Dr. Julien Mercille:

I will read my statement and we can take it from there. The statement analyses the role played by the Irish media in the property bubble in the years leading to the banking crisis. It discusses also media performance in more recent years. In particular, the statement addresses the following points about which the committee wishes to hear my views: the role in the mainstream media for scepticism about the sustainability of the housing boom or the broader economy; potential conflicts of interest in news content associated with revenues from property sector advertising; consistent promotion of buying over renting in the media; and the prevailing view that there would be a soft landing in the property market. So much of the information presented in the statement arose in my book, as the Chairman mentioned, The Political Economy and Media Coverage of the European Economic Crisis: The Case of Irelandin which more detailed and systematic data may be found.

So for the property bubble before the crash, my overarching point is that news organisations largely convey the views of political and economic elites. It is true that there are many debates taking place in current affairs reporting but they are mostly confined to the range of opinions within the establishment, and thus narrow in relative terms. Most research on the media focuses on journalists' herd mentality and reporters' lack of training in finance. However, I use a political economic framework and identify three main factors that account for the nature of coverage of the economic crisis.

The first is the media's links with the corporate and government sectors, the second is advertising pressures, and the third is sourcing. I will take the three points one after the other.

With regard to the links between the media and the corporate and government sectors, both private and State-owned media organisations largely convey corporate and political establishment views, but for somewhat different reasons. Private media entities are large corporations embedded in a for-profit economic system and are thus part and parcel of the broader market economy. This has several consequences. First, in order to start and successfully run a media company with any substantial outreach, significant financial investments are necessary, which means that only wealthy individuals and corporations are able to do so. Second, media firms are integrated into the market and feel the pressure from bankers, shareholders and directors to generate profits. Links with the broader corporate sector, including political elites, are created and maintained through boards of directors, as well as general business and social interactions. Independent News and Media, which is arguably the dominant media conglomerate in Ireland, owns numerous newspapers, magazines, radio stations and websites here and abroad. Just like other news organisations, its board has included numerous individuals linked with the corporate establishment. The same goes for The Irish Times, whose board has included a CEO of Irish Life & Permanent, a bank deeply involved in the housing bubble, along with members of IBEC and other businesses. Third, the media have a close relationship with the Government. News outlets depend on the State for licences and franchises, and so the Government is in a position to exert some leverage over news coverage. Also, State-owned media are, by definition, controlled by the Government to a greater or lesser extent through funding and appointments of principal officers. During the boom years, RTE had as chairman a director of Anglo Irish Bank, which epitomised the excesses of the Celtic tiger and property lending.

Thus, because the housing boom was beneficial to key sectors of the Irish corporate and political establishment, it was never seriously challenged. Rising property prices directly benefited builders and developers, banks, the Government, property firms and, directly, the broader economy thanks to high growth levels. The Government was able to collect large tax revenues from the property boom through stamp duty, capital-related taxes, income taxes on construction workers and taxes on construction materials. For example, while total property-related taxes accounted for 4% of Government revenue in 1996, they accounted for over 17% by 2006.

My second point concerns advertising. Advertising revenues are crucial to today's news industry. They allow newspapers to be sold for a lower price, making them more competitive. This affects news content, because corporate advertisers tend not to subsidise television programmes or news stories that seriously question or attack their own business or the political and economic system of which they are a part, which would be directly contrary to their interests. One particularly clear example of the significance of advertising to the Irish media is the large amount of funding from property advertising received during the housing boom years. The Irish media went even further in benefitting from property advertising money. They became owners of property websites, acquiring a direct stake in the growing housing bubble. For example, in 2006, INM bought www.propertynews.comand the Property Newsmonthly newspaper - the largest Internet property site in Ireland - and, in 2006, The Irish Timesbought the website www.myhome.ie for €50 million, along with the website www.newaddress.ie, which aims to make it easier for homeowners to move residences. Also, most newspapers published weekly supplements about commercial and residential property, glamorising the whole sector, while glowing editorial pieces about a new housing estate were often miraculously accompanied by a large advertisement plugging the same estate, in the words of Deputy Shane Ross, the former Sunday Independentbusiness editor. Ross also stated that unfavourable coverage of developers and auctioneers in other parts of the newspapers was regularly met by implied threats from property interests that advertising could go elsewhere. Moreover, an Irish reporter stated that journalists were leaned on by their organisations not to talk down the banks and the property market because those organisations were heavily reliant on property advertising.

My third point concerns sourcing. Journalists depend mostly on mainstream institutions for their reports because of limited resources, time constraints and a competitive news environment. Reporters need to connect those institutions that provide a steady flow of news, which in practice means large organisations that have themselves the resources to produce and release such a stream of material. The Government and corporations are two such sources, with the result that their points of view are predominant in the media. They can also deny privileged information to journalists who do not adopt the expected storylines, as happened during the housing bubble in Ireland.

As will be seen, during the bubble journalists relied on numerous experts from the real estate and financial sectors for their stories. The media analysis that follows depends to some extent on whether the bubble could have been identified before it burst and whether the size of the crash could have been reasonably estimated beforehand. The answer is "Yes" on both counts, although the precision of the analysis is obviously greater in hindsight.

