Missed Irish warnings and the man who told them so

In 2006, the economy of Ireland changed. Universal growth across all areas – tax income, consumer spending, employment, exports and imports – stopped and some economists began to vocalise a concern that rather than going through a healthy process of readjustment, there were structural weaknesses in the Irish economy.

Morgan Kelly, a professor of economics at University College Dublin and other academic economists soon found themselves being vilified and dismissed by government as unhelpful spoilsports who poured gloom on the party to raise their media profiles and advance their careers, rather than to serve a national interest.

It was said that Kelly and others, jealous that they were not the first to predict the Celtic Tiger, were seeking their revenge by competing to be the first to predict the recession. Such was the contempt in which the then Taoiseach Bertie Ahern held these ivory tower “cribbers and moaners” he rhetorically mused at a 2007 trade union conference why they didn’t just commit suicide?

Battle lines drawn

While Ahern withdrew those remarks, the battle lines had been drawn. On the one side were government and the banks who received delegations of foreign officials who wanted to learn from Ireland how to create their own Celtic Tigers in eastern Europe, and on the other side were Kelly and other economists who highlighted the growing institutional deficiencies in the economy – an overheated property market, an over-reliance on construction, massive personal debt and other indicators which showed Ireland massively exposed to a shock in the global economic situation. When they called for reform, it was largely ignored.

In most cases, Morgan Kelly’s 2007 and 2008 analyses of the economy and demands for reform were dismissed as scaremongering, but a retrospective glance at his published opinion pieces in the newspapers show that even his most dire warnings about the unhealthy state of the banking sector were tame compared to what actually transpired.

Rather than engage in unpatriotic scaremongering, Kelly’s economic projections were based on a real analysis of the data, rather than blind hope. So, when Kelly wrote a column in last week’s Irish Times showing in clear – horribly clear – language that household debt and negative equity could have dire social, economic and political consequences for the future of the Irish state, it brought the economic crisis out of the rarely-read financial pages of the newspapers and into the full glare of the media.

Over the last week, Kelly has been joined by international commentators who have added their own voices in agreement. A confederacy of economists, in Ireland and overseas, has emerged, setting aside their usual professional rivalries, to ram home the message that rather than doing the state some service by just committing suicide, the cribbers and moaners should have been listened to.

Dr Peter Stafford (@peterstafford) is a freelance economic and business research analyst based in Dublin, Ireland.