Once bit­ten, twice shy — why ‘boom envy’ is gain­ing ground

It’s not enough to tell peo­ple the econ­omy is in great shape. They have to feel it, too, and that’s just not hap­pen­ing right now, writes Eilis O’Han­lon

Sunday Independent (Ireland) - - Comment -

ONE sen­ti­ment, more than any other, summed up the ab­ject fail­ure of a cer­tain class of smug, cos­seted self­styled or­a­cle to un­der­stand what hap­pened to the coun­try in the fi­nan­cial crash.

It was that cer­tain type of com­men­ta­tor, on those late-night po­lit­i­cal talk shows back in the day, in­sist­ing that there wasn’t a prob­lem with mort­gage debt be­cause the vast ma­jor­ity of peo­ple were still pay­ing their mort­gages in full and on time ev­ery month.

No men­tion of the hard­ship they might be putting them­selves in; of the sac­ri­fices they had to make; of the pres­sure un­der which they were plac­ing their fam­i­lies. Not one word about what it might do to the spir­its of peo­ple turned into walk­ing life-sup­port ma­chines for debts from which they couldn’t es­cape be­cause house prices had col­lapsed and, even if they had off­loaded that al­ba­tross around their necks, the bur­den would fol­low them to the next ad­dress.

As long as they were pay­ing the bankers ev­ery month, all was deemed to be well with the world. There’s “not get­ting it” — and then there was those peo­ple, who’d turned not get­ting it into an art form.

And they meant it. That was the worst part. With Christ­mas now upon us once again, it might even be fit­ting to say that they were, in ev­ery re­spect, wor­thy suc­ces­sors to Ebenezer Scrooge, who needed sim­i­lar re­as­sur­ance in his day that the set­tled eco­nomic or­der, as he un­der­stood it, was in­tact. Were the work­houses still in op­er­a­tion? The Tread­mill and the Poor Law in full vigour? The bankers still be­ing paid? They are? Then what’s the prob­lem?

One would have hoped that these peo­ple were a thing of the re­cent past, but alas the “Not Get­ting It” brigade are al­ways with us, even in what we’re per­suaded is now an­other eco­nomic boom.

Once again, they have the num­bers at their fin­ger­tips to prove it. The econ­omy is go­ing great guns. Em­ploy­ment is up, and not just among funky metropoli­tans in the tech sec­tor; even long-term un­em­ploy­ment, that most stub­born of in­di­ca­tors, is down. Good news sto­ries dom­i­nate the fi­nan­cial pages.

The restau­rant in­dus­try is said to be in the midst of a “re­nais­sance”, no less. Wages are, al­legedly, ris­ing. The Or­gan­i­sa­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment ex­pects Ire­land’s econ­omy to con­tinue grow­ing healthily for the next two years at least. Num­bers no more tell the whole story, though, than mere words tell a story.

It’s all in the read­ing of the words and the in­ter­pre­ta­tion of the num­bers. Take the re­cent con­sumer con­fi­dence fig­ures, which have shown the sharpest drop since 2010, when the econ­omy was in the heart of a fire storm.

Our old friends who couldn’t see the prob­lem with mort­gage debt would be baf­fled by these find­ings. Faith in one’s per­sonal, and the coun­try’s na­tional, prospects should be sky high. In­stead, de­spite growth of over 5pc this year alone, few peo­ple are ex­press­ing the con­fi­dence to start spend­ing again — and any id­iot could surely ex­plain why, hav­ing been burned once, peo­ple might be re­luc­tant to take an­other dive into the flames.

The last boom ended in dis­as­ter. Why would any­one trust this one not to do like­wise? They’re surely not wrong to be cau­tious ei­ther. Our debt to GDP ra­tio may be down to 73pc from a high of 125pc in 2013, but, with a tiny pop­u­la­tion, Ire­land’s debt per capita re­mains the high­est in the eu­ro­zone, higher even than Greece — and that coun­try is a bas­ket case when we’re meant to be boom­ing.

Our old friends, though, are not id­iots, so they fail to ap­pre­ci­ate sim­plic­ity. For them, “boom envy” — as the sense of feel­ing ex­cluded from the re­cov­ery, while oth­ers flour­ish, has been chris­tened — is an ir­ra­tional re­sponse to ver­i­fi­able data. How for­tu­nate the bean coun­ters must be to find such com­fort in cor­po­rate arith­metic, deaf to the sighs of swathes of or­di­nary peo­ple who, as­sailed on all sides by pos­i­tive head­lines about the econ­omy, still just aren’t feel­ing it.

It’s not that they want to feel this anx­ious. They’d love to be swad­dled in the warm­ing glow of an­other boom. They’ll even gladly wel­come the good news when it’s pointed out to them. Nor are they as wor­ried about their jobs as they were a few years ago, or about house re­pos­ses­sions, or hav­ing enough money to buy ba­sic ne­ces­si­ties; but they still don’t see what’s go­ing on as a boom.

