Tag Archives: crisis

Ireland – Not yet out of the economic woods

10 years on from the onset of the crisis we could take some time to take stock. The government is keen, as are many, to wipe it from memory – keep the recovery going. The recent undoubted recovery has softened memories for the most part. But if we forget the past we will sure as eggs forget the lessons of the past.

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When words collide – Why this is not the end of the Greek crisis

So, as most reasonable people hoped and expected, a compromise has emerged. Greece extends the bailout for four months, has a few days to suggest measures that will work to meet the broad targets therein, but the overall constraints on the primary surplus can, seemingly, be relaxed. So, a less austere bailout. Germany wins on forms of words – the Troika (now unnamed but there) remains, the bailout remains, but the words that are used suggest a lower degree of austerity. Peston sees the Greeks getting the best of it as does Frances Coppola, Bloomberg the Germans, Frances Coppola noting that this gives Syriza a chance to show that it and Greece via it can be trusted to behave like a modern half decently managed country. I think she misses the point in making this point. Greece has an appalling record, but the ordolemmingism that Germany has pushed onto everyone as The One True Way to Prosperity also represents a breach of trust, that states can find their own way within bounds of sense.

Nonetheless, I dont see this as the end. Here, in a picture, is why. Its about words. Humpty Dumpty stated ‘When I use a word, it means just what I choose it to mean — neither more nor less.’. Are Greece and Germany reading the same words while being on the same page? I am not sure.

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Germand and Greeks use words and impart meaning to language in very very different ways. The diagram is from Richard Lewis, and is a model of national cultures to complement the well known World Value Survey, GLOBE, Schwartz and Hofstede models. Crucially, it concentrates on language. Cultures are arrayed around three main poles.  These are as below  Germans are Linear-Active. They place great store on the written word, and are planners. Greeks, not so much. The spoken word, in other words, interpretations of what the written word might mean, that is what matters.

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When did we let economics become the totality of society and culture?

The Irish economic crisis was as much a socio-political event as it was an economic crisis. Given that, it is surprising that we have had so little analysis from outside the realm of economics. Economists and economics took or were given a central role in transmitting what was a social phenomena. This book ( “From Prosperity to Austerity : A Sociocultural Critique of the Celtic Tiger” edited by Eamon Maher and Eugene O’Brien and published by Manchester University Press) is therefore extremely welcome, focusing as it does on whole different set of areas and interlocutors. In particular, it looks at how (some aspects of) what might be termed as high culture has reflected the fall.

I want in this review to concentrate on three aspects. First, it’s always useful in a book review to have some idea of what the reviewer thinks about the actual book, its contents, writing etc. Second, no book on the Irish financial crisis can ever be complete, and it is no criticism of this book to say that there are aspects left uncovered. Third, the existence of this book, a relatively rare examination of an economic crisis from a noneconomic perspective, should force us to ask questions about economists and how they are seen in the media.

Trockhe book’s organisation is pretty conventional. Over 14 chapters a variety of socio-cultural perspectives are deployed on a variety of areas. We have amongst others an analysis of religion as a market, a perspective on women’s fiction and how it has reflected the crisis, how Paul Howard’s beautiful monster Ross O’Carroll Kelly has evolved over Tiger and its crash, a discussion of popular music with Jedward as the empty anti-heroes, the role (limited) of poetry in addressing the crisis, and a wonderful discussion on the monsters of post Celtic Tiger Ireland. The book is full of wonderful insights, too many to pick out here. Let me concentrate on a few chapters, monsters , religion and plays.

father-jack-traditionalIn the chapter on religion we are reminded of how swiftly and how completely has been the shift from religious to ‘real’ capital, with a long discussion on how real this capital is or may be. This discussion, based in the notions of capitals from Bordieau, is reflected later in the discussion on food and wine and to a lesser extent in the chapter on cinema, where the moral capital of the church is replaced by other forms of capital, no less valid but unusual in the context of conventional religion. Religion here is, to a greater or lesser extent, assumed to be observant conventional roman Catholicism. The discussion on how the moral force of the church has become muted while the sacramental and ceremonial remains much more intact resonates with the discussion in a later chapter of how the cinema of the celtic tiger and its fall allowed for a ceremonial depiction of a moral change. Capital is mutable, ceremony less so.

