Colm McCarthy has consulted with the European Commission and the World Bank. He has worked with the ESRI, the Central Bank and UCD, sat on a string of state boards and advised a number of governments about public sector cost savings. But in a previous life in the 1990s, he also tried to get a Dublin soccer team playing in the Scottish league.

The plan failed for a variety of reasons, but a key issue was national structures and the fact that teams do not have freedom of establishment – McCarthy was effectively trying to relocate a Scottish team to Dublin. A business can relocate from Dublin to Paris. A football team cannot. “The structure of European football is a racket,” says McCarthy more than two decades later as he argues that UEFA’s cosy relationship with the European Commission is overriding European competition laws.

An economist, McCarthy has a wide range of views on a wide range of topics. But he is passionate about sport, and football in particular. As such, he watched the attempts by Europe’s largest clubs to establish their own Super League with interest.     

The move has been depicted by detractors as a mechanism to enrich the richest. However, having studied the balance sheets of the clubs involved, McCarthy argues that it was instead a “panicky attempt to avoid losses”, much of which stem from the lack of ticket revenue as a result of the pandemic.

Having served as a point man for various governments on cost cutting, McCarthy argues that the state’s response to the pandemic has been to spend money on a range of areas that are not connected at all with the actual crisis. “Once the fiscal constraint is gone, politicians revert to type and discover all sorts of woolly schemes to increase government spending,” he says.

With the advent of the Department of Public Expenditure and Reform, McCarthy says that we have a decent system for controlling government spending “but only on paper”. Instead, he is worried that it will be difficult to unravel much of the Covid spending increases in non-Covid areas.

He likens the crisis to a war, arguing that the government is engaging in “wartime finance” adding: “The war is on. You have to buy bullets and fight the war. And you clean up the financial consequences afterwards.”

When the crisis abates and the EU stops buying government bonds, he says taxes will have to rise to ensure that we return to some sort of fiscal balance. He also argues that the recent national recovery plan was not a recovery plan at all, but rather an extension of emergency measures. Instead, he will be looking at the content of the forthcoming National Development Plan.

“It is very easy to go off and build stranded assets,” he says. “We have done that before. Hopefully, not this time.”

Over the course of our in-depth interview, we discuss all of these things – and much more besides. But we begin with why he wanted to be economist.

*****

Alison Cowzier (AC): Does a kid wake up some day and think they want to be an economist? How does that work?

Colm McCarthy (CMcC): I think it usually happens by accident. I was always interested in business. And I used to read the business pages in the papers. And I drifted into business and economics courses in university. And then I got a liking for it and went off collecting bits of paper in other universities. And then I had to go and work.

AC: So, was it the analysis bit? The prediction bit? The commentary bit?

CMcC: The analysis bit really. But the focus on predictions in the media always reminds me of something Milton Friedman said 30 or 40 years ago. There were forecasts made about what’s going to happen to the US economy, they turned out to be wrong. And some journalist was giving Milton grief about all this. They weren’t Milton Friedman’s forecasts, they were other peoples.

And he said, economists make forecasts, not because they know, but because they’re asked. And that always stuck in my mind. There’s too much focus on what’s going happen to GDP last year and so on. It’s very difficult to know what GDP was last year.

AC: Never mind what it’s going to be next year.

CMcC: Yeah. So, I don’t pay a lot of attention to forecasts, and I try not to make too many.

AC: You’re in this game for many, many years. As I mentioned, you’ve become well known for the government reports that you’ve worked on, but you’ve done a lot of consulting, you’ve also done a lot of lecturing. The idea of being an economist, is it an attractive route for anyone getting into the game at this point?

CMcC: It is hard to know. And there are some good universities here that have got undergraduate courses. A lot of people who choose economics as a profession tend to push off and do graduate study elsewhere. And that’s what I did. And I’d recommend people to do that. And it’s much easier now than it was then. But it’s not a huge profession. And quite a lot of people who do economics degrees end up doing something else.

