Incestuous Social Partners are as stale as the current Irish Government

Danny McCoy, boss of IBEC (Irish Business and Employers Confederation),  and Paul Sweeney, the economic adviser to the ICTU (Irish Congress of Trade Unions), set out their respective panacea for the future of Ireland in The Irish Times today.  Both speak as high-priests and advocates of the social partnership process.  Each is seeking wriggle-room to establish a bedrock of influence in 2011. 

This time in the context is that of ‘a collective’ that is ‘robust and rational’, whose deliberations are based on ‘evidence-based policy’ making.   They opine that ‘social partnership’ is ‘dysfunctional and politically expedient’ .  ‘We’ in Ireland need to reflect on the type of economy and society ‘we’ would like to emerge and ‘we’ need to craft laws and policies that reflect that vision!  The ‘perverse economic experiment must be dismantled’ and the next government will have to be ‘courageous and radical’; the private sector will have to be ‘reformed’ so as to move from ‘shareholder value’ to ‘stakeholder value’ and ‘cronyism is to be stamped out’. 

Who, under God, will deliver this utopia?  Lobbyists?? The backing of at least a dozen Nobel Laureates will be necessary to attribute credibility to all of this and to ensure the Jewish and Arab bankers who buy Irish bonds adapt to the collective’s notion of ‘stakeholder value’ and fall into line like obedient foot-soldiers.

Social partnership started modestly in the late 1980’s as an attempt to successfully tame a flaming industrial relations jungle. But, by the turn of this century, it had become a disingenuous platform that provided lobbyists with an unwarranted span of influence, instant access to government and direct funding amounting to millions of wasted euro that has been shown to have been inadequately accounted for. This led to a ‘dig-out’ culture of entitlement, free of any risk to the negotiating parties, which ignored the obligation that bread must be earned in the universe - not doled out at the parish pump.

This is the culture that gave legitimacy to gigantic ‘pre-contracted’ bonuses, outrageous professional fees, described as ‘fair and reasonable’ and annual cumulative directors’ emoluments in domestic financial institutions routinely exceeding €30 million because the government and its agencies failed to govern and the absence of moral responsibility is shrouded in legal legitimacy.

Mr McCoy is concerned about the trauma of the past few months; what about the trauma of the past decade? Does the memory of the lines of people queuing to buy a lousy-designed, poor quality residence on highway-robbery terms not make him squirm in outrage? Does the experience of the thousands of FÁS trainees who never obtained certification from an agency controlled and directed by these very same, ever-solicitous, ‘social partners’ not tell its own story about their capacity to be accountable and practice a decent standard of corporate governance?

He is concerned about the Climate Change Bill and the impact of ‘rushed legislation’. But is he not also concerned that the Government has failed to open the marketplace for professional services by, for example, not implementing the Competition Authority’s 2006 recommendations to open the legal services marketplace, a development which would surely benefit IBEC members.

Mr Sweeney, I also abhor the use of the NPRF resources to bail out the vandalism and delinquency of mercenary galoots, but how could this have been avoided? Japan’s debt/GDP ratio is twice that of Ireland but 95% of its debt is due to Japanese people, a higher proportion of whom are in the older age bracket. If bond holders renegotiate and play their ace card – not to put a further cent into Ireland – what happens next when all new Irish debt is owing to foreigners? It is not unnatural to expect borrowers to spend their own money as well?

It is a pity that Mr Sweeney did not define our ‘real economy’ and elaborate on how it is in ‘good shape’ and what the basis of its sustainable strength is.

This country does not have mineral or energy resources. Recovery from the more restricted Swedish bank bailout of the 1990’s was facilitated by a viable engineering and timber sector as well as hydro capacity. Ireland’s younger demographic profile is an important asset but where is the wealth creation potential for this resource to exploit?

HAPPY NEW YEAR!

IBEC and the unions - the watchdogs that never barked

DESPITE the Taoiseach clinging tenaciously to the concept, the principal stakeholders of social partnership have been reduced to empty rhetoric and the threat of disruption that, in due course, will be seen to have achieved nothing. The paltry attendance at street protests outside Leinster House this week is evidence of a weary and disillusioned public.