dracula_book_cover_1902_doubleday_89The monsters chapter is excellent, reminding us that Dracula is actually an Irish word, bad blood, droch fholla, and that there is plenty of bad blood generated in the crash. The Renfield as gombeen man identification is one that should have resonance. In the same way as Dracula is essentially undying unless killed in a particular manner, Renfield Gombeens seem to be a persistent feature of the Irish economic landscape. No great effort at structural reform to eliminate these creatures has been put in place, structural reform tending to instead mean cutting wages. The discussion on popular music takes a fierce swipe at Jedward, seeing them as essentially hollow. One gets the impression reading this chapter, which starts with the (what else would it be) impassioned plea by Roy Keane that the Irish soccer team and fans not simply go along to a championship for a singsong, that the authors are rather despairing of popular music as a reflection of anything other than a cynical marketing exercise. The chapter on theatre is powerful, reminding us that they have in fact been quite a number of performances which punctured the smug bubble of the Tiger and cast an unflattering light on its aftermath. Live theatre is something that when done well is amongst the most powerful cultural expressions. Irish theatre has not thrived in the recession, but nor has it stagnated as much as one might have feared. There is a deep well of local theatrical experience, increasingly professional, which has helped perhaps sustain. We are not back to the days of the fitups, but it is possible now for Metropolitan theatre companies, if they wish, to venture beyond the pale and bring their works and analysis. It is startling to read an account of the play Site: Builder’s Tale, performed in 1999 in Galway, which seems damningly prescient. Hinterland, in 2002, reminded us of the rotten heart of the Irish body politic. The chapter necessarily confined itself to an analysis of some of the theatrical presentations, but one that is missing which should in my view have been examined is guaranteed, but Colin Murphy. While the previous plays looked at the run-up to the Tiger, Guaranteed examined the apocalyptic night of the bank guarantee Again we see an echo of Bordieau, where political capital is expended, irrevocably, in protection of financial capital. Its strength lies in the fact that, like Outsiders, David McWilliam solo production, it relied more on factual than dramatised elements. Art imitates life, and life imitates art.

I now want to move on to the second point, that which is missing. This is a truly excellent book, but the all-encompassing nature of both the boom and bust are such that no perspective can truly give justice. At some stage an encyclopaedia of the great Irish crisis 2008-? will need to be undertaken. Let me concentrate on three areas, entirely subjective, which I feel could give a perspective that is lacking in the book.

dark timesThe first is crime fiction. Although not typically seen as part of “high culture” crime fiction is enormously popular. Ireland is lucky in having some extremely good, world-class, writers of crime fiction. Perhaps the best-known Irish crime writer isJohn Connolly, but his perspective is what business professors might call it a “born global”, that is to say he has started from a local base to a global audience and reach. More typically we have authors such as Tanya French, or Graham Masterson, or Rob Kitchen and Gene Kerrigan, who while achieving global sales take a more local perspective. In a sociocultural critique of the Celtic Tiger which contains a well justified analysis of Paul Howard the lack of an analysis of crime fiction was somewhat surprising. We lack in the Republic a writer such as Colin Bateman, able to combine comedy and crime in a delicious hodgepodge. If you can write about the still raw wounds of Northern Ireland with a rapier wit one wonders why a Paul Howard of post-Celtic Tiger crime has not emerged. The post-Tiger Cork of Graham Masterson, not a native Irish born writer, is one that is easily recognisable. His heroine, a Garda superintendent, struggles with the effect of the Tiger and its crash both of herself, her husband having gone bankrupt, her colleagues, some of whom have become susceptible to the blandishments of the criminal class due to their new-found relative poverty, and the city itself, poised uneasily between success and failure. The dark underbelly of Dublin reflected in the works of Kerrigan, and the methodical police procedural of French, with their dramas rooted in even longer traumas than the Tiger, all these provide a window into our fall.

10561694_675999772482672_6757804091546323022_nA further gap, perhaps reflecting the demographic of the authors and also perhaps the intended audience, is in the area of popular music. As noted there is a chapter on popular music, and its excellent insofar as what it covers. U2, Jedward and The Script aside there is much more to popular music. Amongst the hardest hit of the crisis have been the urban male proletariat, and more generally young men. There is a thriving Irish hip-hop and rap scene, and this gets scant attention. The themes of acts such as represented by Bloodshed Records reflect the raw reality and anger in a way that acts such as U2 have long since left behind. We may not yet have an Irish version of “Straight Out Of Compton”, the rage against the system of early hip-hop is one which has echoes in recent Irish music. It started just hip-hop that is missing, there is a comedict trend in Irish music which is often very subversive. Ding Dong Denny O’Reilly, the Hairy Bowsies, Richie Kavenagh and Patt Shortt had all composed and performed songs which poke sometimes not so gentle fun at aspects of the Tiger and its fall.

