Pat Leahy (posted by David Farrell, October 28, 2011)
Here is the text of Sunday Business Post’s Pat Leahy’s remarks to the 2011 Kenmare Economics conference
The Irish economic crash has been turbo charged by a profound failure of our politics and our political system to comprehend the economic realities of the world, to be self-aware, to regulate its own desires and ultimately to practise good government
Moreover these failures are represented at every level of the political system, from government ministers to TDs, to the political and wider media that regulate and conduct our national debate, to local authorities to individual voters. They also, I am afraid, extend to economists.
These failures happened not just because of a series of bad policy decisions, but because of something much deeper than that: because they reflect our political culture.
Learned fora such as this will debate the entrails and the mechanics of the crash but its roots at every misstep of the way were political decisions, non-decisions, priorities and attitudes.
It may be true that, as the former Taoiseach Bertie Ahern said, that Lehman Brothers’ testicles were everywhere. But they weren’t the only ones who made a balls of things. Politics and our political culture walked us into the crisis and changing that culture is as big a job as the painful economic reconstruction now underway.
Politics is at its most visible, most voluble — and despite the enormous number of lies routinely told — is in a funny way at its most transparent during election campaigns. That’s when normal people who represent as great a majority outside this room as they do a minority within it, pay attention to politics. That’s when they listen to politicians, and politicians listen to them.
I have reviewed the last three general election campaigns and especially the debates on economic policy for the purposes of this presentation. All three were very different. Yet some striking similarities presented themselves. They were identifiably marked by the political culture in which they took place.
All of them were marked not by economic debates in any real sense of the word, nor by a competition among policy alternatives presented by the main parties, nor by philosophical differences about the role of the state. Rather, they were a mad scramble to promise things to voters in return for their vote.
What is unusual is that this is as true in the national debate, as it was on the doorsteps where retail politics is at its fiercest. Culture is resilient — even in 2011, against the background of the EU/IMF intervention, the main competitors Fine Gael and Labour had at the core of their campaigns a promise to their target voters that someone else would bear the brunt of fiscal retrenchment.
Even since the election, one party has been ruling out income tax increases and the other has been ruling out welfare rate cuts. This has already got Fine Gael and Labour into some trouble and it will get them into more.
For the decade before the crash — at least — politics in this country was reduced to a desperate scramble to give voters whatever they wanted. All parties tried to do it; Fianna Fail just did it better than the others.
Voters were no passive bystanders in this. Voters were the ones who demanded it. And when Fianna Fail met their demands, the voters rewarded them.
Of course voters did not consciously vote in favour of an inevitable economic crash. But because our political system had set itself up only to supply without question whatever voters demanded, that is what they got.
This is what I mean when I say that our political culture is inimical to good government.
A couple of important questions I should be clear about:
What do I mean by political culture and what do I mean by good government?
And then, how have they proved inimical to one another?
There are as many definitions of good government as there are political points of view, and for many, it is obviously an entirely ideological question:
I prefer the definition offered by the American writer David Brooks which I think will command wide agreement, irrespective of ideology. Good government, he wrote, is government that disciplines itself but looks to the long term; government that inspires trust; government that promotes social mobility without busting the budget. Hardly rings a bell, does it?
What do I mean by political culture?
Political culture is the generally shared set of belief, norms, assumptions and common practices which underpin the political and electoral system. It isn’t — and this is an important point — limited to politicians, but includes everyone. It even includes marginalised outsiders like David McWilliams.
I will discuss briefly this political culture and the immediate background to it. I’ll then describe the three elections of 2002, 2007 and 2011 before finally attempting to draw some conclusions about our political culture.
Ireland’s political culture
No national politicians in Europe and probably the world are as close to their electorates as Irish politicians. The Irish election study of 2002 revealed the astounding statistic that some 76 per cent of voters had actually been asked personally for their vote by the candidate or by someone acting on his behalf. Moreover, the higher the level of contact, the greater likelihood of securing a vote — Fianna Fail candidates personally contacted more people, and received more votes.
The voters’ evaluation of candidates at election time depends overwhelmingly on their ability to provide a local service to the voter. The single greatest reason voters gave for casting their vote for a candidate in the 2007 election was to elected someone to represent the local area. In fact, there is considerable evidence to suggest that voters think constituency service is considerably more important to being a contributor to the legislative and political process in the Dail, and more important even than sharing the voters own views. Being seen to deliver is the most important thing of all. Voters are quite willing to elect people they disagree with or even dislike as long as the voters are convinced that as TD, the candidate will do a good job of delivering for the constituency. The democratic process, in other words, has transformed itself into a simple transaction.
Fianna Fail’s political model was so riotously successful because the party’s candidates came to seen as uniquely qualified to deliver for the locality. One of the primary goals of national economic policy under Fianna Fail – to provide the resources which enabled the party to deliver locally and therefore win re-election. It was local delivery politics writ large on the national stage.