Social partnership has demonstrated some focus, coherence and purpose when the objective was merely the division of perceived incremental wealth. But there appears to be no scope for partnership when there is no wealth to divide, hence the grandstanding.

The publication, on 10th September, of the Comptroller & Auditor General’s Special Report on FÁS undermines the authenticity of IBEC and the trade unions as social partnership process to the point where this concept has probably run its course.

The C&AG’s examination was part of a follow up to a Special Report issued in April 2008 and the subsequent consideration of the Report and other issues by the Oireachtas Public Accounts Committee.

The examination covered the period 2002 to 2008. In that time FÁS spent €48 million on advertising, promotion and related activities. FÁS had the largest advertising expenditure in the entire non-commercial State sector.

The examination found that advertising and promotional activities lacked strategic direction and that much of the advertising was ineffective in increasing awareness of services provided by FÁS. Budgetary control was poor and expenditure in that area exceeded budgets by 38% in the periods under review. There was some wasted expenditure, including €600,000 spent on television advertisements that were never broadcast and a further €600,000 for which no services were delivered to FÁS.

The examination also found that FÁS did not always comply with public sector procurement procedures and there were shortcomings in its internal financial controls which resulted in breaches of expenditure authorisation limits and a failure to track all expenditure commitments.

The last Director General of FÁS, Rody Molloy, resigned abruptly last November but was rewarded with very significantly enhanced pension arrangements, despite this performance and the country being almost bust. There is no jail-time for white collar crime or incompetence in Ireland. This matter falls within the context of national heritage preservation, although Molloy’s successor admitted the staff of FÁS feel betrayed by the wasters-in-charge.

The Report identifies a number of areas where improvements could be made to systems, practices and procedures at the State agency. The C&AG is to issue another special report about governance at FÁS in a few months.

The recently appointed Director General of the employers body IBEC, Danny McCoy, calls for moderation in government expenditure and a reduction in wages and welfare. He represented IBEC on the board of FÁS from 2005 until he took on this role a few months ago. He had ample opportunity to practice what he so stridently preaches but he failed to do so.

An increase in State funding of 45% to over €1 billion per year was provided between 2002 and 2007. The number on the Live Register increased by 20.3% to 170,376 and the number unemployed increased by 14.6% to 93,400 during this period. A substantial component of the FÁS spend is connected to welfare. They say that a nod is as good as a wink to a blind man so the excess of expenditure over income in 2005 and 2006 did not arouse the sleeping directors of FÁS.

What moral authority does IBEC now have with respect to these issues when
it did not even bark when it could have achieved an outcome that it says it
desires?

Potential savings of €400 million could have been achieved during these years, an era of effective full employment, without unduly compromising the overall intended impact of FÁS.
The trade union movement is heavily embedded in FÁS and the evidence of its very limited competence, most recently under the chairmanship of Peter McLoone, to oversee the agency is now tragically apparent.

The trade union movement has lost tens of thousands of subscribing members since the recession bit the leg off the economy.

A consequence of social partnership is that Ireland ranked second last this year in terms of labour cost competitiveness throughout the EU-27.

Our labour cost competitiveness has eroded by 23%-points since 1998 according to competitiveness indicators published by the European Central Bank. This is a consequence of social partnership. The average deterioration in labour cost competitiveness throughout the EU-27 was 4.4%. Slovakia is the only Member State with a poorer showing. Germany and Austria both achieved a significant improvement in labour cost competitiveness in the decade.
The moral of this is that any prospective social partnership process must be first about the creation of wealth, the enhancement of productivity and increased output. If there is a shared perspective about this the issue of wealth distribution can then be considered from a sold foundation. Sowing precedes reaping.

Ireland must never trust the myopia of a Ponzi-like construction bubble ever again propagated by self-serving bankers, no waste time on a social partnership process that is bereft of effectiveness.

A new approach is necessary.