8-must-have-traits-of-tomorrow-s-journalist-5454316084Third, The words “blog” or “twitter” do not appear at all in the book. Throughout the crisis and afterwards mainstream Irish media has been, to put it mildly, compliant. The old adage of Horace Greeley, that newspapers were there to afflict the comfortable and comforted the afflicted, has with some brave exceptions being jettisoned. An almost and ending diet of compliantly reheated press releases, shallow analytics, and a drumbeat of opeds advocating pulling on the green jersey, that has been the fodder which the media has presented to the Irish public. There are of course exceptions, even in such elite friendly ynewspapers as the Sunday Independent where Gene Kerrigan has ploughed a lonely furrow. The Sunday business Post has continued its rather eclectic perspective, combined with strong analytics. In TV3 we have seen Vincent Browne performing heroic work late in the night trying to provide a variety of voices. But for the most part mass media has fallen into line. Much of the critique of how the government, permanent and elected, has responded to the crisis has come from new media. It is surely a sociocultural phenomena, the growth of Irish new media analysing the crisis, and yet it is not reflected here. Reading this book we woul never know the emergence of blogs such as the Cedar Lounge Review, True Economics, the much missed Namawinelake, The Irish Economy, my own modest effort, Notes on the Front, Ireland after Nama; new online newspapers such as The Journal, Broadsheet; and an explosion of analysis on Twitter and Facebook. This is a pity, as the emergence media landscape, blending new media and old will shape the sociocultural landscape of the next decade.

images (14)This latter lack, the lack of the new media perspective, is also reflective of the change that has occurred in the last three years in relation to how economists are treated. We saw in the run-up to the crash, and in the immediate aftermath, the emergence of the Economist as commentator on a scale never before seen, and hopefully never to be seen again. As things have stabilised, and recovered, the wide variety of voices has been replaced by select few, and we have seen the re-emergence of the financial market commentator as the authority. This reflects back on the notion of capitals, with intellectual capital now being subsumed by financial capital once more. You will wait a long time to hear a philosopher, a poet, a historian even on the radio or TV discussing the economy. This monocular shoehorning seems to happen only in the economic area – we are happy to have celibate men discuss obstetrics ad nauseum, to have the heads of self-professed institutes discuss moral philosophy, to have ex terrorists discuss policing, and so on. And , they have a voice and a right to be heard, even if we dont like what they say.  We seem to be unable to grasp that it is as vital for a longterm healthy economy as part of society to be discussed by a wide variety of observers of society.

wrong-tool-by-jerome-awThere is a great deal to be said for the argument that (macro) economics exists in order to make astrology look good. This is especially the case if we consider economics to be primarily about forecasting the components of GDP. Economics is of course much more than that, a systemic way of thinking about costs and benefits which can be applied to much of human activity. In the run-up to the Tiger for the most part the profession, myself included, took our eye off the ball, were unsure as to the kind of ball we were playing with, or in some cases were playing an entirely different game. There are fantastically talented economic analysts in Irish banks, stockbrokers, and government service. They are not however in the game of truthiness. In financial services their role is ultimately to act as part of a capitalist enterprise dedicated to the pursuit of profit. Nobody has to act in a manner which is unprofessional in order to present an analysis which is aligned more towards selling the that suit the bottom line of the institution than might be the case were they to be working elsewhere. A big part of the problem has been that economists have tended to become more and more, the macro ones especially, concerned with the elegance of and internal consistency of the models rather than the appicability and realism of same. Macro is immune, so far, to mere issues of scientific method and progress – the comparison with physics, an envy of which suffuses modern macro, is stunning.

CP00224-2This is not to argue that only pure hearted academics, with no axe to grind, should be allowed on the radio. It is to suggest that when somebody turns up for stockbroking house they have an agenda. Too often that agenda is neither acknowledged, surfaced, nor accepted as even existing. Bonds gotta sell, product gotta move, assets must be mobilised. Unfortunately academics can also have an agenda. For some that agenda might be to look good for possible future government preference, for others it might be to unconsciously herd towards the line of the majority, in order not to be seen to be wrong. Ideological perspectives yet may motivate others. A desire for fame, a need for self promotion, a chance to showcase to potential consulting clients, all these and more can and are and have been rampant. In other words economics is far too important an issue to be merely left to economists as the sole commentator.

economist abductedThe phenomenon of economists as the only commentators on the crisis is one that deserves analysis. More generally however, if we are to afford economists a sociocultural role as the high priests of distress, we need to understand better what it is they actually do. Economics is more than just macro. A sociocultural analysis of why we have not heard from more varieties of economists, who undoubtedly have valuable and insightful points to make on the nature of the crash and the nature of the economy, that would be a valuable exercise. By ceding the ground to macroeconomic analysis, micro-economists, labour market economists, specialists in public choice theory, experts in a whole variety of areas affected by the crash have rendered themselves mute. Mainstream media feeds now on new media. It is easy to set up a blog, easy to set up a Twitter Facebook feed. The experience of many with something to say, grounded in analytical rigour, is that if you blog it the media will come.