Unfortunately, it contained within itself the seeds of its own destruction – a sort of hyper inflation of election promises that fed the voters’ appetite for delivery. One cabinet minister once said to me, complaining about the increasingly unsatisfiable demands of the electorate, “You know, if we promised to build them a bridge to the Aran Islands, they’d want us to build two bridges.” I got the impression that the minister concerned might well be quite prepared to build one bridge to Inis Mor, but he would want to see a strong case before he sanctioned the second one.
There is, you may say, nothing unusual in politicians promising things to get elected. But what is usual in Ireland is the extent to which is done outside the normal laws of political economy.
Typically, voters were told that they could have both tax cuts and huge increases in public spending. Polls showed that voter felt they were absolutely entitled to exactly this. I am no economist, but I know enough about mathematics to know that this deal can only ever a short term one. I guess if you continue to cut taxes while increasing public spending, then you will end up in a position where your revenue is zero and your expenditure is infinite.
Let me turn to the election of 2002, the first real boomtime election. It came after five years of a real boom. The economy had grown by an average of 8.5 per cent every year; more importantly, voters perceived this in their own daily lives. 62 per cent of voters believed their living standards had improved in the previous 5 years; just 9 per cent thought they had disimproved. With a feelgood factor general across Ireland, you’d wonder how Liveline stayed in business at all.
It’s remembered now as the Showtime general election, but actually we were a lot less certain of ourselves than you might think. Rereading the debates and the manifestos now, they appear a lot more cautious than you might expect.
The memories of the 1980s were actually still pretty strong. As the Progressive Democrats manifesto stated, “Poor management of the public finances cost this country dearly in the past and we paid a heavy price in terms of unemployment, emigration and poverty. It is important the mistakes of the past are not repeated.” The party was as good as its word. It went on to invent entirely new mistakes.
In general, though the FG manifesto was cautious: its greatest economic criticism of the Fianna Fail-PD government was that it had “let public spending get totally out of control”.
The centrepiece of Labour’s campaign was a six-point plan contained on pledge card. Straight away this was promising too much. Everyone knows that voters can only remember five promises. We all remember Fine gael’s five-point plan from the general election earlier this year. A quick Google search shows that politicians have proposed five-point plans in hundreds of local and national jurisdictions around the world, including about half the states in the US, Rwanda, Zimbabwe, Germany, Britain — twice, once by Labour and once by the Conservatives — Ontario and Austria. Even the Dalai Lama had a five-point plan for Tibet.
So Labour’s six-point plan was probably at least one point too ambitious. But worse, it promised things like “properly funded schools system” and even more hairily “tackling the gap between rich and poor”.
Actually for many voters, what they wanted was a TD calling to their door and promising them that their local school would be given funding for an extension, or sportsfield or whatever. Better still if he had a letter from the Minister for Education to the TD promising that he had already okayed the funding for the project.
That’s the difference between campaigning from government and campaigning from opposition.
In fact, all this was taking place against the background of a tsunami of money washing through the public coffers. Exchequer figures for the first six months of the year show that public spending rocketed in the first six months of the year, growing by more than 21 per cent over the previous year, at a time when total tax receipts fell by over 7 per cent. Incidentally, these figures were published the day after the first benchmarking report was published with its recommendations of average 9 per cent increases in public service pay.
So as the government was fighting a long general election campaign that last about 6 months, it was simultaneously opening the floodgates of spending in all areas of its activities. This was not, I believe, a coincidence. This was the real Fianna Fail manifesto and it worked like a dream. As Charlie McCreevy admitted the following September: it was my job to win the election for Fianna Fail, not for Labour or Fine Gael.
It was this type of politicis that would make the Irish bust infinitely worse. Bertie Ahern was the kingpin of this politics. If he justifiably claimed to have made the boom boomier, he also made bust bustier.
The 2007 general election campaign actually began in the summer of 2004, as Bertie Ahern and Fianna Fail digested the disastrous results of the local and European elections which took place in the June of that year. Immediate remedial action was required.
That action essentially comprised three things: the exile Charlie McCreevy to Brussels; the very public rebranding of Ahern’s government as caring and sharing, including the preposterous declaration of the Taoiseach himself to be a true socialist and the opening of the flood gates on public spending.
Not that this increased public spending was to be paid for by tax increases or anything like that – rather it would be paid for by the steadily increasing wave of cash that an inflating property bubble was providing.
As Fine Gael and Labour basked in the success of an encouraging local elections, Fianna Fail began to buy the next general election.
Somewhere between then and the start of the election year of 2007, it dawned on Fine Gael and Labour what exactly Ahern and Fianna Fail were up to. Instead of contesting the Bertiean Model, they decided to try to beat Fianna Fail at its own game. And so it came to pass that in the first pre-election party conference of the year, the Labour leader Pat Rabbitte got to his feet and promised tax cuts as a centrepiece of his party’s economic platform.
By the time the pre-election Fianna Fail ardfheis arrived Bertie Ahern was in serious danger of being outbid by Fine Gael and the Labour Party. But Ahern — still attuned like perhaps no-one before or since to the true desires of the Irish voter — changed his entire strategy the day before the ardfheis speech and formulated an entirely new message, a new electoral strategy. Bluntly, it was this: nobody’s going to outbid me in an election campaign. And so to the consternation of advisers and the amazement of ministers who had agreed a completely contrary plan, Ahern roared it out.
