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Analysis/Comment Last Updated: Feb 13, 2015 - 2:37 PM


Celtic Tiger RIP: Change in conservative Ireland six years after crash
By Michael Hennigan, Finfacts founder and editor
Apr 18, 2014 - 10:04 AM

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Besides so-called door-step 2 to 3 minute interviews, Enda Kenny, as taoiseach/ prime minister, needn't ever give an extensive broadcast interview where he would be subject to forensic questioning on policy issues.

Celtic Tiger RIP: We wrote in 2009 that if you Google "Irish Reform," top of the results list is appropriately a nineteenth century British Act of Parliament: The Irish Reform Act of 1832. In 2014 it remains so and six years after the economic crash, change in conservative Ireland comes ever so slowly if at all.

The most resistant people to change and reform during the economic crisis have been the most privileged, Brendan Howlin, minister for public expenditure and reform, said at the Labour Party conference last February. However, he declined the opportunity to be more specific.

“I’ll have to wait to write my book,” Howlin said during a seminar on Labour’s “agenda for reform and recovery.”

Howlin is right because the well-off have access to insiders and the media. However, it would be wrong to suggest that there is an appetite for change among the Irish in general.

Electricity pylons and septic tank charges rile up people in the heartland but boring process, accountability and the nitty-gritty of misgovernance don't.

The corrupt land rezoning system that makes development land scarce in a country that is 4% urbanised cannot be changed as farmers like university academics with pension top-ups, regard the potential bonanza as a "legitimate expectation."

Following economic crises in the early 1990s, Sweden put its welfare state system on a durable footing with equal rights for public and private sector workers (only a small number of jobs such as in the judiciary, are guaranteed for a work lifetime) while Finland reformed its education system, which today is regarded as being among the best in the world.

Sweden had dropped from being the fourth-richest country in the world in 1970 to the 14th in 1993 when public spending reached 67% of GDP.

In Ireland in September 2012, a UCD-Trinity College university merger proposal in a leaked draft report triggered a rapid reaction from various interests to kill the chicken in the egg. It was as if a fatwa had been issued by the elite. There would not even be a discussion on it.

Seán Flynn, then 'The Irish Times' education editor, reported:

Minister for Education Ruairí Quinn and three university presidents last night moved to distance themselves from a controversial report recommending a merger of University College Dublin with Trinity College Dublin, and other radical changes. Mr Quinn said such a merger was 'neither feasible nor desirable,' while key elements of the report 'would not be acceptable to Government.'

The report, prepared by some of the most distinguished figures in international higher education, has been effectively buried, according to education sources."

REFORM

Enda Kenny and Eamonn Gilmore, the leaders of the governing coalition as respectively taoiseach (prime minister) and tánaiste (deputy prime minister) made a number of reform proposals in their party manifestos before the February 2011 general election.

However, both leaders had no real interest in significant change and Kenny's 'big idea' was to abolish Seanad Éireann, the Upper House of the Oireachtas (Irish parliament), but when it was put to a referendum last year he was unable to put a coherent case for its abolition. He lost.

A parliamentary inquiry into the banking collapse will begin soon!

Last July the International Monetary Fund reported that there isn't a common chart of accounts to categorise spending across the public sector.

Prof John FitzGerald of the ESRI wrote earlier this month: "What the experience of the last two years shows is that the standard EU harmonised national accounts are not a satisfactory framework for understanding what is happening in the Irish economy."

An evidence-based policy making system cannot be developed unless the distortions caused by the dominant foreign-owned exporting sectors are both identified by the Central Statistics Office and acknowledged by ministers - - in the current system distorted data that exaggerate performance are used for propaganda purposes by ministers.

Despite the crash and severe public spending cuts, it took until mid-2013 for legislation to be passed to enable more prescribing of generic drugs. Meanwhile, the State's annual drugs bill rose by €400m to €2bn.

Speaking on RTÉ’s Prime Time last December, Richard Bruton, enterprise minister, said progress on the Legal Services Regulation Bill, introduced in 2011, had been delayed because the priority was to bring in personal Insolvency legislation to deal with families in distress.

The courts and the big professional firms have been have been heaving with activity through boom and bust, with the Exchequer picking up big tabs and the minister says the Government cannot multitask during an economic emergency?

The latest promised date for final voting on the bill is June and it has been reported that lobbying by lawyer members of both parties, Fine Gael and the Labour Party, has stalled progress.

The Competition Authority said in April 2012:

In November 2010, the Government signed a Memorandum of Understanding (MoU) with the EU/IMF. The MoU included a commitment that, by the end of the third quarter of 2011, the Government must establish an independent regulator and implement the outstanding recommendations of the Competition Authority. In October 2011 the Minister for Justice, Equality and Defence, Mr. Alan Shatter, TD published the Legal Services Regulation Bill."

Live horse and you'll get grass.

Ms Justice Elizabeth Dunne, a High Court judge, made a ruling in June 2011 that there was a flaw in a 2009 law that impacted buy-to-let property repossessions. It took exactly two years to address it.

FINANCIAL REFORM

New management at the Central Bank responded swiftly to overhauling regulatory systems but in recent years, it has responded in a hands-off manner to the slow pace of progress in the banks' resolving debt problems.

Michael Noonan, finance minister, met the bailout troika's demand for a fiscal advisory council but it has been designed to be an intellectual ornament, which does not produce its own forecasts, with a membership appointed by the minister and with reporting accountability to the Department of Finance.

