Looking back over the year, an interesting speech by the Taoiseach, which got lost in the confusion around Brexit, deserves attention for three reasons. It showed that maybe the leader of Fine Gael is not as right wing as portrayed.
Secondly, it indicates there may be a Plan B for enterprise policy, which is more complex than the low corporation tax “cornerstone” mantra. Thirdly, it means that the Government may yet give full-blooded support to indigenous enterprise.
This could include New Era, the State holding company, becoming a dynamic development agency, utilising commercial public assets to create more jobs and value.
In a speech to mark 90 years of the ESB, Ireland’s State-owned electricity company, on November 22nd, the Taoiseach strongly supported the future development of State-owned commercial enterprise. “State enterprises - both existing and new - will play an important role in the future economic and social development of Ireland,” he said.
Thus the apparently deeply conservative Leo Varadkar is not just recognising the past role of State-owned commercial enterprises, but is now declaring that they will have a key role in Ireland’s future development. He continued: “Those who think private enterprise is the answer to everything, are asking the wrong set of questions.”
In the past we used to talk of Ireland’s “mixed economy “ - a mixture of public and private enterprise, which had served us very well. Indeed the Taoiseach quoted one of his predecessors, Seán Lemass on the importance of these firms in Ireland’s past: “even the most conservative among us understands why we cannot rely on private enterprise alone. State enterprise in fields of activity where private enterprise has failed, or shown itself to be disinterested, has not only been accepted but is expected.”
The Taoiseach reiterated this point and promised that “State enterprises - both existing and new - will play an important role in the future economic and social development of Ireland.”
Historically, Fine Gael had set up many state enterprises starting with the the ESB, but Fianna Fáil were enthusiastic too, until both joined Margaret Thatcher’s revolution to roll-back the state by tax-cutting, privatisation and deregulation of finance and labour.
The economic literature in the 1980s found that state enterprises even with diverse objectives, performed as well as private firms. Then, all our private banks, developers and many other firms collapsed overnight. Ironically we were forced to sell-off some State firms and assets to pay private bank debts.
The privatisation of Telecom/Eircom 1999 was a disaster for Ireland. It was a naïve privatisation of a public monopoly and we have poor broadband today due to the asset-stripping by private owners instead of investing. This led to its near collapse a decade later.
In contrast, the ESB has paid the State over €10 billion in dividends over the past decade. The Taoiseach said it pays €2 billion each year in investments, taxes jobs and dividends. The firms we privatised could also be paying us dividends today, as well as the taxes they pay.
The speech may indicate recognition that Irish industrial policy is confused. It appears that Governments favour foreign investment over home grown enterprise. For example, they have sold off some of the biggest companies which they owned on our behalf. Of 13 firms privatised most were substantial, profitable and contributing much added-value.
Most of them still do, though in foreign ownership. The Government, while paying lip-service to indigenous firms, plans to sell-off all Irish banks as soon as possible without even a strategic review of their importance or future profitability.
A small globalised economy will have a substantial and welcome multinational presence, but not to the detriment of many good indigenous firms and our reputation? The Taoiseach’s speech may mark a wake-up call for a debate on how many strong indigenous firms should be retained and developed.
It is difficult to stop private enterprises being sold off to foreign buyers, even where the taxpayer has funded and nurtured them. Much more could be done to retain the best of them. Why sell-off strong, indigenous State-owned firms which may lead us to be over-dependent on US firms, some of which may only be here because of Ireland’s tax regime.
Varadkar’s speech does not mark a new departure, but a reversion back to the “mixed economy” of previous governments; to a more considered enterprise policy where state firms will again be vehicles for development. It could even mark a rejection of the failed and out-dated British fashion of privatisation which has served us badly. It may lead to innovative enterprise thinking in 2018, in recognition that Ireland’s role in tax avoidance is over.
Paul Sweeney is chair of Tasc Economists’ Network and former chief economist with the Irish Congress of Trade Unions