Showing posts with label Croke Park Agreement. Show all posts
Showing posts with label Croke Park Agreement. Show all posts

Monday, January 21, 2013

21/1/2013: An Uncomfortable Question


Let's ask our Government an uncomfortable question: 

The Government claims (legitimately, to some extent) that 
  1. The economy has stabilised & fiscal situation has improved significantly and
  2. The Croke Park agreement 1.0 delivered what it required in terms of savings. 
Thus, by (1) & (2) things are going according to the MOU-sealed plan (signed within the confines of the Croke Park 1.0) and there are no new urgent pressures or shocks arising. 

In that case, why does the Government need Croke Park 2.0 with another round of EUR1bn 'savings'?

The idea that we need structural reforms in the public sector is not exactly hot on the Government's agenda. Furthermore, that idea was already, allegedly, reflected in the Croke Park 1.0 which was a 'success' per Government official accounts. Lastly, all structural reforms were supposed to deliver on targets set within the MOUs and these are consistent with the Croke Park 1.0.

So which side of the Government is talking porkies? The side that claims Croke Park 1.0 has delivered on reforms and changes and savings needed or the side that claims we need Croke Park 2.0?

Monday, March 12, 2012

12/3/2012: Social partnership is Ireland's institutionalized corruption


This is an unedited version of my article for the current edition of the Village magazine.



Illegal corruption – in its various forms and expressions – is hardly a rarity in Irish society. So much we know. Perhaps less well understood, are the legally permitted forms of corrupt behaviour that contribute to social and economic degradation and undermine democratic institutions and state legitimacy.

Economists identify corrupt activities to include illegal abuses of the system, such as bribery, cartels,  explicit collusion, price fixing, and embezzlement. But corruption also includes activities that fall into grey areas of the law – tacitly allowed: cronyism, nepotism, patronage, implicit collusion, and influence-peddling.

Over the years, the Irish state recognised that both types of these activities exist in the realm of private and semi-state business, and in order to restrict the former forms of illegal corruption, has decided unofficially – of course – to give the perpetrators of the latter quasi-legal ones the strongest political representation in the land – direct access to policy formation. In recent decades our Government and elites Left and Right, went so far as to institutionalise the arrangement.

Since 1987, Social Partnership has constituted a closed shop with membership restricted to select organisations, representing certain subsets of Irish society. Since this membership restriction is codified and since Partnership is explicitly concerned with fixing prices for some forms of capital and inputs into production (for example – wages, that serve as the compensation for human capital, and via planning restrictions linked to State-determined development agenda, to land), it is both de jure and de facto a cartel. That it is a public cartel, as opposed to a private one, does not change its corrupt and corrupting nature.

This cartel actively and with State support promoted policies that led to gross distortions of the markets and of competition between the market players; and also led directly to the relegation of the State’s duty of care to consumers and ordinary investors. An unobservable, but nonetheless equally distorting feature of the system is the effect this system had on preventing formation of competitive enterprises and entrepreneurship, as Social Partners colluded to restrict and re-allocate (to their benefit) investment and employment opportunities, and re-shape the space of new policy ideas formation, formulation and expression.

Social Partnership rubber-stamped a policy of ‘Never at Fault, Never Responsible’ for our financial regulatory and supervisory regimes. It trumpeted the culture of unaccountability in the public and protected private sectors. Without Social Partnership support, it is hard to imagine the State sustaining the very regimes that led to open, but never-prosecuted violations of the law (e.g. breaches of regulatory liquidity-requirements), ethical codes (e.g. loans-for-shares machinations and misclassifications of deposits), MiFID (Markets in Financial Instruments Directive) requirements (e.g. the mis-selling of investment products by at least four banks in Ireland, explicitly uncovered two years ago) and violations of prudential ethics in financial regulation (e.g. resistance to full public-data disclosure and investor-suitability testing and protection in the case of property transactions).