There are two main measures to determine whether property prices are in bubble territory: the price-to-earnings ratio and the price-to-income ratio. The Economistmagazine used those indicators to warn about property bubbles around the world early on. In 2002, it stated that the Irish housing market had been "displaying bubble-like symptoms in recent years", and, in 2003, it calculated that Ireland's property market was overvalued by 42% relative to the average of the previous three decades. In Ireland, the economists David McWilliams and Morgan Kelly identified the problem and warned about it early on.

However, overwhelmingly, the Irish analysts and institutions, including the media, maintained that there was no bubble and that the boom would eventually end in a soft landing. Indeed, there is a clear discrepancy between coverage of the housing bubble before and after it burst. Before 2008, the media tended to largely ignore it, and it was only months after it started deflating that reality had to be faced. Once the housing market collapsed, the media simply could not ignore its downwards trajectory, hence the increased coverage. I have included two figures showing the number of articles on the housing bubble that appeared in newspapers by year. On average, The Irish Timeshad 5.5 times more articles on the bubble per year in 2008–11 than in 1996–2007. Similarly, the Irish Independentand the Sunday Independent had on average 12.5 times more such articles in 2008–11 than in 1999–2007. Moreover, the few articles published during the earlier period often denied that there was a bubble. For example, there were articles in The Irish Timesentitled "Study refutes any house price 'bubble' " and "House prices 'set for soft landing'," while the Irish Independent and Sunday Independenthad headlines such as "NCB [Stockbrokers] rejects house value threat from burst bubble," "House prices not about to fall soon, insist auctioneers," "Price of houses 'not over-valued' says new report," and "There is no property bubble to burst, despite doomsayers." In particular, between 2000 and 2007, The Irish Timespublished more than 40,000 articles about the economy, but only 78 of these were about the property bubble, or 0.2%. This is small coverage for what was the most important economic story in those years.

The residential and commercial property sections and supplements presented articles and glossy pictures encouraging readers to buy as opposed to renting. Stories described various properties on sale and were virtually indistinguishable from advertisements. One entitled "There’s a billion reasons to buy" introduced new luxury apartments by noting that they "feature quality designer kitchens with integrated AEG appliances [whatever that is] and stone worktops; top notch bathrooms with ceramic tiles, heated towel rails and chrome fittings". Potential buyers should waste no time, though, as "numbers are strictly limited – you’d want to stake it fast". Articles celebrated Ireland’s newly found pride in entrepreneurialism at home and abroad. One profiled the "ever-bullish Irish property buyer ... looking for the hot new property market", wherever it is in the world. Another article stated: "[I]n Victorian times, it was fashionable for the British to suggest that 'the sun never sets on our Empire'. Now the sun never sets on Ireland’s burgeoning property empire".

The media relied on so-called experts from the financial or real estate industry to describe the market, which thus received almost invariably upbeat analysis. For example, as late as November 2007, The Irish Timesconducted a survey among "property experts" to predict how the market would evolve in 2008. The six experts selected all held high-level positions with property firms. Not surprisingly, their forecast was enthusiastic. A number of journalists simply acted as cheerleaders for the property sector. Many even persisted in rejecting the view that the market had been in a bubble months after it started collapsing. For example, in April 2008, the Sunday Independent conveyed the thoughts of a real estate agent who believed that "[T]he time to buy is now. There is certainly great value in the market at the minute but it doesn’t mean people can dilly dally." Another journalist wrote a book entitled The Best is Yet to Comein 2007 and claimed that "Far from collapsing, our economy and property prices will do more than hold up."All that was required to protect Ireland against a crisis was not to talk about it, because "unless we talk ourselves into one, an economic storm is not going to happen."

Television followed the same pattern as the print press. During the boom, RTE sustained a national obsession with houses by presenting programmes such as "House Hunters in the Sun", "Showhouse", "About the House" and "I'm an Adult, Get Me Out of Here". Leading current affairs programmes such as "Prime Time" also sustained a housing bubble. Between 2000 and 2007, 717 shows were aired, of which only ten, approximately 1%, contained a segment concerned with the housing boom. These shows presented a total of 26 guests or interviewees of whom 11 came from the property or financial sectors, four were politicians from the main political parties, four were journalists, academics or researchers, and three were economic consultants. With respect to their views on the housing boom, only two interviewees said clearly that there was a bubble and that it would burst while the other 24 remained vague, argued explicitly that the housing market was and would remain strong in the years to come, or stated that a soft landing was to be expected if the boom decelerated at some point.

