Vanity Fair and the Irish Paper Tiger: Expert Discusses Why Media Ignored Warnings of Financial Collapse

At  this month’s Vanity Fair, best-selling author Michael Lewis chronicles Ireland’s collapse into the deepest recession of any European Union country.  In a guest post today, my American University colleague Declan Fahy considers the role of the Irish financial press in the collapse. 

A professor of journalism, Fahy reported for the Irish Times, Irish Daily Mirror, and Longford Leader newspapers before completing his doctoral studies at Dublin City University.  Fahy recently co-authored a study at the Irish Communication Review that draws on interviews with the leading financial journalists in the country–Matthew Nisbet

Michael Lewis’s Vanity Fair article described the conflicting reactions to two op-ed pieces by economics professor Morgan Kelly that predicted the end of Ireland’s decades-long real estate boom – which had driven the rise of the Celtic Tiger economy.

The first reaction was amusement. The second was hostility.

Kelly’s cautious messages (house prices could halve, banks are lending recklessly) ran counter to the prevailing economic optimism in a country experiencing its first major wave of wealth.

And such dissenting voices were marginalized in Irish media coverage – as they had been elsewhere.

Harvard economist J.K Galbraith told in his A Short History of Financial Euphoria how he was asked by the New York Times in 1986 to write about the speculation in financial markets caused by the frenzy of mergers and acquisitions at the time.

His piece, which predicted the October 1987 crash, did not run. He said the paper thought it ‘too alarmist’.

Galbraith noted that those who speak out during a time of collective euphoria about economic growth ‘will be the exception to a very broad and binding rule’ where personal interest, public pressure and ‘seemingly superior financial opinion’ conspire to sustain the euphoric belief.

To see if Irish financial journalists were caught up in this financial euphoria, myself and two colleagues, Mark O’Brien and Valerio Poti, both at Dublin City University, interviewed Irish financial journalists for a recently published article in Irish Communications Review.

We found that several reporters were highly critical of the specialism’s performance overall, arguing that it was too tame, too compliant and too fearful.

One reporter we quoted said: ‘The problems that we have seen in Irish financial journalism in recent years have been due largely to its unquestioning support for the elite consensus.

‘There have been critical financial journalists but they have largely been marginalized by their profession’.

This support for elite consensus has been explored cogently in several works by scholar Aeron Davis using ‘critical elite theory’ to describe how journalists use elites as sources and, rather than disseminate this information to mass audiences, instead write news for other elite audiences.

In this system, financial elites were simultaneously the major sources, targets and recipients of news. Coverage is produced and consumed in closed communication networks. The majority of citizens were merely observers.

Not all Irish reporters we interviewed agreed that they had been ‘captured’ within this elite-elite network. Some pointed to examples of critical coverage and noted how the tone of reporting changed over time and from outlet to outlet.

Reporters agreed that financial journalists now operate in an environment heavily mediated by public relations, one with legal constraints about reporting market-sensitive information, a difficultly in accessing information, and the threat of legal action from well-funded companies.

All these factors combined to create an environment that made sustained and systemic economic criticism difficult for journalists.

However, we found that reporters agreed that a new style of critical and skeptical coverage had emerged after the scale of the country’s financial crisis became clear.

It will be interesting to see if this new post-Celtic Tiger model of financial reporting remains the norm when, and if, the economy recovers, not just in Ireland – but globally.

For readers, how might consumers and citizens participate in this environment of increasingly critical financial reporting?

–Guest post by Declan Fahy, assistant professor of journalism in the School of Communication at American University, Washington DC