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2008 not 2000-1

David McWilliams is a talented analytical polymath but he is egocentric and predictions of both boom and bust for Ireland have nearly all been wrong

David McWilliams is a brilliant communicator, albeit with an irritating, fixed cockiness, and a fine analyst. His columns and his books are racy and informative.

However, he is in some respects a charlatan: not an Eddie Hobbs communicator-charlatan but a uniquely self-serving egotist with a penchant for realigning history, or at least his reports of it, to favour his role in it.

McWilliams caroused into the public consciousness in 1999 when it became somehow perceived that he’d invented the term Celtic Tiger. However, later that year he had to concede it was a London-based analyst Kevin Gardiner who had unleashed the – not spectacularly clever – descriptive in a 1994 Morgan Stanley report. As late as 2005 the Irish Times was still reporting “that he coined the term ‘Celtic Tiger’”.

McWilliams semi-apologised early on for allowing the perception to arise but mainly seems to have privately resolved that no Celtic-Tiger-derived phenomenon in Irish society would go unnamed by him. So in his book the ‘Pope’s Children’ (2005) he introduced us to social icons like Breakfastroll Man, DIY Declan, Speedbump mom, Kell’s angel, Hi Co, Bouncy Castle man, Carrot Juice Contrarian, to Robopaddy, Low GI Jane, and The Expectocracy; and to phenomena of the time like the Wonderbra effect and Deckland.

‘The Pope’s Children’, a racy and expansive read, was largely value-free. McWilliams reads widely and is nothing if not attuned to the times, so he has latterly – with the onset of our era of authenticity – tried his hand at some values. Therefore in the last few years he has championed climate-change action and even equality, though it is evident that he really means equality of opportunity which is essentially a variant of freedom, not of equality. This approach got an outing when he brought Bernie Sanders to Dublin last summer for his Dalkey Book Festival.

His real views are probably best represented by his comment to the Irish Times in 2005, “I believe totally in the individual, and I think that every culture should be judged by how they value the individual”. This unradical perspective is the guiding norm in Irish society and it therefore provides a platform for his popularity. He isn’t particularly doctrinaire. He told Village, some years ago that his capitalism was not “pure”. Nevertheless there is sometimes a suspicion, despite his keen efforts, that McWilliams has a tin ear for the problems of the badly off. In ‘The Pope’s Children’ he wrote, apparently without irony: “The country has blurred into a classless nation”. Since there’s anti-discrimination legislation: “if you are poor there is something wrong with you, personally”. This seems strangely harsh.

McWilliams’ first TV outing, apart from some preternaturally confident appearances as a precocious economist-for-hire for UBS bank and Banque Nationale de Paris when he was in short trousers, was on the ‘Late Late Show’ in 1999.

He predicted in round and precise tones, like those we recognise so well today, that there would be a crash within one to two years.

Around the same time he wrote, in a book entitled `Are We Forgetting Something?’: “when punters begin to pay over the odds for a certain type of asset, this triggers a boom to bust cycle. In Ireland today [1999] this asset is property”.

The problem is that the average house price in Dublin then was £120,000 (€135,000) and it was to rise over the next nine years to €397,000. It is now [2018] €354,000. By any conventional measure he was utterly wrong to say €120,000 was “over the odds”.

It is impossible to disprove many opinions and some statements of fact but it is easy to hang someone who makes false predictions, and McWilliams did. A stopped clock is right once a day, but is not to be relied upon.

We may contrast McWilliams’ prognostications about the demise of the Celtic Tiger with those – a significant number of years later – of UCD’s Morgan Kelly who, observing that, between 2000 and 2006, house prices in Ireland had doubled relative to rents, while the price-toincome ratio had also significantly outpaced its historical level, considered, on the evidence, 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”. It happened, to the letter – when he said it would.

Kelly of course got it horribly wrong about the recovery and nobody cares what he is predicting about the next crash.

The problem here is that writing in his new Irish Times column in early January 2018, McWilliams stated what he sees as the cause of the crash, which happened in 2008: “Once the banking system ran out of Irish deposits and began to borrow abroad to finance the property mania at home, the collapse of the debt-fuelled economy was not a matter of if, but when”. And he gives a time for it: “The banking crisis didn’t start with the bank run of 2008 but with the overlending in the early- to mid-2000s”. In other words he happily claims that the crash was caused by event which clearly hadn’t occurred in 1999, the year he first predicted it. In effect in 1999 was predicting a crash on grounds which he now says didn’t exist or didn’t matter. He clearly made his prediction without evidence. He blustered it so people would look at him and to make himself famous. And he was six to seven years out in his timing. It happened in 2008 not 2000-1. In terms of economics, which assumes a business cycle of around a decade, this was a very grave mis-prediction. His recent article was initially headlined ‘I saw the Crash Coming but not the rebound’ though the Irish Times eventually change it to ‘The crash was foreseeable. The rapid recovery wasn’t’.

He got it wrong. Why then does he consistently say that he predicted the crash and that he was made a pariah for it?

Like Kelly, McWilliams got it wrong about the recovery. He has written recently in the Irish Times under the headline ‘The recovery came as a bit of a shock’: “According to economic theory, the Irish recession should have lasted much longer. This is because the specific type of recession Ireland experienced was “a balance sheet recession”.

In any case by November 2017 McWilliams was again predicting bust: “I believe there is a bubble and it is building very rapidly. The interesting thing is you don’t need credit to have a bubble. A three-bed semi in Dublin, the sort of house I was brought up in. When a house like that costs €450,000, which is 10 times the average wage, you know you’re in very dangerous territory”, he told his new TV3 series, ‘David McWilliams’ Ireland’.

It wouldn’t do to patronise McWilliams, who organises the Dalkey Festival, the Irish Economic Forum (don’t ask), has his own Hedge Fund and high-charging financial-advice website and who, remember, was consulted by Minister for Finance, garlic-toking Brian Lenihan, about his wheeze to bail the banks out – though of course McWilliams says he envisaged a two-year, timelimited bailout not embracing sub-prime debt, and not the open-ended one that did for the economy, or nearly did. No, this is a talented and polymathic guru, who illuminates dark economics for many, who has a genius for colourful analysis. His predictions probably don’t really matter.

Because, for an economist, McWilliams is exciting and entertaining.

He didn’t name the Celtic Tiger, he mis-predicted its demise and he failed to prognosticate the recovery. Now he’s predicting another crash. If you want a soothsayer to foresee boom and bust, you’re better off looking into your own heart. And not losing the run of yourself.