At the last Labour Party conference, delegates voted to retain existing public enterprises in the hands of the Irish people. This was a clear affirmation of the extent to which members still identify with the core principles of the Party and are willing to defend them, something which alone makes the support for public enterprise a central aim of the Campaign for Labour Policies, as a movement whose objective is to provide a critique of austerity and articulate a progressive alternative consonant with the principles of ordinary members.
It is not necessary, however, to look just through the prism of Labour values to appreciate the economic benefits of public enterprise. Newly independent Ireland had a largely agrarian economy and was of little interest to foreign investors. It took radical government measures – the establishment of the Agricultural and Industrial Credit Corporations, Aer Lingus and Irish Life – to fill the gap, providing credit and stimulating economic activity, paving the way for the full industrialisation of the Irish economy.
The remarkable contribution of the semi-state assets to the economy is as visible today as ever, when we see their extraordinary resilience in the face of the economic crisis. The sector operates very profitably and its profits are returned to the Irish people in the form of a dividend. The McCarthy Review on State Assets showed ESB/Electric Ireland leading the way in earnings, in the black to the tune of €580 million, which alone was enough to cover the losses of the four largest loss-making companies more than three times over[i]. The fact that the semi-state sector consistently runs a surplus enables it to subsidise expensive but crucial services, for example, public transport to reach out to people in remote areas, and gives the government additional money to develop the infrastructure which the economy requires to thrive.
By contrast, private ownership would sharply curtail the strategic vision and objectives of the companies. Divided up and each motivated by profit, there would be no mechanism enabling the largesse produced by the wealthiest companies to be used to support vital services provided by smaller and less profitable. The privatisation of Éircom provides an example of the catastrophic effects of relinquishing public control. It was passed from owner to owner like a hot potato and each one stripped it of capital. Having been debt-free when publicly-owned, as a private company it racked up €4 billion in debt. The fact that Ireland now has one of the worst levels of broadband provision in the EU owing to the lack of co-operation from privatised Éircom with its plans is an indictment of the strategic myopia of for-profit companies.
Rather than flogging off flagship public enterprises for amounts that would only keep the country going for days, we should prioritise the country’s long-term economic future. There is no sign of a let-up in the investment strike which has characterised the private sector. Investment has fallen by €21 billion since 2007. Although 2012 saw a tiny increase, it was from a point so low that it has been estimated[ii] that it would take an entire century at current levels for investment to return to pre-recessionary levels. As recent economic figures have shown that Ireland dipped back into recession in the second half of last year[iii], even that may be optimistic.
There is no motive for firms to invest in a bankrupt country. Trying to make the country more “competitive” by reducing labour costs and refusing to raise the corporate tax rate has had the reverse effect: less money for people to spend on goods and services and less money for the government to use to upgrade infrastructure will not attract investment. We should instead harness the economic resources we do control. Increased investment in public enterprise would have the dual benefit of generating employment and stimulating further economic activity. Examples of public investment that would do so include a national roll-out of broadband and an expanded role for the Irish State in the extraction and sale of our natural oil and gas reserves, whose known worth alone is estimated at €750 billion, but little of which currently goes to the State, which can currently be charged full market prices for its own resources by private corporations[iv].
The Campaign for Labour Policies believes that it is the will of the Party membership and in the interests of the country that our semi-state assets remain in the hands of the public. Public enterprise enables breadth of economic planning, and represents the most potent instrument we have to create jobs and put the economy back on its feet.
[i] Colm McCarthy, et al, Report of the Review Group on State Assets and Liabilities, April 2011
[ii] Michael Burke, Irish Left Review, 23 March 2013
[iii] Central Statistics Office, Quarterly National Accounts, 21 March 2013
[iv] SIPTU, Optimising Ireland’s Oil and Gas Resources, 4 July 2011
It is not necessary, however, to look just through the prism of Labour values to appreciate the economic benefits of public enterprise. Newly independent Ireland had a largely agrarian economy and was of little interest to foreign investors. It took radical government measures – the establishment of the Agricultural and Industrial Credit Corporations, Aer Lingus and Irish Life – to fill the gap, providing credit and stimulating economic activity, paving the way for the full industrialisation of the Irish economy.
The remarkable contribution of the semi-state assets to the economy is as visible today as ever, when we see their extraordinary resilience in the face of the economic crisis. The sector operates very profitably and its profits are returned to the Irish people in the form of a dividend. The McCarthy Review on State Assets showed ESB/Electric Ireland leading the way in earnings, in the black to the tune of €580 million, which alone was enough to cover the losses of the four largest loss-making companies more than three times over[i]. The fact that the semi-state sector consistently runs a surplus enables it to subsidise expensive but crucial services, for example, public transport to reach out to people in remote areas, and gives the government additional money to develop the infrastructure which the economy requires to thrive.
By contrast, private ownership would sharply curtail the strategic vision and objectives of the companies. Divided up and each motivated by profit, there would be no mechanism enabling the largesse produced by the wealthiest companies to be used to support vital services provided by smaller and less profitable. The privatisation of Éircom provides an example of the catastrophic effects of relinquishing public control. It was passed from owner to owner like a hot potato and each one stripped it of capital. Having been debt-free when publicly-owned, as a private company it racked up €4 billion in debt. The fact that Ireland now has one of the worst levels of broadband provision in the EU owing to the lack of co-operation from privatised Éircom with its plans is an indictment of the strategic myopia of for-profit companies.
Rather than flogging off flagship public enterprises for amounts that would only keep the country going for days, we should prioritise the country’s long-term economic future. There is no sign of a let-up in the investment strike which has characterised the private sector. Investment has fallen by €21 billion since 2007. Although 2012 saw a tiny increase, it was from a point so low that it has been estimated[ii] that it would take an entire century at current levels for investment to return to pre-recessionary levels. As recent economic figures have shown that Ireland dipped back into recession in the second half of last year[iii], even that may be optimistic.
There is no motive for firms to invest in a bankrupt country. Trying to make the country more “competitive” by reducing labour costs and refusing to raise the corporate tax rate has had the reverse effect: less money for people to spend on goods and services and less money for the government to use to upgrade infrastructure will not attract investment. We should instead harness the economic resources we do control. Increased investment in public enterprise would have the dual benefit of generating employment and stimulating further economic activity. Examples of public investment that would do so include a national roll-out of broadband and an expanded role for the Irish State in the extraction and sale of our natural oil and gas reserves, whose known worth alone is estimated at €750 billion, but little of which currently goes to the State, which can currently be charged full market prices for its own resources by private corporations[iv].
The Campaign for Labour Policies believes that it is the will of the Party membership and in the interests of the country that our semi-state assets remain in the hands of the public. Public enterprise enables breadth of economic planning, and represents the most potent instrument we have to create jobs and put the economy back on its feet.
[i] Colm McCarthy, et al, Report of the Review Group on State Assets and Liabilities, April 2011
[ii] Michael Burke, Irish Left Review, 23 March 2013
[iii] Central Statistics Office, Quarterly National Accounts, 21 March 2013
[iv] SIPTU, Optimising Ireland’s Oil and Gas Resources, 4 July 2011
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