This Government has made some stupid and costly economic decisions – the bailout of Anglo Irish Bank and Irish Nationwide, the Nama valuations, the blanket bank guarantees, its fiscal policy. Now it plans to flog off indigenous companies at a time when solid enterprises are needed.
These actions and the economic policies of tax-cutting and deregulation generated the biggest crash in any economy. Now the Government is going to make things worse by selling a huge swathe of productive indigenous Irish industry to foreign multinationals, speculators and friends.
You can read the rest of Paul Sweeney's opinion piece in today's Irish Times here.
2 comments:
There has been a need for a wider debate on the role of public enterprise in the Irish economy for some time. Unfortunately the current crisis has narrowed the focus of any debate to the question of privatisation. In this regard the key question is whether the transfer of ownership to the private sector will improve the performance of the enterprise in question as well as improve wider economic efficiency. The theoretical and empirical literature does not provide unequivocal results. There is no clear case for privatisation in terms of performance. It depends on other factors such as the extent of market power held by the privatised company, effectiveness of regulation etc. The Irish experience with privatisation has not been a good one. Besides Eircom, the performance of privatised companies has not improved dramatically after the change in ownership. The current economic crisis highlights the folly of simplistic arguments in favour of private ownership as well as the challenges of regulation. Privatisation accompanied by ineffective regulation is not a good idea.
So should public enterprises be sold to raise exchequer revenues? Like Edgar Morgenroth, Paul Sweeney, Donal Palcic and others to contribute on this topic, I am against a fire-sale of assets. Paul Sweeney makes the point that there is not an immediate funding crisis that requires any such fire-sale. Moreover, the full value of assets is unlikely to be realised.
In the absence of convincing arguments for privatisation we come back to the need for a wider debate on the role of public enterprise in the near future. The case for a state holding company which Paul Sweeney refers to in his article has never received the attention it deserves. It addresses key governance problems that are relevant to all state owned enterprises. Moreover, it does not rule out a degree of privatisation. Selling stakes in public enterprise can yield advantages in terms of improved governance as stock markets monitor the the commercial performance of partially privatised companies. This should have happened in the case of Eircom. A wider debate might also address Edgar's question about whether public enterprise should be involved in certain types of business. Personally, I don't have a problem with state owned enterprise as long as it is efficient. But this is a question that can be addressed in a wider debate.
@Paul S
I am sure you have already seen it but Forfás published a discussion paper on the role of public enterprise last Friday.
The mian policy implications highlighted by Forfas in relation to the SOE sector are:
1) The need for a national policy on the role of SOEs
2) The need for an evaluation of the mission and goals of SOEs
3) The potential to implement clearer governance structures
4) The potential to implement stronger corporate governance frameworks
5) The development of clear criteria to guide the potential sale of state-owned assets
6) The need to develop contestability in certain markets
7) The need to develop a clearer policy towards SOE internationalisation
Number 3 above, which recommends the establishment of a centralised agency dedicated to SOE supervision, would appear to be along the lines of the state holding company governance model that yourself and ICTU have been advocating for many years now.
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