Why sell a successful State company in the service of a doubtful ideology?
Opinion: The public and private sectors are permeable, and productively so, in the modern economy
Does it make sense to sell one of Ireland’s largest indigenous companies, Bord Gáis Energy (BGE), to a foreign multinational to repay a fraction of the debts of the collapsed private Irish banks? Should the Government privatise performing State enterprises? Is our current industrial policy focused only on private firms, and especially multinationals? Do profitable State enterprises no longer fit with our industrial or enterprise policy?
The view that private endeavour is superior to public and that the State has to be pushed back as much as possible is an ideological one and is open to challenge. Ireland’s bank rescues saw the public sphere expand, while internationally states showed that they could be very strong in the globalised world when the crisis hit, rescuing huge private banks. The State moves in and out of many areas of the economy. Public and private are permeable; indeed they are deeply intertwined, and productively so, in the modern economy.
Public enterprise can and does play an important role in the economy, provided it is well governed, as indeed it is in Ireland. The Government does not have to privatise State companies. Privatisation is not included in the troika memorandum of understanding and the troika explicitly denied seeking any privatisation of State companies at a meeting with the Irish Congress of Trade Unions on October 22nd, 2012. In any event, the troika is gone but it must be said that the proceeds of €1.1 billion (less huge fees to professionals and banks) from the BGE privatisation is insignificant in comparison to the cost to the taxpayer of Ireland’s bank bailout.
The taxpayer has a portfolio of international shares that it could sell, if it really had to, amounting to €6.6 billion. Of this, €1.1 billion is in north American equities, €736 million in private equity firms, €243 million in corporate bonds, €454 million in property, and billions more in shares in banks and other multinationals all over the world. It would make greater sense to sell our shares in some of these firms than to flog off BGE, which is Ireland’s 35th largest indigenous firm.
The experience of the privatisation of Eircom should inform our policy. This entity had performed very well in State ownership and invested heavily. What did privatisation bring? First, no investment; second, a less than world-class telecoms system, predators having sucked so much value out of it; third, big losses for shareholders; fourth, examinership.
Given our recent history, most people must now have serious doubts that private enterprise, especially the Anglo-American “shareholder value” model, is superior to other forms of ownership. The “commanding heights” of the private economy – the banks – had to be nationalised because their directors and management ran them into the ground, destroying shareholder value and even endangering the State itself. Nobody wanted this to happen. A large section of the top indigenous firms collapsed and had to be saved by the State. The top five Irish-owned companies – four banks and Quinn Group – and the leading “developers” were all rescued by the State, at some cost.