By Michael Gallagher
This rather provocative title is intended to raise the issue of just what end it’s hoped will be served by political reform.
Possible ends could be classed as process-oriented or outcome-oriented. Regarding the former, having a political system that is more transparent and participatory is worth trying to achieve in its own right, regardless of whether anything actually changes ‘on the ground’. The fact there was very little talk of political reform while the economy was (or seemed to be) booming might suggest that, while process considerations no doubt play some part in the minds of reformers, for most these are a secondary consideration, and they are either seen as not important or as important primarily because it is hoped they will lead to better outcomes.
The outcome-oriented arguments for reform suggest, or hope, that if the political system had been reformed ten years ago the country would not now be in its current difficult economic position. The economic crisis leads many to assume that there must be something fundamentally wrong with the political system – otherwise, how could things have gone so wrong? For a few, apocalyptically, the economic crisis betokens a rotten and corrupt political system.
But attempting to identify cause and effect between political system and economic mismanagement is not so easy. The economic mismanagement occurred primarily between 2001 and 2008, when the banks were allowed to borrow heavily abroad so that in turn they could lend money to property developers to purchase buildings or land whose value was artificially high and was to collapse at the end of the decade, leaving the banks unable to collect the loans they had given out and thus unable to pay back the loans they had taken out. Meanwhile, government entered into spending commitments predicated upon property-related taxes remaining at their high levels, leaving a huge budget deficit once these taxes dried up. Government also devised a whole range of tax breaks and incentives to encourage the building of dwellings (especially apartments) and hotels, leading to the current spate of ghost estates and zombie hotels.
With hindsight, it’s all so obvious what errors were made. Government showed no awareness of the shaky foundations upon which its spending plans were based or of the total inadequacy of the regulatory regime, if it can even be called that, that it had put in place supposedly to ensure that what happened could not possibly happen. But what changes to the political system might have prevented this?
Most of the changes discussed so far on this site don’t seem to carry the potential to have had much bearing on any of this.
No-one in any country expects MPs to spot a macro-economic problem that no-one else has noticed. MPs are rarely economic experts in their own right, but they are usually quick to pick up on concerns being expressed by those who are experts, whether in the state machinery or an academic or journalistic commentator. If the real experts had been loudly expressing concerns in the 2001–08 that economic policy was leading inexorably to crisis, TDs would have picked this up. If the Financial Regulator, the Central Bank, the civil servants at the Department of Finance, and independent (academic and journalistic) commentators had been shouting from the rooftops about the wrong track along which the economy was heading, and TDs had been too immersed in their constituency work to notice, then it would be reasonable to start thinking of ways in which to reduce TDs’ constituency focus. But, with a few exceptions among the commentariat, that wasn’t the case. And while other reforms, including many discussed elsewhere on this site, could be seen as likely to result in improvements to policy, there seems no reason to think that, with one exception, they would have prevented the economic debacle.
The one area where it seems that a reform could have made a difference lies in the area of party finance. Fianna Fáil, as the main government party of the period, was a large-scale recipient of financial donations from companies involved in building and property development. Without alleging anything nefarious, it is asking a lot to imagine that the party’s heavy reliance on finance from this sector, and its promotion and facilitation of policies sought by the sector, are unrelated.
This might suggest that a thorough reform – and the word ‘reform’ might be inadequate to sum up what is needed – of party finance should be a priority. This goes beyond simply banning corporate donations, because there is little substantial difference between a property developer donating heavily through a company or as an individual – it’s not clear what is achieved by banning the former while permitting the latter. It would require the banning of all donations over a very small amount – around €100, say – and the expansion of state finance to fill the gap. Giving more public money to parties at a time of cutbacks would not be popular, to say the least, but that is one of the paradoxes of state financing of political parties: when it is most needed, public resistance is highest. The cost of such a party finance regime over the past ten years, had one been in place, would be a minute fraction of the current cost of bailing out the banks.