By Iain McMenamin (30 March, 2011)
The Moriarty Tribunal’s report details an exchange between a politician and businessman, the like of which cannot easily be targeted by political reforms. Politicians have a demand for cash and can supply lucrative private goods to business, such as a mobile phone licence. The political demand for cash in Ireland is already limited compared to other countries such as the USA and Australia because paid broadcast advertising is not allowed. The Criminal Assets Bureau has great potential to recoup illicit cash from politicians.
The ability of politicians to supply private goods can be reduced by ceasing production of private goods or by eliminating political control over the distribution of private goods. Recent reports suggest our corporate tax rate creates a public good for business, in contrast to the private goods created by the multiple exceptions and schemes in France. Even when the state provides private goods, decision-making is well insulated from politics. For example, Enterprise Ireland provides a wide range of private goods, but is outside political control. The granting of the second mobile phone licence was designed to be insulated from politics, but Moriarty argues that Michael Lowry managed to interfere in the decision. Official thinking could clearly go further in moving away from the production of private goods. The recent discussion of a casino licence is a spectacular example. Why just Dr Quirkey or Treasury Holdings? Why not all applicants fulfilling some basic criteria? (Or why couldn’t the state operate a monopoly?) The grant of a small number of casino licences is an invitation to corruption. The grant of a general right to open a casino eliminates the incentive for bribery (even if it might create a host of different problems). Current political reform proposals do not seem to address political demand for money or supply of private goods.
Business has a demand for profitable private goods and can potentially supply money to politicians. The empowerment of whistle-blowers might slightly reduce this demand for private goods, but the basic incentive seems inherent to a competitive economy. The introduction of a lobbying register and code of practice might somewhat increase transparency around the Houses of the Oireachtas, but will not reduce business demand for private goods from the political system. Irish law already severely restricts the amounts of money business can supply to politicians, but there is little to be lost from completely banning corporate donations. Clearly, none of these proposals would have prevented the exchange between Moriarty and O’Brien. In particular, O’Brien’s payments were secret. Indeed, they were only uncovered by good journalism, good luck and (I confidently predict) a grotesquely expensive tribunal. Various intermediaries and companies seem to have been involved, but the inference seems to have been that the most important payments were ultimately personally funded by O’Brien, not by a corporation.
Exchanges between politics and business can be reciprocal or discrete. A discrete exchange is explicit and simultaneous. By contrast, in a reciprocal exchange, each actor’s part of the exchange is separately performed and the terms are unstated and uncertain. Reciprocal exchanges between business and politics seem to have been common in Ireland in the recent past. This was probably the basis of the tent at the Galway Races. Regular payments to Fianna Fáil served to maintain a relationship, which could come in useful at a later date, or would provide a vague, general insurance against unfavourable political decisions. Many subsidies provided to Charles Haughey seemed to have had a similar rationale. Maintaining reciprocity will become much more difficult under a total ban on donations and greater transparency about party finances. The Lowry-O’Brien exchange related to one political decision and in that sense was discrete. The sequence is quite unusual compared to anecdotes about other discrete exchanges in Ireland and elsewhere. The uncovered payments relate to the period after Mr Lowry made Mr O’Brien’s fortune. O’Brien the tycoon was hardly threatened by the independent TD from Tipperary North. I wonder why O’Brien didn’t take his licence and laugh all the way to Woodchester Bank. At any rate, current reform proposals do not seem well aimed at such unusual, but massively damaging, discrete exchanges. They should have some effect in hastening the demise of an even more damaging systematic financial relationship between business and politics in Ireland.