Covid, wartime economics and loosening purse strings

AC: We’re all armchair economists, I think particularly now looking at where the world is post Covid-19. Looking even at what governments around the world, and particularly in this country, are attempting to do at the moment, what do you think we need to focus on?

CMcC: Well, the response to this downturn, and it’s been a very severe downturn, in Ireland, has been instep really with the other countries around Europe – which makes it different from the financial crash when we managed to mismanage our banking system in spectacular fashion. We failed to regulate and so on. It was a colossal failure. Most other countries didn’t make as big a mess of it as we did. So, we were a stand-out, if you like.

And there wasn’t really a comprehensive Europe-wide response to the banking bust because most people didn’t have as big of a banking bust, as we did. Even in Britain, where they had a pretty significant one, relative to the size of the economy it wasn’t as big as here. And in some of the continental European countries, they didn’t really have much of a banking bust at all. They did in the United States, as you know.

This is different in the sense that it’s a pandemic. The European Union, I think, has shaped up reasonably well.

AC: After a halting start at the beginning.

CMcC: The European countries haven’t shaped up all that well, but at the central level, which means the Commission and the European Central Bank, I think they’ve shaped up a bit better. They made a mess of the vaccine procurement. And they were too slow, and so on. That’s been well documented. But that’s fine. They began to catch up.

But on two things, I think they got it right. First of all, they suspended the ceilings on government borrowing and government debt. The Commission did. The European Central Bank said, okay, we will buy government bonds and we will support the government bond market and we’ll support even the ones that look a bit iffy that have already over borrowed a bit.

AC: So, was that rulebook was thrown out the window?

CMcC: Well, I think it was the right thing to do. The shorthand is ‘it’s wartime finance’. That’s how governments finance wars, they say the economy has got to come to a halt, or large parts of it have. Lots of the available labour force is going to be reduced, partly by government fiat. And eventually, the war will be over. And in the meantime, we’ve got to finance government, we’ve got to keep interest rates down. The simple way to do that is to get the Central Bank to buy government securities to expand its balance sheet, without limit really.

And what do you do about it? And the answer is, you wait until the war is over and worry about it then.

AC: So, you’re reasonably happy with what we got?

CMcC: I think it was the right decision. It was a correct decision to support household income. It was a correct decision to make more money available to health services.

And you can’t agonise over if the health service is as efficient as we’d like it to be. We know the answer to that. We’ve known the answer to that for 20 or 30 years. The war is on, and you have to buy bullets and fight the war and clean up the financial consequences afterwards. The one mistake we’ve made here,

“I think there has been a worsening in the level of seriousness in the policy machine.”

I think, is the government has actually loosened the purse strings on things that have nothing to do with the pandemic.

So unfortunately, once the fiscal constraint is gone, politicians revert to type. And they have increased government spending here, and the fiscal council has complained about it extensively. They have loosened public spending here in areas that had nothing to do with the pandemic.

AC: Do you think it’s a bit of a free for all?

CMcC: Well, it is the instinct of politicians, they think public expenditure is too low and taxes are too high. That’s what they tell everybody, constantly. All politicians, right, left and centre.

AC: So where does the money come from? Which is the ultimate question.

CMcC: Well, eventually, we’re going to have to head for some kind of fiscal balance here. Let’s paint a rosy scenario for a second. Suppose vaccination works, and the public health measures work. And suppose in two-year- time, say that the worst is over, and things are kind of back to normal. I’m not sure that’s going to happen. But suppose it did. You can be quite certain that the European Commission would reimpose something like the Stability and Growth Pact, which will say there’s a limit to how much you can borrow. There’s got to be a ceiling on public debt, and so on. And more importantly, the European Central Bank will stop buying government bonds. And when that happens, you’ll have to get the budget back into balance. And of course, when that happens, politicians will scratch around at civil service and they’ll scratch around, and then suddenly discover that there are great big expenditure commitments that have been made to non-health things during the pandemic. They were things we didn’t think we could afford a few years ago, when the economic prospects were better.

