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Eggheads prick Nama bubble

Posted on: August 30th, 2009

ONE of my favourite people on God’s earth is Professor Joe Lee, the history professor from University College Cork.

A few years ago I shared a room with Joe in Seanad Eireann. We had regular jousts about the state of the nation and, occasionally, the value to the community of academics such as himself.

I was a sceptic about academics — their PhDs, their professorial titles, their doctorates and their apparently light workload.

One day I opened up our conversation with a cheap shot.

“You guys,” I suggested impertinently to the learned Lee, “are overpaid for seven- week terms, a few lectures, short hours and long holidays.”

Joe looked at me with those lively but always good-humoured eyes and snorted loftily.

“You guys,” he joked, “do not seem to realise that the State pays us to think.”

Quite a putdown from a professor with an unparalleled research record to a layman with an obvious chip on his shoulder about eggheads.

After a single session in the Seanad, Joe headed off (voluntarily!) to do some serious “thinking” in the US, where he spent many subsequent years. Thankfully he is now back in Ireland more often, adding to the gaiety — and the learning — of the nation. In the meantime, nowhere was he missed more than in the Seanad, where his contributions were among the most refreshingly unpredictable in the State’s history.

Joe chose the academic road, but for a short time he had been a legislator injecting the sort of heretical thought into debates on the Irish economy that would be priceless today.

Academics are often branded as protected creatures living in a warm bubble of their own making. When Joe had put me back in my box with his retort that he was paid to “think”, I did not respond with the obvious taunt that none of his breed had ever laboured at the coal face. I was a beaten man.

Today I should be interested in Joe’s views on Nama.

So it has been fascinating to observe some of the current crop of academics taking a front seat in the Nama debate. Indeed, last week, when Brian Lenihan’s personal economist, Alan Ahearne, took to the airwaves on Morning Ireland, we saw that the minister had decided to fight the fire currently being poured on him from academics with his own guru.

Alan, plucked by the minister from the womb of University College Galway, was sent out to bat against his former colleagues from every ivory tower in Ireland.

He scored one or two telling points on the actual figures, but his adversaries among Ireland’s economists are running a credible campaign against Nama. It is gathering steam thanks to the support of the Irish Times, but such a distinguished media crutch should not force us to exclude the possibility that the academics’ arguments have merit.

It was a fair achievement of Professor Brian Lucey to gather 46 signatories from a profession that contains the highest percentage of egotistical prima donnas outside Hollywood; but he did. They all signed an article on the dangers of Nama. These are some of the guys — in the words of Lee — paid by the State to “think”. So, at the least, the State should take note of their thoughts.

Their thoughts are disarmingly simple. They did not need to put too much of that cerebral stuff into overdrive. There is only one real argument with Nama: that is, the price paid by the taxpayer for the properties held by the banks.

We know that the taxpayer will pay too much. And none of us need the collective brainpower of 46 eggheads to tell us that this is hardly a sensible course.

Yet the Government is trying to persuade us of the wisdom of the taxpayer paying above market value for properties that no one else on the planet will buy.

Admittedly, government spinners dress their case up in flowery economic language, meaninglessly talking about paying “fair economic value”. After establishing “market value” they will add on a bit, enough to keep the banks afloat.

Somehow Nama’s “experts” will establish the “market value” of the property as a starting point. Not a bad trick when there is no market. Hence the fantasy price.

Nama brings with it a whole new fantasy world. It is an effort to recreate an artificial level of property prices that may not be seen for a generation; because Nama pretends that property prices will rise in the long term, an assumption that landed us exactly where we are now — in the last chance saloon.

Property prices could easily fall, not rise, for the next 10 years. If that happens, or even if they remain on a plateau, the only group having paid too much for property will be taxpayers. There will be a two- tier property market: one where Nama deliberately pays the banks too much for its assets and another where the free market dictates lower prices. The final collapse of Liam Carroll’s empire will set this two-tier market in motion.

The Nama fantasy is based on another flawed assumption: once the banks have been relieved of their bad debts, they will liberally lend money that becomes available in the global money markets.

That bogus message is not coming from the banks; it is coming from government spinners. Bankers are too cute to be offering such a false hostage to fortune. Once they have laid their hands on the loot, they will not be lending it to tiresome clients like productive but struggling small businesses; they will be back to grand projects — loans to big and favoured customers.

Nama, based on these fantasy assumptions, will rescue the bankers while crippling our children and grandchildren with debt. It is the lovechild of the permanent insiders, the bankers, the Taoiseach, the Department of Finance and others who have landed us in this mess.

There is an alternative. Why has this same cabal set its face against nationalisation?

Nationalisation would eliminate the problem of paying too much for the assets. The State would own them all. It would not be an ideological decision, but a practical one. It would be taken with the express intention of refloating the banks on the stock market if they ever returned to a good profit.

The 46 academics — few, if any, lunatic left-wing ideologues — advocate this course. Academics, so often accused of living in a featherbedded bubble, are suddenly the leaders in highlighting the fantasy world of the supposedly hard-nosed insiders. The roles are reversed.

And last week, at Beal na mBlath, another independent academic entered the debate about the economy.

Professor Mary Robinson, Chancellor of Trinity College, made some welcome but thinly veiled criticisms of the lack of vision in the current crisis. She did not mention Nama, but my memory is long enough to recall one of her earlier policies that caused a storm, when she was a bright, young senator in the Seventies. She was one of the first Irish politicians to call for the nationalisation of the banks.

Academics have a good record. We should listen to them. We could do with a few more “thinkers” like Robinson and Lee.