The Irish Banking Crisis and Corporate Elite Capture

Not so long ago, when I was doing my Masters degree, I wrote a thesis on the disastrous flotation of Eircom and how the Irish financial media failed to inform the public of the risks of share ownership, an oversight which resulted in thousands of small investors losing their savings when the company’s shares nosedived.

I concluded that a media phenomenon known as ‘corporate elite capture’ was at work. Boiling it down to its basics, the concept attempts to explain the influence that corporate elites, such as bankers, have on the media. It rejects the conspiratorial argument of direct manipulation but argues that journalists can, if they are not careful, end up losing sight of the bigger picture and start advocating the views of their sources at the expense of other stakeholders, such as the general public.

Although I had hoped following the financial crisis had eradicated corporate elite capture from Ireland, an article that I read in the Irish Independent earlier this week gave me flashbacks from my thesis. It was an opinion piece by that newspaper’s banking correspondent, Laura Noonan, arguing that the state had to make a €3.1 billion payment  due this weekend to keep the zombie bank formerly known as Anglo Irish Bank afloat.

This post isn’t about the rights or wrongs of taking such action but about the language used by Noonan in her piece, which set my alarm bells ringing. For a start, she consistently uses bankers’ shorthand to refer to promissory notes, the instrument of payment involved.  From my brief investigations, the shorthand term “pro notes” seems to be rarely used outside the elite circle of analysts and bankers who still populate the state’s shattered banking system.

Most worrying though was the casual disregard of the impact that the payment – which bankers and bondholders desperately want to see happen – would have on the non-banking elites such as the general public. According to Noonan, the question of altering the terms of the note is an irrelevance because:

“It is paid from the state coffers to Anglo — another arm of the state. It’s like if you regularly pay money from your current account to your savings account — the net impact on your finances is the same. It simply does not matter.”

But it does. The allocation of government funding has a profound impact on the type of lives experienced by the general public. Even at a fixed level of expenditure, the usage of that finance can result in a myriad of different outcomes. For example, if the government slashed its education budget and spent all the money on nuclear warheads, you would end up with a highly militarised country with an uneducated population (like an Atlantic version of North Korea perhaps). If it took the same level of finance and invested in watersports, we’d end up in a state festooned with swimming pools.

For those bankers, who seem keen to get their hands on the €3.1 billion, this point needs to be seen as an irrelevance. It is arguable whether handing over €3.1 billion to the former Anglo, while slashing public services to do so, to please the financial elites is a desirable use of public money. In a perfect world, journalists shouldn’t dismiss such issues out of hand but in instances where corporate elite capture is at play, such outcomes do occur.

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