When is a recovery plan not a recovery plan?

AC: So, the recovery plan that’s been published, with the emphasis on quite a lot of capital spending, a lot of sustainability, the green economy. What’s your views on all that?

CMcC: Most of the recovery plan is just an extension in time of the emergency measures. The essence of the recovery plan was deficits are going to be €20 billion this year, instead of €18 billion.

That was bound to happen. There’s no way they were going to withdraw the PUP, while there’s still so many people relying on it. So, everybody knew that that was going to happen.

And this surrender to the inevitable, gets dressed up as a recovery plan, which is a tribute to the public relations people in government. But it’s not really a recovery plan.

AC: What do you think should be in that if it was to set us up for actual recovery as opposed to simply papering over the cracks what’s happened?

CMcC: Well, it’s just extending in time measures that were always going to be extended. Okay, what happened last October in the budget was the government said, we have to assume something. And we will assume that by the middle of next year, the worst of this will be over. And we can start phasing out these measures. Well, the worst of it isn’t over.

So, they can’t responsibly phase out the measures. They were always going to extend them, and you can borrow the money at very low interest, so why not? It’s what everybody else is doing. So, they extended the measures.

There is a component in the recovery plan as published, along the lines of the things you mentioned, on the capital side, and so on. It’s small though. There will be a new national development plan and it will be released in a month or six weeks, which is a big deal.

Emissions, development and sustainability

AC: What are your hopes for that?

CMcC: I hope it’s focused. I hope it respects the public spending code, which requires that the capital programme only consists of well-researched projects with serious cost estimates that have passed a cost benefit test. And that’s all done in public in accordance with public spending code.

AC: And you believe that may not happen?

CMcC: I think it may contain quite a lot of brain waves that surface around the cabinet table. And that worries me. It’s very easy, particularly when you’re at a kind of a juncture, because of the climate crisis, it’s very easy to go off and build stranded assets. And we’ve done it before we built turf fired power stations down in the midlands, only about 15 or 20 years ago.

AC: When the writing was ultimately on the wall.

CMcC: Well, everybody knew that there was an emissions issue then. But there were politicians that said, ah we need jobs in the midlands – at a time when you couldn’t hire people in the midlands because there was a shortage. And we’ve now had to close those stations. So, you can build stranded assets if you’re not serious. And it worries me a little bit.

I’ll give you an example. If we’re going to decarbonise road transport, then why are we going to electrify the railways? And there are people that want to electrify the provincial railway.

AC: You’ve been quoted on this many times talking about trains that are departing stations with five people on them.

CMcC: There are. There’s not that many, actually. I mean, most of the main lines have kept some reasonable level of traffic. And they’re there. Queen Victoria very kindly built these and left them when she pulled out, or her successor pulled out. But if you really intend to decarbonise road transport, then why not rely on buses? And it’s nice to get the train to Galway, but it’s not exactly a flippin’ nightmare to get the bus to Galway.

AC: So, does that not mean more roads, better roads?

CMcC: Well, we kind of have the better roads in most parts of the country – there’s a few bits missing still on the national road network, which needs to be fixed. But by and large, the road system is not at congestion levels. The cities are. But the solution in the cities is to cut out these silly tolls that we have and put in proper congestion charges in cities. Which is great news for buses too, of course.

AC: So, transport, obviously a big area for that national development plan in the context of sustainability. I mean, where do you see Ireland on that sustainability track? We’ve lots of promises. Who should we be benchmarking against? Who has done it right?

CMcC: There’s one problem here that I think people have begun to notice. The figures as measured suggest that agricultural emissions in Ireland are about four times the European average per capita. But that can’t be based on consumption. Because we don’t eat four times as much stuff as everybody else.

