Recovery depends on discarding discredited value system that underpinned economic crash, says SIPTU President

Date Released: 09 Sep 2010

SIPTU General President, Jack O’Connor, told the Richard Cantillon School in Tralee, County Kerry, today that in order to emerge from the present economic crisis Ireland must look beyond issues such as lack of regulation and question the value system that underpinned the economic bubble and facilitated those forces that wrecked the economy.

Speaking in the afternoon debate on, ‘The Need for Entrepreneurial Behaviour in the Public Sector’, he said people had to stop confusing speculation with entrepreneurship and “beggars on horseback with entrepreneurs”. With the collapse of private investment it was essential to mobilise the collectively owned resources of society - our semi-state enterprises - to rescue the economy. This could best be achieved by establishing a state holding company that could free up capital for innovation and investment.

He said that a now discredited value system had allowed one institution “to contaminate our entire banking system and bring the economy to the verge of total collapse, as well as mortgaging the future of everyone living in Ireland today, along with at least one generation not yet born.” A situation developed “whereby the net foreign borrowing of our banks escalated from the equivalent of ten per cent of GDP in 2003 to 60 per cent in 2008. Virtually all of this debt was borrowed on the short for lending long against speculative investment in property.”

Jack O’Connor added; “When you boil it all down, our self-styled entrepreneurial culture incentivised speculation while starving innovation.” It was still unclear if the lessons had been learned

“I think we need, as a society, to come to terms with weaknesses more profound than inadequate regulation or greedy bankers and short sighted politicians. We have to address the value system that promoted and facilitated this malign strategy that has crippled Irish society. It was a value system that resulted in the election of governments that prized speculation and starved innovation over three successive general elections and that gloried in private affluence while ignoring public squalor.”

“It is a value system that venerated those who displayed the contempt for their fellow citizens, particularly those who worked for them – and our democratic institutions for that matter; a value system that seemed to have a penchant for elevating the most obnoxious elements in society, confusing avarice with acumen and excess with entrepreneurship.”

With the demise of “our so-called entrepreneurs we desperately need people with real entrepreneurial skills, not least in the public sector where gross capital fixed formation fell 51 per cent between 2007 and 2009, with a further fall of 19.2 per cent predicted for this year. Indeed it is absolutely critical that we recognise the need for public investment to fill the vacuum left by the demise of the private investor.”

He said that there was no shortage of entrepreneurship in semi-state commercial enterprises.

“Since the foundation of the State they have stepped into the breach and either salvaged industries and sectors where private enterprise had failed, or created totally new vehicles for social and economic growth.”

The SIPTU and Congress President contrasted the “proud records of continuing growth and achievement” of companies such as the ESB, Bord na Mona and the Dublin Airport Authority with “the once proud Eircom” which had been privatised and asset stripped by corporate raiders. Semi-state companies had brought entrepreneurial skills to the tasks with which they had been mandated on behalf of the nation and had successfully maximised the use of the scarce resources available to them to achieve their objectives.

“This is precisely the legacy that the Irish Congress of Trade Unions envisaged mobilising in the public interest when it advanced its proposal to create a State holding company to secure the assets of all our commercial semi-state bodies so as to optimise their leverage, their capacity to grow and their flexibility in the deployment of resources.”

He said it was necessary “to look again at the advisability of maintaining approximately €17 billion in our National Pension Reserve Fund, a significant percentage of which is invested in economies across the world. It is prudent of course to keep funds in reserve for a rainy day, but it is actually pouring at the moment.”

“We have to find a way of reversing the equation that incentivises speculation, while starving innovation. We have to become innovative about innovation and display a degree of entrepreneurship in public policy making as against the parsimonious ‘beggar thy neighbour’ strategy being followed at present. I have no doubt that those ingenious enough to devise NAMA could, if put to the task, devise ways of incentivising real entrepreneurs and real innovation to Ireland.”

He also warned that “the day of reckoning must come for those who have been insulated since the beginning of the current crisis and who, incidentally, created it in the first place. Those with real wealth, who didn’t lose it all on the equity markets, have to be asked to make a contribution.”

“They key to recovery is the development of a credible plan which has the potential to mobilise the entire resources of the nation, which offers not just a coherent vision of the future but the prospect of establishing a truly sustainable economy and a fairer  and more just society. I am confident that there is a way out of the current debacle and that entrepreneurship in both the private and public sector is critical to it. But to achieve that we must address the fundamental deficiencies in our value system that has repeatedly confused beggars on horseback with entrepreneurs.”

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