More mood music on ‘selling off the silver’ of the public sector… July 29, 2010Posted by WorldbyStorm in Economy, Irish Politics.
In Prospect magazine – the issue dated July – Tim Leunig of the LSE writes about how public sector workers in the UK must work longer [though no longer than private sector workers] and their pensions shouldn’t be awarded on the basis of ‘final-salary’ in order to subsidise their pension provision. As it happens I’m not that exercised about the second point there. ‘Career average’, perhaps weighted slightly upwards somewhat, seems reasonable enough. But more interestingly in light of the debate on the cuts here are some of his thoughts on the situation more generally.
[George] Osborne needs to save a decent amount of money: we are hugely in debt and must pay back enough of it so that the economy can be bailed out next time it crashes. (there will be a net time, after all – capitalist economies are like that)… and [the measure(s) suggested] delivers big enough savings that we might just be able to rescue our economy from the recession of 2022 as well.
Three thoughts seem to me to follow on from that analysis.
Firstly what a curious creature capitalism is in this phase of its development that it is now seen as subject to cyclical rebooting.
Secondly that those reboots are underwritten by the state – or more precisely by all of us who pay taxes, and those who don’t either but depend upon the state for services of one sort or another. Surely this flies in the face of the precepts of capitalism, even in a mixed economy. Where now the concept of failure in a system where failure is no longer an issue, assuming that the entity is ascribed ‘systemic’ importance?
Thirdly the obvious question that arises, if you allow me to descend into the near-bathetic, were we apply this to our own finances – and no lesser mortal than Margaret Thatcher was fond of this sort of an exercise. If I sell off my assets – particularly assets that generate revenue – to pay off my current debts, but I know that future debts will inevitably arise, then surely I am simply piling up worse troubles for myself in – say – 2022 or whenever.
Curiously enough much the same point is made by Richard Curran in last week’s Sunday Business Post where he notes that:
Businesses such as ESB are highly profitable and highly cash generative. They could be worth billions to the exchequer if sold off. However that would bring about a single one-off financial gain to the state coffers. The exchequer needs every euro it can get, but one off boosts might not mean a lot when the exchequer is borrowing €20bn per year.
And there you have it.
But consider that McCarthy Committee and see what way the wind is blowing. Tom McGurk writing in the Sunday Business Post writes a remarkable piece which is fascinating for its lack of reference to the economic environment which saw the genesis of the semi-state sector. He writes…
The 28 semi-state bodies currently under review have all been carefully shaped over generations by pragmatic Irish political and social demands.
They were never just state-owned companies established within the largely private market-place, they were carefully structured to deliver votes or jobs or promotions where necessary.
The Irish ‘semi-state’ has been a unique type of commercial vehicle, subtly designed to carry the burden of the unique relationship we have developed between the Irish state and its citizens.
Note the key missing word in his first sentence. He doesn’t for a second discuss why the semi-states were established, their ‘economic’ function, but attempts instead to position them in some sort of supposedly ‘unique’ social and political relationship… one which he continues…
They were once the place to get a ‘safe job’ to avoid the emigrant boat.
Working for one you would have a job for life, with a good pension at the end.
What impact did they have on the commercial and employment life of the country? Did they dim ambitions? Did they attract only the least ambitious, since they were regarded as ‘safe’ career places?
Sadly this is a risible analysis.
The semi-states from ESB onwards were in the main established because private capital wasn’t up for the job in this state – and indeed wasn’t up for the job in most countries (the REA in the US speaks of the difficulty that the private sector, and even to use that term is to be needlessly anachronistic given how that sector has developed, had in stepping up to the plate on large scale infrastructural tasks. A difficulty that as we’ve seen with the gloomy history of more recent public/private partnerships remains entirely extant). It was also a means in a society profoundly antagonistic to the concept of socialised enterprise to allow the state to exercise some control and authority without seeming to tip towards outright statism.
But not for McGurk any of that…
In many ways they have become relics of another economic age, great dinosaurs floating around in the seas of free marketism.
