Labour manifesto reads like fairy tale

Comment: The art of making an omelette is in blending the ingredients so finely that the taste of each is no longer distinguished in the symphony of it all and Pat Rabbitte is a master chef indeed. His latest thesis, a New Irish Labour (NIL) manifesto on the future of our society, is a fine piece of cookery - rich with fire of denunciations and the soothing sweetness of fatherly advice.

The problem, of course, is that economic policy requires more than an ideological omelette of clichés. And here the document fails. The factual side of the first part of the manifesto, history-according-to-Labour, is so thin that it requires a dollop of accusations to keep the cooking going.

First, Mr Rabbitte accuses the State of being over-run by the neo-liberals, then he argues that it was not neo-liberal enough. He lashes out at the Government controlled by "liberal market economics", only to claim that it was a tax-and-spend Government after all. So which one was it?

The manifesto's approach to neo-liberalism, markets and economic thought revolves around omitting the obvious and asserting the obscure.

Take for example a view that the disastrous 1970s and 1980s were caused not by "the dominance of 'social democratic' thinking" but by "oil price shocks and subsequent international downturns". As any undergraduate student learns, the sluggish labour markets response to twin oil shocks in Europe and Ireland was caused by the social-democratic policies that promoted over-regulation and State monopolies, trade union-induced wage rigidities, and doled out employment-retarding benefits.

The "reckless mismanagement of the economy" of these decades was the reckless tax-and-spend policy that Labour (a) advocates as a prescription to our current ills and (b) accuses Minister McCreevy of.

In a truly Machiavellian-Orwellian turn, the manifesto claims that the Celtic Tiger was the result of the "favourable shifts in Ireland's demographic profile". Does this mean the wholesale escaping of young qualified labour out of socialist Ireland in the 1980s? Or is this an admission that lower taxation and rising wages spurred an unprecedented increase in labour force participation by women, which accounts for a vast share of the Celtic Tiger success.

The rest of Mr Rabbitte's master-chef fare is equally inconsistent, foggy and ideologically biased.

He quotes the recent Enterprise Strategy Group report, saying that "Ireland has lost its former ability to respond... flexibly to \ needs". He then decries privatisation, failing to mention that it was the semi-State monopolies and their trade unions that left us with the third-lowest degree of domestic competition in the OECD.

According to the paper: "There is a limit to how much of the growth dividend can be taken in private incomes rather than public services."

Apparently, Mr Rabbitte never learned that the diminishing returns to scale apply more to the static State enterprises, and far less to the adaptive and innovative private markets. One will be hard pressed to find an example of a persistently growing economy in which the share of government services increases at a faster pace than the private sector. There are plenty of examples to the contrary.

In a striking example of economic illiteracy, the manifesto claims that, "for neo-liberals, everything can be reduced to a small number of categories and... improved through a stronger centralised state and/or... market mechanisms".

In fact, exactly the opposite applies. Neo-liberal thinking evolved in response to the socialist view of an economy as a manageable domain of limited social interactions and categories. The claim that society can be centrally managed by the State squarely belongs in the camp of the socialists and corporatists.

This hodge-podge approach to history adopted by the manifesto extends into the concluding section - the prescriptions for correcting the Republic's "ills". This starts with a 10-point programme that reads like a shopping list.

Labour promises to unlock human potential, embrace the regulated market, invest in people and public services, leaving no-one behind. Add to it the goals of respecting the citizen-consumer (are there any other citizen types?), designing a new enterprise strategy, building a sustainable economy and a fairer world, and redefining the economics of care.

A well rounded fairy tale indeed - the last 10 pages of the manifesto are completely devoid of any substantial proposals and an abstraction from the world of policy making. In the case of ideas on unlocking human potential and embracing the market, obscure quotes from socialist philosophers and historians replace actual submissions.

According to Labour, competition "is in the interest of consumers", but not in the case of Aer Rianta, so NIL will not support a more competitive economy where such policy will undermine the power of their trade union clients.

Similarly, no proposals are given for improving education or investing in public services. The only important section of NIL's discussion of public service reforms is the argued need for greater tax revenues. The old song with a new twist - Labour is calling for more tax revenues by "developing a fairer tax system" that will end the tax breaks for the wealthy and raise capital gains, inheritance, "land speculation" and environmental taxation rates. The problem is that these proposals actually hurt the poor and the middle classes more than the wealthy.

From the pages of the manifesto, the spectre of the big Government and happy trade unions is haunting the Republic once again. This time around, it veils itself in the rhetoric of "social fairness". Yet, its promises ring hollow when set against history and modern realities.

An omelette of lofty ideals and manipulated facts does not make a healthy policy diet for sustained growth and prosperity of the society.

Constantin T. Gurdgiev is director of the Open Republic Institute and a research associate with the Policy Institute at Trinity College Dublin