January 11th Lunchtime: The Recession Diaries
The newspaper articles read like war reports - from the economic front-line on which we are all trapped The new CSO figures on unemployment confirm this. Already, leading economists are suggesting the jobless rate could exceed 12 percent by year’s end, making projections made only last week already out of date.
It’s depressing enough that the Government is seemingly paralysed. But the opposition parties also have little to offer. Fine Gael continues to make a fetish of the budget deficit. And while Labour has made a better fist of it with proposals to generate jobs in the construction and green-collar sectors, neither party has put forward concrete proposals for the ‘market economy’ - the jobs and businesses in the traded sectors, local and export. All we get is the dismal mantra of ‘restore our competitiveness’ led by the National Competitiveness Council; mantra is an apt term - it amounts to little more than a prayer offered up to false economic gods.
Every turn of the recessionary screw has called for for more public intervention into what was once considered a private reserve - the ‘wealth-generating sectors of the economy’. Never mind that it was never ‘private’ nor the exclusive source of ‘wealth’. What is important is that every turn has called for a ’social democratic moment’- a new paradigm to reorient not only the fundamentals but the very culture of market activity. Unfortunately, we are still waiting for that moment - waiting here, that is. While the UK Labour Party draws up plans to create 100,000 jobs (even if much of the programme is a rehash of what was announced before), while President-elect Obama proposes the biggest public intervention ever in a market economy, too much of the Irish Left contents itself with attacking the Government, demanding the Government do something, picking holes in the Government’s proposals (and there are holes a plenty). Enough. Let’s do our own brainstorming. Here’s my opening gambit.
We should propose a ‘New Enterprise Guarantee’. In essence, this would provide a guarantee to every enterprise in the leading sectors. A guarantee for business ? Why not? We have a bank guarantee and a bank, after all, is a business - though highly critical ones for the economy. We now discover that the ’state guarantee’ issued in respect of the pork scare will cost the state over €35 million. The Export Association was on Morning Ireland looking for a ‘currency guarantee’. The fact is that everyone, business interests included, are looking to the state for protection. There are no neo-liberals in the foxholes these days.
This guarantee would enable participating companies to access direct and indirect supports to maintain employment and activity. This is not about ‘cutting taxes/wages/regulations’ etc. Rather it would focus on the real problems within our indigenous base. And there are plenty of problems:
Fragmentation and lack of scale • managerial ineffectiveness • lack of capital • high cost of entering export markets (market intelligence, foreign regulations, language skills) • poor labour relations • poor marketing • no resources for produce/process innovation • the list could go on
This list could go on. But there are other more immediate measures to provide short-term relief:
- Payroll subsidies for unavoidable short-timing or voluntary leave (this would maintain workers’ wages, ensure they remain employed with the firm while reducing costs to the business)
- Underwrite bank loans, credit and overdrafts in addition to enhancing venture and seed-capital
- Prioritise participating companies in public procurement procedures
This are only a sample of targeted state supports that could be provided for participating companies. Many supports would need to be tailored to the needs of the company or sector. For instance, the Export Association has called for a ‘temporary Sterling stabilisation fund’ which would operate through 2009. This would be established in partnership with the banks and the state (here’s an opportunity for the State to extract a price for the bank guarantee) and allow Irish exporters into the UK at a reduced currency rate. This measure could save thousands of jobs.
The principle here is that it is easier to maintain jobs during a crisis than to let them go and hope for an uptake when things ‘return to normal’ (and that depends on your definition of post-recession normal).
This enterprise guarantee would, of course, come at a price for the participating companies - a price, mind you, that would serve their long-term interest in terms of productivity and profit: recognition of trade unions and the introduction of employee participation scheme, full disclosure of the company’s financials including executive salaries, published environmental and gender audits, co-determination with the workforce on strategic issues (product, marketing, export, HR). Companies that introduce such cooperative measures are in a much better position to weather the storm and come out the other side in a stronger more competitive position.
