size and scope), and UL. We should build on these platforms, determine the strengths of the other schools and let them build on those. One size does not fit all and neither can every school be good at everything.

Anglo deal doesn’t quite cut it

This is a extended version of a column published in The Irish Examiner 9 February 2013

teddebtSo now we know – its Frankfurts way, all the way. One can only wonder what was going through the minds of the labour party ministers as they signed off the deal that irrevocably linked the Anglo debt to the state. Was it the words of Collins on his signing the AngloIrish treaty , in a political sense? Or was it the words of Mr Rabbitt on the distinction between electioneering and governing? Or was it simply thanks that there was a deal, any deal, that didn’t require a payment on 31 March? Regardless it is now clear that they have swapped a shortterm loan of dubious legality and even more dubious morality for a longterm loan of impeccable national standing. There is zero chance of ever getting out of this now. Zero. All major parties have now voted for the linking of state and private debts. Labour which stood against the 2008 deal, mainly because it gave too much power to the minister and was rushed through has now rushed through a deal that gives sweeping power to the minister. The view within the tent must be so much better than without.

In any sense, we now have the full foul flower of the 2008 banking deal. Having sunk 30+ billion of cold hard cash into the wreck of the banks we have now sunk a further 30b of taxpayers cash into an arguably worse deal, paying for the folly of the guarantee to the anglo subordinated bondholders. This deal flies in the face of all the talk (or as Pat Rabbitt might call it “Auld Palaver” ) at the European level of delinking banking and sovereign debt. It cements and accelerates at the European level the move away from an integrated and globalized banking system and reinforces the trend towards national based banking systems. It makes a mockery of the moves towards banking union in that it demonstrates explicitly the fact that the national state remains on the hook. This national banking approach is evident in more than this. Despite a desire and despite the evident need for one the European leaders still cannot put in place a proper banking union template – national taxpayer cofinancing for bank failures will still be required. In the UK the moves to increased regulation include a move towards a sharper distinction between UK, other EEA and non EEA banks. We have seen a continual concern in the core about TARGET2 balances viz a viz peripheral countries, with the most convincing explanation suggesting that these flows demonstrate a pulling back to the core of credit previously extended to the periphery. All round there is a renationalization in the financial sphere and this deal is part of that.

While financial globalization has brought problems to us, the evidence is by and large that it brings benefits. Deeper, broader more responsive banking systems are associated with greater economic growth. There is an issue as to the lags, and there is an issue also about what we might call utility (the basic money transmission and simple savings/loans) versus industrial banking, but overall the evidence is favourable. In acquiescing to this ECB driven linkage of the banking debt to the sovereign the Irish government has acquiesced in this renationalization.

What of the deal itself? Like any deal it has good and bad points. I remain convinced that the economically and morally appropriate thing to have done was not to pay. However, we have now done so. The deal is complex. It in essence involves IBRC being liquidated, the central bank seizing the asset (promissory notes) that was used as collateral for it extending liquidity, and the government and the central bank agreeing to swap this worthless wretched note for proper NTMA bonds. These bonds are of a longer term and at no more cost than the promissory note so in terms of the present day value they are less. How much less is a matter of some conjecture as the terms of the newly issued bonds are floating. But a reasonable conjecture would be that the value is between about 40-60% of the total amount.

Before we start doing cartwheels of delight however several notes of caution must be struck.

First, there is a requirement in the deal that the central bank will not hold onto these bonds to maturity in total. They will have to sell some. This introduces a degree of uncertainty as to the deal.

Second, the cost is unclear, but we know that we are right now at a low point of the interest rate cycle. As the cost of the bonds fluctuates upwards as do interest rates the cost must rise as do interest rates. The bonds are pegged to a cost over 6m EURIBOR rates. Nobody can forecast with any certainty the rate of EURIBOR, that rate at which large banks lend to each other, over the next few months never mind the next few decades. At a low point in the interest rate cycle a truly favorable deal would have fixed the cost now. The average 6m EURIBOR rate over the last twenty years has been just over 4%. By comparison a rate set at the ECB Main Refinancing Rate would have been cheaper. This leaves aside also the issue that the cy calculation of the EURIBOR itself is under scrutiny and threat, with panel banks pulling out of its calculation right left and center.

Third, much is being made of the argument that, over time, inflation and GDP growth will erode the “real value” of the bonds. This is in one way merely a restatement of the fact that the present value is lower than the total nominal amount. But it also seems to ignore that the ECB have an inflation target (and it has shown itself to be a strong inflation fighter) of 2%. The value will take a long time to fall.

Fourth, even if we were to take the present value as being50% of the face value we have still, at a stroke, added one years deficit. This is hardly consistent with fiscal prudence.

Fifth, there is a worrying line of argument, from the Taoiseach down, that saving the billion a year in funding as we are, we can thus relax austerity measures by a concomitant amount. Even as we are looking at structural budget balances forecast to be over 5% in 2014 ( versus a surplus in Greece ) it is hardly time to raise expectations that this deal is agame changer. Rather than relax the adjustment process (which can only be for party gain) the adjustment should be continued and in effect accelerated with this additional fiscal benefit.

Sixth, the bill contains sweeping powers for the minister for finance. Enabling acts that allow ministers to override commercial judgement on bank asset purchases, create at their own judgement securities (whatever happened to the idea of the Dail having a say on money bills?), or override and instruct the liquidator do not seem to me to be good laws. When dealing with billions of public money the elected representatives should always have the final say.

Finally, we have been here before. In 2008 we saw the oireachtas rush to judgment with complex legislation in the mistaken belief that the issue was one of liquidity rather than solvncy. Then it was the banks, now we are doing the same with the state. Saving cash on an ongoing basis is a liquidity issue. The deal does nothing to adjust the solvency of the state. And that is what a deal should have done.


Labour Senator calls for election if PN paid

@JohnGilroyTeam: i think that there will have to be a general election if promissory notes are to be paid

John Gilroy is the labour spokesperson in the Senate on finance. Throughout the last two years he has been one of the few people in politics who has engaged openly on social media. Most of his engagement has been in the issue of these wretched notes. He’s a serious sober thoughtful politician. People like him are the ones that if it comes will constitute the bulk of those in labour calling for an exit. Coming in the wake of the report that the Tainiste has suggested no deal would precipitate s government breakup is clear that the stakes in the game are ratcheting higher.

Have we the “bottle for the battle”?

Anglo..a view from Europe

So I spent the last few days in the very pleasant environs of Maastricht, as an invited speaker at a symposium on the future of international banking. Some really interesting papers and presentations were delivered, on which I will blog later.

At the conference were a goodly number of bankers, central bankers past and present, and academics on banking and related.

A summary of the views of the core Europeans would be ; Ireland is trying, and that's to your credit, but your legacy banking debts (read, the pro note) are going to be left with you, as YOU screwed up by lax regulation badly implemented. Oh, and your corporate tax rate? You want us to bail you out while you screw us with tax arbitrage? Not. Gonna. Happen.

I see that Brendan Howlin has stated that a deal on the note is essential. One hopes that he is talking to and listening to the same thing as I was hearing. It ain't pretty…