May 16, 2005
Years ago, I forged a reference from Jurys in Ballsbridge. I was heading to London for the summer after doing my Leaving Cert and intended to get any job, as long as it wasn’t on the sites. I realised early in life that I wasn’t cut out for building. Hotel work would suit me just fine, but I’d no experience.
A mate’s sister was working at the front desk in Jurys, so I got some headed paper from her and bashed out a reference citing my great bar skills, impeccable manners, diligence and aptitude for hard work.
Two weeks later, I was working behind the bar of the Royal Kensington Hotel, courtesy of the fictitious Michael McCarthy, allegedly front of house manager of Jurys Ballsbridge!
As a result, I have always had a soft spot for the place. And this week, I see that it has become the latest victim of the great Irish land rush.
Like all gold rushes, the great Irish land rush has turned into a frenzy and is corrupting, denigrating and elbowing out all other businesses in its wake.
Along with the Killiney Court Hotel and Bewley’s, this week we hear another Irish landmark, Jurys Doyle Hotel Group, is apparently about to go.
A property consortium has approached the owners, presumably with the idea of knocking down some of the hotels and building apartments on the premium sites, such as the one in Ballsbridge.
History is repeating itself. A feature of the original gold rushes – particularly those of the late 19th century in California, South Africa and Australia – was that, in the mania to be involved in gold at all costs, other businesses were sacrificed, not intentionally, but as a result of the gold industry sucking in all the best cash and the best people. The reason is very simple: the returns from gold were so much more than in other businesses that all ventures were benchmarked against the precious metal.
Why bother with carpentry, tanning or teaching if you could try your hand at gold prospecting? Why invest in agriculture, technology or shipping when you could punt on a gold mine?
It is interesting to look at the diaries of the man who first found gold in the Sacramento River in California, Johann Sutter.
Looking back, he said that, because of gold: ï¿½All my plans came to nought.
One after another my best people disappeared in the direction of the gold fields; only the sick and crippled stayed behind.ï¿½ He was lamenting the fact that his real project was to expand his farm, bakery and sawmill business but, on discovery of gold, his men and investors left him so they could speculate, hoping to strike it rich overnight.
In the event, only very few did so.
Even the schools in San Fransciso had to close because teachers and then pupils headed off into the hills to prospect.
The crucial point is that the impact of gold for the rest of the economy was deleterious because, while it made some people very rich, it starved many other businesses of money and people.
Fast-forward to Ireland in 2005, and it is clear that we are in the grip of a frenzy much like a gold rush. Land has replaced gold. Quite apart from the social dislocation arising from astronomical land prices, a real problem for our society is that so much of our cash and debts are being funnelled into this most unproductive and speculation-prone of assets.
The dilemma for a society that allows itself to be swept up in speculation fever is the pernicious impact that ï¿½frenzy greed’ï¿½ has on all other businesses. Instead of building a long-term business with customers, branding, employees and cash-flow, the lure of the easy money in land speculation is far too attractive.
In Ireland, we are experiencing the same dilemma faced by California in 1849. Back then, real businesses were judged, not against benchmarks such as profitability, robustness and market share, but rather against the absurd capital gain promised in gold.
The subtext really was that if you weren’t into gold in some way, you were a bit of an eejit. Similarly, in modern Ireland the same type of mentality applies: if you are in businesses other than land, many regard you as a bit of a simpleton.
Land is, after all, where the action is.
Take Jurys – it is a premier brand. It is a name that immediately says something to all of us, yet it might soon be no more.
How many times have you said: ï¿½See you in Jurys’ï¿½ after a soccer or rugby match? How many debs ended in the Coffee Dock? How many of our tourist industry staff have been trained there?
ï¿½But today it is more valuable as a site than a hotel, so it will go and be replaced by swanky apartments.
ï¿½The shareholders will cash in their chips, not because Jurys was losing money or couldn’t hack it as a hotel, but because our land mania dictates that knocking it down and flogging hi-spec apartments off plan makes more sense.
ï¿½Crucially also, the banks’ infatuation with land as collateral means that the developers will get all the leverage they need to buy and build. When it comes to selling the flats, the same bank will give the new buyers the loans to acquire their ï¿½once in a lifetime opportunity in Dublin 4′ï¿½.
So the bank simply transfers risk from the Jurys shareholders to the developers on to the buyers and the mania continues. Apartments of this type will be targeted at retirees, people trading down or those soon to retire.
It is highly likely that many will be bought using tax-efficient retirement vehicles, which means the state will subsidise the purchase via tax foregone.
Obviously, no one can blame the owners for doing what they are doing, in the same way that no one could blame the teachers in San Francisco’s schools for swapping basic maths for basic mining. However, the collective consequences of these individual actions are disturbing. In societal terms, what does this land frenzy lead to?
First, it has changed the balance of wealth in society. There has been a massive transfer of wealth from workers, employees and entrepreneurs to landlords. Secondly, we will have a banking system totally over-exposed to one asset: land. Thirdly, only projects backed by land will get financed. So entrepreneurial ideas that have nothing to do with this new gold will be starved of seed capital.
Also, like the oil lobby in Texas or the gold lobby in South Africa, the landlord lobby will become even more influential in politics.
The illusion of wealth, which in reality is a mirage created by debt, hides the fact that, over time, Irish business and creative flair will be sacrificed for dull bricks and mortar. The economy will simply become a duopoly – the multinational economy and the land economy. The multinational economy will be foreign-owned, high-tech, flexible and foot-loose. The domestic or land economy will be bank-owned (on our behalf), low-tech, rigid and very, very permanent. If anything went pear-shaped, at least there’d be money in forged references once again.