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Analysis/Comment Last Updated: Sep 30, 2010 - 4:40:40 AM


Political and economic reform in conservative Ireland and the promise of an "everlasting boom"
By Michael Hennigan, Founder and Editor of Finfacts
Sep 18, 2009 - 5:15:47 AM

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The IMF said in a report last June, that following the sharp deceleration of Irish growth and revenues since 2007, the fiscal deficit threatened to reach 15 per cent of GDP, which compares with Ireland’s record 17½ per cent of GDP in 1978 - - the year following the 1977 general election, that resulted in the first of the two periods of monumental economic mismanagement in the history of the Irish State. The second began in 1997.

In the Irish General election campaign of 1977, Fianna Fáil front-bencher Gerry Collins, placed an advertisement in his local provincial newspaper in Limerick, which said that his party wasn't offering "pie-in-the-sky promises such as no rates."  By the time the newspaper hit the streets, FF had added the abolition of residential rates to its treasure chest of electoral goodies, which had included the scrapping of car tax.

Between 1977 and 1982, the combination of tax cuts and huge spending increases (in the single year 1979, the public service pay bill was increased by 34 per cent), resulted in a trebling of the National Debt and the National Debt will treble again, in a similar time-span, compared with 2007.

Historian Roy Foster says in his book Luck and the Irish: a brief history of change from 1970‎, that in December 1977, Trinity College professor of economics, Martin O'Donoghue, who was then minister for economic planning and development, promised an "'everlasting boom." In 1978, a public spending fuelled boom in Ireland resulted in a budget deficit of 17.6 per cent of GDP (gross domestic product) - - a record for developed countries according to the International Monetary Fund (IMF), for the period 1970-2008. In the realm of political reform, in the interval, conservative Ireland has left intact and virtually unchanged, what it inherited from the British.  Economic reform has been excruciatingly glacial with little progress in opening up the non-tradable service sector to competition, while a culture of Victorian era secrecy protects insiders, be they in the public or private sectors.

Foster terms O'Donoghue, the Mephistopheles to his taoiseach Jack Lynch's Faust but apart from the beginning of a period of reckless economic mismanagement, 1977 marked the entry to Irish national politics of Bertie Ahern, Charlie McCreevy and Mary Harney. Two decades later, on assuming power, the words of Frenchman Prince Talleyrand about the Royal Bourbons, were apposite: "They have learned nothing and forgotten nothing.”

Now, more than twelve years after another false dawn, a key question in the wake of the second period of monumental economic mismanagement in the State's history, is whether the experience might prompt significant overdue reform? It's hard to be optimistic at a time when the Government is trying to clear up the mess it created while the Opposition parties need to seriously prepare now, if they are interested in implementing significant change on winning power. 

Limited if any accountability in a system where the buck stops nowhere, continues to be the default format, despite the crisis.

Business leaders such as Martin Murphy, managing director of Hewlett-Packard in Ireland, who this week called for an enterprise culture, are simply wasting their time if they politely avoid confronting the central issue - -  the broken political system, which retards change and economic reform. The same applies to the polite calls for change that will no doubt be made at the diaspora business forum this weekend.

Clientism confers an illusion of access to the powerful in Ireland but what counts is money and the collective power of vested interests - - be it farmers, trade unions including the one representing the highest earners - -  hospital consultants - - and professional cartels operating in a system with little transparency.

Contrast the benefits bestowed through collective power, to the lot of the typical private sector worker, without a pension and exposed to the vagaries of the economic cycle.

The latest Comptroller & Auditor General's report, sets out the annual litany of public spending waste including a farm waste grants scheme originally expected to cost €248 million now due to cost €1.1 billion and €71.4 million spent on an online project including the abandoned Public Services Broker web portal; €54.4 million on voting machines and so on.

Change comes at glacial speed in conservative Ireland.

It is almost three years since then Taoiseach Bertie Ahern commissioned the Paris-based Organisation for Economic Co-operation and Development to review the public service and recommend changes. The OECD reported in April 2008 and criticised the proliferation of "arm's length bodies," known as quangos and concluded the situation amounted to an "organisational zoo." Bertie Ahern agreed that the estimated 800 agencies were "too many agencies by half." 

The most important quango of all, the "bad bank" NAMA is a new creation and has already shown that there will be no departure from the outdated culture of Victorian secrecy when it comes to public spending and lucrative contracts for private firms.

