May 4, 2003
Fate of Killiney Court Hotel shows the free market at its very worstPosted in · 9 comments ·
‘Freeeee, Nelson Mandela, oh, oh, I’m begging you.’ The year:1984. The place: The Killiney Court Hotel. The reason: a debs. The mid-1980s, with its Elvis Costello/Special AKA collaboration, teenage girls’ cleavages, profiteroles and the Killiney Court Hotel are indelibly linked in my memory. The song went on to be a political classic and the pretty girls are probably married and driving young kids around in Range Rovers, but the hotel, which stood for over 100 years, is about to be demolished for apartments.
The story of the Killiney Court Hotel is a microcosm of boomtime Tiger Ireland. It is a classic example of the victory of short-term thinking over long-term reason. It is emblematic of a society where private opportunism dominates the public good.
No one is disputing the rights of the owners to do whatever they want with their property.What is at issue here is why the owners feel commercially compelled to convert this landmark into a block of apartments. How come the straightforward commerce of the tourism industry – the biggest employer in the country – has become perverted in this self-congratulatory little country of ours?
The Killiney Court is no ordinary hotel. It is set in the most breathtaking location in Dublin.Yet it can’t make as much money for the owners as a going concern as it would if it were converted into apartments.
Anyone who knows the area, knows that the view out across Killiney Bay, north to Dalkey Hill and Dalkey Island and south to Bray and the Wicklow Mou nt a i n s i s t h e most spectacular on the east coast.
There is a Dart station at the end of the driveway, and the tourist gateway of Dun Laoghaire ferry port is three miles away.Yet this hotel cannot stave off the relentless building of the dreaded gated apartment complex.
Apart from the prospect of another part of the south coast being privatised for good, the issue goes to the root of the type of system that we have created in Ireland.
Before regular readers think the May Day protests have brought out the secret Marxist in McWilliams, let’s address this idea of the public good versus private opportunism.
The public good is synonymous with successful capitalism. There is no point having a free market if it does not deliver the best results for all of us.
The best results typically stem from doing the right thing, and a free market should create the incentives to do this. We have a problem if the system referred to as `stakeholder capitalism’, which reflects the preferences of a variety of punters, is replaced by `cowboy capitalism’ where the interests of only a few are served.
Over the past ten years Ireland has adopted an economic system straight out of an American MBA textbook, with startling success.
The American approach is based on four pillars. The first rule is that we are all primarily driven by material self-interest, at least in our economic lives. Second, there is a type of market fundamentalism abroad that suggests that the free market rules and any social or political action to regulate markets is undesirable.
The third tenet stipulates that the state has only a minimal role to play. In fact, the state’s role should not extend much beyond the enforcement of contracts and private property rights. Finally, the low taxation pillar suggests that the aim of government should be to keep taxes as low as possible and not to indulge in redistributing wealth.
Many believers in the US creed make moral arguments – defending low taxes or non-intervention by the state – and warn that any increase in taxes is an attack on personal liberty. Although a combination of these factors may work in the US, where competition and rigorous enforcement of laws prevent real abuse of the consumer, there are arguments against taking such an approach in Ireland.
Is it in the public’s interest that 48 apartments replace a hotel? No. A fully functioning hotel is a public amenity. It creates jobs, skills and revenue for the locality. It gives a sense of place to a community with shared experiences and memories. It generates outside interest from tourism.
It complements other public services, such as the transport system that services it. It makes public amenities such as the beaches, the views and the nature walks around much more attractive. In short, a commercial venture like a hotel has a positive self-reinforcing impact on a locality way beyond the profit and loss approach of moneymen. Of course, the place needs to make money, but maybe the point of reference should not be today’s inflated land values.
This brings us to a favourite of this column: the corrupting influence on Irish commercial life of inflated land prices and ludicrous insurance costs.
We are the least densely populated country in Europe, with the highest land prices. How come?
Again we see the influence of private opportunism over public good. Prices are so high here because of man-made bottlenecks in the planning process and the rezoning process. Cheap credit has its role, but only up to a point.
The main reason prices are so high is because only a tiny amount of the available land comes onstream for development eachyear. And inwhose interest is this? The minuscule minority that own the land,of course. And what does the state do? Nothing. Why? Because of the primacy of private property rights? Or is it something more sinister?
The long and the short of it is that businesses such as the Killiney Court hotel have to benchmark themselves against property speculation profits, not the rest of the tourist industry.
If the hoteliers operated in a similarly low-cost environment, such as the low interest rate environment, they might have a chance. But it works precisely the opposite way.The low interest rates have created an inflationary backdrop for business, which means it has to pass on its costs to the consumer. But in the case of hotels, the consumer is a foreigner.
If he is American, he is already reeling from the falling dollar, and if he is German, he can get a better deal in Italy. Why? Maybe insurance costs explain part of it. Our insurance costs are astronomical, and are crippling the tourist industry. This is a scam being perpetrated on society by a number of people with vested interests who benefit from the present structure.You know who they are.
Taken together,the public good suffers and yet the agency of the public, the state, does nothing. Ideologically, the problem is that we have adopted the four pillars of the US system without having the US regulatory or competitive structures in place. We talk about the free market, yet we prevent land from coming onstream. We talk about tourism, yet we employ market campaigns abroad while allowing the industry to be strangled at home by ludicrous insurance costs.
A small, opportunistic private group benefits,while the notion of the public good is ridiculed and our coastline is privatised under our very noses. And who will pay for the Dart that the new apartment owners use? You will.
Who will pay for the road repairs in Killiney after the cable companies have dug it up to lay cables for highspeed telecoms for the complex? You will. I could go on.
The cowboys have taken over the asylum, and they know that you will foot the bill. What is happening now in Killiney will happen all over the country, and at the moment there does not appear to be a damn thing we can do about it.
Where is the Minister forTourism? With the Meridian Hotel group in trouble, what price in three years time the swanky `horseshoe’ model of apartments that might be erected on 27 Stephen’s Green North, previously known as the Shelbourne? Maybe that might wake the Minister from his slumber.