This book is invaluable, if only for the fact that represents the first serious attempt to cast a wide sociocultural net across what has happened. It’s not always easy reading, nor is it always comfortable reading. It is dense, rewarding, valuable. As we move towards the upswing, with the inevitable consequence that that also shall end, we need to reflect in broad about what happened, and how we responded to it. This book helps us to do that.

This is a longer version of a book review published in the Irish Times 25 October 2014 of “From Prosperity to Austerity : A Sociocultural Critique of the Celtic Tiger”  a book on the Irish economy and society edited by Eamon Maher (IT Tallaght) and Eugene O’Brien and published by Manchester University Press.

Ireland is not in Europe..

This is an expanded and updated version of an opinion piece published in the Irish Examiner on Saturday 4 August 2011.

National Culture is a funny fuzzy concept. Anyone who has ever dealt across different societies knows that cultures and how things are reflected in them differ widely. It can be thought of in this context not as the “high culture” so derided by Goering and the other Nazis who declared, “When I hear the word culture I reach for my gun”, but as the complex interwebbing of how we operate as a society. If we have learned nothing else form this crisis it is that economics is, and must be treated as a social analysis. Culture in this context then includes religion, the way we formulate laws, the holistic way in which society works. A widely cited definition of culture is “is that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society”. We are familiar with this in Ireland. There is a culturally accepted norm that we do not, generally, evict people. There is a cultural norm that we do not generally either whistleblower or reward those that do so (we are indeed only now getting round to protecting same). We might as economic analysts decry the effects of these, but that they are cultural norms is something we cannot deny. And culture is very slow to change.

Its a funny feeling to be on the (kinda) same side as Mitt Romney, who caused uproar when in Israel he suggested that the culture of a country powerfully influences its economic prosperity, pointing favourably to Israel in contrast to the palestinians. This did not go down well in many quarters. On parsing this in the National Review he seems to equate culture with freedom and no doubt there is a linkage but the relative lack of freedom of the average palestinian is as much a reflection of their being a geopolitical chewtoy as some form of inate cultural preference. And the massive aid channeled to the Israelis by the USA over the decades has had some influence one might imagine on their economic development. But Romney is right in one sense, that culture, defined broadly, does matter for economic outcomes.

Culture, or proxies for same, has only recently been accepted as a valid part of modern economic analysis. While cognate disciplines, in particular international management and latterly international finance scholars have adopted many measures that proxy for aspects of culture mainstream economics has been to date slowly to take these on board. This is despite the fact that the most cited social scientist by some measures is a Dutch scholar, Hofstede, who’s work on culture from the 1980s has been of profound importance to how international business scholarship has progressed. I had the experience dealing with Irish economists on presenting work ( see here and here )involving this scholar’s concepts to be told by such things as “what we cant measure is not amenable to being modeled and as such is not useful” and “sure that’s not economics so why would we read or cite it”. If economics is to move forward it needs to escape from the blind alleys of needless formalism and the conflation of assumptions made for modeling purposes as being actual representations of reality. At the leading edge this is already the case but we know from studies of the philosophy of science that the body of knowledge rarely moves until a crisis. Perhaps this is the crisis.

Hofstede proxies culture as being on four (latterly five) dimensions. He suggested from his work with managers and later extended that societies could be ranked along how masculine they were, how great a proclivity they had for individualism, the extent to which people were and were accepting of being distant from power, whether the society is long or short term orientated, and the extent to which they would avoid uncertainty. Over the years other scholars, in particular those associated with the world values survey have amended and extended this basic insight but the work and measures of hofstede still dominate.A vast literature in international business has found that these cultural dimensions are associated with many economic phenomena. Thus we find that even when we account for other issues (different accounting standards, different legal systems, different ways of dealing with creditors) relative cultural distance is associated with lower foreign direct investment, lower degrees of mergers and acquisitions, and lower portfolio investment. That’s perhaps not very surprising – all things being equal people feel more comfortable doing business with people “like themselves”.What is perhaps more interesting is how the individual elements of culture impact.

