After Ireland’s reckless “if-I-have-it-I’ll-spend-it decade”…

There seems to be a sustained counterattack on Irish Labour at the moment, usually framed as a question: ‘what would you do instead?’ That was the predominant line of questioning of Pat Rabbitte on Morning Ireland this am… Although you can see from Noel Whelan’s column on Saturday that whilst Labour may have many policy documents they may not add up to the sum of the parts…

Rabbitte’s response was not to get tangled in the detail, but to argue that ‘people know which party owes responsibility for the current mess’… Or as Eamon Gilmore put it in the Dail last week: is the money gone?

Dan O’Brien lays out that responsibility in glorious technicolour in this morning’s Irish Times: the Fianna Fail government certainly but also the Department of Finance officials who in particular fell asleep on the job of monitoring the general finances of the state and the economy:

There is a vast and growing literature on how best to manage public finances so that policy objectives are met, taxpayers’ money is used efficiently and fiscal crises are avoided.

In a pre-crisis report* drawing on this literature, the European Commission came up with a detailed methodology to measure member countries’ proximity to accepted best practice. Usefully, the study ranked participating countries.

The result: Ireland’s overall arrangements were found to be the most deficient of the 19 countries which participated in the study. Second from bottom came Greece. That was in 2007. The study turned out to have considerable predictive power. In 2009, Ireland had the largest budget deficit among the EU 27 and Greece the second largest.

Most damningly, the report found a total lack of foresight capacity. One of the seven sections of the study covered prudence. There were five metrics to judge whether finance ministries had in place measures that would insulate the public finances from crisis or set warning lights flashing if one approached. Ireland not only came last among the 19 in this sub-section, uniquely, it was found not to have a single safeguard in place.

It is said by some that the long term effects of a nasty economic shock lasts less than a generation. By O’Brien’s calculation it is well over a generation since the Republic last dipped below the economic surface: ie, in that period which opened with Fianna Fail’s abolition of the car tax. But in fact it really does seem there is no such thing as a free lunch:

Consider, for instance, the issue of the department’s own human resources during the boom years when massive increases in spending were taking place. Why was it beyond the ambition of senior officials to take advantage of this to beef up their own capacity and bring on board the sort of expertise that any finance ministry needs in a modern economy? (This apathy appears all the more curious when one considers the huge effort and long hours many officials have put in since the onset of the crisis.)

In the meantime, treat that IMF report of modest growth for next year with some caution. One, it’s for next year (and anything can happen). But, two, the IMF are one of two or three organisations who are dictating the broad outlines of the Irish government’s response to the ongoing economic crisis…

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