ANALYSIS:The idea Irish regulatory and political failure is fuelled by excess judicial machinery overlooks too many external factors, writes GERARD HOGAN
DAN O’BRIEN raised the interesting question of whether the Constitution has contributed to political inertia and, hence, to economic underperformance (Opinion and Analysis, November 7th). A central part of this thesis is that Ireland has performed worse than any other developed country in the present crisis. But this premise is, to my mind, highly questionable and, in any event, save for one possible exception, the Constitution has had no bearing on these issues one way or the other.
No one doubts for a moment that grievous policy errors combined with serious regulatory failures have helped to make the present recession an especially acute one which has inflicted real pain on the Irish public. But it seems clear from a slew of recent data that the recession in Ireland is ending, at least in the sense that there is likely to be a rise in nominal gross domestic product (GDP) in this quarter and that GDP possibly even grew in the third quarter. At the risk of tempting fate, the evidence suggests that, barring another Lehman-style debacle, when the final GDP figures for 2009 are published in March, we will see the contraction in the Irish economy for 2009 was much closer to -6 per cent, than, say, the International Monetary Fund (IMF) forecast of -10 per cent. If this proves to be correct, then Ireland will be not far off the euro zone mean.
Nor does Dan O’Brien’s thesis allow sufficiently for the impact of exogenous factors, not least the impact of the credit crunch in August 2007 and the Lehman Brothers collapse in September 2008. As is too well known, these events – which, in the language of the law of torts, were not reasonably foreseeable – led to a massive rise in global risk-aversion and led to something close to a collapse in world trade, factors which obviously impacted profoundly on a small, open economy such as Ireland.
This was far from a uniquely Hibernian phenomenon. Nor can it be implied that a property crash is a result of an uniquely Irish policy failure: quite apart from the present crisis, well-run and advanced countries as diverse as the United States, Switzerland, Sweden and Finland have all experienced significant banking failures and/or property crashes within the last 20 years.
And while Irish policy failures seem obvious now, they were not universally obvious prior to the onset of the credit crunch. Thus, for example, the IMF’s country report for Ireland published in September 2007 is replete with lavish praise for the Government’s economic policies, noting that the public finances were operating from balance to surplus. Of course, in its latest country report for Ireland in 2009, the IMF contends that by 2007 there was already a structural deficit of -8 per cent. But if this was so obvious then, why did the IMF not say so at the time when these problems could more easily have been addressed?
Turning to the Constitution, O’Brien identifies the voting system, the parliamentary system, the referendum system and judicial review as contributing to institutional inertia which, in turn, leads to policy failure and economic underperformance. He is correct to say the Irish judiciary “wield as much power as in any other country of the world”, but the arguments regarding the impact of judicial review in this jurisdiction are somewhat passé. Much the same could be said about the impact of judicial review in countries such as the US, Canada, Germany and (increasingly) France, without any evident adverse impact on their economic performance. One might, for example, regret the outcome of the statutory rape case (one of the examples given by O’Brien), but it is hard to see how this could impact on economic policy failures.
In any event, judicial review operates as an antidote to inertia. Most of the declarations of unconstitutionality operate in the micro-field, often in respect of pre-1937 laws, so that the courts are forcing the Oireachtas to reform and recast old legislation which, in practice, has been found to operate unfairly in individual cases. Less often, but more spectacularly, judicial review operates at the macro level, so that in the past the courts have imposed social change on a reluctant Oireachtas and, indeed, wider public. The best example here is probably the Supreme Court’s decision in December 1973 in McGee – finding the anti-contraception laws unconstitutional – which set in train a social revolution, the ripples of which are still being felt to this day.
It is true that the referendum requirement in the case of all constitutional change is unusual and is probably a reaction to the ease with which the Irish Free State constitution (1922) could be changed by ordinary legislation, one of the key factors in its ultimate demise. This issue always presents a difficulty for small states, because larger federal states have inbuilt checks and balances. In Germany for instance, the use of a parliamentary super-majority involves the Bundesrat (upper house) and hence, indirectly, the consent of the individual Länder (states comprising the federation).
But in the case of unitary states such as Ireland, the use of the parliamentary super-majority to effect constitutional change can seem more questionable. Thus, for example, once the French Conseil Constitutionnel ruled in December 2007 that ratification of the Lisbon Treaty required a constitutional amendment, President Nicolas Sarkozy simply convened a joint meeting of the parliament and used the super-majority to secure the necessary change, which left a sour taste.
The two other European countries that specialise in referendums – Switzerland and Italy – are both hugely admirable societies, providing proof the referendum requirement need not clog economic development or the evolution of civilised standards.
Nor am I convinced by arguments based on the need for a complete separation of powers, ie that the Government should be completely independent from the Oireachtas. On this, there are arguments both ways.
O’Brien skilfully presented the case for change, but he did not mention that the risk of institutional gridlock is evident in those jurisdictions (such as France and the US) where the legislative and executive branches are entirely separate, such as, for example, the Republican control of Congress during Bill Clinton’s tenure. Canada’s performance during the present economic crisis has been widely praised, but it operates substantially the same parliamentary system as ourselves. Nor is it clear, for example, that Chancellor Angela Merkel is any the less successful as a world leader because she is also elected to represent Mecklenburg-Vorpommern.
Where I agree O’Brien has a valid point is in respect of the voting system. Here the system is probably too skewed in favour of local populist factors. The case for a mixed voting system (perhaps along German lines), taken together with radical reform (if not, indeed, as Enda Kenny suggests, outright abolition) of the Seanad seems compelling.
But I nevertheless cannot agree the Constitution has inhibited economic growth. Rather, it has provided a stable legal system and has (broadly) protected property rights, the two factors which, as economists from Adam Smith to Alan Greenspan agree, are necessary agents for economic growth. The missing sparks – an educated workforce; promoting entrepreneurial spirit and a “can do” attitude to penetrating world markets; and export growth – were to come later.
It is true very serious policy and regulatory errors were made in recent years, exacerbating an acute crisis caused by even more serious policy errors made elsewhere. For all the failings of our political class, we as a people have been slow to acknowledge the extent to which all facets of Irish life – living standards, infrastructure, housing, education, health and longevity – have been transformed over the last 20 years.
If the economic data is correct, Ireland is about to take faltering and hesitant steps towards economic recovery. Perhaps it is only then that, along with recent failings, this huge transformation can be fairly evaluated.
Gerard Hogan is a senior counsel, lecturer and specialist in constitutional law