#GE2020 – I’d like to hear from Morgan Kelly before any Election Musketeers….

The speculation finally ended this morning and a General Election has been called for a Scrap Saturday in February. By tomorrow morning the country will be aflame with posters and #GE2020 paraphernalia. A campaign full of promises awaits. However, before the runners and riders line up behind the tape, there is one person I would like to hear from: Professor Morgan Kelly.

It’s nearly 10 years since he delivered his de-facto State of the Union address to the nation via the Irish Times. The most substantial indicator that we had fully and finally descended into a basket-case country with a junk bond banking system was the curious fact that Professor Kelly was the only person in Ireland that the populace trusted to tell them the truth.

A media shy U.C.D economics professor with an earnest, halting and unpolished delivery method gave it to us straight between the eyeballs on each TV appearance. His writing style was a complete contrast. Complex issues deconstructed in clear, engaging and unambiguous language. When I think of his scripting style – Michael Lewis springs to mind. Of course he had a captive and willing audience – we all had skin in the game and were hungry for facts.

As election fever kicks off I find myself contemplating these previous times and  wondering what Morgan Kelly thinks about the current state of Ireland Inc. Are the obstacles ahead, of Brexit and climate change, mere rapids on a difficult section of river or indicators of an impending waterfall.

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Of course public trust of this nature is hard-earned. Professor Kelly established his bone fides back in 2007 on a Prime Time debate against Jim Power of Friends First. He laid out the clear and present danger of the Irish housing market, indeed the only thing missing was a sponsorship deal with French Connection and rebranding to FCUK-ed.

Power and other economists, the Irish Builders lobby and the political classes were all lined up against him. But he didn’t seem to care.

For the younger generation, who perhaps are unfamiliar with Professor Kelly and his contributions it is a very worthwhile exercise to go back and watch this contest on Youtube. I’ll post a link at the end of this piece. It’s a reminder of what people that are right look like and of course more importantly what people that are wrong can look like.

A line from Shakespeare’s Merchant of Venice springs to mind.

All that glitters is not gold;
Often have you heard that told:

Not long after Kelly’s pronouncements the Irish housing market went belly up and damn near took the Irish economy with it as we all know. By November 2010 over two years into the crisis – the government were still grasping at straws and dealing in illusions. Denying that Ireland was imminently about to enter into a European sponsored bail-out. Professor Kelly’s article stripped bare the last of these government sponsored fantasies. Within 1 month Ireland were signed up to a 85 billion international bail-out facility at the prohibitive rate of 5.8% interest.

I guess what I respect him for the most, in hindsight, is that he didn’t make a career out of being right. About being the one that was most right. Plenty of others did, waxing lyrical on radio and TV to beat the band. Books, lectures and workshops. Hell plenty that were completely wrong kept on keeping on.

There is a characteristic of leadership that you’ll rarely hear about from the Shylock of gurus in the January sales of self help workshops and 5 grand leadership courses. Mainly because, it’s not one with designs on getting you to the top of a business tree. Yet a key defining ingredient of a Leader, in his or her truest form, is not the ability to muster a crowd or lead a following but paradoxically, the opposite – a willingness to embrace the courage of their convictions and walk the first steps alone. Unsure who or if anyone will follow. Leaders with this mettle don’t always make it – is the sad truth. But all the greatest leaders have had it. And some like Morgan Kelly go back to UCD teaching and influencing the next generation having done the State a vital service and eschewing the trappings of power, ego and fame.

In the breakdown of Ireland’s bail out in 2010, the European Financial Stability Mechanism contributed €22.5 billion, the IMF €22.5 billion and the final €22.5 billion coming from the European Financial Stability Fund. Eye watering numbers and It is worth remembering that we contributed 12.5 billion ourselves via a raid on our own pension fund reserves and scrimping 5 billion from other sources.

The reason I bring this up and reference Morgan Kelly is not because I think 2020 is 2010. It’s because 2020 feels similar to 2002/2003. The economy in general is performing well. And in specific areas not so well. We are finally running budget surpluses again. As a result this election campaign is likely to have some very wild spending promises. An injection of realism and common sense would be mightily appreciated from someone with the gravitas to be listened to. Someone like Professor Kelly.

I suspect it’s not as difficult to be a Finance minister during a bust. You get to say No a lot and no-one goes on strike. You cut and cut until the electorate throw you out of office. And they generally don’t throw you out of office. Curiously enough, as a country, we historically remember finance ministers that wielded the scythe kindly. Going right back to Ray McSharry in the 1980s.

Managing an economy during a boom is an entirely different matter. Historically we are terrible at it. There have been steady Eddies and out of the box thinkers like Charlie McCreevy. In the early Celtic Tiger years from 1997 – 2004 we saw policies of running budget surpluses while at the same time reducing tax rates. Government spending increased by nearly 50% in the last 3 years of this cycle. McCreevy as a result received a lot of post bust criticism. Some correct and some by politicians happy to do a poor man’s Johnny Sexton impression.

