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Irish Economy: Irish Political and Business leadership and the cojones to bat straight
By Michael Hennigan, Founder and Editor of Finfacts
Jun 30, 2008 - 6:18:09 AM
President McAleese presents Taoiseach Brian Cowen TD with the Seal of Office of Taoiseach at Áras an Uachtaráin
Irish Economy:In the week that the Economic and Social Research Institute forecast the first Irish recession in 25 years, Taoiseach Brian Cowen refused to acknowledge such an outcome while the principal Irish business lobby group IBEC called for a public pay freeze but was reticent about key other influencers on competitiveness.
In politics, we have contrasts in leadership from Roosevelt to Brown in times of crises.
Franklin Delano Roosevelt had scrawled in his copy of the book The Road to Plenty (1928), ''Too good to be true - You can't get something for nothing'' and as the new US president on the grim Saturday March 4, 1933, when the banking system was in meltdown across the country, he said in his first inaugural address: This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.
Roosevelt began his presidency by declaring an extended bank "holiday" and asking Congress for wartime powers
American historian Arthur M. Schlesinger Jr has written that a fortnight before Roosevelt took office, the Senate Finance Committee summoned a procession of business leaders to testify on the crisis. ''I have nothing to offer, either of fact or theory,'' said John W. Davis, the head of the American bar. ''There is no panacea,'' said W.W. Atterbury, president of the Pennsylvania Railroad.
Schlesinger wrote that economists had been so wrong in the recent past and were in such hot disagreement in the urgent present that no non-economist could take the profession seriously.
In the late 1970's, Jimmy Carter, an intelligent man, was paralysed by indecision as UK Prime Minister Gordon Brown appears to be today. Insiders speak of a prime minister obsessed by the next day’s headlines, working hellish hours, prone to anger, micromanaging the detail of government and slow to take decisions.
The Financial Times reported last week that Downing Street staffers arrive at their desk to find e-mails from Brown, some bashed out as early as 4am, issuing instructions for countering negative newspaper stories or plotting some headline-grabbing initiative.
While colleagues attribute the early activity to Brown being awakened by his young children, some fear that overwork is blunting his ability to think strategically.
The prime minister’s obsession with the daily news cycle demands that he comes up with initiatives at short notice. Hospitals have been called early in the morning to be informed Brown would like to visit.
Whatever he announces may not be fully formed. Relevant ministers admit that even they know little of what Brown intends to say, fuelling Labour MPs’ claims that he is putting tactics before long-term strategy.
Ministers report being woken at dawn by Brown, urging them to get on the airwaves to address the story of the day. A stabbing in south London demands that Mr Brown convenes a “knife crime summit”. A fuel blockade requires an“oil summit”.
The FT says that Number 10, Downing Street, is effectively the CEO’s office for the government, and is small compared with those supporting other world leaders, with between 25 to 30 political advisers and perhaps 30 to 40 civil servants involved in frontline decision-making. The mood is set by the prime minister.
For Downing Street staff, the early morning e-mails from the prime minister can set the tone for the whole day. “People feel permanently under the cosh,” says one with experience of life in the Brown bunker. “It is not an efficient or happy place to work. Gordon’s working methods are chaotic and extremely demanding.”
The FT says Brown, according to his officials, has a particularly volatile relationship with staplers, on one occasion stapling his hand in a moment of rage. On other occasions they become missiles. These incidents suggest a prime minister living on the edge. Some aides fear there will be a “blow up” moment in front of a camera, exposing the prime minister they know in private to the world outside.
Before Gordon Brown became Prime Minister a year ago, the Economist reported that Brown hadn't spoken to Tony Blair's Chief of Staff Jonathan Powell since soon after the Labour Party victory in 1997 because Powell had omitted him from the list of attendees at a planned meeting.
Irish Taoiseach Brian Cowen may not fire staplers around his office and while Ireland faces a manageable crisis, he has the opportunity to be more than a tinkering manger. Cowen has the chance to set the backdrop for the next decade. There is no one of the stature of TK Whitaker in the Irish public service today who can challenge political spoof and the mangers of enterprise agencies IDA Ireland and Enterprise Ireland are artists who accentuate the positive for their political masters. There are serious challenges ahead and blather about transitioning to a world-class knowledge economy, serves no purpose other than short-term propaganda. Why not admit that as Iona Technologies becomes a unit of a US company, the future will be even more dependent on foreign companies than the past?
Cowen should impose a public sector pay freeze, cut political pay and allowances 10% - as the politicians were the biggest income gainers since 1997. He should also cut the number of no-job junior ministers from the current level of 20 and also slash the number of quangos. Cowen should also direct the Department of Finance to provide total public spending data by category similar to a detailed Profit and Loss statement rather than the current archaic system of setting out Departmental spending. "Incidental Expenses"is one of the biggest areas of Irish public spending.