AC: But we export hugely.

CMcC: We export it. And there is a flaw, I think, in the manner in which emissions are allocated to different geographical territories, which means countries. And a lot of the emissions are allocated on the basic consumption. If you go off and buy petrol to put in your car, it is debited to Ireland’s emissions, and you pay a fancy price for petrol to discourage you. And there is nothing wrong with that. It’s not debited to Saudi Arabia’s emissions. But if a fella in Munich buys a pound of butter, and eats it in Munich, it’s debited to Irish emissions.

AC: So how does that square with the need for growth in the food industry for example? Farmers will tell you that it’s better that pound of butter is produced from grass fed cows in Ireland than Brazilian intensive farming, for example,

CMcC: Correct. Or in tiny herds in south eastern Europe where there’s nothing to graze on except cactus and lizards.

AC: Has that been raised? Is that considered?

CMcC: Constantly.

AC: And no traction?

CMcC: There is a flaw in the manner in which emissions are measured. And the flaw is the following: A lot of them are measured on a consumption basis. So, it’s right and proper that if you burn diesel or petrol in your car or heating your home, the consumption basis is the right way to discourage excessive emissions. But that’s not applied to agriculture. You could end up saying, oh, there seems to be a lot of emissions in Ireland because there’s a lot of dairying in Ireland or Denmark or various other places. So, we’ll discourage that. But the risk is that you displace those emissions to places where the per unit emissions are higher.

AC: Obviously, the farming lobby, and the food industry, are about to get into protracted discussions and arguments and all the rest on that. But interesting to see that being raised as a potential route, which certainly hasn’t been to the fore.

CMcC: I sometimes find that the Green Party’s position on this kind of stuff, and they’re in government now, simultaneously inspirational and frustrating. In the sense that their heart is in the right place and they have been arguing for a long time to have carbon taxes, which means let’s bring it home to consumers everywhere. If you consume goods or services, that have high emissions, then we want to discourage you from doing that. Obviously, we will reduce taxes on something else. And I’ve always been in favour of that. And it’s great that Eamon Ryan and his colleagues have pushed the carbon tax. I think that’s the right thing to do.

AC: You said in the past, on that whole sustainability piece, that country by country strategies are just not going work. It needs to be broader.

CMcC: Yeah, it does. But the bit that frustrates me about the Green Party and the policy they’ve succeeded in getting in, like the Climate Action Plan, now is a quantitative target for our annual emissions reduction. And it’s going to be seven per cent per annum. The consequences of actually doing that have not been thought through. And it’s not a policy instrument, it’s a target. And Irish politicians are divils for producing targets without thinking through, how’s that going to work? Because you can’t run a business that way. You can’t say, oh, well, my target is to make a million quid next year. You’d say, that’s fine, but how are you going to do it?

Give hugs, not pay rises

AC: Moving on from sustainability, I mentioned in the intro, you’ve been author and lead on a number of government reports over the years that have managed to gain notoriety. An Bord Snip and An Bord Snip Nua. Do we need another one?

CMcC: Well, we’ll see. For both current and capital spending, there is now a set of processes in place, which are meant to keep decent control of public expenditure. And the Department of Finance was split in two ten years ago. And a part of it was hived off as the Department of Public Expenditure and Reform. So, there are now two ministers. And on paper, we have a decent system for controlling public spending, but only on paper. And over the last four or five years, government revenue has actually been better than had been expected. All the extra bit has got spent.

And it’s all kind of a coiled spring now.  When the economy gets going again, I think there’s a real danger that there will have to be a revisiting of public expenditure. What form it takes is neither here nor there. It comes as a shock to the system.

I keep bumping it to people around the city, not around the country as you’re not supposed to wander around the country, and a question they asked me constantly is where is all the money coming from? It’s coming from the bond market courtesy of the ECB. And that will not be the position into the longer term.