In Australia, the equivalent is the Parliamentary Budget Officer (PBO) who is an independent Officer of the Parliament and is not subject to direction in the performance of his/her functions.

The current incumbent has said that the "PBO has had a significant impact in helping to level the playing field for non-government parties and independent parliamentarians as they develop their policies.

It has done so by helping to redress the asymmetry of access to costing and budget information services that existed prior to the establishment of the PBO."

The PBO also costs party proposals at election time.

Why would a politician who was then sixty-nine years old and who had long experience of the wilderness on the Opposition benches, once inside the tent, agree to a restrictive regime that benefits the Department of Finance, which had a disastrous record during the property bubble?

It can only be explained by innate conservatism.

DISSENT

During the bubble years there was a phalanx of politicians, public officials, vested interests including the mainstream media, and some well-meaning delusionists, who united to squash anyone who would dare question the gods of the status quo.

HL Mencken (1880-1956), the American writer, once said: "Never argue with a man whose job depends on his not being convinced."

There was that certainly but some people did believe that the free lunch had been invented.

In one post-crash report it was suggested that there had been groupthink in the Department of Finance.

Who would believe that has changed?

Last year Prof Frank Barry of Trinity College in a paper, 'Politicians, the Bureaucracy and Economic Policymaking over Two Crises: the 1950s and Today' [pdf], compared the disastrous Irish policy making of the Lilliputians of recent times with the times of giants like TK Whitaker, who was appointed secretary of the Department of Finance in 1956.

Barry said the philosopher Plato could not explain 'where he would find the wise men who would govern his ideal state'. Experience since seems to show the best results come from the paradox of competing sources of power jockeying for their own advantage.

He says this is the key that draws together the findings of the three independent reports of 2010 and 2011 into the weaknesses and failures of the Department of Finance, the Central Bank and Financial Regulator - - besides 'deference and diffidence', the reports refer to 'groupthink'.

Prof Barry says that this is less of a problem of course if the institution in which it prevails is only one voice in the mix.

The paper says:

As far back as 1987, TK Whitaker said that he would like to see 'a restoration of the old (civil service) principle that you were independent of ministers. You gave your views on any new proposals fearlessly, critically, honestly. You did not care whether your views were likely to commend themselves to the minister, whether for their own sake or politically. Once a decision was taken by minister or government, however, you carried it out as loyally and efficiently as you could. That was my understanding of the function of senior civil servants but I’m afraid it has been undermined. The young men who are preoccupied about this generate deep disappointment in me by telling me that that was an old world that has vanished. In the new world, the civil servant is all the time trying to please the minister, over-conscious of what might be politically acceptable, arranging the options so that they will appeal, rather than in strict order of eligibility']

It would surely be a good thing!

It was only when massive corporate tax avoidance became an international issue that the Irish establishment taboo on discussing it was lifted.

In the interval, the government has struggled to make a credible case for what it calls a "transparent" tax system.

A current example of a disengaged Oireachtas (Irish Parliament) coupled with journalists as mainly cheerleaders of their sector, that echoes the property bubble, is the absence of any debate on the floundering goal for Ireland to become a world leader in science by 2020 -- this aspiration had replaced the 2006 goal to be recognised as a "world class knowledge economy" by 2013.

When the members of the Oireachtas have nothing to say and most technology journalists are cheerleaders of the high tech sector, any debate on the inflation-adjusted €24bn spent on science policy over the last decade would be confined to the web -- which in Ireland was long-viewed with suspicion by long-in-the tooth journalists.

In the mainstream national media outlets, a small number of gatekeepers control access.

The Irish Times in 2007 began publishing the views of Morgan Kelly, a professor of economics at University College Dublin, when the economy was beginning to creak.

Kelly began a series of searing indictments of monumental misgovernance, policy and regulatory failures during the years when many thought the free lunch had been invented.

Peter Murtagh who had experience with The Sunday Times in London and later at The Guardian where he was deputy foreign editor and finally news editor, was opinion editor at The Irish Times when the Celtic Tiger crashed. He was prepared to give a platform to dissenters from the status quo.

Today's 'lifers' who have never worked outside Ireland are more likely to give precedence to 'people of standing.'

CONCLUSION

Nothing much has permanently changed since the crash.

Memories will recede; high debt and EU fiscal rules will likely prevent a return to auction politics; a new international tax system may force some serious attention to the underperforming indigenous exporting sector and public service reform will remain a very slow process.

A universal health system is due to become operational in 2019 but that's an aspiration at this point.

What is extraordinary is that a taoiseach/ prime minister needn't ever give an extensive broadcast interview where he would be subject to forensic questioning on policy issues.

When Enda Kenny claimed that leaders at the EU summit of June 29/30 2012 promised Ireland that the €64 billion in sovereign support for banks would be mutualised, was he ever asked to name the leaders who made the promise? It's an obvious question to push him for an answer.

Before self-rule, we had run big US cities such as New York and Boston and in 'The Americans: The Democratic Experience' (1973), Daniel Boorstin wrote:

"Although the Irish were quickly and spectacularly successful in politics…they did not prove masters of the arts of good government."

Boorstin said in the third of his American history trilogy, that the Irish politician made himself into "a social service or more precisely a personal service agency."

...and the Constitutional Convention has recommended the retention of multi-seat political constituencies where the enduring clientism system will continue to thrive.

SEE also:

OECD BEPS Project: Ireland should embrace corporate tax reform

Irish Innovation: Evidence of science policy failure mounts

Irish Medium-Term Economic Strategy 2014-2020: Exports to plunge by €50bn - Part 1-8

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