Neither the Unions, nor any other Social Partners stood up at the Partnership Table in support of the handful of whistleblowers pointing to the above failures. The ‘straw man’ argument is that the Unions always advocated ‘more regulation’. Alas, history shows that other priorities miraculously took precedence time and again over the proper regulation of finance, the protected professions, quangos and pretty much every other aspect of Irish governance. These, of course, were pay and conditions for the Unions’ members, slush-funds for ‘training’ and ‘research’ activities, and state-board appointments, including to the boards of financial regulation and supervision bodies. Having been bought by the ‘robbers’, the self-appointed ‘cops’ have, since the late 1980s, stayed nearly silent lest they damage the regulatory charade performed by the Government and rubber-stamped by their own members in charge of the regulatory bodies.

The Unions, of course, were neither unique, nor the most active participants in regulatory capture of the state by vested interests. Irish semi-state companies, banks, protected professions and public sector own (outside the Unions-led) self-interests were. Nonetheless, by deploying the rhetoric of ‘integrity’ and by relying on the arguments that their actions ‘protected the vulnerable’, the Unions were some of the most damaging – ethically speaking – players in the game.

In effect, the Irish state didn’t just tolerate corruption, it actively managed and encouraged it. Even debating the merits of the form of corruption embodied by Social Partnership shows how instrumental ethics replaces real values when the cancer of corruption metastases. Social Partnership is simultaneously a collusive cartel, a conduit for influence peddling, a vehicle for patronage and a price-fixing mechanism. Its goal is to preserve the status quo of wealth and income distribution, skewed in favour of the Partners.

It should come as no surprise that in 2011, Ireland ranked 19th in the Transparency International Corruption Perception Index (CPI) – the lowest of all small open economies in the Euro Area, bar Estonia and Cyprus. As the Moral Sages of our Left ardently decry market economics, its flagships – New Zealand (ranked 1st in the world), Singapore (5th), Switzerland (8th) and Hong Kong (12th) – are less corrupt than the Social Partnership-governed Ireland. In Political Risk Services International Risk (PRSIR) rankings, Ireland is placed between 26th-31st in the world – alongside Uruguay, the UAE, Botswana, Israel and Malta. The only euro area country that scores below us for overall political risks is Estonia.



Higher corruption overall is associated with a significantly lower quality of economic institutions. The correlation between the CPI score, the Economist Intelligence Unit Country Risk Assessment score, the IMD World Competitiveness score and the PRSIR score is in excess of 0.9 or, in statistical terms, nearly perfect. This shows the costs we pay for corruption in terms of economic institutions quality.

In 2011, in Ireland, trust in the Government as measured by the Edelman Trust Barometer – another metric of democratic institutions quality that correlates strongly with CPI – stood at 20%, against an average of 52% for the 23 countries surveyed in the report, making Ireland the lowest ranked country in the study. On the back of 2011 elections, the reading rose to 35% in 2012 and remains significantly below the 43% global average. As of today, of all institutions of the society – private and public – the Irish Government has the lowest trust of its people compared to businesses and NGOs, and equivalent to that of the Irish media.

Years of institutionalised corruption, sanctioned by the State and sanctified as Ireland’s panacea for industrial conflict and policy stalemate – Social Partnership – have definitely come home to roost.



Monday, December 5, 2011

5/12/2011: Exchequer balance: November

In the previous post we looked at the Exchequer receipts. Now, let's take on Exchequer deficit.

Based on data through November 2011, Exchequer deficit stands at €21.37bn in 2011 against the same period 2010 deficit of €13.35bn. However, netting out banks recapitalizations and the sale of stake in BofI, Exchequer deficit on comparable basis was €11.72bn in 11 months of 2011 or €1.63bn below that in 2010.

Factoring in the pensions levy (temporary measure), savings to-date amount to €1.18bn on 2010 period.


Anti-climatic? You bet. Chart below breaks down the 'savings' achieved, with data reported for annualized rate of spend based on January-November 2011 receipts. Voted current expenditure for 2011 rose from €36.39bn in 2010 to €37.59bn in 2011 (data through November for both). Voted capital spending fell from €4.26bn in 2010 to €3.08bn in 2011 (again, data through November). So all of the above 'savings' come from tax increases and capital cuts. Again, when it comes to current spending (Government services), there is no austerity on the aggregate. In fact, there is ever-increasing profligacy. Once again, keep in mind, this does not mean there is no pain. It's just that the pain we have is really in the form of robbing Peter to pay Paul.


