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.