This enterprise guarantee would take place under a new architecture which I’ve discussed before: sectoral structures in key sections of the economy where participating companies, through a more deeply embedded social partnership (e.g. tri-partite co-determination) become candidates for ’sectoral champions’ - firms that the state is committed to developing in the home and export markets. This can establish a new benchmark for companies that want to succeed.
Alongside this enterprise guarantee would be a state commitment to intervene where potentially viable companies would be brought into public enterprise ownership (I will go into more detail on this issue in a later post). There are many companies - either indigenous or potentially stand-alone within a multi-national group - which are going through difficulties through little fault of their own. Maintaining these firms under public enterprise would provide the space to allow them to continue trading until conditions improve. This need not be a statist instrument. Creative strategies could involve using private capital, workers’ and local management financial input, even local authorities (if we had an empowered local government tier) could be part of the mix. And why not a public enterprise venture capital firm which would parachute, based on commercial criteria, extra resources to companies? The development of public enterprise in the past was always pragmatic, and pragmatism is what is needed now more than ever.
Within all this would be the absolute necessity for the Government to embark on an Obama-like expansionist programme, fueling demand within the business sectors and among consumers, directing the economy into more sustainable production activities and, most of all, giving people hope - hope that the democratic process is more efficient than throwing around subsidies and incentives in the vague hope that private capital or multi-nationals will smile upon us. Taking control of our own future is part of the ’social democratic moment’ which we need so badly.
Will an enterprise guarantee save all businesses? No. Many operations are unsalvageable, many are tied into global chains that cannot stand alone and be developed as an authentic indigenous organsiation (Dell is one example). The ability to choose will prove an enormous challenge to a new social partnership architecture; and mistakes will be made.
Do these inevitable mistakes outweigh the benefits. I would argue no, but at this stage this is all still a theoretical exercise. Our Government of ‘ rabbits-in-the-headlights’ is hardly going to launch this programme. To use the parlance of many commentators - this Government is incapable of taking ‘difficult’ decisions, making ‘hard choices’. They would rather cop-out and beat up public sector workers and close down educational programmes for disadvantaged areas. In short, they don’t have the chutzpa.
But pointing out that fact doesn’t automatically create an alternative. Eamon Gilmore has called for an immediate election. That’s a correct call. Anything to get rid of what we have now. But as things currently stand (and unless they change radically) all that will do is produce a potential Fine Gael-led government. And if anyone thinks that a Fine Gael-led government will embark on an expansionist, interventionist programme they should sit down in a small window-less room until such thoughts pass.
Unless the Left, working with trade unions and progressive social organisations, develop the type of policies our economy badly needs; unless they get their strategic act together and put forward a viable, realistic governmental alternative - one that is led by the Left - we should start getting used to more and more setbacks in the economic war.
And governments who have no idea what to do.
Discussion
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Comment by: Balor
Jan 12th 2009 at 15:01
More good stuff Michael. Keep it coming.
I work in the workplace partnership area and what I read from you in this is a call for “compulsary genuine workplace/enterprise partnership”.
Or as you say: “recognition of trade unions and the introduction of employee participation scheme, full disclosure of the company’s financials including executive salaries, published environmental and gender audits, co-determination with the workforce on strategic issues (product, marketing, export, HR). Companies that introduce such cooperative measures are in a much better position to weather the storm and come out the other side in a stronger more competitive position.”
That last sentence is valid too. There is evidence out there (the National Centre for Partnership and Performance have researched it) that companies where there are strong trade unions and also strong workplace partnership area actually more productive.
Sad really that all we would get from an FG/Lab coalition is much the same as we get from the current lot. I suppose a call for a “no coalition” policy from within the Labour Party would be too much to ask for.
Comment by: bogdodo
Jan 12th 2009 at 17:01
Balor’s hit a fundemental question on the head - and perhaps those closer to the Labour Party can answer this… is there any chance of the Labour Party driving a hard bargain with a coalition partner and demanding implementation of new forms of democratic economic structures?
Especially if they are going into coalition with FG who’s economic policy doesn’t seem to extend beyond an obsession with cutting public expenditure.
Is there any hope for new (green) New-Deal initiatives on a European wide scale?