As an aside, I have a more sympathetic outlook on McCreevy than others that were in the job before and after. Hindsight placed plenty of blame on his doorstep for the property bubble. Halving Capital gains Tax and introducing schemes for house building in rural areas to name two off the top of my head. Yet,  he also streamlined the taxation system and introduced measures like the Government Saving scheme which proved an innovative and popular scheme to take some heat out of a bubbling economy in the very early noughties. It’s not that he didn’t make mistakes but there was ample time in 2004 and beyond for the naysayers to turn the ship around. Except there were no naysayers on either side of the political isle in the 2004 -2007 period. The 2007 election campaign was straight out of a Walt Disney movie by all the parties involved.

I suppose the point I’m getting to is that when politicians get comfortable with a little extra cash in the government pockets they usually start making bad decisions quickly. As I see it we have two massive problems that we need to address and hopefully have the means to tackle meaningfully. Housing and the Health Service. In that order.

A third issue is climate change. This requires a medium term plan rather than the current knee jerk poppy-cock.

The aspiration to own a private residence on the average industrial wage should not be a mere pipe-dream. It’s the foundation on which we build our lives and chase our dreams as adults. If it means streamlining the planning processes and the myriad of regulations to do it so be it. If it mean re-zoning and handing over state land free-gratis so it can be done cost effectively so be it. The housing requirements of the people on the bottom three rungs of the ladder need to be addressed together. The homeless, the unemployed awaiting social housing and the employed entering the workforce for the first time. The rungs on these three steps are completely broken.

The average price of a starter two bed apartment or 3 bed semi needs to be within grasp of a person or couple earning the average industrial wage. The last thing this economy needs is a rash of property builds in 2020 at prices that are unrealistic to begin with and effectively kick off another property bubble. Innovative thinking is required.

In 2018 we spent 16.8 billion on Health in this country. In response the only word that comes out of the HSE seems to be…..More. It has been the same mantra my whole adult life. As far as I’m concerned there are far too many smart people in that organisation doing not very smart things for a very long time. From Health Ministers right on down the line. Any increases in the Dept of Health should exclusively be on the capital investment side targeted specifically on increasing bed capacity, on the day-to-day side – spending should be focused on delivering the required personnel. Hospitals should be 24 x 7 operations in every facet of delivery. There is also a vast administrative class in the HSE that we could quite frankly do with taking a chainsaw to.

If a United Ireland comes to pass in the next 10 or 15 years it is the amalgamation of the public services that could bankrupt us in the first instance. One of the benefits of the Good Friday agreement was an increase in expenditure on publicly funded bodies and departments in the North. There are roughly 210,000 people employed in Northern Ireland’s public services compared with the Republic, which depending on what report you read is a little north of 300,000. Considering we have over 2.5 times the population that is quite a disparate in density. The more streamlined and efficient our public services are in advance of any such happening the better, as the safe-guarding of those NI jobs will most definitely be part of any negotiated future treaty.

And finally climate change. The elephant in the election room. The European and council elections have shown us that the topic is now a supreme vote gathering machine. We can ignore it no longer.

The little I know leans me towards the sensible rather than sensational. The #GE2020 election campaign is barely up and running and the Greens are already yelping about banning the export of live cattle. I would remind them that China is still churning out over 100 coal burning power plants a year. Don’t wreck the agricultural sector unless there is a specific plan to replace that income immediately.

The idea of taxing our way to a zero carbon footprint is one I’m not convinced about as of yet. Generally speaking people that drive the shittiest cars and live in the shittiest homes are also stuck with the shittiest jobs if they have a job at all. It is effectively a tax on the poor.  I’m tired of Ministers of Finance waltzing around the country like their Albert Einstein because they stick 5c on a litre of petrol and 50c on a packet of cigarettes every 12 months.

I would much prefer the next government focuses on getting our electricity production to 0% reliance on imported fossil fuels as first priority. An investment in electricity infrastructure and research will be needed to achieve this. For example people that make an investment in solar or wind, even at a domestic level should be able to feed any extra capacity into the national grid and get paid for it. Everywhere.

There are obvious long term benefits to any economy that is energy independent. And if we are energy independent on 100% renewables all the better. It’s good for the environment and good for the economy simultaneously.

The current government have made a big commitment by agreeing to ban the sale of Diesel and Petrol cars by 2030. We should match this with an investment in the extra infrastructure required to deliver it. This, along with a commitment to have an electrical grid using a 0% fossil fuel base is plenty to be getting on with for one election cycle.

And as for the the Farmers……. I’m hoping we won’t have to rely on the kindness of strangers in order to have a steak in 5 years time.

Morgan Kelly Irish Times Article Nov 2010  here

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