Guaranteed to some extent by the fact that they enjoyed various state monopolies, they were commercially fire-proofed from the economic realities other companies had to face.
Really? Is this even credible. Is it true of a profit generating ESB, one so profitable that Richard Curran writing in the same paper as McGurk notes its ‘highly cash generative’ nature?
Perhaps it would be if other states not dissimilar to our own didn’t have semi-state companies. But of course they do. Furthermore many of the ‘monopolies’ are precisely the the sort of ‘monopolies’ that private enterprise has been loath to take on. He says it himself…
Whereas one can imagine there may be interest in the airport authorities – though their debt pile is a problem – it is difficult to see how attractive our tiny rail and nationwide bus services could be.
Who in their right mind would want to buy CIE, when the market is so tough and even private bus operators are finding the pickings very small? The various port authorities are also under review, but are surely of limited interest.
Indeed he positions all this explicitly in the context of the free market…. ‘pickings’, ‘market is… tough’… etc.
And then he focusses on a certain sector.
The principal area of interest must be energy, with the ESB, Bord Gáis and Bord Na Móna all potentially available.
The wider political row over energy policy is already under way, yet can one imagine any potential overseas buyers or investors in Irish energy getting involved with a state where apparently nuclear power generation is, strictly speaking, illegal?
Since our future energy policies – as the fossil options run down – are destined to become a major political debate, what potential energy investor wants to get into bed with Irish governments who will simply not consider the nuclear option?
Now, this is interesting. McGurk appears to believe that the Green Party is the focus of some dreadful conspiracy in our politics, so I find it near-entertaining that he should alight on the area where the GP has a Minister in the relevant Department. What, one wonders, does the Minister make of this following observation by McGurk?
Our future energy needs long term political nous, the very thing our political classes have shown they simply do not possess.
Anyhow, McGurk, also considers his former employer RTÉ…
RTE is also on the list and with McCarthy already a self-confessed opponent of the licence fee, there is going to be much nervousness in Donnybrook.
There may be a very real possibility that some of the more profitable parts of RTE radio or television services could be sold off, at a time when that organisation is already facing huge costs to rebuild and restructure to provide for the digital age.
Does that make any sense? Wouldn’t it make more sense for those costs to be defrayed by a continuing revenue stream rather than a once off sale into an already far from clement market? And given that McCarthy is an ‘opponent’ of the license fee, and that RTÉ already raises revenue through advertising what does that tell us about the shape of our public broadcaster in the future? No license fee, presumably massively increased dependence on advertising or sponsorship. But we already have commercial channels pitching for precisely that funding. Which leaves RTÉ where exactly? And what does that mean for ownership.
But here’s the interesting thing. He doesn’t say. He assumes an air of studied neutrality.
When this McCarthy committee reports, probably early next year, it will trigger a significant political and economic debate.
For example, whereas Fine Gael has already signalled they support semi-state sell offs, where is the Labour party on the question?
Will Eamon Gilmore for once have to take a position on something?
Will Tom McGurk do so on this issue, although his sentiment is clear enough…
Is it a good idea?
The debate will start now and it is possible to argue passionately on either side of the debate. In the end, our needs may well supplant our opinions.
Bit by bit, this state has being picked down to the bone and now the very bones themselves are exposed for our consideration.
Who out there is brave enough to think we might even have any choices left about what McCarthy will suggest?
But he concludes with this…
Oh for the old days, and the luxury of ideologies.
But what McGurk discusses is profoundly ideological. It is the stripping away of state provision and state enterprise and its appropriation by the private sector. He acknowledges that that private sector will only take what it wants, leaving the remnants for the state to retain.
And the idea that these are ‘luxuries’ beyond the scope of the Irish state to finance is something that would have had the truly impoverished administrations of the 1940s and 1950s when many of the semi-states were established gazing in astonishment.
And what happens in 2022 or whenever when the next crisis of capitalism overwhelms us with our slimmed down state, so slim the bones are now showing? What precisely do we do then locked into a low tax low provision model?
Mood. Meet the music. And consider what the outcome of the reports soon to hit tables are likely to be.