Wednesday 18 September 2019

Eilis O'Hanlon: 'Once bitten, twice shy - why 'boom envy' is gaining ground'

It's not enough to tell people the economy is in great shape. They have to feel it, too, and that's just not happening right now, writes Eilis O'Hanlon

SHOPPING: Coming up to Christmas, people may start splashing out more cash; but that could be as much about comfort as confidence
SHOPPING: Coming up to Christmas, people may start splashing out more cash; but that could be as much about comfort as confidence

Eilis O'Hanlon

One sentiment, more than any other, summed up the abject failure of a certain class of smug, cosseted self-styled oracle to understand what happened to the country in the financial crash.

It was that certain type of commentator, on those late-night political talk shows back in the day, insisting that there wasn't a problem with mortgage debt because the vast majority of people were still paying their mortgages in full and on time every month.

No mention of the hardship they might be putting themselves in; of the sacrifices they had to make; of the pressure under which they were placing their families. Not one word about what it might do to the spirits of people turned into walking life-support machines for debts from which they couldn't escape because house prices had collapsed and, even if they had offloaded that albatross around their necks, the burden would follow them to the next address.

As long as they were paying the bankers every month, all was deemed to be well with the world. There's "not getting it" - and then there was those people, who'd turned not getting it into an art form.

And they meant it. That was the worst part. With Christmas now upon us once again, it might even be fitting to say that they were, in every respect, worthy successors to Ebenezer Scrooge, who needed similar reassurance in his day that the settled economic order, as he understood it, was intact. Were the workhouses still in operation? The Treadmill and the Poor Law in full vigour? The bankers still being paid? They are? Then what's the problem?

One would have hoped that these people were a thing of the recent past, but alas the "Not Getting It" brigade are always with us, even in what we're persuaded is now another economic boom.

Once again, they have the numbers at their fingertips to prove it. The economy is going great guns. Employment is up, and not just among funky metropolitans in the tech sector; even long-term unemployment, that most stubborn of indicators, is down. Good news stories dominate the financial pages.

The restaurant industry is said to be in the midst of a "renaissance", no less. Wages are, allegedly, rising. The Organisation for Economic Cooperation and Development expects Ireland's economy to continue growing healthily for the next two years at least. Numbers no more tell the whole story, though, than mere words tell a story.

It's all in the reading of the words and the interpretation of the numbers. Take the recent consumer confidence figures, which have shown the sharpest drop since 2010, when the economy was in the heart of a fire storm.

Our old friends who couldn't see the problem with mortgage debt would be baffled by these findings. Faith in one's personal, and the country's national, prospects should be sky high. Instead, despite growth of over 5pc this year alone, few people are expressing the confidence to start spending again - and any idiot could surely explain why, having been burned once, people might be reluctant to take another dive into the flames.

The last boom ended in disaster. Why would anyone trust this one not to do likewise? They're surely not wrong to be cautious either. Our debt to GDP ratio may be down to 73pc from a high of 125pc in 2013, but, with a tiny population, Ireland's debt per capita remains the highest in the eurozone, higher even than Greece - and that country is a basket case when we're meant to be booming.

Our old friends, though, are not idiots, so they fail to appreciate simplicity. For them, "boom envy" - as the sense of feeling excluded from the recovery, while others flourish, has been christened - is an irrational response to verifiable data. How fortunate the bean counters must be to find such comfort in corporate arithmetic, deaf to the sighs of swathes of ordinary people who, assailed on all sides by positive headlines about the economy, still just aren't feeling it.

It's not that they want to feel this anxious. They'd love to be swaddled in the warming glow of another boom. They'll even gladly welcome the good news when it's pointed out to them. Nor are they as worried about their jobs as they were a few years ago, or about house repossessions, or having enough money to buy basic necessities; but they still don't see what's going on as a boom.

Why should they when the macro-economic indicators don't reflect where they are in their lives? The Central Bank may tell them that total household wealth is now greater than before the crash, but, as Austin Hughes, chief economist at KBC Bank Ireland, points out, the position of the average household is still worse off than it was more than a decade ago, and they're still "under pressure" and "in recovery mode from the crash", neither of which is likely to boost feelings of beneficent well being.

It's not a boom if you're not feeling it, and we're just... not.

Instead, as Austin Hughes explains, people are simply "trying to keep their head above water, and the idea that the economy is running too hot seems entirely alien".

The key to understanding this phenomenon of "boom envy" is the feeling of "exclusion from the recovery", as it's been described. One in 10 mortgages are still in arrears; 100,000 remain trapped in negative equity. Even if that's not you personally, it's likely to be someone you know, someone you care about. Jobs and wages are one part of the equation, but feeling weighed down by soul-crushing debt is another. It's important not to replace the misplaced positivity of the Celtic Tiger years with an equally dangerous negativity, but those who don't share the jollity should not be made to feel as if they're talking the country down.

The conditions are still not in place to foster a sense of ease.

Of course, coming up to Christmas, people may start splashing out more cash; it's the time of year for it; but that could be as much about comfort as confidence. Again, the key to understanding what's going on is that behaviour and sentiment can often conflict.

This is what the Government needs to grasp, surely, otherwise it's just destined to stumble into a rerun of the 2016 election 'Keep The Recovery Going' debacle. The team which ran that disastrous campaign had at its core Leo Varadkar, then health minister, now Taoiseach, and Simon Coveney, then minister for agriculture, now Tanaiste and minister for foreign affairs. Varadkar chaired the sub committee on communication, Coveney on policy - an arrangement which some might say still stands. According to the behind-the-scenes analysis published after the election by Sunday Independent journalists Philip Ryan and Maeve Sheehan, no one would subsequently admit to coming up with the slogan 'Keep The Recovery Going', but certainly "no one threw up a red flag or banged the table" - even though Patrick Coveney, chief executive of Greencore and the current Tanaiste's own brother, was telling a conference in Cork that the "great mystery" was that "no one feels" this revival.

Right now, what seems to be saving Fine Gael from going full scale into a repeat of the same scenario is Brexit. There's so much uncertainty, indeed fear, around what might happen once the UK leaves the European Union that it's putting a lid on Varadkar's tendency to boyish enthusiasm.

Is anyone in the Cabinet banging the table or holding up the red flags on behalf of those suffering from "boom envy"? If they are, they're doing it so quietly as to be almost inaudible.

The lesson back in 2016 was that people needed most of all to feel at peace with the state of the country, and that sense of equanimity is still some way off. The housing crisis is an open wound. Hospitals are struggling to cope. High streets in many towns in Ireland look down at heel.

One factor that has become increasingly evident from recent elections is that the economy is no longer the dominant consideration that it once was. Even if people believe that the economy is on the right track, they care about other things too. That should have been another take away from 2016 - the need to understand the "human impact" of economic shocks.

Recovery from trauma always takes time. As one minister noted after 2016: "A politician has many flaws but one thing a politician can do is read the public moods... the people in our party at a strategic level didn't listen." The nagging unease out there suggests they're still not picking up the signals.

Sunday Independent

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