Fintan O’Toole: Public interest, private initiative – what must change

I have never taken LSD but Irish politics reminds me that I don’t need to. The flashbacks to bad trips keep coming without chemical assistance.

A litigious Irish tycoon dominates a large part of business life. A governing party that has had financial links to the tycoon. A publicly owned financial scheme which can be of great benefit to the tycoon. Some Opposition TDs who suspect, rightly or wrongly, an uncomfortable closeness between the tycoon and the governing party. Concerns that the tycoon may have been able to get more access to public resources than others. Fierce denials and legal actions. Stonewalling, stonewalling, stonewalling from ministers. And, eventually, an inquiry.

Yes, indeed, it's 1989. Phil Collins songs are polluting the airwaves and Indiana Jones is cutting a swathe through exotic natives. The tycoon is Larry Goodman, whose beef empire accounted for almost 5 per cent of Irish GDP. Charles Haughey was in power. The relevant public money was in a thing called the export credit insurance scheme, which underwrote with State funds private exports to (among other places) Saddam Hussein's Iraq. And all the rest of it is pretty much the same as recent months in relation to Denis O'Brien, IBRC and Siteserv.

There is one very important difference: allegations against Goodman’s companies included some that involved illegal activities including fraud and tax evasion. (These turned out to be accurate, though Larry Goodman himself was never found to have personal knowledge of them.) There are no allegations of illegality in relation to O’Brien who, as far as we know, merely pursued legitimate business interests. What is striking, rather, is the way the so-called democratic system dealt with both of these episodes – a quarter of a century has changed nothing.

At the heart of this problem is the nature of Irish private fortunes. There is a myth of the self-made man, the rugged individualist who succeeds in building an empire in spite of the nanny state.

In reality, the typical Irish private fortune comes from gaining access to public resources of one kind or another. Goodman’s fortune in the 1980s was built on his brilliant and relentless use of the massive EU and State subsidies available to the beef industry. The typical Irish fortune in the 1990s and early 2000s was built on property development and dependent on dubious public decisions to rezone land, massive tax subsidies and a “private” banking system whose risks were underwritten by innocent citizens.

Mobile phone licence

O’Brien’s own fortune is in this sense typical. He began his accumulation of capital by gaining access to three public resources. The first was the radio licence for 98FM. The second was the ability of his first phone company,

Esat Telecom

, to piggyback on the publicly funded State phone infrastructure without bearing any of the underlying costs.

The third, of course, was winning the State's immensely valuable second mobile phone licence with help from then minister Michael Lowry. Much of O'Brien's subsequent investment is outside Ireland but he has continued (legitimately) to seize opportunities to gain control of resources owned by the State: Topaz and Siteserv were in effective public ownership when he acquired them.

Part of the point here is that Ireland doesn’t have enough genuinely private business. If you take away the immense transnational corporate sector on the one hand and what we might call the public private sector based on gaining access to public resources on the other, we are left with an underdeveloped field of true private entrepreneurship. The small and medium enterprises where genuine get-up-and-go individualism thrives are always an afterthought in official policy.

But the other half of this point is that Ireland doesn’t have enough public business either. What we get in our unhealthy intertwining of public and private is a weakening of both sides. When leading entrepreneurs see their primary opportunities for building fortunes as lying in the control of public licences, public decisions and public resources, the pressure on the State to bend itself to their desires is enormous.

Political trust

And the State has been unable to resist that pressure. Time and again, it gives the tycoons what they want. In every decade this leads to a crisis of political trust. Goodman’s success in shaping State policy to his own demands led us into the era of inquiries, investigations and tribunals and to a loss of trust in the State itself. The success of the golden circle of developers, bankers and landowners in shaping physical, economic and political realities gave us the catastrophic collapse and the loss of State sovereignty. And now Michael Noonan’s Burkean (Ray, not Edmund) stonewalling on Siteserv has revealed to citizens that the “democratic revolution” that was supposed to respond to the causes of that collapse was a hoax.

These crises will keep erupting until we have a democracy in which the State encourages private initiative, defends the public interest and, most importantly, knows the difference between them.