Business Irish

Thursday 15 November 2018

Read all about it: the media and the housing bubble

As the three-year troika bailout comes to a formal end shortly, the long-term consequences of the path successive governments have taken are becoming a little clearer.

We didn't get a great deal from our European partners, especially the ECB, but we were lent enough money to get through this crisis, while ensuring European bondholders all got paid in full.

The debate about whether we should have burned the bondholders, defaulted, devalued and gone it alone, will continue to rage in the public's mind, a bit like the Roy Keane saga in Saipan.

But how did the media perform during the turbulent years since 2008 and the crash, through the guarantee and the bailout. A UCD academic, Dr Julien Mercille, is working on a publication which examines that precise issue. Mercille has some form in this area, having written a paper a few years ago, called 'The Role Of The Media In Propping Up Ireland's Housing Bubble'. In that publication, he upset a number of journalists and commentators about how they had failed to ask the right questions and been far too supportive of the property market during the bubble.

He is not alone in that assessment. Peter Nyberg's report into the crash also pointed the finger at shortcomings in the media during the boom years. "Much of the media enthusiastically supported households' preoccupation with property ownership," Nyberg wrote.

He went on to say that the "long upswing in the property market, accompanied by relentless media attention eroded the risk- awareness of both of banks and their customers in Ireland."

This view was echoed in the excellent account of the crisis by Donal Donovan and Antoin Murphy called 'The Fall Of The Celtic Tiger'.

However, Mercille reckons the media missed the bubble, not because they got it wrong and weren't particularly good at their job. He believes it had more to do with the fact the media is generally compromised by its links to corporate and political establishments, elite circles holding a neoliberal ideology and pressure from advertisers.

This is the same presupposition that he brings into his latest work, called 'The Role of The Media in the European Economic Crisis: The Case of Ireland.'

Mercille, Nyberg and Donovan all have a point about how the media in general could have done better during the boom. However, if anything, large sections of the media after 2008 were determined not to get caught out again by not questioning what various institutions, experts and politicians were saying.

In that sense, Irish media has acquitted itself a lot better in the crash than in the boom. There are many examples of different voices with different views, writing newspaper articles and being heard on the airwaves.

Online media had a field day with the crisis and carried just about every kind of view imaginable. Mercille believes, certainly with mainstream print and broadcast, a bias was at play which backed up the main political and corporate prognosis of the problem.

He believes the media participated with the elites in putting the frighteners on everyone about how catastrophic a default would be. He also seems to believe there was a viable alternative to the austerity programme.

In September of this year, he wrote a paper on European media coverage of the Argentinian default of 2001, suggesting it was portrayed too negatively.

With the benefit of hindsight, Ireland's 120pc debt-to-GDP ratio, the multi-billion euro annual interest payments on our national debt and our very limited potential for economic growth for a few years to come, I think we have ended up as the laboratory rats in the eurozone's financial experiment. However, burning bondholders and defaulting on sovereign debt was going to cause short to medium-term panic and damage. Instead, we opted for austerity, partially because we thought we would get a debt writedown if we needed one.

Instead we got a minor reduction on the interest rate on our loans, a few extra years to pay them off and nothing back for the €32bn we stuck into the banks to help protect the stability of the eurozone's banking system.

But an assessment of choices made cannot rely on hindsight alone and must take a realistic analysis of just how viable the alternatives really were. Eamon Gilmore's famous "our way or Frankfurt's way" wasn't so much about misleading people, as showing how naïve he was while in opposition. In fact, fellow UCD academic, Morgan Kelly, called this one absolutely right when he said we would end up relying on the "kindness of strangers".

If you want to weigh up how the media performed its job during this period, you have to ask whether the public was adequately informed about all of the alternatives and all of their possible consequences. Taxi drivers, hairdressers and farmers, seemed to me to be among the best informed people about bank balance sheets, sovereign debt default swaps and Iceland's boom/bust.

If the media failed to question the consensus of the boom years, I think it did a much better job in presenting a better variety of views during the crash and the bailout. Irrespective of whether our politicians made the best choices or the took the least-worst options during the crisis, an assessment of the performance of the media should ask whether it provided an outlet for alternative views.

Mercille has done us all a favour by simply placing the media into this debate. Journalists are instinctively protective of their patch, despite dishing out criticism of others. We will read his finished work with interest.

Irish Independent

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