AC: So, I suppose the genesis of a lot of those reports that you’ve been working on, and I know it’s a long time probably since you’ve done a national one, but it was about cutting back the public service, the numbers, it was about reducing wages and salaries, it was, to some extent, about reform. But I suppose over the pandemic, what we’ve seen is perhaps on a personal basis, many people have seen when big government actually takes over and comes in and is the fire brigade in those emergency situations and does well. And the HSE rallies round despite what criticisms may be there. Do you think that frame of mind will continue? Or was it simply the emergency response?

CMcC: Well, I think it was the emergency response. I think when the dust settles, there will be public inquiries in all of the countries with democratic and accountable governments. And I think the public inquiries will conclude that nobody in Europe did a terrific job on this, some did better than others. And there are certainly aspects of what we did here that were well done and well executed.

“There was an opportunity to do a bit of engineering on the banking system.”

AC: Do you think that’s rehabilitated, to some extent, public perception of the state and the state can do when it does well?

CMcC: I’m not sure. And, you know, you never should extrapolate from what you know, we hope, is an unrepeatable experience. This is an emergency, and we did what we did. I don’t think there’s any doubt that the personnel in the health service have made a special effort. Everybody should be grateful to them.

AC: Do they deserve a pay rise?

CMcC: That’s another story really. They deserve a hug. Whether they deserve a pay rise is another story. But there are aspects of the overall response that were poor. The carry on in the UK, you’ve seen it repeated now with Johnson declining to control travel from India for three or four weeks now, when he should have. And cases are rocketing again in the UK. It looks scary.

There were mistakes made. And it’s happened in most European countries. And it’s humbling to have to concede that a whole heap of countries in Asia have done much better. And it’s in the death, in the fatality rates, and all the rest of it.

And there was a study done that was partly financed by the Gates Foundation, just before the pandemic broke at the end of 2019. And a whole bunch of very, very impressive professional medical people in the United States, virologists and epidemiologists, and so forth, and they published world rankings, which two countries or 10 countries are the best organised, if something like this happens. And the winners were the United States and Britain. And the United States and Britain, and we’re at least halfway through this now, I hope we’re more than halfway through it, the fatality rates are unarguable and the fatality rates in the United States and Britain have been the highest in the world. But they had terrific hospitals, terrific. Doctors, nurses, money, universities.

AC: Do you think the system failed?

CMcC: Yeah. I think there was a system failure. I think there’s going to have to be some serious introspection. Because all of the experts think that these flippin viruses will arise from time to time, and that this might happen again.

External shocks and water charges

AC: So, I suppose from an economic perspective, that readiness radar that we need to be on what is coming next, what’s the next external shock? As you mentioned at the beginning, previous crises have been somewhat self-made. This is not self-made, as a crisis.

CMcC: It’s a worldwide thing.

AC: Yeah. So, should we have a rainy-day fund for managing this? Should we be putting it aside? A percentage of income that is ring fenced deducted?

CMcC: Governments have come to be seen increasingly as kind of great big reinsurance companies, or insurance companies, in the sense that if something really bad happens, people look to the government, and say, what are you going to do about it? I think that’s fine. It’s clear that governments have capacity and there are certain kinds of things that only the government can do, like organise mass vaccination campaigns. It’s difficult to see how that can be done by anybody other than the government. But there’s an implication if you regard the government as an insurance company that will take once off measures if various things go wrong, and if you think that lots of things could go wrong, climate emergencies being an example, or epidemics or whatever like crop failures, droughts… Government is going to deal with that. How does the government prepare itself for that? And the answer is, have a robust balance sheet. Don’t start off with the huge amount of debt on the balance sheet. And as the role of government expands, the virtue of government solvency rises. And I think there’s a lot of people in politics who instinctively believe government can do everything, and sure jaysus we’ll borrow the money.

But if you do that, and you don’t have your own currency, which we don’t, when disaster next strikes you won’t have any money.