(This excerpt is lightly long, but it best encapsulates the Fianna fail approach to that election bear with me)
“From next month a family with two children under 6 will get a direct and untaxed payment of 5840 a year.
We will recruit 4000 more primary school teachers.
We will provide 2000 extra gardai
We will cut the standard rate of tax from 20% to 18%
We will cut in top rate from 41% to 40%
We will index tax credits in line with pay increases
We will double the home carer tax credit
We will halve prsi
We will Increase the old age pension from 200 a week to 300 a week
We will introduce a free health check for all
We will provide 1500 extra hospital beds and double the number of consultants
We will join the Luas lines
We will build metro west, metro north to Dublin Airport and the Western Rail Corridor”
As the speech also said, “Irish prosperity begins with responsible government”.
So what were Fianna Fail’s rivals for government doing?
Encourged by the gurus of the Sunday Independent and citing the need to restart growth in the property growth in the property market Fine Gael had been first into the field with promises to cut stamp. By the time Fine Gael and Labour launched their joint economic document on April 19, a few weeks before the general election, they had agreed on the following:
• 2 point cut in the standard rate of tax
• indexation of credits and bands and a further e5,000 increases for one-income couples
• increased capital spending and increased day-to-day spending on health and education
• to increase current spending by 8 per cent every year and an average of e680 million in tax cuts every year
Other selected goodies from the Fine Gael and Labour bag of giveaways included:
• paternity leave
• health screening
• biofuel subsidies
• a doubling of capitation grants for primary schools
• 2 extra public holidays
• music classes for all
• and a 1 euro flat fare for Dublin Bus
Probably the crucial moment in the campaign came when Bertie Ahern faced Enda Kenny in the leaders debate a week from polling. Polls showed the race was delicately balanced. People didn’t like Fianna Fail, but didn’t trust the Fine Gael-Labour alternative. Bertie Ahern targeted Kenny’s credibility as a deliverer of his promises. He didn’t attack the Fine Gael-Labour promises. He cast doubt on their ability to make good their promises and pointed at Fianna Fail’s record of delivery. It made sense to enough voters to win the election for Fianna Fail.
And so to the election of 2011
The result of February’s election was so overwhelming that it is commonly accepted as having been revolutionary. Certainly the make-up of our parliament was profoundly shaken up in a manner not seen for over 80 years – but that is not the same thing as a change in our political culture.
At the start of the campaign there was, unusually, no debate about either the issues at hand or their seriousness. Outside of the populist left-wing fringe, there was agreement that public finances had to be brought to a sustainable position and that plans would be constrained by the demands of those willing to lend us money to keep things going.
What is really very striking about the election is that the circumstances were unique but the campaign was actually very traditional. The most effective campaign by far was by Fine Gael and it was one which was very closely modelled on previous Fianna Fail campaigns.
The leader rushed around the. Daily policy launches and photo-ops drove coverage – and the party sold the idea that it had a programme which would make things right without people feeling the impact. No income tax rises. Dutch levels of health care with no additional cost. Lower mortgages for the negative equity generation and “not one red cent” extra for the villainous bankers. This was immediately reflected in the polls and had a powerful impact on a major struggling group, particularly n target seats on the Greater Dublin area. Backing all this up was serious investment in supporting candidates on the ground.
While the party faltered slightly in the final days due to the debate and interview performances by its leader, on election day it turned 36% of votes into 46% of the seats.
When Labour looked like being a threat they were deftly despatched with attacks on that party’s supposed commitment to what they termed “job-killing taxes”.
In many respects, it was a soundbite-filled masterclass in how to win votes by traditional Irish political campaigning. Labour tried, and comprehensively failed, to set out an alternative. Fianna Fáil was not a contender for government, and not treated as such, even by itself. Sinn Fein and others saw no reason to even try to offer credible policies.
The 2011 election did not involve a new type of campaigning or a new level of honesty by our politicians. Nor were those things required by voters.
What can we learn from this?
Let me finish with a question I have asked many times: what would have happened if the Fianna Fail government had said before the 2007 general election:
“Dear Voters, we are in the middle of an unsustainable housing boom, our competitiveness has been hugely eroded, our tax system has become dependant on cyclical transactional taxes and we are highly vulnerable should an international downturn emerge. We need to reduce demand for housing, so we will introduce a property tax. We need to restore competitiveness, so we will freeze wages in the public sector. We need to restore our tax system so we will increase income taxes. And we need to bolster our public finances, so we will halt the growth in public spending. We will do these things no matter what you want. By the way, will you please vote for us? Yours, Bertie.”
We all know what would have happened. But we all know that no politician produced by our political culture is equipped to write such a letter. That is the culture that must change. And while that culture change must be led by politicians and political leaders, it must be followed by the voters. Ultimately, politicians acted the way they did because they correctly believed that voters would reward them for it. As long as voters continue to reward delivery politics, short-termism and taking the easy choices, then politicians will continue to practice them. The change required in our country means much more than resuscitating ourselves economically. It means renewing ourselves politically. In many respects, that is a much harder task.