by Frank Schnittger
Wed Sep 17th, 2008 at 07:24:45 AM EST
The Ireland of the Celtic Tiger era is often held up as a prime example of the success of the "Free market" or "Anglo-Disease" (take your pick) model of economic development. Reduced taxes, de-regulation, entrepreneurial spirit, direct foreign investment and unfettered access to global markets are said to be the direct cause of the economic growth which averaged 8% over the 1990's and over half that from 2003-2007.
Little matter than the Irish performance was far more influenced by tax competition; by EU agricultural, infrastructural and cohesion aids; by strong social, public education, and industrial policies; and more latterly by financial services globalisation and EU enlargement.
However the one single factor behind Ireland's success that is almost unique to Ireland has been its 20 year experience of concluding National Partnership deals between Government, Employers, Trade Unions, and the Agricultural and Voluntary/Community sectors on a wide range of pay, benefits, social rights, legislative and empowerment initiatives at a National level.
The Irish Social Partnership process is far too "Socialistic" in concept and practice to gel well with the "Free market" narrative, and thus has often been ignored in the Anglo-American economic discourse. Many have predicted its imminent demise, but a new deal has just been agreed despite the Government's almost unprecedented current difficulties in the face of construction industry melt-down, financial services decline, the Lisbon conundrum, rapidly rising unemployment, and a huge hole which has just appeared in the public finances as a result of a collapse in tax revenues.
The outlines of the new deal are only just emerging, and, as usual, there are noises emanating from all the various parties as to how difficult the new deal will be to sell to their respective constituencies. Expect a lot of public huffing and puffing - it is part of the ceremony of negotiation Irish style. The deal does need to be ratified by the Cabinet (perhaps today), the Trade Unions and the employer bodies, and hiccups may still occur. The general experience however has been that it is far better in times of economic difficulty to hang together collectively rather than seek to plow a lone furrow, and so the process is likely to be concluded in the coming weeks and months.
Many would argue that the partnership process has not prevented a rise in income inequality (within the context of rapidly rising average incomes) and this new deal does little to protect the position of the lowest paid - a paltry additional .5% for the lowest paid on top of the 6% payable over 21 months following a 3 to 11 month pay pause for the private and public sectors respectively. Certainly, public sector workers have done much better under past deals, with significantly higher than average pay, job security, and largely unfunded and inflation proofed pensions.
However none of that would matter much if the efficiency of the public services were comparable to best practice internationally. Unfortunately the Civil Service has proved adept at resisting all (admittedly hamfisted) attempts at organisational reform, and the political class simply do not have the skills necessary to manage very large and complex organisations. Recently a small group of Civil Servants attempted to contact the OECD (using public phones to avoid scrutiny) to give them the inside picture of the huge inefficiencies at the heart of the service. True to form the OECD ignored the information and produced the usually senior civil servant vetted whitewash. A senior civil servant of my acquaintance scoffed at the gullibility and naivety of the OECD staff concerned with compiling the report - which has now been listed for review as part of the National Agreement. We can assume from this that the public service has once again succeeded in copper-fastening its position in the latest agreement.
A former management consultant colleague of mine once spent a year working in a key Government Department. After a few months he had devised a huge number of proposals to improve the efficiency of the Department and was thrilled to be given the opportunity to present them to the most senior Officials in the Department. A few minutes into the presentation it became clear he was losing his audience. The eyes had glazed over and the feet had begun to shuffle. A few minutes on he realised he had "lost" his audience completely, and stopped to ask the rhetorical question: "I don't seem to be addressing your key concerns here - don't you agree that improving the efficiency of our department has to be our key priority?"
After a suitable pause for reflection the top civil servant present responded: "No, not at all. Our key priority is to increase the size of our Vote (budgetary allocation). The prestige of the Civil servants depended on the size of their Department and the scope of their discretionary expenditure. Increased efficiency would actually undermine these goals, and there was almost no place for cost-benefit analysis. I scolded my colleague for breaking the first rule of management consultancy: find out what your client wants and make sure you give it to him. It is a rule the OECD have learned rather well.
Problems with the public service aside, the partnership process has been almost wholly beneficial for Ireland. The Small firms Association have been perennial critics and there is no doubt that insurance costs, regulatory inefficiencies, and other overheads have crippled the development of the small indigenous entrepreneurial sector in Ireland. The deals are more structured to meet the interests of the major players - Government, public service, big employers, and big Unions, but there is no doubt that they have contributed to the development of the economy as a whole.
One of the things which have fascinated me is the broad support for the Partnership process within the Management class in Ireland, including many non-Union or anti-Union businesses such as Ryanair and some US multinationals. The fact is that the National Partnership process and associated legislation and institutions (including a plethora of quasi-judicial employee rights and dispute resolution processes such as the Labour Court) have provided a very positive environment for doing business - low strike rates, established mechanisms for resolving disputes, predictable (and budgetable) pay rises, and very little requirement to spend a lot of management time negotiating those issues locally.
Certainly, pay rates in Ireland are now amongst the highest in the World, but that in itself isn't a major issue for large businesses if they can be budgeted for in the context of a profitable business in a favourable environment. What kills big business is uncertainty, complexity, barriers to ongoing change and the costs of protracted negotiations. Being able to outsource much of this to the Government is a huge boon to a big business.
And that is why I am also rather puzzled by the popular embrace of neo-liberal economics in the Anglo-American world. Big business needs good regulation, state intervention, a functioning civil society, and trade Union leaders who can deliver on the agreements they have negotiated. Working with competing groups and leaders is part of a process which has now become so institutionalised in Irish management and political culture that a Thatcherite or neo-conservative attempt to destroy Unions or civil society more generally are simply not on the agenda of the "business community".
Michael O'Leary of Ryanair is perhaps the antithesis of this philosophy, but do not underestimate the posturing involved in his frequent rantings. Ryanair has much to thank the EU and Irish Government for - when it comes to proving a regulatory and infrastructural environment which have enabled his business to thrive. Many within the Irish business community view his public and employee relations strategies with disdain - because they threaten the fabric of the social cohesion which has been a key part of the Irish economic success.
There is good reason why Neo-liberals never look at the Irish Economic success story over the past 20 years too closely. It is anything but the classic neo-liberal success story and owes much to enlightened and active Government intervention, the EU, and a willingness to work with people representing different interests. The conflict resolution and negotiation skills developed as part 0f 20 years of Social Partnership have also served Ireland well in EU Council and Northern Ireland peace process negotiations.
But Sin scéal eile as we say in Ireland...that is another story.