January 24, 2011
Back in the early 1990s, I was working in the Central Bank when work was under way on framing much of the Irish position on the Maastricht Treaty.
Every few weeks, an Irish representative from the Department of Finance went to Frankfurt, Brussels or Basle, to Central Bank or European Finance Committee meetings.
Together with my colleagues, we drafted the Irish submissions.
When I started working in the Central Bank, my boss kicked off my career by telling me to read the minutes of the previous few week’s European meetings, so that I could familiarise myself with the job. I noticed something odd: the Irish representative never spoke at the meeting. I put this down to the fact that maybe, that week, the Irish delegation had nothing to say.
But time and again, these minutes revealed that, no matter how detailed the briefs were that the junior and middle ranking economists gave to the representative of Ireland, the Irish representatives never took part in any of the debates.
Why was this? Was it because they were afraid to offer an opinion?
Were they afraid to stand out and explain to the Europeans that Ireland was different?
After all, we did more trade with Britain and the US than we’d ever done with Europe. We had a lot at stake and yet we didn’t speak up.
These were crucial debates on the European Monetary Union (EMU), and whether we should join the euro. At the time, the British and Danish representatives were particularly vocal, as, of course, were the French and Germans.
Periodically, the other smaller countries’ representatives would question what was going on, but never the Irish delegate.
The people who should have spoken out for Ireland never spoke, they went along with the majority.
There was – from my Memory of the minutes – no effort made to articulate an Irish perspective, no effort made to point out that Ireland had a lot more at stake from joining the EMU than any other country. It was clear at the time to most economists that this was a political, not an economic, policy, and our top civil servants went along with it, without question.
The same silence was apparent when we had a currency crisis in 1992/3. When any one of us suggested that the policy of defending the Irish punt at all costs against devaluation might be misguided, we were slapped down with the great civil service putdown, that any deviation from policy would be ‘‘unwise’’.
The official view held that any potential devaluation would be catastrophic for the Irish economy. The official view was that, if we were to devalue, Ireland would suffer permanently in capital outflows, higher interest rates and higher unemployment.
In the event, after we were forced to devalue, money flowed into, not out of, the economy. Interest rates fell, as did unemployment.
In short, everything said by the Irish economic policy-making machine, the senior civil servants at the Central Bank and the Department of Finance, was wrong.
They hadn’t a clue. And do you know what happened to most of the senior civil servants who were involved with that policy debacle?
They were promoted! That experience suggested tome that satirical British comedy Yes Minister was not too far off the mark. The role of senior civil servants in Ireland’s lamentable performance should not be overlooked in the next ten weeks.
As the current Fianna FÃ¡il/Green administration continues with its interpretation of the final act of a Shakespearean tragedy (ie, nobody left standing in the end), it is worth taking a hard look at the civil service – otherwise know as the ‘permanent government’.
Yes Minister cast a satirical eye over the role of senior civil servants and their disdain for the politicians they served. In that series, Sir Humphrey, the fictional senior mandarin, is concerned mainly with maintaining the status quo, with the civil service kept strong and the elected government weak.
A direct comparison between the Irish civil service and the fictional Sir Humphrey is probably a bit unfair, but there are some interesting similarities between how Sir Humphrey exercised and maintained his power and how Fianna FÃ¡il governments over the past 13 years have sought to do the same.
Sir Humphrey was a genius at getting his allies appointed to (allegedly impartial) boards and agencies in order to maintain influence over decisions that were meant to be impartial. Fianna FÃ¡il has spent the last 14 years setting up quangos which it has stuffed with its own party faithful, and failed TDs, in order to do the same.
On March 11, the electorate can, if it wants, evict Fianna FÃ¡il from government and choose others to run the country. We cannot, however, remove the members of the ‘permanent government’ who have risen to positions of power over the last decade and a half. These mandarins are at least as guilty as the elected administration for the catastrophic events of the last five years.
If you think this is unfair on senior civil servants, look at the arrangement revealed in January last that shielded 600 senior civil servants from the full effects of the pay cuts.
These pay cuts were levied on ordinary public service workers. While an ordinary nurse or teacher was getting a pay cut of 8 per cent, the salary of an ‘assistant secretary’ – earning â‚¬150,000 a year – was cut only by 3 per cent. For Ireland, a change of government is an absolute necessity.
But it is also necessary to change how government works. It is clear from its record over the past ten years that the Department of Finance has made mistakes.
The department, as with most others, works behind closed doors and occasionally emits projections, budgets and advice.
Without clarity on how any of those are reached, why should the people of Ireland accept those reports as fact? Every single one of its economic forecasts in the boom and the bust was wrong, so why should we believe anything it says?
Any candidates who are elected with a mandate for change will have their work cut out for them.
The top of the civil service will fight any interference with the status quo.
For them, the status quo is that they are permanent and the government elected by the people is temporary.
Fianna FÃ¡il may well be a spent force after the coming election, but the shadow cast by its 13 years in power is long – and the various quangos, boards and ‘makey uppey’ state agencies will prove a formidable barrier to real change. But that’s the real challenge.
Real change begins, not just in the DÃ¡il, but in the corridors of power that surround it.
David McWilliams will teach a ten week diploma, Economics without Boundaries, from February 7 at Independent Colleges