With the crash in the Irish economy we started to hear a lot about the actions of ‘elites’, and their part in our downfall. But despite the short roll call of the most sinful developers, bankers and regulators, we still didn’t know how such elites operated. The lack of transparency within our economic and political system means that we are still unclear about how our apparent elite may influence policy or how they can be so powerful that their collective decision making could be responsible for the collapse of a once reasonably prosperous economy.
The great benefit of TASC’s Mapping the Golden Circle, however, is to provide us with a clearer picture of how a small group of people could control so much. In the report we see how those from the same class and educational backgrounds can make up a small but very significant network of power and influence, particularly within the banking sector. And we can begin to see how their very interconnectedness leads to a consolidation of their own interests to the detriment of the entire economy. All done, of course, while broadly espousing the belief that what is good for them is good for everyone.
Another eye-opening report was provided by Harry McGee in his recent Irish Times article which informed us about the government’s complicity in all this. In 2007 Brian Cowen as Minister for Finance created a forum to advise on the creation of new legislation to update the regulatory structure of the Irish financial services sector. The forum, chaired by the managing partner of Arthur Cox solicitors Pádraig Ó Ríordáin, was made up of 23 members. Nine were from the “banking and finance sectors, compared to only six members from government departments” McGee reported.
“The subgroups charged with drafting the proposed legislation were also dominated by the private sector. An internal Finance memo from January 2007 said that its expectation was that the private sector would provide expert personnel whose pay would be resourced by the industry itself.
Of the 19 members of the drafting subgroups, only five came from the government side: two from the Financial Regulator’s office; and three from Finance. The others were lawyers and regulatory experts drawn from private law firms and banks including Merrill Lynch, Arthur Cox, AL Goodbody, McCann Fitzgerald, Educational Building Society, Bank of Ireland, Mason, Hayes and Curran, Davy and the Irish Stock Exchange.”
These two combined illustrate that at a national level there is a tacit agreement to cede power to vested interests on the understanding that they are the experts, and that with the position they have gained within the relevant sector they are the best people to make decisions that are supposed to be for the ‘common good’.
That they should do so, in the case of the financial regulation forum, for free is considered to be a ‘gift to the nation’.
But what about the more local level? Saturday’s Irish Examiner revealed the names of 17 people who are advising the Health Service Executive (HSE) on reconfiguration of health services in the South. Revealed that is, because up until Fine Gael TD Bernard Allen discovered who they were the names of the group were kept a secret.
“The future of health services in this region is being discussed behind closed doors by a secret group and it is typical of how the HSE operates. I found out about this accidentally, and I was gobsmacked,” the Cork North Central TD said.”
The reason that it was a secret may have been because the chairman of the group is property developer Michael O’Flynn. O’Flynn’s property development company is one of the first to move its substantial development loans to NAMA.
According to this recent Irish Times profile, which also lists the other 10 heading to NAMA:
“O’Flynn Construction has been in business for 30 years and is one of the best known construction companies in Munster. One of its more high-profile projects is the high-end residential development, Elysian Tower in Cork city (pictured above – D), Ireland’s tallest building at 83 metres.
In 1999, the group established a separate company, Tiger Developments Ltd, to pursue property development and investment in the United Kingdom and Europe.
The company has an estimated €1 billion worth of projects under way in Ireland and abroad. It opted for unlimited status in 2005, so no recent financial figures are publicly available.
In 2007, O’Flynn Construction acquired a 9.2 per cent stake in Blackrock International Land, the listed property firm spun out from fruit importers Fyffes.”
O’Flynn has also been quite outspoken about NAMA, saying that the government should talk directly with developers and bankers about how best to organise the bad bank scheme. It most definitely is not, he argues stridently, a bail-out for developers.
Talking to the media back in April 2010 when announcing a deal with a US private equity firm to develop a 435-bed student residence near Wembley Stadium in London, he remained prescriptive about how NAMA should work:
“Mr O’Flynn said there needed to be a functioning property market if Nama was to be a success and that a more sophisticated development sector had to be created to attract future foreign investment into Ireland, despite the current difficulties in the industry. “We are in a position to already show that in the absolute infancy of Nama there is an industry and there will be an industry but we have to make sure that this country actually provides a platform for there to be an industry,” he said.”
Being chairman of a reconfiguration committee that will oversee the development of new hospitals will help with the providing the platform no doubt.
At the same announcement the Irish Examiner reported him as saying:
“Finance is the lifeblood or raw material of our industry,” said Mr O’Flynn, adding: “In the pre-NAMA vacuum, banks weren’t going to allow people to invest in anything new, so you had two options; do nothing, or find another way of doing it.
Mr O’Flynn, who is on the Construction Industry Federation’s committee dealing with NAMA and who has had many of his group’s loans transferred to NAMA, said “there is no one anticipating NAMA to be approving any development of any scale anywhere for the foreseeable future, other than consolidating what is there, figuring out what is best for the country”.
Other leading business figures on the board include Pádraig Ó Ríordáin, managing partner of law firm Arthur Cox Solicitors, who we saw earlier as Chairman of the Forum advising on a new bill to regulate the financial sector.
Another aspect of the Irish Examiner report that is worth quoting and emphasising:
“Prof John Higgins, the HSE’s director of reconfiguration in the South, said the existence of the group had not been widely publicised because members’ time and advice was free of charge.
He said the genesis of the group had already existed when he took up his reconfiguration post and that he had broadened it to include academia and clinicians.”
All hail those who will gain profit in a new market by offering their services to their community free of charge.
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