In the tricky days ahead for Irish politicians in navigating a civilised path through the economic crisis, it is worth reminding ourselves that there is no conflict between private enterprise and public service, two of the three pillars that are essential to an Irish economic recovery.

Private enterprise is a concept that is embedded in the Irish Constitution (Article 45). It is the business model of all democracies, recognising the freedom of individuals, not just to free speech and association, but also to do business privately, and to supply a market that is allowed to operate without overbearing regulations or taxation.

When economies approach the point where markets and the very existence of free enterprise begins to fail because of the over-riding weight of taxation/regulation/ we face a breakdown of the system.

Were that to happen in Ireland, the troubles of the present would be a picnic by comparision. Yet we find ourselves in the situation where this would be the position if we had to meet the publicly aired demands that are now being made to the Irish Government by the ‘Social partners’. Do those parties care if the (capitalist) system breaks down in Ireland? It is the case that many of those who are numbered among the Social partners indeed do wish for this very outcome. That’s fair enough. That is their democratic prerogative. However, our democratically elected Government needs to be very careful about the nature of its engagement with such forces.

Thankfully, the Irish Constitution still prevails, with its recognition of free enterprise, and the institutions of State, and, indeed, the absence of any reference to ‘Social partners’, or structures to accommodate them with special arrangements of access and accountability.

In the weeks leading up to the Budget, politicians on all sides need to concern themselves about how they should channel the anger, disappointment and concern of the electorate through the democratic channels of the Oireachtas.

'The business model of all democracies'
Aside from our inherited Constitutional attachment to private enterprise, it would also be worth reminding ourselves that it is the social business model par excellence. For millennia now, it has shown itself, with all its inherent potential flaws, to be the best framework for allocating goods and services. And it beats the Marxist model, admired by many of the ‘Social Partners’, which lasted as an operating economic system for just 70 years.

Furthermore the future of private enterprise has never been brighter than now. Information is the life blood of efficient markets, and the information age, through the internet, has enabled free markets to work on a global basis that economists of the last century would not have dreamed possible. Even those central planners with their crude calculators, ledgers and matrices holed up in 1930s and 40s Moscow might have seen the light about efficient resource allocation had they seen the economic power of the internet.

This is all the more reason that it is ludicrous that the present debate about the Irish crisis seems to be mired in the thinking of the 1930s, 40s, and, worse, the worst aspects of the immature materialism of the Celtic Tiger period.

We talk about FAS, and the billions it has wasted, and call for just its rebranding, or ‘giving’ the money to some other unaccountable, state sector, structure. We talk about abolishing the Senate, while ignoring the excellent, up to date, and valuable work of An Bord Snip in showing us how to close down hundreds of unaccountable state spending mechanisms. We talk about reform of the Health Service, and Education as if all that were needed was a better administrative mouse trap, or re-branding, or re-organisation, without considering the efficiencies that market systems could bring to bear on both health and education.
At a macro level, we ignore the simple reality that over 350,000 of our workforce are employed in such unaccountable public sector structures (not their choice) and that now the revenue does not exist to pay for about one third of them, at present pay and pension rates.

In business terms, Ireland Inc is running at a loss, and the only way it can stem the losses is to rein in its costs. If we are to do better than just look at this as a zero-sum game of public sector versus private sector, the best way for it to be resolved is for the surplus workforce in the public sector to be transferred to the private sector. That would require a complex (but realisable) plan, involving taxation, awful words from the 1980s like ‘privatisation’, and a fiscal plan and framework that provided hope, and confidence, the intangible animal spirit, quoted by Keynes, that is the precondition for all recoveries. All of the above, would be dismissed by the Marxists amongst our ‘Social partners’ as right wing Thatcherite demagoguery, as unfeeling for public sector workers, or as apologetic for ‘bankers’, ‘developers’ or whatever other bete noir might be dreamt up.

But it is not unfeeling for the 350,000 public servants, and ‘front line’ workers, whom the Dads’ army of the Social partners hope they might mobilise, in their paramilitary-style ‘24/7’ campaigns, nor is it for the generation of young workers, especially those facing negative equity on their borrowings, in both the private and public sectors. Meeting the demands made by the ‘Social partners’ would amount to absolute ruin for all of those whom they profess to care for.

The antidote to the demagoguery of the Social partners is a renewed spirit of support for public service in Ireland. True public service, exemplified recently at the funerals of the two Air Corps pilots is something that tended to be forgotten during the material years of the Celtic tiger. It was corrupted more than anything else, by the benchmarking process that equated public service with monetary gain. The concept of a ‘public service’ career in Ireland being an opportunity for ‘a lifetime of being served at public expense’ took root. It will have to be reversed as a precondition for recovery.

As for private enterprise? Adam Smith once said that the pursuit of private profit is not inconsistent with public spirit, or public service either. Indeed, the more public service that private enterprises provide the more successful they tend to be. The Marxist ‘Social partners’ may chose to disagree with this, and insist that the central planners in their backoffices can do better, possibly because they care more, which seems unlikely. The task of Government will, in the months to come, be to bring the concepts of private enterprise and public service together. And that will require the third pillar: wise governance.

This article appeared in the October 2009 issue of Finance Dublin