Sunday, June 23, 2013

Irish economy, political control of civil service and cowardice

It's striking that given two Irish economic disasters in the space of a generation, that followed appalling periods of misgovernance, senior civil servants have been profiles in cowardice and have docilely accepted increasing political control, in a system that has become addicted to spin.

If the public enterprise agency heads are as sycophantic in private as they are in public, then why should there be surprise that despite long-term unemployment (1 year or more) at almost 200,000 people and more than 500,000 Irish people on the Live Register and in publicly-funded activation programs, Ireland lacks a credible jobs strategy for the long-term. 

I cannot recall anything of consequence publicly uttered by Barry O’Leary, current IDA Ireland chief or Frank Ryan, Enterprise Ireland chief.

Frank Barry, a professor of International Business and Economic Development at the School of Business, Trinity College Dublin, has written [pdf] that many of the institutional innovations that would give birth to the modern Irish economy emerged over the course of the 1950s.

The Industrial Development Authority and Córas Tráchtála - - a forerunner of today’s Enterprise Ireland -- took shape at the beginning of the decade. The origins of our low corporation tax regime lie in the export profits tax relief introduced in 1956. Discussions on trade liberalisation reached fever pitch in the late 1950s, triggered by the imminent establishment of the European Free Trade Association (EFTA). Economic policymakers of the time faced a diversity of viewpoints from within the bureaucracy.

Prof Barry says:

"The Departments of Finance and Industry & Commerce offered distinct sets of policy choices, and politicians rarely adopted policies that had not been advocated by – or garnered the support of – one or other of these camps. The bureaucracy of the time, furthermore, guarded its independence jealously. This is in sharp contrast to the situation that prevailed in the build-up to the present crisis, as revealed by recent reports into the performance of the Central Bank, the Financial Regulator and the Department of Finance.

These reports document the deference and diffidence of the modern bureaucracy and its vulnerability to ‘groupthink.’'

TK Whitaker (b.1916), who was appointed head of the Department of Finance in 1955 at the age of 39, was given permission in 1958 to have ‘Economic Development’, the seminal blueprint for a modern Irish economy, published under his own name.

He became publicly associated with the new economic departure and what is striking is how craven senior public staff have been in the past half-century despite his precedent.

In the period 1977-1981 the national debt trebled and in 1978 a budget deficit of almost 18% of GDP (gross domestic product) was recorded - - the largest for a developed country in the period 1970-2008, according to the IMF.

It took a decade to climb out of the hole and a decade later, delusionists who believed they had invented the free lunch, held sway.

No senior civil servant or central banker dared shout stop in public.

It’s a shameful record of cowardice.

It would make a difference if individuals who may be much more versed than ministers on particular policies felt able to go beyond official talking points.

Ministers have been twittering about income tax this week, motivated by party concerns.

A cross could be put on the mantelpiece, if there was for example a spin-free debate on long-term jobs strategy.

Irish Economy Blog: Lessons from the 1950s