You might recall last week’s post concerning Dr Julien Mercille (top), of University College Dublin and his report into the Irish media and the property bubble.
His academic paper claims that organisations such as the Irish Times, The Independent group and RTE helped stoke, sustain – and ultimately fail to warn people about the dangers of – the bubble.
Having now read the report.
It wasn’t all bad news..
Dr Mercille (who has given us permission to quote from his findings), writes:
“In Ireland, economist David McWilliams (centre) warned unambiguously about the unsustainability of the boom as early as January 1998, when he wrote that ‘fundamentals count for nothing if your house is built on a bubble’ and pointed to the fact that mortgage lending in Ireland ‘has been growing at 15 per cent per annum for the past four years. This cash has been funnelled with the help of significant fiscal incentives, into bricks and mortar, pushing, as we all know, prices through the roof. On top of this, general credit in the economy is up more than 20 per cent in 1997 alone. A quick glance at property prices suggests that we are definitely entering asset-price bubble territory’. Until the crash, McWilliams has been one of the few analysts in Ireland to warn publicly and explicitly about the growing housing bubble and its eventual collapse. Another Irish analyst to have done so is Morgan Kelly (above). He looked at nearly 40 property booms and busts in OECD economies since 1970 and showed that there is a strong relationship between the size of the boom and ensuing bust: typically, ‘real house prices give up 70 per cent of what they gained in a boom during the bust that follows.”
“Kelly observed that, between 2000 and 2006,house prices in Ireland had doubled relative to rents, while the price-to-income ratio had also significantly outpaced its historical level. This showed that Irish property prices were no longer sustained by fundamentals such as rising employment, immigration or rising income. He predicted a fall in real house prices of ‘40 to 60 per cent over a period of 8 to 9 years’, which seems relatively accurate as of this writing.”
The prevailing mood was such that:
“Marc Coleman, the Irish Times economics editor, wrote as late as September 2007 that: ‘Far from an economic storm – or a property shock – Ireland’s economy is set to rock and roll into the century’. In fact, ‘Ireland enters the 21st Century in a position of awesome power’.
[Of Brendan O’Connor’s June, 2007 Sunday Independent column: ‘The Smart, Ballsy Guys Are Buying Up Property Right Now’] “(The article was) urging Ireland’s readers to buy property, saying himself: ‘Tell you what, I think I know what I’d be doing if I had money, and if I wasn’t already massively over-exposed to the property market by virtue of owning a reasonable home. I’d be buying property. In fact, I might do it anyway…anyone who is out there in the jungle will tell you that it is a buyer’s market big time’
Dr Mercille gives four reasons why the media may have sought to downplay the bubble and its dangers.
1) The news organisations have multiple links with political and corporate establishment, of which they are part, thus sharing similar interests and viewpoints.
2) Just ‘like elite circles’, they hold a ‘neo-liberal ideology’, dominant during the boom years.
3) They feel pressures from advertisers, in particular, real estate companies.
4) They rely heavily on ‘experts’ from ‘elite institutions’ in reporting events.
“Irish news organisations are large private or government-owned institutions, and as such are themselves part of the corporate and political establishment…”
“…The overall point is that news content reflects economic and political elites’ interests and views. The Irish media can be seen as neoliberalised, in line with Ireland’s political economy. Over the last several decades, mergers have reduced the number of smaller, independent regional news organisations and increased the concentration of ownership, while the liberalisation of the industry has allowed a number of foreign companies to take stakes in the Irish media. It has been argued that increased commercialisation has contributed to a shift away from investigative journalism and toward a ‘tabloidisation’ of the news.”
Dr Mercille says because the property boom helped key sectors of the Irish corporate and political establishment, “it was never seriously challenged”.
“Government-owned media are by definition controlled by the government to a greater or lesser extent, through funding and appointments of principal officers. In theory, state-owned media could be more representative of popular concerns than private media since they are part of the democratic structure of government. However, this only goes so far as the government is democratic and, in Ireland as elsewhere, national politics are largely dominated by a few parties representing various factions of the establishment.”
“In 2008, PricewaterhouseCoopers conducted a detailed study offering a comprehensive look at the ownership, size and concentration of the media in Ireland that illustrates the above statements. Independent News & Media (INM) is arguably the dominant media conglomerate and is listed on the Irish and London stock exchanges. During the housing bubble years, it generated annual revenues of €1.67 billion (2007 data), owned 200 newspapers and magazines, 130 radio stations and 100 online sites in Ireland, the UK, South Africa, India, Australia and New Zealand. In Ireland, it owns seven national and 17 local newspapers and 27 websites. Some of those are leading titles, such as the Irish Independent, Sunday Independent, Sunday World and Irish Daily Star.
“Its main bankers are Bank of Ireland, AIB and Ulster Bank Ireland, which were all deeply involved in the housing bubble. Its board members and directors are establishment figures, including the financial sector. For example, board members have included Brian Hillery, a Director of the Central Bank of Ireland and former Fianna Fail member of parliament, Dermot Gleeson, the chairman of AIB during the housing bubble years, and B.E. Summers, a director of AIB.”
“The Irish media even acquired a direct financial interest in the sustenance of the real estate bubble by acquiring property websites. For example, in 2006, INM bought PropertyNews.com (along with the PropertyNews monthly newspaper), the ‘largest internet property site on the island of Ireland’ listing ‘nearly 20,000 properties for sale’. In 2006, the Irish Times, Ireland’s newspaper of record, also bought the property website MyHome.ie for €50 million, along with the website newaddress.ie which aims to make it easier for home owners to move residences. The Irish Times’ board has also been replete with individuals linked to the corporate and political establishment. For example, during the bubble years, the board included David Went, CEO of Irish Life & Permanent, an Irish bank deeply involved in the housing boom.”
“RTÉ is Ireland’s state-owned media organisation and dominates the television sector. It is funded through advertising revenues, indicating an important commercial dimension, and also by the government through license fees collected from the public. The government appoints RTÉ’s board, giving it additional influence on the organisation.”
“During the boom years, RTÉ had as chairman Patrick J. Wright, who was at the same time a director of Anglo Irish Bank, which epitomised more than any other bank the excesses of the Celtic Tiger and property lending. In 2006, Mary Finan took over as chair, with a resume including positions such as director of the ICS Building Society, a Bank of Ireland subsidiary mortgage lender that offered 100 per cent mortgages from 2005 onwards and was eventually covered by the 2008 government guarantee.”
In relation to advertising, Dr Mercille writes:
“The Irish media received a large amount of funding from property advertising during the housing boom (and, as seen above, they even became owners of property websites). Most newspapers published weekly supplements for commercial and residential property, ‘glamorizing the whole sector’, while ‘Glowing editorial pieces about a new housing estate were often miraculously accompanied by a large advertisement plugging the same estate’, in the words of Shane Ross, former Sunday Independent business editor.
“Ross also shows the power of advertisers’ in influencing news content when he states that: ‘Unfavorable coverage of developers and auctioneers in other parts of the newspapers was regularly met by implied threats from property interests that advertising could go elsewhere’.
“Moreover, a journalist working for the Irish media stated that journalists ‘were leaned on by their organisations not to talk down the banks [and the] property market because those organisations have a heavy reliance on property advertising’. As Irish Times columnist Fintan O’Toole remarked: ‘There is no question that almost all of the Irish media for the last 10–15 years has had a crucial economic stake in a rising property market. Because property advertising is very lucrative and is a very important part of what makes the Irish media tick’.“