Why should they when the macro-eco­nomic in­di­ca­tors don’t re­flect where they are in their lives? The Cen­tral Bank may tell them that to­tal house­hold wealth is now greater than be­fore the crash, but, as Austin Hughes, chief econ­o­mist at KBC Bank Ire­land, points out, the po­si­tion of the av­er­age house­hold is still worse off than it was more than a decade ago, and they’re still “un­der pres­sure” and “in re­cov­ery mode from the crash”, nei­ther of which is likely to boost feel­ings of benef­i­cent well be­ing.

It’s not a boom if you’re not feel­ing it, and we’re just... not.

In­stead, as Austin Hughes ex­plains, peo­ple are sim­ply “try­ing to keep their head above wa­ter, and the idea that the econ­omy is run­ning too hot seems en­tirely alien”.

The key to un­der­stand­ing this phe­nom­e­non of “boom envy” is the feel­ing of “ex­clu­sion from the re­cov­ery”, as it’s been de­scribed. One in 10 mort­gages are still in ar­rears; 100,000 re­main trapped in neg­a­tive eq­uity. Even if that’s not you per­son­ally, it’s likely to be some­one you know, some­one you care about. Jobs and wages are one part of the equa­tion, but feel­ing weighed down by soul-crush­ing debt is an­other. It’s im­por­tant not to re­place the mis­placed pos­i­tiv­ity of the Celtic Tiger years with an equally dan­ger­ous neg­a­tiv­ity, but those who don’t share the jol­lity should not be made to feel as if they’re talk­ing the coun­try down.

The con­di­tions are still not in place to fos­ter a sense of ease.

Of course, com­ing up to Christ­mas, peo­ple may start splash­ing out more cash; it’s the time of year for it; but that could be as much about com­fort as con­fi­dence. Again, the key to un­der­stand­ing what’s go­ing on is that be­hav­iour and sen­ti­ment can of­ten con­flict.

This is what the Govern­ment needs to grasp, surely, oth­er­wise it’s just des­tined to stum­ble into a re­run of the 2016 elec­tion ‘Keep The Re­cov­ery Go­ing’ de­ba­cle. The team which ran that dis­as­trous cam­paign had at its core Leo Varad­kar, then health min­is­ter, now Taoiseach, and Si­mon Coveney, then min­is­ter for agri­cul­ture, now Tanaiste and min­is­ter for for­eign af­fairs. Varad­kar chaired the sub com­mit­tee on com­mu­ni­ca­tion, Coveney on pol­icy — an ar­range­ment which some might say still stands. Ac­cord­ing to the be­hind-the-scenes anal­y­sis pub­lished af­ter the elec­tion by Sun­day In­de­pen­dent jour­nal­ists Philip Ryan and Maeve Shee­han, no one would sub­se­quently ad­mit to com­ing up with the slo­gan ‘Keep The Re­cov­ery Go­ing’, but cer­tainly “no one threw up a red flag or banged the ta­ble” — even though Patrick Coveney, chief ex­ec­u­tive of Green­core and the cur­rent Tanaiste’s own brother, was telling a con­fer­ence in Cork that the “great mys­tery” was that “no one feels” this re­vival.

Right now, what seems to be sav­ing Fine Gael from go­ing full scale into a re­peat of the same sce­nario is Brexit. There’s so much un­cer­tainty, in­deed fear, around what might hap­pen once the UK leaves the Eu­ro­pean Union that it’s putting a lid on Varad­kar’s ten­dency to boy­ish en­thu­si­asm.

Is any­one in the Cabi­net bang­ing the ta­ble or hold­ing up the red flags on be­half of those suf­fer­ing from “boom envy”? If they are, they’re do­ing it so qui­etly as to be al­most in­audi­ble.

The les­son back in 2016 was that peo­ple needed most of all to feel at peace with the state of the coun­try, and that sense of equa­nim­ity is still some way off. The hous­ing cri­sis is an open wound. Hos­pi­tals are strug­gling to cope. High streets in many towns in Ire­land look down at heel.

One fac­tor that has be­come in­creas­ingly ev­i­dent from re­cent elec­tions is that the econ­omy is no longer the dom­i­nant con­sid­er­a­tion that it once was. Even if peo­ple be­lieve that the econ­omy is on the right track, they care about other things too. That should have been an­other take away from 2016 — the need to un­der­stand the “hu­man im­pact” of eco­nomic shocks.

Re­cov­ery from trauma al­ways takes time. As one min­is­ter noted af­ter 2016: “A politi­cian has many flaws but one thing a politi­cian can do is read the pub­lic moods... the peo­ple in our party at a strate­gic level didn’t lis­ten.” The nag­ging un­ease out there sug­gests they’re still not pick­ing up the sig­nals.

‘Re­cov­ery from trauma al­ways takes time, and that goes for the econ­omy, too’

SHOP­PING: Com­ing up to Christ­mas, peo­ple may start splash­ing out more cash; but that could be as much about com­fort as con­fi­dence

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