NESC Report: Next Steps in Addressing Ireland’s Five-Part Crisis: Combining Retrenchment with Reform
This post was written by Philip Lane
NESC has released a new report on how to address the current crisis situation: you can download it here.
Tags: Irish economic crisis, NESC
October 14th, 2009 at 9:51 am
The overview of policy responses and developments since March presented in the Appendix appears to be reasonably comprehensive and is well presented.
The concluding paragraphs of the main report convey the impression that, at long last, some nettles are being grasped - in particular, the following:
“…in focusing on the severity of the fiscal position, thought might be given, as a matter of urgency, to finding structures and processes that are capable of selecting the tools to be used in each policy area. In selecting which approach to adopt in each area, account needs to be taken of the speed at which each tool can be designed and used; and the likely timing of its impact on the deficit, economy and society. It is then necessary to combine, sequence and implement the chosen changes. In selecting, combining, sequencing and implementing the chosen changes, such a process should aim to design fiscal, economic and social policy actions that are the start of a deeper process of reform, which will address the fiscal problem but also be socially inclusive and citizen-focused.” Sec. 3.5.3, p24
But then one comes backs to earth with a bang when confronted with the final sentence in the Appendix:
“For the past twenty years, Ireland’s progress has been associated internationally with the capacity of government and the social partners to reach multi-annual agreements, within the context of a shared analysis of economic and social challenges.”
It is generally accepted that the “social partnership” process helped to secure susbtantial economic progress in the 1990s. However, since then, the process has been focused on distributing the fruits of an unsustainable bubble while blithely ignoring any objective commentary or analysis that questioned its sustainability. This process of economic and social policy decision-making was conducted in an almost entirely extra-parliamentary manner. This is not to say that the unreformed process of democratic governance (such as it is) would have performed any better, but one could entertain the hope that it would have compelled more transparency in policy formulation and more scrutiny of policy proposals.
There is no doubt that Ireland will “muddle through”, but, in the absence of major reform of the process of democratic governance - in particular with regard to the formulation, scrutiny and implementation of economic and social policy, the muddling will be unnecessarily extended, costly and painful - and it will put unwarranted strains on social cohesion and demcocratic stability.
October 14th, 2009 at 10:02 am
Waould you buy an economic recovery strategy of a body whose council comprises representatives of the people who led us into to the crisis in the first place? Most restructuring stories begin with a complete clear out in leadership at the top.
October 14th, 2009 at 11:09 am
If you look up the OED under NESC you will find the following definition: Complete - self-serving waste of space.
If you read anything by this organisations written during the crisis of the 1980s (and I’ve read all of it) you will not find a SINGLE reference to any government policy errors made up to or during that time. Putting it simply, the NESC lives in its own Panglossian public sector universe.
I mean take the piece Paul Hunt has helpfully posted above. ‘thought might be given, as a matter of urgency, to finding structures and processes…then necessary to combine, sequence and implement the chosen changes. In selecting, combining, sequencing and implementing the chosen changes, such a process should aim to design fiscal, economic and social policy actions that are the start of a deeper process of reform, which will address the fiscal problem but also be socially inclusive and citizen-focused.’
This is complete and utter obscurantist, garbage. In plain English it means:
We don’t have a democracy. We have a managed / planned / corporatist economy. We have developed this pseudo-scientific mumbo jumbo to give you the impression that enlightened social engineers (i.e. the NESC) are providing the necessary management content….’ Ugh.
I’ve posted elsewhere on this Forum my Reduced Shakespeare History of the Irish Economy….here it is - slightly edited - again.
History of Irish economy.
1) De Valera’s autarky experiment - economic war with Britain - policy of cultural autism (the latter is now called ‘promoting native culture’) causes catastrophic economic / and cultural (censorship etc.) failure.
2) Followed by Lemass state-enterprise experiment - moderately successful - how could it not be compared to what went before and its relative openness to trade…..but with the awful side effect of convincing everyone that Gov’t is the real source of enterprise.
3) Corporatist / social partnership culture entrenched since 1937 (not 1987) as the medium for all discourse on economic matters.
4) This culture is shattered in the 1980s as Irish public sector unions become infected with Scargillite militancy.
5) Rescue operation for economy / and just as importantly for the social partnership / corporatist culture by Haughey and Co.
IMPORTANT POINT - NO IRISH POLITICIAN SUFFERS POLITICALLY BECAUSE OF CATASTROPHE OF 1980S
6) Social partnership agreement is that public sector unions refrain from destroying the economy in return for unspecified benefits later on.
