OPINION:Our failed model of governance needs a root and branch review to enable it to create conditions for sustained future wealth, writes EOIN O'LEARY
THE GAPING hole in the Government finances, the exposure of the taxpayer due to the National Asset Management Agency (Nama) and the massive bank recapitalisations all point to the most irresponsible policymaking debacle in the history of this state.
It is very surprising that despite this, our Government is seen by the majority as being the key player not only in solving these problems, but also in plotting a path to future prosperity. Why, in these dire circumstances, is nobody asking whether we have too much government?
Instead, we have Fine Gael, the trades unions and a considerable percentage of the public arguing for a government stimulus to lift the economy out of recession. So, do we really want more rather than less government? Are we serious about keeping faith with a failed model of government being able to deliver sustained future prosperity?
There may be another way, which involves a leaner but more effective government that backs the ingenuity and enterprise of its citizens as the route to economic development.
For the last four decades, our development strategy has been one where governments or their agencies pick winners. Recently, this has been exemplified by, for example, the Minister for Energy offering incentives for the purchase of electric cars; or by a Government agency, Science Foundation Ireland, injecting taxpayers’ money into research on new asthma drugs.
In either case, the basic premise is that governments ought to be actively investing in wealth creation, leading to future Irish prosperity.
This fundamental premise is seldom questioned. Instead, the debate is about what government measures will deliver for “Ireland Inc”. The media, so-called experts and high-profile businesspeople engage in endless speculation about what would be best for our country. The often-used catchcry that we, as Irish citizens, are all in this together is seriously misleading, however.
While Irish prosperity is without doubt the ultimate goal, it is by no means the key incentive that influences the behaviour of the various players involved.
Re-election is clearly the ultimate motivation of the politician proposing State subsidies for electric cars. It goes without saying that the short-sightedness of politicians seeking re-election has been one of the main obstacles to national prosperity in recent times. Why should we trust it now?
Company profit is the overriding motive of the chief executive officer of a multinational drugs company encouraging Ireland Inc to invest in an asthma cure. It does not take a rocket scientist to see that this motive and Irish prosperity may be misaligned, if, for example, the research generates wealth in other countries.
All Government economic development initiatives should be subject to detailed economic evaluation, which first established that the measure was something that would not otherwise be successfully provided by the private sector. In the case of electric cars, the question is: are politicians or their advisers in a position to know whether this technology will win the international race for solutions to the automotive carbon emissions problem? If not, why not let private industry find out, and let them, rather than the Irish taxpayer, take the risk that they are wrong?
Even if a proposed measure passes this first test, the second test is whether the investment is the best use of valuable public resources relative to alternatives forgone. Thus, are there other public projects that will yield a better return to the taxpayer than investment in asthma research?
A key problem in this country is that evidence-based policy is almost wholly absent. Instead, we get a plethora of government strategies full of far-flung aspirations, woolly argument and arbitrary targets that ultimately fail to mask the self-seeking behaviour of politicians, business interests and lobbies. This is the model that delivered the gross policy errors in the property and banking sectors in the last decade.
The so-called smart economy strategy, which is heralded as our long-term growth strategy, is riddled with the same malaise. The idea that the taxpayer should fund this plan, which hinges on the disciplines of science as opposed to business delivering sustained national prosperity, is reckless.
The only solution to these deeply ingrained problems is a root and branch review of both our political institutions and the functioning of government departments and agencies.
Perhaps a good starting point for redesigning our economic development strategy would be to reflect on the words of one of our most successful political leaders, Seán Lemass, who stated in 1954 that “the less the government is brought into the operations of a private business enterprise, the more successful that business will be” (quoted in Tom Garvin’s recent book, Judging Lemass). Lemass had a strong belief in the important role in economic development of a properly regulated enterprise sector. He was personally incorruptible and was supportive of a developed welfare state.
So, imagine a leaner government stripped of all unnecessary expenditure by agencies and taskforces. This would be a government that concentrated on removing obstacles to entrepreneurship and focused on providing an environment in which business could prosper. For example, it would address inadequate facilities in our primary and secondary schools, our chronic shortage of high-speed broadband and the lack of a service-oriented public sector.
At the same time it would ensure a level playing field through regulation, and would scrupulously avoid the bailing out of businesses that fell foul of competition. Instead, it would concentrate taxpayers’ money on looking after the needy in our society – such as the mentally ill and the poor, would establish an equitable health system, and re-energise local democracy.
This vision of a leaner, more caring and smarter government is based on a pragmatic view that there is a better way. It is worth wondering whether our political system is capable of delivering the fundamental change that is now urgently required.
Dr Eoin O’Leary is a lecturer in the Department of Economics at University College Cork. He specialises in economic growth, innovation and regional economics