Sunday, November 28, 2010

Ireland, reform and the IMF

The empty Dáil Éireann chamber of the Lower House of the part-time Oireachtas (Irish Parliament). The members are amongst the best-paid in the world - - typical pay before last December's Budget was equivalent to that of a United States Senator's $169,000 plus tax-free expenses, which can amount to more than 100% of pay - - but the Parliament only holds about 90 plenary sessions annually and the shutters are pulled down each year for a 3-month summer break in common with teachers and the highest earners at the State broadcaster RTÉ.
Two members of the current Government - - who remain on the payroll of the Department of Education - - are building up credits for 3 public sector pensions while the majority of private sector workers do not have one occupational pension.

In 1940, Deputy James Dillon said in the Dáil in reference to the three year sentence to an industrial school, that was given to a child who had stolen some grapes: “Can you imagine the son or the daughter of a resident of Fitzwilliam Square being brought down to Morgan Place and sent from there to an industrial school because he stole 5/- (32 euro cent) worth of grapes?”

How times have changed! Or maybe not.

The IMF is possibly our best hope for a fairer society.

From the early 1950s, when the Catholic Church opposed ’socialised’ medicine and found common cause with devotees of the God Mammon in medicine, the protected professions have comfortably handled the schizophrenic existence of being both socialists and capitalists.

Even the free market side operates via what is effectively a tax (health insurance) as a dual system is the main plank of public policy. The ‘cartel’ charges at consultant level are simply obscene.

On independence, the English inspired legal system continued; why would any of the big wigs have changed it?

Payments to barristers by the DPP rose 11% to €15.2m in 2009 despite an 8% cut; the Irish Times reported last April that its own columnist Noel Whelan was the 5th highest earner at €234,766 (inclusive of VAT).

Lawyers become multimillionaires on the public payroll investigating corruption which should be confusing or ironic and besides reform of the underlying cause of one aspect of corruption, land rezoning, is a taboo issue.

“If you’re not inside, you are outside, OK?" the Gordan Gekko character says in Oliver Stone’s recently released ‘Wall Street.’

Robert Frank of Cornell University has written of “winner-take-all markets.”

These are markets in which small differences in performance (or even small differences in the credentials used to predict performance) translate into extremely large differences in reward.

While these markets have been evident in entertainment and sport for many years, when applied to professional cartels, it’s not just a pioneering surgeon like the late Maurice Neligan who gets big rewards but everyone who manages to get inside the circle.

Then there is a cascade ripple effect beyond.

American CEOs, for example, earned 419 times as much as the average worker last year, up from only 42 times as much in 1980. The top one percent of US earners have seen their real incomes more than double since 1979, a period during which the median income has remained essentially unchanged.

Over time, some of these CEOs will be shown to be duds.

As for the ‘independent figure’ proposed in the four-year plan, just three years ago, an ‘independent’ panel containing at least two multimillionaires proposed lavish hikes in the salaries of politicians and senior public officials.

The Dublin City Manger, just 18 months in his job, got a hike of 36% as did his retired predecessors and so it went.

In the legal world, to take silk should be more like taking nylon.

The Competition Authority (CA) says the legal profession in Ireland is organised into a highly rigid business model: access to barristers for legal advice is limited to a few approved clients, barristers cannot form partnerships or chambers or represent their employers in court.

There is no profession of “conveyancers” in Ireland, as in other common-law countries, and this limits competition in conveyancing services; the title of senior counsel is inclined to distort rather than facilitate competition; junior counsel generally charge a fee equal to two-thirds of the senior counsel’s fee, regardless of the work done by each barrister, despite the fact that this practice was identified as anti-competitive in an independent report on the legal profession 16 years previously; establish objective criteria for awarding the title of senior counsel.

The level of solicitors’ fees in the High Court increased by 4.2% above general inflation annually over the period 1984 to 2003 while the level of senior counsel fees in the High Court increased by 3.3% above general inflation annually over the same period.

The public sector is the biggest customer of the legal profession as with other professional services.

If not now, when will it change?

Transparency and political will to clear the dust from several CA reports is all that’s needed.

Meanwhile a report by the Comptroller and AuditorGeneral says sick leave has jumped since the 1980’s in the Irish  civil service  with the absence rate rising from 3.3% to almost 5%  of available working time, which was lost to sickness absence in  2007.

On average, 59% of all staff employed availed of sick leave in  that year.

The average employee was absent for just over 11 days.

Irish Economy Blog: More on the Four Year Recovery Plan

Finfacts article: Four Year Budget Plan: Ireland's first steps in long march; Real reform dependent on IMF