August 16th Morning: The Recession Diaries
What a trooper - Denis O’Brien riding shotgun through the radioactive land that is our economy to bring us the good news of recovery and redemption. The masses have waited and are not disappointed. The band plays in the main square, the children toss rose petals on the pot-holed ground and the town elders don their ceremonial robes. For Denis O’Brien carries with him the proclamation of the New Totalitarians. And he will be heard.Ah, the New Totalitarians; like the Soviet-style bureaucrats of old, they, too, believe in a command economy - but now commanded by financial and global capital. It’s the same ’sit-down-and-shut-up’ attitude to democracy, with some slight differences: there is no Gulag here. Unlike the old command societies, though, where a cadre who missed the tractor quota got exiled, today the failed executives get golden handshakes. Mr. O’Brien believes there is nothing that cannot be done by the private sector - and god help anyone who interferes with the myopic and relentless pursuit of private profit.
Yes, Denis O’Brien has prescriptions for the economy. His is the last in a series of opinion pieces the Irish Times published last week from leading ‘entrepreneurs’. They certainly saved the best for last. Let’s take a whirlwind tour through Mr. O’Brien’s insights.
First, Mr. O’Brien takes the town elders to task for ‘talking down’ the economy, for creating a ‘panic environment’.
‘Personal or corporate investment is as much about confidence as it is about capital.’
I could spend a number of posts on this mushy waffle. Suffice it to say that since 2001 ‘investors’ were confident enough - investing €50 billion in property, mostly overseas. Contrast that with the meager €1 billion invested in Irish business. The fact is that ‘investors’ look for the best return and rarely is the best return in indigenous enterprises, especially in their start-up or developmental phases. Now that domestic and overseas property is taking a hit, the investment is drying up (though I read that some ‘entrepreneurs’ are selling Iraq as the new property investment destination - good grief!). The main investors - pension funds - don’t really bother with indigenous enterprise - never have, except for banks and property. And most of us don’t have the beans to invest in high-tech companies here at home. What is Mr. O’Brien going on about? It’s not about confidence, nor even about capital; it’s about directing, nay, coercing, investment into productive activities.
Second, Mr. O’Brien calls for cutting public expenditure by 5%. We have one of the lowest levels of expenditure in the EU but never mind that. What should we cut? Education (to hell with the knowledge economy)? Health (go back to herbal cures)? Public transport (you got legs, don’t ya)? Here’s the killer - indigenous enterprise relies to a considerable extent on state-aid and grants. Cut that? Just what we need as we enter a recession. The one body - the State - that has the capacity to increase resources and invest them into productive activity, creating jobs and wealth, and Mr. O’Brien wants to cut it. Why does he think this can work? Apparently, he was talking with some Minister in Latvia and they’re considering cutting public expenditure. Oh, geez, QED.
Third, Mr. O’Brien wants to privatise a shed-load of public activities. He lists them but it would have saved newspaper space if he just listed those activities which he wouldn’t privatise. Why is he suggesting this? Because Eircom is such a poster-child for privatisation. Even since it was pirated, Eircom’s assets have been sweated until they have no more glands. I can’t even count how many owners it has had. And now one of our most vital infrastructures is subject to the financial whims of some Down Under homeboys who are obsessed with the share price of their equity fund and can’t even spell Eircom.
Yes, privatisation has been a roaring success. Greencore? What a shining example of corporate governance. Aer Lingus? It was within a hair’s breadth of being bought out by a competitor, thus creating a monopoly (and I thought privatisation was about creating competition). Irish Ferries? They introduced a new form of industrial relations - firing practically every one of their employees (and using taxpayers’ subsidies to do it with). Privatise ESB? The last time the private sector ran electricity there were 125 private companies - and only 12% of buildings were electrified. Yes, Mr. O’Brien, asset sweating, fraud allegations, monopoly markets, mass lay-offs and no lights - what a way to run an efficient and dynamic economy.
Here’s a little story: I came across an archived article which suggested that Mr. O’Brien’s E-Power company was going to take on the might of the ESB in the electricity market. I laughed so loud the neighbours called the Guards. When they arrived and I told them the whole story they couldn’t stop laughing either. Mr. O’Brien’s E-Power didn’t ‘compete’ with the ESB. The ESB was required by the Energy Regulator to ’sell’ electricity to Mr. O’Brien at a discount. He turned around and sold on the electricity to large industrial users. How could he make money out of this? Because the ESB’s tariff was set high enough by the Regulator to allow Mr. O’Brien to turn a profit. How much electricity did Mr. O’Brien’s company generate? Nada. It was all a paper transaction. Neat, eh? That’s the way to build a dynamic economy (post-mortem note: E-Power died because it couldn’t get any more cheap ESB power).
Mr. O’Brien has a few more suggestions such as Dermot Desmond and Bernard McNamara running hospitals, publicly subsidising low-cost mortgages to get the property sector up and running again (yes, to repair the damage of a property bubble you just start another bubble) and real cuts in wages. Now, not all his proposals are off-the-wall - he shows some insight when discussing the disabled. But by and large Mr. O’Brien’s prescriptions should be given the treatment they deserve.
Yes, the masses have not been disappointed. That’s because they’ve been working in the real world, trying to get to grips with the real problems in our economy and society. They’ve been waiting alright - but for someone to give them a good laugh, to break the drudgery. And Mr. O’Brien hasn’t failed them. Even the cats and dogs have suspended traditional hostilities to fall around each other laughing, wiping the tears from their whiskers and their snouts.
The New Totalitarians deserve no less.
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Aug 21st 2008