AC: So, we’re back to fiscal prudence as well.

CMcC: What we ought to be into is, first of all, a realisation that there is this kind of insurance role of government. That some damn thing will happen. In due course, we don’t know what it is. But whenever that happens, you’ve got to be ready. The government’s going to have to deal with it.

AC: Higher taxes?

CMcC: The government will need to have the fiscal capacity to do it. I think we’re going to have to have some increases in taxes over the next while. It’s very disappointing to see people still unwilling to contemplate water charges.

AC: That’s a political no go area in this country…

CMcC: Well, it wasn’t at one time. And it will have to be dealt with. Most people have in their homes, they have electricity, they might have a landline, if you remember what those were. They might have broadband and cable TV, and gas central heating. They pay for all those flippin’ things every month. Why on earth of all the different pipes and wires that come into my house and deliver all these things that I use, why should one of them be free? Who says water is free?

AC: That argument was had and it was lost.

CMcC: The politicians bottled it.

AC: Absolutely.

CMcC: Well, they can rediscover their bottle.

Two and a half banks (and a housing crisis)

AC: I want to take it to the banks. Clearly, we were still in the aftermath of the banking crisis as a country. We’re now facing a scenario with two pillar banks and possibly another kind of half, two and a half banks, essentially, with exit of Ulster Bank. Certainly, as a business person, that does not serve well the business community, I don’t believe it serves the consumer either. What can we do as a country to change that?

CMcC:  Yeah, it’s difficult. I think, in the circumstances of 2009/2010/2011, when the banking system imploded, the banking crisis here was very unusual in that every single bank needed to be rescued. Some went completely while others went half wallop, and so on. And they all had to be rescued. So, it was a really big and system wide banking crash. And relative to the size of the economy, one of the biggest banking by busts in the history of the developed world. So, decisions had to be taken quickly, they set up Nama and the IBRC. And you know the rest. The Exchequer took on a huge amount of the liability to bank creditors. Some people think that was a mistake. I thought the bank guarantee was a mistake and I said so at the time. But it happened, and what’s done is done. We’ve now ended up with an architecture for the banking system, which, as you rightly say, is two and a half banks.

“There’s a kind of a concordat between UEFA, an outfit with a blemished record, as you know, and the European Commission”

We used to have a two and a half party political system when it was Fianna Fáil, Fine Gael and the Labour Party half. But we now have a two and a half bank setup. It’s a tricky thing. How different would it look if different decisions had been taken in 2011.

For example, the Educational Building Society (EBS) which was unlucky to go bust actually. It was probably the best one of them. And it went bust and it was given over to AIB. Maybe that should have been put somewhere else.

AC: And then, from where we are now, for any SME going and looking for a loan, whether it’s a capital loan or growth loan, whatever, there is absolutely limited availability. The banks that are there will cherry pick clearly what they want. Is there an opportunity at any level for state intervention here? At European level, at local level, that can really begin to reform? Because we have not just an imperfect banking system, we have a system that just doesn’t work. It’s not fit for purpose.

CMcC: Yeah, it is not distributing credit efficiently, which is really what you want the banks for. One of the things that bothers me is that there is a certain type of lending that is natural lending for banks. Banks that have mostly deposits as their source of money. And a natural type of lending is lending with a 12/18/24 month time horizon. Working capital finance and stuff like that. Not really equity. The banks aren’t really venture capital funds. Curiously, the Irish banks will now lend you 30-year money to buy a massively overpriced house in Dublin that you can’t afford.

AC: They won’t give you €20,000 to invest in a business on a growth fund?

CMcC: But they won’t finance the flippin a builder for 18 months or 24 months. And one of the reasons why you’ve had all this flap about the overseas funds block buying estates and so on, is that you have to pre-sell the flippin thing to get funded. And my tuppence worth on this issue was the following: for a bank, which has runnable liabilities, it’s got deposits, that’s the liability side of the balance sheet, for those kind of outfits, lending money for 18 or 24 months to a builder is actually a more natural form of lending than lending money to you to you too…

AC: Is that a hangover from the banking crisis?