As for the other 800 quangos, a taskforce is still reviewing what to do, while the training agency FÁS, provides a vivid illustration of what happens when nobody is held accountable for control of public funds. In this case, the taxpayer’s loss has been a big gain for the hospitality industry at home and overseas.

One can only wonder, when a once in several generations economic crash, cannot change the slow-motion Irish policymaking, what could?

The Chinese say that a fish rots from the head down and it should be self-evident that the 216-member Oireachtas is unfit for purpose. It is as good as any vested interest in protecting privileges it gives itself, but only a small number can speak competently on crucial issues such as the banking crisis. With the Dáil shuttered when the draft NAMA legislation was published in late July, TDs in general remained silent on the sidelines in the subsequent weeks, while academic economists, used the platform of the media to force changes in the lopsided proposals.

In recent decades, research resources, coupled with huge earnings and expense hikes, have given the people what is possibly the worst Dáil Éireann since 1919.

In the past, while there was more bitterness and Eamon De Valera who had defeated John Dillion in East Mayo in the 1918 general election, had to contend with Dillon's son James arguing in the Dáil, that his antecedents were fighting for Ireland while Dev's were "bartering budgerigars in the backstreets of Barcelona," there has been a common thread through the decades, to the present time.

In 1986, the late UCD constitutional law professor and Fine Gael TD, John M. Kelly, said: "Ireland's political and official rulers have largely behaved like a crew of maintenance engineers, just keeping a lot of old British structures and plant ticking over... The challenge is to evolve structures - - within which the people can be drawn to individual and community responsibility for their own development." 

Ten year later, in 1996, the Constitution Review Group, which was chaired by Dr. T.K. Whitaker, recommended a partial list system, to improve the quality of national representation. It was of course ignored.

In the debate on the new government in June 1997, Fine Gael TD Alan Dukes, made two prescient observations.

Dukes said Bertie Ahern had displayed through his political career an impressive capacity to mediate and resolve problems. "I hope he finds a way of using that talent to mediate and resolve without it costing the rest of us money. That is a major part of the obligation he now has," he said.

The former Fine Gael leader said the new tánaiste, Mary Harney, had said something very interesting to him on the last day of the previous Dáil. "She commented: 'I know Minister Dukes does not like soundbites, but if it can't be said in a soundbite it is not worth saying.' She should reflect on that because the electorate told her that in spades during the election. She was clobbered by soundbites and she is now a very junior partner in Government because of soundbites...I hope for the sake of good government, if not for the sake of the parties in government, and for the kind of politics the Progressive Democrats is supposed to stand for  - - the party is supposed to be policy driven - - that the tánaiste has learned the lesson that soundbites are inimical to good politics. Life is more complicated than a soundbite and I hope she has found that out."

All parties resort to soundbites and there is little policy making. So in power, aspirations are fleshed out by the consultancy industry at a huge cost, together with a plethora of so-called "task forces." The process would sap the enthusiasm of a saint.

Simply, the urgency in Opposition usually gives way to political sclerosis in government.

While the collateral damage from the failure to modernise a governance system with overpaid people who are not held accountable, is the ruined lives of tens of thousands of people, both Fine Gael leader Enda Kenny and Labour Party leader Eamon Gilmore have only intermittently spoken about political reform.

At the MacGill Summer School last July, Enda Kenny asked why do we have a budgetary system in place that is unfit to run a corner-shop, let alone a nation of 4 million people?

"Has it anything to with the replacement of accountability in the public service by a new cosy relationship between ministers, senior civil servants, trade unions, Government agencies and regulators?" he asked.

Eamon Gilmore told the recent meeting of his party’s parliamentary party, in Faithlegg, Co Waterford: “It is not enough just to think and talk about economic recovery: we must communicate our vision as to what it is for.”

He said the party needed to set out strategies on the economy, on reforming the public services and on political reform.

The Opposition may have the opportunity in government to implement radical reform and produce a modern state to be proud of - - reforming a public spending system, which is designed to protect insiders while keeping taxpayers in the dark; ending cronyism; introducing accountable systems where the pass the buck culture would end and changing the clientism dominant political system, which has not served the public interest.

However, producing laundry lists of aspirations in Opposition will not position the parties to hit the ground running in government.

If they fail, the ancien régime will be restored and the seeds will likely be sown for another episode of reckless economic mismanagement.

SEE also:

New approach needed to fix broken Irish political system

The Waste Land - - Bord Snip, Irish Public Spending Transparency and the motto "Never do anything for the first time"

The big fee "cartels" in Irish professions; Time for Ireland to change "the natural state of things"

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