The economists who acted as the cheerleaders for the property bubble acted in bad faith. The French have a phrase, la trahison des clercs , the treachery of the intellectuals, for those who are aware of abuses but fail to denounce them. They are the last people we should listen to now as we seek to recover from the damage they inflicted.
‘La trahison des clercs’ strikes me as too grand a term to apply to people who are in the pay of financial institutions and therefore issue opinions in line with the interests of their employers. To say that they acted in bad faith is to imply that they could have acted in good faith.
A more interesting question is how these people gained widespread respectability. The well-known fact that both the Irish Times and the Irish Independent had made substantial investments in property-related enterprises is undoubtedly a factor, since the opinions of these people, which could be represented as authoritative statements, meant a low-cost supply of content for delivering reporting on the property market intended to stimulate the fears and aspirations of potential buyers.
What has received less attention is the role of the state broadcaster, which used these people regularly, and continues to do so. Just last week I heard a radio discussion involving a prominent economist still in the pay of a financial institution, who, referring to himself as a ‘worker’ at one stage, and calling for public sector pay to be cut, proferred the opinion, somewhat incongruously, that the VAT arising from unsold houses would result in a substantial contribution to the state coffers if these houses were sold. In doing so he was implying that some form of action should be taken in order to expedite their sale, a course of events that would no doubt boost the revenue of his employer. His interlocutor, whilst known to bristle with colourful language on occasion at suggestions he finds unpalatable, particularly with regard to his own house, saw no need to challenge the brazen promotion of private interests in the guise of objective analysis.
Leaving aside the manifold appearances on discussion programmes, there are many examples, easily found, of RTE using privately-funded economists as authoritative sources in their news reporting. In many cases, the interventions appear as the product of objective, dispassionate empirical inquiry, touching on broad macroeconomic matters, with no outward relation to encouraging the sale of particular financial products. No doubt this is the intention, from the perspective of the entity providing the analysis, because if a particular individual can be seen to provide wide-ranging, apparently disinterested, commentary on a range of general matters, this serves to create the impression that the institution he -it is normally a he, of course- represents is primarily concerned with acting in the interests of the general public. Or, in a complementary fashion, what is good for the financial institution is also good for the general public. This activity, which continues to this day, has a cumulative effect: the longer it goes on, the greater the authority the representatives acquire, and even though the current robbery conducted by the government on behalf of the banks has done much to dispel many illusions about where the interests of banks and related institutions lie, RTE as yet has shown no inclination to dispense with the services of the individuals in question. Nor, for that matter, do the individuals appear inclined to dispense with the services of RTE.
The story, then, as it concerns the ‘experts’, seems to me not so much a barrage of misleading stories about the housing market produced by interested parties, but how easy it was for private financial institutions to circumvent the normal limits of advertising to represent themselves in license-payer funded media as acting in the public interest, even though their only true interest can only ever be the bottom line.