One group that will likely be immune from a public sector staff embargo, will be the 130 ministerial constituency "helpers" while functions such as "home-helps" will be easier to target.
He should also commit to a rapid Government response to all Competition Authority reports on opening up protected areas of the economy to competition.
Cowen's political hero Sean Lemass stood up to those who opposed the ending of industrial protections. Today, Ireland could well do with a leader of similar vision.
In an article for The Irish Times in the wake of the ESRI forecast on the economy, business lobby group IBEC's Director of Policy, Danny McCoy, said the increase in unemployment was already giving rise to a greater degree of wage restraint in the private sector through market forces.
"This pay restraint must also be reflected in the job-secure public sector. The private sector will not be prepared to pay for higher public-sector pay growth by the loss of their jobs or businesses. The rapid deterioration in the public finances has to be addressed. The only way of doing this, while sustaining Ireland's long-term prosperity, is by reining in current expenditure growth, whilst preserving much of the capital expenditure committed under the National Development Plan",he said.
McCoy said that given the scale of the public-sector wage and pensions bill, a pay pause in the public sector needed to be given serious consideration by the Government in the national interest.
How true but when an "independent" body recommended double digit pay increases for ministers and senior civil servants, Danny McCoy had no negative comments about it when queried in a radio interview.
The Secretary-General of the Department of the Taoiseach Dermot McCarthy, got a hike of 25% as did his retired predecessors. The Secretary-General is presumably currently involved in discussions on a possible pay freeze for his juniors and other cuts. The Dublin City Manager, just 18 months after he was happy to assume office on the then pay scale, got a 36% hike as did his predecessor John Fitzgerald.
IBEC had nothing to say when Taoiseach Brian Cowen promised the Irish Farmers' Association to veto a world trade deal if the farmers' didn't like it. The IFA had enlisted dairy and beef processors in support of protections.
IBEC's retail section opposed the abolition of the anti-competition Groceries Order.
Pay is an important factor in competitiveness but not the only one. Why is agricultural and development land the most expensive in Europe? Why is the cost of land at over 23% of the Irish roadbuilding budget - double the European average?
The World Bank in a report last November, ranked Ireland as the fourth most expensive economy in the world after Iceland, Denmark, Switzerland, Norway.
The political and business leadership need to move beyond pay restraint and staff embargos.
Sunday Independent Editor Aenghus Fanning wrote in his newspaper yesterday:It has been my opinion, for a few years now, that Celtic Tiger Ireland has spawned and allowed full expression to two particular types, who sometimes overlap; the piss artist and the bullshit artist. If you were to take them out of it, I sometimes wonder how many might be left to actually do something.
The Government, in my view, has no shortage of bullshit artists, whatever about piss artists.
Brian Cowen and Brian Lenihan come readily to mind as belonging to the former category.
Like many babies of the Celtic Tiger, they know how to talk the talk, but they don't even want to know about walking the walk. There is nothing in that for them except blood, toil, tears and sweat.
In fact, I don't believe that they are really serious at all about taking on the public service, about cutting down its size, its pay and its pensions.
It is a wise ruler who knows how to assess advice by running it past the 'cui bono' test. Who really benefits from what is being offered to me, he should ask.
Also in the Sunday Independent, Minister for Defence and newspaper columnist Willie O'Dea wrote or had written for him:The one thing we most definitely won't do is to listen to the siren voices of the countless economic pundits advocating their countless, panic-stricken hare-brained schemes.
I was going to close with the Thomas Carlyle quote, from 1849, that economics was a "dismal science". On the basis of this observation alone, one would be tempted, to herald Carlyle as a man of great wisdom and insight. The problem, unfortunately, is that Carlyle also expressed some other, less insightful, views - not least his remark that Ireland was "a black howling Babel of superstitious savages."
So I will close instead with a line from John Kenneth Galbraith, who said: "The only function of economic forecasting is to make astrology look respectable."
As to what the late John Kenneth Galbraith would make of the accomplished "messenger-boy" politician from Limerick, is another story.
Hare-brained schemes? Decentralisation maybe? Benchmarking? Cutting capital gains tax on property and boosting property tax incentives during a boom? Losing count of the number of State agencies/quangos that have been created - estimated at about 800?
In April 1933, the Republican Senator from California Hiram Johnson said: The admirable trait in Roosevelt is that he has the guts to try. ...He does it all with the rarest good nature. ...We have exchanged for a frown in the White House a smile. Where there were hesitation and vacillation, weighing always the personal political consequences, feebleness, timidity, and duplicity, there are now courage and boldness and real action.
Ireland needs the political and business leadership with the cojones to bat straight together with the other key ingredients of the cocktail that can instill public confidence despite short-term problems.