7) These benefits come in general improvement of economy and increased employment and so are in line with union goals
HOWEVER
There’s got to be a specific win for the unions themselves. And so we have the motif of ’sharing’ the wealth. Remember the teachers unions argued that because ‘education’ was ‘vital’ for economic success then they were therefore ‘entitled’ to their share for ‘creating’ it through their hard work.
9) Benchmarking I and II - an entirely opaque / backroom deal to transfer wealth from the private sector to the public sector.
10) In the meantime much of the so-called economic prosperity was really a debt bubble. Productivity in the domestic economy was going backwards. The GDP growth rate was artificially boosted by US corporations booking profits through Ireland.
11) Notwithstanding official policy was to ’share’ this GDP with the public sector unions.
12) So here we are again. Like illiterate peasants living on a volcano that erupts with devastating results every 200 years we have failed to write down our history and hence have failed to learn from it and, hence, we are now repeating it.
NESC reports must be seen as anti-bodies sent into the body politic to protect the corporatist establishment from blame for the crisis. This is just more of the same. Utter, utter, venal, drivel.
October 14th, 2009 at 11:48 am
@Paul,
Is there any polite way to encourage you to not post your history of the Irish economy in these comments?
October 14th, 2009 at 11:48 am
my comment is directed at Paul Mac D
October 14th, 2009 at 11:55 am
@Tomaltach. If there is you clearly haven’t found it.
October 14th, 2009 at 12:59 pm
The tri-partite approach (government, employers, unions) is not unique to Ireland. It is used - with degrees of effectiveness - in a number of EU members. My focus is on identifying ways to bring this process more fully and firmly within a reformed system of democratic governance. While it continues to operate as it does in Ireland all the commentary and economic policy analysis in the world will have no impact on policy-decisions.
October 14th, 2009 at 1:40 pm
@Paul Hunt
Paul I am currently working on a thesis with the working title of “Placing social partnership at the heart of democratic governance”. Would be interested in hearing any insights or views; if you are interested perhaps we can find a means of sharing contact information?
October 14th, 2009 at 1:47 pm
@Paul Hunt
Point taken. I understand it’s not unique. It owes a lot to Mussolini. The problem with it is that it tends to be designed to ensure ’stability’ but it does this at the expense of removing threats to
a. uncompetitive economic structures / arrangements (e.g. actors in the energy sector - mainly ESB)
b. corrupt individuals (no examples needed surely).
It wraps conflicts of interest in a shroud of ‘consensus’. It doesn’t even allow - theoretically - for the possibility of conflicts of interest. So we have trades unionists and businesspeople on Gov’t bodies - everyone is on everyone else’s state board. IBEC is calling for tax increases. We celebrate May Day….etc..etc..
In short removes checks and balances and tends to encourage group think when dealing with problem solving. In the current crisis we have:
1. Country is hit by fiscal Black Swan much of the venomous power of which is auto-generated by the Irish system of social partnership which caused public spending to rise too fast.
2. Country’s ‘reputation’ deemed under threat due to weakened position of banks
3. Decision to use taxpayers money to ‘restore’ banks and failure of government to address 1. is allowed and deemed reasonable.
4. Decision to raise taxes instead of cut inflated public sector salaries and numbers is deemed reasonable because tax-payers are not, as such, a social partner. Whilst those who are rely no taxes for income - even IBEC members are huge suppliers of services to Gov’t and have, by any measure, been massive net beneficiaries from the system.
3 & 4 are justified on the basis of ‘collective decision’ / ‘fairness’ / ‘best practice and advice’
It leads to the logic:
1. We are the social partners and represent the collective will of the people.
2. The will of the people must be right and moral because it is the will of the people.
3. Whatever we do - even if we say that black is white - it must be good and moral because we represent the will of the people.
What’s missing is accountabilty or ‘falsifiabilty’. In other words Can you think of any sequence of events in Ireland’s own brand of social partnership that would cause the ’social partners’ to bring down the gov’t?
No. Because Social Partnership IS the government - in reality. So it’s like Robocop. The ‘Prime Directive’ is that it can’t arrest an employee of the corporation that owns it.
We need a new political party that promises much less gov’t and no social partnership.
October 14th, 2009 at 2:04 pm
Further…..you say: ‘ways to bring this process more fully and firmly within a reformed system of democratic governance.’
Why bother? The ‘memory’ that it was ‘discovered’ like a magic key lying in a forest in the late 1980s, is entirely false. It exists to prevent damage to an elite from political failure. As I said above No Irish politician paid a price for the 1980s. This time it will be different…hopefully..
