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Ireland Public Private Alliance: from success to crisisagain Rory ODonnell Director National Economic NESC Social Council NESC

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Late development Industrial strategy Social Partnership Ireland is interesting because

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Late development Industrial strategy Social Partnership Ireland is interesting because 19thC de-industrialization & population collapse Specialised in milk/beef Protection, 1922-1960, failed because of small, poor, peripheral, home market

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Late development Industrial strategy Social Partnership Ireland is interesting because Since 1960, industrial development with activist public agencies focus on: exports inward investment European integration Networked Developmental State

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Late development Industrial strategy Social Partnership Ireland is interesting because Inherited sterling and UK industrial relations Since 1987 used public- private institutions to achieve: macro stability wage discipline competitiveness membership of the euro

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Discuss relation between two wings of the PPA: Industrial Policy & Partnership 1.Industrial policy and FDI, 1960-87 2.From initial growth to crisis 3.PPA widened & deepened1987 to 2008: Social partnership Re-focused industrial policy 4.Complementarities, tensions & gaps 5.From Celtic Tiger to current crisis

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Autonomy Close to firms Constraints Industrial Development Authority Upgrading

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Autonomy Close to firms Constraints Industrial Development Authority Upgrading Semi-autonomous agency Pursued industrial development & exports Hire outside civil service Set job-creation targets Monitor cases thoroughly Protect Irelands tax advantage

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Autonomy Close to firms Constraints Industrial Development Authority Upgrading Stay close to client firms Both in Ireland and abroad Tailor package of supports Sectors are picked not through a magical crystal ball of superior state rationality but rather through international information-gathering and attempting to follow international trends as closely as possible (0 Riain)

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Autonomy Close to firms Constraints Industrial Development Authority Upgrading Identified successive constraints on business development: Capital Industrial sites Skills Telecom infrastructure Regulatory Mobilise other agencies Ignored economic debates

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Autonomy Close to firms Constraints Industrial Development Authority Upgrading Work with Irish managers in TNCs Focus shifted: From job numbers to value added From capacity to capability Moved early to software and other services Network Irish engineers abroad Now links firms to Irish S&T

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2. From initial growth to crisis Opening & activist policy started growth Through FDI, trade, public investment, EU but Indigenous industry lost in free trade Social need & expectations rose Sterling context meant inflation/instability Industrial relations conflict 1970s-80s US FDI fell in 1980s Crisis prompted discussion in NESC

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Orthodox economic view: fiscal and wage indiscipline undermined business success Decline of inward investment and failure of indigenous business Excessive spending, public borrowing and wage growth

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NESC analysis yielded wider view 1980-86: problems of stabilization, distribution and development are connected Business damaged by fiscal and labour problems Also reflect developmental challenge of a regional economy Fiscal crisis has a developmental element Macro pressures & debates also crowd out supply- side issues

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3. Public Private Alliances: Widened & Deepened 1987 to 2008 3.a. Social partnership 3.b. Refocused industrial policy extended development agencies But note also: European internal market Social/cultural change

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3.a Social Partnership wing of the Public Private Alliance NESC: forum of employers, unions, farm orgs., social NGOs & civil servants Served by professional Secretariat Analysis & deliberation the key role Agreed NESC Strategy report (first 1986) Negotiated 3 year programme 1987 8 Partnership programmes 1987 to 2008

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Role of negotiated programmes articulate a shared understanding of key economic and social mechanisms align partners to consistent and competitive actions: macroeconomic, distributional & supply-side. provide framework for strategic government policy.

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Basic relation between two wings: Partnership aided business/innovation Fiscal stabilisation 1986-1990 & after Disciplined wage bargaining Embedded new exchange rate regime Improved industrial relations Acceptance of competitive traded sector Active labour market policies New participative approaches to social exclusion and local development

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Two wings of the PPA: ambitions 2000-2009 Innovation Policy Forfas Build National System of Innovation with public S&T investment Social Partnership NESC New perspective on social deficits and social policy: Developmental Welfare State

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Networked Developmental State & Developmental Welfare State NDS The long-term strength of the economy now depends on industrial & effective social policy DWS Social policies must share responsibility for economic performance and participation

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Complementary Widened focus Insufficient reform The links between the partnership & industrial policy wings of PPA Vulnerable mostly complementary (see above) but weakly connected institutionally advantages: industrial policy mostly free of capture & veto... disadvantages: dont get change in some vital policies

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Complementary Widened focus Insufficient reform The links between partnership & industrial policy wings of PPA Vulnerable Both discussed skills, education, childcare, housing, employment services, broadband, immigration, social policy... Focus on wider context not same as view that only the business environment matters.

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Complementary Widened focus Insufficient reform The links between partnership & industrial policy wings of PPA Vulnerable In public policy & system: training, education, health, transport, energy, childcare, welfare, social services, housing... Where: Lack of policy ambition Weak public management Union veto points.

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Complementary Widened scope Insufficient reform The links between partnership & industrial policy wings of PPA Vulnerable Loss of developmental focus: not same as max profit opportunities Political opportunism: e.g tax & public spending over heated housing market High-level dialogue, but less multi-level problem solving in partnership wing of the PPA. Global conditions, as in 2008-09

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Banking Public finance Economic NESC Irelands Five-Part Crisis Social Reputational

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Banking Public finance Economic NESC Irelands Five-Part Crisis Social Reputational

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Banking Public finance Economic NESC Irelands Five-Part Crisis Social Reputational

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Banking Public finance Economic NESC Irelands Five-Part Crisis Social Reputational

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Banking Public finance Economic NESC Irelands Five-Part Crisis Social Reputational

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Banking Public finance Economic NESC Irelands Five-Part Crisis Social Reputational

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Irelands policy and partnership bind in 2008-09 Convincing approach to one dimension dependent on widely- understood approach to overall crisis A widely- understood approach to overall crisis requires clear & purposeful approach to each of the five elements

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Banking Public finance Economic NESC Irelands Five-Part Crisis Social Reputational But existing shared analysis on: Small open economy Asymmetric shocks within euro Incomes policy Demand: domestic & international Price inflation/deflation in the euro Not yet yielding agreed analysis... sufficient to find a partnership response to the overall crisis

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Policy & partnership crisis Size, openness & deficit limit fiscal stimulus Approach to bank rescue seen as unfair Govt: deficit 12.5% demands budget cuts: Services Public pay Total welfare bill (in context of falling prices) Unions: reject nominal wage reductions emphasise demand & possible deflationary spiral Job protection & activation measures may provide a bridge to a joint approach

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Competitiveness Property bubble Credit crisis Irelands current crisis - causes

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Known vulnerabilities Risks not identified National policy frameworks & institutions Crisis as manifestation of risks and vulnerabilities

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Ireland Public Private Alliance: from success to crisisagain Rory ODonnell Director National Economic NESC Social Council NESC