CMcC: I think it is. I think the bank’s balance sheets got savaged. They’ve got replenished, they still have non-performing loan issues. The Central Bank, quite rightly, is cautious, it doesn’t want to have to bail them out again. The government doesn’t want to have to bail them out again. And they’ve shied away from any kind of risky lending.

AC: So structurally, I mean, what is the answer to two and a half banks in an economy?

CMcC: Yeah. I’ve been thinking about this for the last while. It is not clear that you can ever have a huge number of banks and a small economy. In a way, we tried that, and they all completed too much. They all went wallop. That was an ingredient of what happened here. And there are big countries, big economies, bigger than ours that don’t have a huge number of nationwide banks. So maybe three is as good as it’s going to get. And we’ve ended up now with a structure.

I think it’s a pity maybe that the government didn’t have to think about could we have fashioned a third one? Don’t forget, the government did own ICC and ACC one time. There was an opportunity to do a bit of engineering on the banking system.

The Super League and the economics of an anti-competitive sport

AC: I’m going to take you away from the economy side, but I suppose it’s somewhat linked to one of your passions in life, which is sport and particularly soccer. We’ve seen a collision over the last 10 or 20 years between sport and business, sport and economics. And I suppose we’re now at a point if you consider what’s happened over the last couple of years, even in the last few months on the likes of European Super League, GAA amateur code. All of those really big questions. I mean, has cash killed the beautiful game?

CMcC: What’s really happened is if you look back 20 or 30 years, including professional sport in the United States, but also in Europe, television has infused enormous amounts of money into these sports. The sports are competitive. Teams want to win. And they bid for the best players. And the money flows through to the players. There’s a notion around that the Super League was a dash for profits by greedy capitalists and stuff like that. It was a panicky attempt to avoid losses. That’s really what it was.

AC: Because of the demand for player salaries?

CMcC: No big because of the pandemic. You can’t charge people 20 quid to get in or 60 quid. So all of the big clubs in Europe, which have huge wage bills, and fancy stadiums to pay for have made horrendous losses. I mean, it’s not quite as bad as the carnage in the airline industry. But if you can’t charge at the gate, you’re in trouble. The racing industry is in trouble.

AC: But many of them are highly leveraged and owners have taken the cash off the table, which is another issue entirely. I suppose you know that the concept of recent emergency responses is one thing. But this has been brewing for some time.

CMcC: It has. But the dash for the Super League now, I think, was motivated in a large degree by the horrendous losses that these clubs have enjoyed in the last 12 or 18 months. But to come back to the economics of it all, the structure of European football is a bit of a racket, in that there are five big leagues in Spain, Italy, France, Germany, and England. And there is a rule in the FIFA rulebook which has been there since 1998, which says that teams do not have freedom of establishment. Now you have your business, you can put it on the back of a lorry, and you can drive it off to England. Well, not anymore, but France or Germany or anywhere else in the European Union. You can’t do that with football clubs.

AC: How has that survived anti-competitive legislation?

CMcC: That is a good question. I have a lawyer friend who’s interested in this stuff, who tells me that there’s a kind of a concordat between UEFA, an outfit with a blemished record, as you know, and the European Commission, and they get on terribly well together. And the European Commission has indulged non-competitive behaviour in European football, which they would not condone in other areas. They’re now being sued. The Madrid High Court referred the Super League stuff at the insistence of Real Madrid, to the European Court of Justice, under European directives about competition and freedom of establishment.

AC: You at one point were involved in attempting to bring in an Irish team to Scotland at one point.

CMcC: No, we bought a team in Scotland, me and a few other fellas in a few other firms and tried to relocate it as a Scottish League team here. And the FAI with the farsightedness for which they’re justly celebrated were behind this rule change in FIFA in 1998. And now, you cannot relocate teams without permission.