After the crisis, as the property market recovers, especially in Dublin, media coverage has essentially not changed. By this, I do not mean its content is the same as during the pre-crash years. The situation is different and we are not faced with a massive national bubble in the market. Rather, I mean that the media coverage points roughly in the same direction as before 2008. In general, it is the interests of elites that are mostly reflected in editorials and news stories, while those of ordinary people are often left out. This is not unexpected, given that the political and economic nature of the media industry outlined above is intact. News organisations are still corporate or Government-owned entities, advertising still plays a role in generating revenues and journalists still source their stories overwhelmingly from establishment institutions and individuals. One can find a few articles of a more careful or sceptical nature relative to the ongoing real estate boom in Dublin. I surmise that the pre-crisis bubble and its negative consequences are still felt strongly, and this may lead to more balanced coverage, although in relative terms this is a minor trend and, overall, a significant amount of critical commentary is not appearing in the media. The election of a few Deputies with progressive politics has also resulted in more critical coverage when their views are reported.

The fact that media coverage still reflects elite interests may be appreciated by considering analysis and commentary on the following key issues in the housing market. Approximately 90,000 people are on the waiting list for social housing, and there has been a rise in homelessness. Austerity has reduced State investment in social housing as capital expenditure for social housing was cut by 80% between 2008 and 2013. Approximately 118,000 mortgage accounts, 15%, remain in arrears and a number of repossession procedures are ongoing. So-called vulture funds involving mostly foreign investors are buying up large chunks of the property market. The Government has facilitated this by encouraging the establishment of real estate investment trusts, REITs, via generous tax breaks. REITs buy, among other things, property portfolios from NAMA. Vulture funds raise rents to maximise their incomes before they leave the market, after approximately three years, or whenever their real estate assets have increased enough in value in order that they can sell them back to Irish people at a higher price. NAMA promotes a vision of property as a commodity, not as a social good, given that it needs rental growth and seeks to maximise commercial returns.

Media coverage of such issues has reflected elites' views and interests. Coverage has not been extensive and has not foregrounded analysis and opinion that would reflect ordinary people's interests. Relatively little attention has been paid to progressive strategies to address the problems, such as significant public spending on a social housing building programme, NAMA playing a role more directed towards providing housing as a social good, rent controls, making unfinished estates safe and attractive places to live, converting vacant properties into rental units, mortgage debt write-downs and dealing with the issue of homelessness through a redistribution of wealth and power in society. The problem is not that nobody has presented alternatives. The union, SIPTU, has made the case for establishing a social housing REIT. The youth advocacy group, We're Not Leaving, produced a report on problems faced by renters, including deposit retention and low standards of quality in rented accommodation. The Nevin Economic Research Institute has argued for establishing and financing an affordable housing strategy. However, such organisations have not been included in the media to any significant extent. Instead, we often hear the views of developers, bankers and real estate agents and companies that call on the Government to ease the cost burden of construction in order that more houses can be built by the private sector to allow the market allegedly to solve the problems. We also still see stories of buyers telling how they are being outbid when they attempt to buy property.

After the crash, the media also presented the Government's crisis resolution policies in a largely favourable manner, again in line with the views of Irish and global elites. The media enthusiastically endorsed a blanket guarantee and declared it the cheapest bailout in the world. NAMA was called "bold and imaginative" and the "holy grail", while The Irish Timesclaimed it was our "best bet". However, there were progressive alternatives. Strong conditions could have been attached to the nationalisation of banks such as firing their top management, cutting the salaries of top officials, requiring that investment decisions be made with socially useful purposes and establishing strict regulations on banks' operations. A good bank could have been established, as explained in detail by the economist Willem Buiter in the pages of theFinancial Times. After some hesitation, the media endorsed the EU-IMF bailout in late 2010. The Irish Timesargued that:

On one level, intervention by the EU and the IMF is no bad thing. It means that rational decisions on how we can live within our means will now be forced down the throats of the competing interests who have stymied any genuine national response to the crisis.

The accumulation of sovereign debt in Ireland and Europe gave rise to the possibility of default and restructuring. However, the media described a potential default as a "cataclysm",an "evil day", an "unmitigated disaster", "hugely damaging", a "doomsday scenario" and likely leading to intolerable contagion effects throughout the eurozone. However, scholarship on sovereign debt restructuring reveals that countries that decide to cancel the repayment of their debts typically suffer only short-term economic costs and that long-term negative consequences are not significant so that, overall, defaulting often yields positive outcomes, for example, in Argentina and Greece.

The media has also strongly endorsed austerity since 2008. At the outset of the crisis, the media called explicitly for a campaign to educate the public about the need for austerity. The Irish Timeseditors complained that members of the public still did not appreciate the possible extent of the economic downturn and the editors asserted that the Government would have "a major job to do in educating public opinion about unpalatable economic realities and the need for civic discipline". A study I conducted of more than 900 opinion articles and editorials in the five main newspapers between 2008 and 2013 found the following revealing statistic: only 11% of pieces opposed austerity while 58% supported it and the remainder were neutral. The articles' authorship was also significant. More than 200 of the pieces were written by outside writers, not journalists. Of these, 29% were mainstream economists, 28% worked in the financial or corporate sectors and 20% were political officials in the three main political parties in power during the crisis, including only four from the Labour Party with the bulk from the two dominant right-wing parties. The overwhelming majority of writers, 77%, came from elite political or economic institutions. The remainder of authors comprised academics, members of progressive organisations and only 3% were trade union officials. Thus, a conservative cast of writers expressed their views and interests in the media.