In hofstede metrics Ireland is low on power distance (information flow and management tends to be informal and not hierarchical), highly individualistic and masculine (encouraging of risk taking and focused on winning for personal gain), and low on uncertainty avoidance (risk is rewarded and technicalities tend to be ignored) and on long-term orientation (we tend to not pass up short-term gain even if that may have long-term deleterious consequences). These traits are associated in recent research with for example earnings management in companies, and to more inefficient banks. Lower uncertainty and shorter term orientation is associated with low levels of cash buffers and thus an inability to ride out shocks. This analysis can be carried further : countries (such as Greece) with low individuality, low masculinity and high uncertainty avoidance are more prone to tax evasion ; higher uncertainty avoidance is associated with more severe impacts from crises. Low power distance and high individuality (as is the case in Ireland or Germany but not Greece) are associated with easier adoption of new work practices. The list can be extended greatly. The reality is that there is a growing body of literature, mostly outside economics but increasingly seeping into it that shows that we ignore national culture at our peril.

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One of the things that the Eurozone crisis has exposed is the divide in Europe. There are many divides: Germanic neomercantilism versus communitarian economic policies, countries with zombie banks and those that have banks in the process of zombification, the UK versus everyone else. But one that in many senses may underlie this is the cultural divide. An increasing amount of culture studies use the framework of the world values survey. This is a complex instrument but it in essence can be reduced to two scales : how traditional/open is a society and how collective/individual is it. What is remarkable is when one plots these measures we find groupings of countries fall in place in accordance with our preconceptions : latin American countries fall mostly in one area, east Asian in another and so on.What is striking when we examine this is how non-homogenous the EU appears. The other issue is how much of an outlier Ireland appears when viewed through this cultural lens. Culturally we are much more similar to latin American countries than we are to northern European or even Mediterranean countries. The prevailing approach in Europe at present is to make us all good germans it seems. That wont happen. An approach that recognizes that there are deep cultural divisions, that these reflect in different economic outcomes and approaches, and that a union which wishes to thrive must acknowledge, accept and manage with these is one that will be much more likely to stand the test of time. Rather than becoming poor imitations of germans this approach would urge us to become better Irish, greek or Italians.

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Bundes-boobery

One of the first ever pieces of non academic work which I wrote was, shortly after leaving the central bank of Ireland in 1992, to suggest that we should consider ditching the then Irish punt and adopting the then Deutsche Mark. The arguments revolved around a (in retrospect astonishing naive) view that doing so would bind our political system to behave.
At the time, and for a long time thereafter, I was a great admirer of the Deutsche Bundesbank. Throughout decades they kept the flame of a stable German currency burning, soothing the population with folk memories of the hyperinflation et seq of the 1930s. Alas, it’s no longer possible to admire the Bundesbank, at least for me. one of the things we know from behavioural economics is that success rather than breeding success can breed overconfidence. Recent events and speeches from the BuBa make me wonder if their thought processes have ossified to the extent that what was then a sensible economic policy, strong stable money, has now ossified into theological rigidity.
The most recent bundesboobery comes from board member Andreas Dombret. Reported on Bloomberg he states “Putting too much weight on short-term, demand-side risks misjudges the root cause of the current crisis, namely a profound loss of confidence in markets,” and goes on to caution about the desire to loosen monetary policy and slack off austerity.
This is almost 100%wrong, and that such frank nonsense can be spouted from a senior policy maker makes one shudder. There are massive issues in the euro, and they are problems of imbalances. Peripheral counties are not regions of Germany, but independent democratic states. Faced with depression era indicators of unemployment, and in some cases economic collapse states are being urged to cut their way out of a debt hole. The market confidence or lack of same in Greece, Spain etc is not the problem. It is the symptom of national debt levels that are either unsustainable (Greece), at the brink of sustainability (Ireland) or unsustainable absent some massive growth spurt (Italy, Spain, Portugal). The solutions are bifold: debt reduction and growth stimulation. The firmer can come from write offs and restructuring (markets have a conniption, but get over it), inflation (the BuBa/ECB has a conniption), or growth. This comes from the reduction of state and private debt levels to a level that will allow consumer/business confidence and the diversion of monies from savings/debt repayment to investment and consumption and from structural reform.
To confuse rational market skepticism on the ability or willingness of the core (read, Germany) to allow inflation or write offs, combined with the slooow reforms in many peripheral countries coupled with broken banking systems (caused by core, read german, desires to see no bank fail) is to demonstrate myopia. To smugly suggest Spain with 24% unemployment or Ireland, drowning in zombie bank debt,mor the shattered remnants of the Greek economy must carry all the burden of adjustment is frankly nuts.