May 24, 2006
This morning, the news was grave. It focused on problems in social partnership. The reporter adopted momentous tones and outlined solemnly the impending disaster that was about to befall us if these giants of modern Irish economics could not hammer out a deal. You could swear a financial hurricane of Katrina proportions was about to rip through Ireland, devastating everything in its wake.
The truth is that if the partnership charade disappeared tomorrow, very few would miss it. The continuing fraud is one of the single biggest scams foisted on the Irish people in years.
This annual palaver with all its self-aggrandising pomposity is straight out of the Fossett’s Circus school of economics where the knife thrower never misses and the elephants never escape. Like the circus, the whole thing is a contrived piece of theatre.
Whereas the circus is aimed squarely at the mind of a nine-year-old, the partnership charade is a sad joke and the joke is at our expense. The main problem is that hard thinking has been replaced by mantras. Simply by repeating the mantra, it has become fact and by becoming fact, it becomes indisputable.
We are experiencing what the great US economist, Paul Samuelson, called “government by shibboleths”. He believed that certain economic policies acquired mantra-like characteristics, so that if they are repeated often enough they become unassailable. Gradually, the mantras come to replace hard thinking. To argue against the shibboleth is seen as heresy. In Ireland, the mantra – cheer-leaded by many in the media – is that social partnership is/has been the engine of Irish economic dynamism. Unfortunately for those of us that have to suffer the bizarre circus, this is a load of tosh. Let’s look at the facts. Partnership is now mainly a public sector event.
The vast majority of Irish workers are not represented by the trade unions because the majority is not unionised. Whether this is a good or bad thing is for another day, but it is a fact. So what we have are public sector unions talking to their employer, the Government, about their pay and conditions. In the rest of the economy, union representation is falling, and falling faster than anywhere else in Europe as a percentage of the workforce.
Have there been government moves to smash the unions? No, not as far as I recall. In fact, the opposite is the case – union membership is falling at a time when the unions’ political power has never been stronger. Why could this be? Is it because ordinary people have no need for a union? Maybe, who knows? For whatever reason, workers are not craving a union card. Clearly, work practices have improved across the board. If we look at the top ten companies on the Irish Independent sponsored ‘Best company to work for’ each year, a disproportionate amount of winners are non-unionised.
So it is not clear, contrary to the central claim of some trade unionists, that union presence on the floor automatically makes a company a better place to work. But let’s forget the unions for a second – because today’s concern is not about unions – good or bad. The issue at stake is why partnership is not addressing the key challenge for this country and why, if it were to disappear, no-one would miss it.
The central fact in Ireland is that we are dangerously over-dependent on multi-nationals and apart from their activity, we are nothing more than an economy that sells houses to one another, financed by other people’s money. We have a serious deficiency of native companies doing well and – although there is no shortage of capital – all this spare cash is going into property.
Property creates no value added, no innovation, no patents and no creative long-lasting capacity. The great consumer/producer brands of the world – Sony, Apple, Mercedes, Walt Disney, U2 – are not made of bricks and mortar but are made of brain power and are creativity-driven. We are not creating any of these brands. In fact, a recent Fortune 500 survey put only one Irish company – Ryanair – in the global top 500.
The implication of this development is that the producing capacity of the country is falling back alarmingly. If this continues, we will not be able to pay our increasing indebtedness.
Today, Microsoft, Dell and Intel, account for 20pc of our GDP. Think about that for a moment. The turnover of the operations of three multi-nationals in Ireland accounts for one euro in every five in circulation here! Furthermore, 72pc of all our exports came from two sectors – the “pharmachem” sector (chemicals and pharmaceuticals) and computer sector.
Multi-nationals accounted for an astounding 87.6pc of Irish exports, yet there are only 100,000 people working in the multi-nationals as opposed to 1.9m in the rest of the economy.
Of the remaining 12pc of our total exports, close to 8pc were agricultural goods, so domestic firms only account for a tiny 4pc of exports. Are things now becoming clear? The engine of growth in Ireland, the sector that earns hard currency for us, is the multi-nationals. They are non-unionised and are as a result, not directly covered by partnership. If we take the multi-nationals out of the equation, our productivity figures collapse.
So for example, the Enterprise Ireland sales-pitch claims that Irish productivity is the highest in the world but, when we take out the multi-nationals that impressive first in Europe, drops to a lowly eighth.
Without productivity growth, we cannot sustain wage increases indefinitely. This is the nub of the problem with partnership. Because it is a one-size-fits-all approach to the economy it operates on the basis of averages.
So those parts of the economy where productivity is low, manage to extract wage deals commensurate with sectors where productivity is high. This increases costs in the domestic side of the economy, which can only be paid for with lower profits.
All this makes the property market appear even more attractive for investors, because everyone thinks that prices can only go upwards. So the net result of partnership is to drive even more money into the property monster and away from domestic long-term wealth creating industries.
As long as everyone keeps borrowing and spending, these fundamental structural developments go unnoticed.
SO partnership, rather than making Irish workers more secure, is serving to waltz us up a cul de sac where real businesses are getting squeezed between the multi-nationals on the one side and on the property Leviathan on the other.
The multi-nationals are getting the best brains and the property industry is getting the cheapest capital. The piggy in the middle is the domestic private sector which is living off scraps.
This is not happening to the same extent in any other European country.
We are being blindly led by the feel-good factor associated with inflated house prices and the political imperative of the next general election.
With the world’s financial markets collapsing around us this week – signalling choppy waters in the future – all we seem to be worried about is the partnership charade. Rarely, has the feeling of living in an economic Lilliput been more intense.