I was at a festival last week that combined up-to-the-minute economic analysis with raucous no-holds-barred comedy. It sounds like a strange mix – but it worked. Maybe that’s because this unique hybrid event took place in Ireland where, even in the teeth of adversity, folk see the funny side of life.
Kilkenomics is staged annually in the elegant bijou city of Kilkenny, in the south east of the Emerald Isle. Dubbed “Davos with laughs”, it attracts a high-powered crowd of economists hailing from central banks, financial institutions and some of the world’s top universities – together with the odd renegade dismal scientist such as me.
This 3-day festival is spread across four venues in Kilkenny’s charming medieval centre. At the heart of the agenda are a dozen or so panel discussions – with catchy titles describing serious underlying issues, such as “Apocalypse West” and “Kicking Arrears: Ireland’s Personal Debt Crisis”.
Each panel features a clutch of economists but is chaired by a razor-sharp Irish stand-up – who puts the technocrats through their paces. Before a well-informed and free-to-heckle audience, glib, fence-sitting responses from people often not used to being publicly challenged are exposed for what they are. The result, as long as good spirits are maintained and tempers held in check, is an aching face from having smiled so much and, often, an illuminating discussion.
My favorite session was among the more trivial: “Jargon Busters – the Economics Buzzword Game Show”. This featured a couple of senior academics from Ireland and America who ended up bent double with laughter as, amidst good-natured sniping from the comics, they were asked to define “quantitative easing”, “comparative advantage” and other unpalatable terms. “Animal spirits”, quipped one one-stage wag. “That’s when we get our dog drunk every Christmas.”
One of the panels I appeared on was serious, at least for a while. Charmingly entitled “Pulling it out of our A*@e”, the session was an inquiry into the reliability of economic modeling and statistics. It began calmly enough, as we economists traded debating points on the accuracy of GDP and trade data. But when the discussion moved on to inflation, the sparks began to fly.
Myself and others argued that official CPI numbers are perhaps a low estimate of inflation and many shoppers experience price pressures that are greater. When a well-respected Irish academic, who has worked at various central banks, manfully rebuffed such arguments, the crowd erupted. He ploughed on but was floored when, seizing the moment, Max Keiser, an American panelist and well-know economics “shock jock”, produced a rubber chicken and employed it like a ventriloquist’s dummy. “My name is Plucky, and I work at the central bank – so do what I say,” he said in something approaching a hen-like voice, as the audience howled with laughter at what amounted to an economic pantomime.
Kilkenomics began four years ago, and was born out of Ireland’s traumatic deep-dive recession, after the collapse of Lehman Brothers in the autumn of 2008. The following year, the Irish economy, previously lauded as “the Celtic Tiger”, contracted by an eye-watering 6pc and has since failed convincingly to recover. While the country finally climbed out of recession in the second quarter of this year, unemployment remains above 13pc, with spending depressed by tax rises and salary cuts.
Ireland, to be sure, has seen public spending reductions over the last four years that are three times greater in proportionate terms than the UK government’s “austerity measures” are imposing in eight years. That’s the reality of what the Irish public has endured. It’s also the reason why Kilkenomics strikes such a chord, and is rapidly becoming a part of the country’s popular culture. The scars of economic adjustment run deep and the pain is real – and one way the complex Irish psyche deals with suffering is to laugh in its face.
The rather risqué title of the statistical debate I appeared in echoes a phrase used on the notorious “Anglo-Irish tapes”, the recently released recordings of senior executives at one of Ireland’s largest banks. As part of a ploy to lure the state into providing a massive bank bail-out in late 2008, the Anglo-Irish management, we now know, plucked the initial estimate of taxpayer-backing they needed from the air – although, joking among themselves, while being secretly recorded, they (ahem!) used a rather ruder phrase.
The idea, the tapes reveal, was to claim a relatively small €7bn life-line first, to ensure that the Irish government had “skin in the game” and couldn’t then back out, before later demanding what the bank bosses knew what was really needed – upwards of €30bn. As somebody of Irish ethnicity, with close ties to the country, I think I can safely say that “the Anglo-Irish episode” amounts to the country’s Watergate. It is a source of on-going bewilderment and shame.
During the boom-times of the early-2000s, Ireland’s banks had been extremely lax. Balance sheets were so stretched, that when the property bubble burst, the hole in the banking sector was huge – an estimated €64bn, or €14,200 per person. And, of course, the Irish government famously agreed to stand behind the biggest banks’ total liabilities – protecting not only depositors, but also bondholders and other bank creditors.
That was a fateful decision, which placed a massive burden on taxpayers and brought Ireland’s public finances to their knees, resulting in the 2010 bail-out courtesy of the International Monetary Fund, the European Commission and the European Central Bank – collectively known as “the Troika”. That put the Republic in the same company as ostensibly far more precarious Eurozone economies such as Portugal, Greece and Spain.
The reason the Irish government took on the €60bn+ of bank liabilities in late 2008, there can now be no doubt, was that the Troika forced it to do so. Had the Irish followed their instincts, and restructured the banks, wiping out the bond-holders, massive losses would have been imposed on other European banks that held such bonds, not least those in Germany.
So Irish taxpayers took the hit to prevent “financial contagion” spreading across the Eurozone. That the country ended up with a €85bn bail-out two years later caused resentment. Having fought for centuries to gain their sovereignty, the Irish have been loathe to accept the Troika’s harsh policy conditions.
That’s why last week’s news that Ireland is to make a clean break from its bail-out next month is so important. Three years ago, the country was unable to raise money on international markets. Since then, Ireland has won enough credibility to issue debt and build a €21bn cash pile, funding itself into 2015, with yield on Irish 10-year Treasuries falling from 15pc to 3.5pc.
The first of the Eurozone “peripherals” to emerge successfully from a bail-out, Ireland is presented by the eurocrats as a success story. Yet massive challenges remain. Household debt is twice annual GDP. Mortgages in 6-month arrears are at a record 17pc. House prices, while picking up in Dublin, are almost 50pc below their 2007 peak.
I’m concerned that, as we learnt last week, the Irish government has “said no” to a precautionary line of credit. The country’s deficit, while on a downward trajectory, remains above 7pc of GDP. Buried within the Irish banking sector, toxic assets lurk. Yet with no precautionary financing line, Ireland is now excluded from the Troika’s various support programs.
Ireland is a small country, highly reliant on trade. With the best will in the world, further help may be needed. So, if the global economy turns nasty, that would be no laughing matter for the Irish. Or perhaps it would.