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March 05, 2007



I read Jim O'Leary's piece in last week's Irish Times with considerable interest.

The current discussions from all are based on the money rolling along merrily. However, today's job losses together with the prospect of Dell closing their Limerick operation and moving it lock, stock and barrel to Poland should make all sit up and reconsider.

Also the Central Bank published a sectoral analysis of new borrowing in 2006 last week. It showed total new borrowing of more than €56,000M. However less than 10% was for productive purposes. Over 90% was spent on personal consumption or the Irish obsession on property. The Irish the most heavily indebted people in Europe blowing borrowed money, which will have to be repaid.

Compare our little island to supposedly sick Germany. Germany growth was at 3%, despite a declining population and the natives repaying their debts! Oh, they also ran a massive current budget surplus by manufacturing real goods that people want to buy, not building and selling castles in the sky!

Jim O'Leary

I'm glad to see that my Irish Times column has a readership that extends beyond the predictable business and finance types. Still, I must take issue with you on a matter of interpretation. You quote me as saying that I believe the 'economic priority' to be 'the effectiveness and efficiency of public expenditure programmes' and then go on to suggest that you don't know exactly what I mean by this and to profess a suspicion that it is code for public spending cuts. Well, let me assure you that what I mean is what is generally meant by effectiveness and efficiency. I take effectiveness, in the context of public spending programmes to connote the degree of success of such programmes in meeting their objectives. I take efficiency in the same context to connote the achievement of outcomes at least cost in terms of resources used. The reason why I believe enhancing the efficiency and effectiveness of public spending programmes is a priority of budgetary policy at this time is because I believe that there is huge scope for improvement in both these dimensions. In other words, I believe that a sizeable efficiency dividend could be unlocked if better practices and procedures for planning, monitoring and controlling public spending programmes(along the lines of those proposed in the joint Fine Gael/Labour policy document of last year) were adopted. To what use could this 'efficiency dividend' be put? Well, yes, it could be used to reduce overall public spending. Alternatively, it could be used to finance the enhancement/extension of public services. I don't have any ideological hang-up about the latter option. It's a matter of perfectly legitimate political choice and I'm perfectly comfortable with the idea of the state providing better quality and/or wider-ranging public services, if that's what the citizens of the state vote for. What bothers me is programmes that fail avoidably to deliver on their objectives (not to mention programmes where objectives are not specified) and programmes that waste resources. I would have thought that, in the interests of maximising the legitimacy and authority of the state and its institutions, people who see themselves as left-wing would be amongst the staunchest advocates of an efficient and effective public service. Surely, socialists and social democrats must recognise that an inefficient and/or ineffective public service is its own worst advertisement.
Jim O'Leary


Thanks Jim for your comment and be assured that, whatever about other non-predictable business and finance types, I will always be an avid reader of your work.

I accept, when commenting on your article, I was a bit cavalier in my reference to 'code' for efficiency and effectiveness and fully sign up to your common sense explanation. Unfortunately, political debate is not so common sensical and such codes proliferate. One thinks of 'tax reform' (read: tax cuts). Or ‘competition in the electricity market’ which is code for market-distortion measures that actually prevent competition. The Left has its own codes – of which I referred to in the post. What should be a debate about efficiency and effectiveness all too often is a debate about something else that protagonists on all sides keep hidden. The Lab/FG policy proposal will hopefully ground that debate in more neutral terms.

And I would urge all 'socialists/social democrats' and fellow travellers to take on board your comment about being the staunchest advocates of an efficient and effective public service. If the Left is ever to win over a larger section of people to the idea of enhanced and expanded services, they will have to prove to people they are capable of managing such a move.

Please feel free to make further comments on this site, if only to keep me and my fellow travellers on the straight and narrow.

Couldn’t agree with you more Niall. For all the problems the German economy has been going through, in large part arising from unification, it still retains a solid export base that is based, not on transfer-price fixing and other fiddles, but actually making and producing things, backed up by a social market consensus. I believe this will see it through. It’s hard to know what will see the Irish economy through.

What I find politically depressing is that the Left could have exploited the points you make to tremendous effect. Instead, we are content to address redistribution issues and engage in dubious tax proposals. And the ironic things is that people know, without being fully aware of the statistics you provide, that something is wrong: we're losing jobs in the export sector (another 200 + lost in Nenagh today), while more and more people are buying second homes and jacuzzis on credit. Something will give, and unfortunately we are not providing people with an analysis and a way forward.


In a way part of the problem is, or so it strikes me, that there is - despite the supposed grounding of left politics in economics - a huge dearth of actual understanding of economic models and how they purport to work, which leads in part to a retreat from and fear of serious engagement with the area and a lot of slipshod and cliched thinking. I'd also hazard that for those of us from the old WP/DL side of things the not entirely great economic education available in the WP at least didn't help matters too much.


From today's IT at the end of Jim O'Leary's column.

"In last month's column, I stated my view that a big challenge for budgetary policy at this time is to improve the efficiency and effectiveness of public expenditure programmes.

Subsequent correspondence brought it home to me that, to people on the left, this is right- wing economist code for public spending cuts. Well, in this case it's not.

I take effectiveness in this context to connote the degree of success of a programme in meeting its objectives, and efficiency to connote the delivery of services at least cost in terms of resources used.

To the extent that there is an "efficiency dividend" to be reaped from reducing waste in the public sector, it is true that that dividend could be used to cut spending, but it is equally true that it could be used to deliver better and/or more wide-ranging public services.

Indeed, the more effective and efficient the public service is and is seen to be, the more supportive of public service provision and the less resistant to paying tax the citizens of the State are likely to be.

That being the case, it seems to me that those who champion public service provision should also be champions of public service effectiveness and efficiency. A wasteful public service is its own worst advertisement.

Oh, and get this: the truly right-wing economist is the one who wants the State to be small and inefficient."

He is entirely correct up to the last paragraph. People are not somehow born right wing and thus instinctively want the State to be inefficient; rather people see State inefficiency and become more right wing in their views.

Furthermore, is it really that bad a thing for an economist to be described as 'right-wing'? JO'L seems to be taking some umbrage at the moniker. This might seem strange for an ex-Davys Stockbrokers economist and current AIB board member but perhaps less so for a University economics lecturer (after all Sean Barret may have the whole right-wing-economist-lecturer -thing tied up).

Finally, a tip of the hat in the article to Notes on the Front would have been nice.


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