So, the result is that there are five big leagues in Europe and all the good players all end up playing in, in our case in England, but all the good players from Central Europe end up playing the Bundesliga. And a lot of lads from South America end up playing in Spanish league and so on. So those five leagues have kind of a monopoly. And the result is that big cities that could easily support successful football clubs have six teams instead of one playing at a local league against villages. And that’s true in Finland, Ireland, and so on.

AC: Do you think that mitigates against the kind of fan base, the supporters?

CMcC: Well, when the season gets going again normally, which I’m sure it will, the big crowds at Dublin Airport on Saturday morning are mirrored in the airport in Oslo, and Stockholm, and all these other places, all gone off to matches in England and Germany and so forth.

It’s not what the rugby people did. The rugby paper realised, here in Dublin, they realised if we try and replicate the League of Ireland by having Wanderers and Lansdowne playing against Mullingar, and Arklow, we’ll all go bust. But they tried it for a few years. Got sense, went off and did a deal with the Scottish terms and the Welsh terms and so on. As a result of which you have a successful rugby team in Dublin 1.

AC: I’d have to ask you what your views are on the FAI, being such a football man. Do you think it’s redeemable?

CMcC: I’m not familiar with exactly what structures and stuff have been put in place. There’s some capable people now in the FAI Council. It’s a real problem with these voluntary organisations, governments are loathed to interfere with them and rightly so. They inclined to think, look, this is a voluntary stuff and if these people want to run it we’ll let them fire ahead.

And the courts are like that. If you appeal if you’re sent off for kicking a fella in the head, and you got barred for a month and you moan in court the judge will say, I’ll leave that to the football crowd. So there is this natural hands off thing with these big voluntary organisations and sometimes it works but when they screw up they can screw up in spades.

And I think it’s pretty clear that the Football Association of Ireland should have been intervened in by the government a long time ago. Actually, there’s a wonderful UEFA tradition of, ‘oh, we don’t want politicians interfering in football associations’, which means you can keep up the racket anyway you like lads and we’ll keep the government off your back. And that’s the way it worked.

I wouldn’t mind, and it’s not often you’d hear economists saying this, civil servants couldn’t run Irish football worse than the FAI ran it. So I wouldn’t mind if there was more public involvement.

These voluntary bodies, when they get their hands on significant revenue flows, which they do in football, it’s hard to keep an eye on them.

Outlook and predictions

AC: When we started our conversation, you mentioned that you’re not a big fan of predictions. But we’re going to finish by attempting to look 18 months down the road when, as you mentioned, hopefully we’re through the worst of Covid-19. Where do you see Ireland at that point?

CMcC: Well 18 months ago I would have gotten this particular forecast wrong. I would have thought there won’t be a vaccine because that’s what pharma companies thought. They thought it could take a couple of years to get a vaccine and then get it administered and manufactured. So, we are in a better position than one would have expected 18 months ago. But in another respect, we’re in a worse position, that the overall response of the public health measures and in particular manage travel restrictions properly in Europe has been a failure. It just hasn’t worked. There’s still an awful lot of the disease around. There’s all this stuff about mutations going around, I don’t pretend to understand it. It seems to me we could be out of this in 18-months-time but we don’t know. And there could be more accidents, particularly if variants arrive.

AC: From an economic perspective have we learned anything that would put us in good stead for the future?

CMcC: I don’t know. I’m a little bit disturbed that from the onset of this negative development for the Irish economy, namely this terrible disease, that it was used to discover things to spend money on that you wouldn’t have before when the outlook was better. So I think there has been a worsening in the level of seriousness in the policy machine.

I think 18-months-hence if the worst of this is over, there is going to have to be a gradual return to some kind of sensory policy management. Rebuilding the capacity for the government to act as an insurance company next time round.

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