Wednesday, October 5, 2011

05/10/2011: Ireland's 'Sustainable' Deficit through September

With Exchequer results for September (see earlier posts on the details of tax returns and tax burden), here's the update on overall Exchequer deficit for nine months through September 2011.

Overall 2011 Exchequer deficit currently stands at €20.66bn with ex-banks deficit at €12.31bn, implying net reduction in deficit ex-banks of €1.069bn on 2010 levels and absent pensions levy / expropriation 'measure', the deficit reduction achieved through September is now just €612mln.


This hardly represents a significant drop in our overall fiscal imbalances. Cumulative deficits for 2008-present are now at €76.76bn or €42,146 per each employed person or €54,990 per each full-time employed person in Ireland (per Q2 2011 QNHS numbers, not counting Nama debts, Government promisory notes and interest on these soon to be due). 

So a run-of-the-mill family of 2 full-time employed workers is now facing, on top of massive mortgage and Government-monopolized/regulated utilities and services bills, plus gargantuan costs of childcare, education, and health care, an additional debt pile of €109,000 on average, courtesy of the serial failure of the state to control its own spending habits. 

As the 'Green Jersey' crowd would say: "It's all sustainable" cause 'exports will save us' and we have 'jobs programmes' alongside 'homes retrofitting'/'windmills-potential' economy. Sure...

Saturday, September 17, 2011

17/09/2011: QNHS 2Q 2011 - public sector v private sector trends

This is the second post on the data from QNHS for 2Q 2011.

Table below summarises data from QNHS results, showing changes for specific sectors of the economy as well as core figures for overall employment, labor force and unemployment.
Using the data from core QNHS we can compute decomposition of employment pool into three broadly defined subsectors, as shown below. The core trends here are the following:
Ratio of private sector employees to those employed in public sector now stands at ca 2.76 private sector workers per 1 public sector employee. Sacred yet? That ratio rose from 2.73 in (an improvement, in fact) qoq between 1Q 2011 and 2Q 2011, but is down from 2.78 in 2Q 2010 and 3.00 in 2Q 2009. In other words, there are fewer private sector employees now per each public sector employee than in either 2010 or 2009 or indeed in 2008 and so on.

The same is true across the specific sectors. There are more people in employment in education per private sector worker now than 2007-2010, there are more people employed in public administration per private sector worker now than in 2007-2010, there are more people employed in healthcare per person employed in private sector today than in any moment since 1Q 2004. This, after the allegedly savage cuts in numbers in public sector employment.

QNHS also now reports EHECS-based public sector employment estimates. Table 1.1 below (reproduced from QNHS release) shows the estimates of public sector employment broken down by the different high level areas within the public sector. I've added the red line below showing proportional allocation of employment - the number of private sector workers per each public sector worker. This only slightly differs from the same metric I derived above based solely on QNHS. Again, there are, broadly speaking, 2.82 persons working in private sector per each 1 person in public sector. A year ago, there were 2.86, 2 years ago, there were 2.85... savage cuts folks? Not exactly. Looks more like continued steady burden on private sector from supporting public sector employment.
That's a tough thing to swallow, folks. Per CSO: "The number of employees in the public sector showed no change over the year to Q2 2011. However, the employment figures for this quarter include 5,300 additional temporary Census field staff who were employed during the periods covering Q1 and Q2 2011. When these staff are excluded there was a fall of 1.3% in employment over the year to Q2 2011." Give it a thought, folks - a fall of 1.3% when unemployment rose 3.93% and underemployment went up 20.89% and employment fell 2.1% and private sector employment declined 2.4%.

"The number of employees in the public sector has continued to fall over the last three years with a total decrease of 24,600 up to Q2 2011 when excluding census field staff." Drama unfolds? Let's check that table above. Since 4Q 2008 through 2Q 2011:
  • Private sector employment is down 12.9%
  • Civil service employment is down 7.5%
  • Semi-states employment is down 8.5%
  • Total public sector ex-semi-states employment is down 5.5%
  • Total public sector employment is down 5.9%
Draw your own conclusions as to whether the Croke Park is delivering or not.