The debacle surrounding Irish water, which is by no means yet resolved, has highlighted once again the importance of communications. Indeed, much of the blame in relation to Irish water is being laid at the door of communications, from the company and from the government.
At the height of the Irish financial and economic crisis a very common refrain from some was that people should “stop talking down the economy”. This was usually directed at those who stepped outside the consensus de jure.
The idea, of course, is that the economy is such a fragile creature that it teeters perpetually on the edge of a meltdown. This meme, that we should stop talking down the economy and pull on the green jersey etc, has now thankfully disappeared from the most part from Irish political and economic discourse.
It has however recently made an appearance at European level. The ECB, who have done more than most to depress the European economy, recently warned of the risks of pessimism.
There is some recent research, which sheds light. A recent paper by a Swiss economist looks at the impact on sovereign bond and CDS spreads when statements are issued by National, European level, or international commentators.
This found that it was really only statements by officials from large countries or from ECB governing council members that had an immediate and lasting effect on these yields.
Statements by domestic, smaller country politicians had no measurable effect. What should also worry local politicians is that more hawkish statements tended to have a larger and more long-lasting impact than dovish or soft statements.
Other work on politician’s statements, as opposed to others, reinforces the notion that it is only the large country political communications that matter. Some recent research suggests that for smaller countries it is the communications of non-political actors, rather than political, who have any effect.
Finally, a comprehensive examination of the drivers of sovereign bonds, a flawed if plausible proxy for healthy economies, concludes that in the case of the European economy the regional macroeconomic effects and investors’ appetite for risk is what really drives. There is no strong evidence that local sentiment type issues had much of an impact.
The consequence of this is that there is very little penalty, if any, evident from having a robust internal debate.
They may pay some attention when a large country politician or market participant comments, hopefully from a position of knowledge, but not so much from when we ourselves speak.
We should, thus, embrace a multitude of voices. We should ask ourselves whether or not our national broadcast media in particular, be it state or privately-owned, provides us with the service for discussion. Where are the contrarians? There is a very robust debate, with all shades of opinion, evident in the print media, and online. On broadcast, not so much.
The economy is recovering. This recovery is fragile, and there are enormous threats in the external environment. We need to allow voice to those who draw attention to the existence and nature of these threats, if only to ensure that we do not groupthink ourselves into fooling ourselves that these do not exist.
It seems very clear from the debacle surrounding Irish water that our permanent and elected government finds it difficult to hear those who speak against the policy at hand. It was only at the point of crisis that effective steps were taken to deal with the water issue, effective they will prove to be.
We saw in September 2008 that it was only when the crisis was breaking upon us that the government took effective, if ultimately well-meaning but disastrous, action. Where are the contrarian voices, the minority opinions, the dissidents from government policy?
As a society, we need to open up to debate not close it down. From the economic perspective, nobody that matters pays that much attention to what we say, so we may as well say it openly to ourselves.
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