October 14th, 2009 at 2:07 pm
@Paul MacD,
You’re taking us off into very political territory that is likely to encourage the site-owners to give us a (perhaps, well-deserved) clip on the ear. The logical conclusion of your posts is for you to found a new political party or to engage with an existing party with a view to persuading them to adopt your manifesto.
Meanwhile, I’d prefer to consider ways to ensure high economic policy analysis is fully embedded in a reformed policy fomulation and scrutiny process.
@Vincent B
I’m very pleased to learn you are tackling this issue and would be keen to learn more.
If you wish you can contact me at paulthunt@btinternet.com
October 14th, 2009 at 2:34 pm
@Paul Hunt - I’m not sure which part of my post is ‘political’. I’ve pointed up what are, I believe, systemic / governance problems with social partnership in Ireland. My reference to ‘politics’ is at the very end and wasn’t entirely serious.
You statement: ‘I’d prefer to consider ways to ensure high economic policy analysis is fully embedded in a reformed policy fomulation and scrutiny process.’ suggests you have a lot of practice in issue / conflict avoidance - which is what social partnership is all about. Sorry if I’ve insulted the family business.
Most democracies where policy is ‘made and scrutinised’ do so on a party system basis. Social partnership is - as even the NESC admits - captured by vested interests and (I believe) is actually nothing more than a clearing house for vested interests.
I’m open to persuasion that it has a useful purpose but you’d need to answer some of the governance problems I’ve raised before you could persuade me. To help matters along it might be better to see me less as an individual putting forward a particular point of view and more as a representative of a potential social partnership actor (I’ll suggest which one later).
October 14th, 2009 at 3:29 pm
@Paul MacD,
I’m not in disagreement with the thrust of your posts. Nor am I insulted - those who know me would be amused; I tend to confront issues and engage in conflict.
Where I think we might differ is that you appear to be convinced that the entire “social partnership” process should be junked whereas I recognise it as something that may have served some useful purpose, that no longer is fit-for-purpose but which might be modified to generate some socially useful outcomes and that most certainly needs to be made subject to a reformed process of democratic governance.
I suspect you may be unpersuadable and considering the implications of junking it may take us off-piste (even though it’s a perfectly valid position to adopt). Examining its effectiveness from an economic perspective is, I think, useful. For example, Frank Barry (http://www.esr.ie/Vol40_1/ESRI%2040-1-1.pdf) presents a cogent, if sceptical, analysis.
October 14th, 2009 at 3:52 pm
@Paul Hunt
Yes I suppose you’re right about my view on it. I think its main (only?) benefit was that it allowed for stability and predictability in industrial relations during the 1990s. But that maybe because the trades unions realised that, having destroyed the economy in the 1980s, there was nothing left to burn.
I suspect that Social Partnership flatters the rather sentimental / pantomime view that unions have of the world - as comprising ‘workers’ and ‘capitalists / owners’ and, as I’ve pointed out elsewhere in this forum, it treats representative organisations as agents representing individuals - regarding the individual as having been ‘consulted’ if the sector to which he is deemed to belong has been represented amongst the social partners. It treats the group and not the individual as the basic moral unit of society.
I have to confess that I find it as objectionable as apartheid - and for exactly the same reasons.
Again thanks for your considered reply.
October 14th, 2009 at 10:55 pm
Question,
Why is this the only report we have heard from the NESC and 99% comes from the ESRI?
I haven’t heard from the NESC (through the media) in months
October 15th, 2009 at 6:31 am
Pyramid theory states that leaders tend to be of a particular personality type and ride roughshdo over many. These types tend to rise tio the top no matter what sphere they operate within. Thus Mussolini would have found many sympathetic ears within such a structure.
Democracy is very dangerous when media are sophisticated and operated by those from outside of a culture or state as is thwe case with multinationals. Privatise exerything is a marvellous intro to crony capitalism, just look at Russia! Having power strutures meet and having some of them democratically accoutable is a safeguard of sorts but the proof is in the pudding. Corruption and cronyism has fluorished so Paul McDonnell has won his point.
Since we have proven unable to govern ourselves maybe the EU will do a better job? The problem with this is that we know they are also corrupt and we shall have no chance against that at all. The ECB seems to be in league with FF to foist Nama onto a generation of Irish to teach us all a lesson. Trouble is, I did not realize that we were in a war, although it is obvious that we lost through poor policy, something that is entirely our own fault!
The NESC report is anodyne and backs the past structures because to innovate is to threaten! Circumstances are changing and the report neglects the challenges by ignoring the threats altogether. I suspect that our anonymous shills may work for organizations such as this!
The absence of some commentators from this thread may be telling!
We need dramtic change and should be ready for it as it is coming despite reports like this.