OPINION:We need a definition of national wealth going far beyond the limiting focus on finances
Ill fares the land,
To hastening ills a prey,
Where wealth accumulates
And men decay.
Oliver Goldsmith
The Deserted Village, 1770
THESE LINES from Goldsmith appear on the cover of Tony Judt's little book Ill Fares the Land, in which he describes the state of the world where trillions of dollars zip around while millions of people live in dire poverty. They also summarise the sad story of Ireland over the past decade. Just three years ago we were told this was the "second wealthiest country in the world after Luxembourg" – or was it Japan? The country was "awash with money" and the government was giving it away in the form of special savings investment accounts (SSIAs).
We now know to our great cost the idea Ireland had become one of the wealthiest countries in the world was an illusion, a house of cards. Behind the facade – as Bertie Ahern said, “the boom times are getting even more boomer” – the seeds of economic collapse and social crisis had been sown and would soon bear bitter fruit. While wealth accumulated, decay had set in, with terrible consequences.
Looking to the future, Goldsmith’s poem challenges us to adopt a definition of national wealth that goes far beyond the narrow focus on lots of cash, “fool’s gold” as Fintan O’Toole called it, if we are to avoid repeating the boom-to-bust cycle. Here is a five-part framework:
1 A balanced scorecard for Ireland
In the world of business, “balanced scorecards” are used by many firms to ensure the single-minded pursuit of profit does not blind everyone to what is happening regarding the other keys to the sustainability of the business, including customer satisfaction and retention, the innovation pipeline, and continuous improvements in efficiency.
If an aircraft is to have a soft landing – to use an apt metaphor – the pilot needs details of speed, height, distance from the runway and fuel level. The pilot needs to balance the interplay of all these vital signs to land safely.
There is a truism that “what gets measured gets done”. On budget day every year, the minister for finance presents a progress report almost exclusively on just one of these five dimensions – the public finances.
But as we were climbing up the league tables to become the “second most wealthy” country, what was happening to our performance on the other vital indices that determine sustainability? For some of the elements we knew how we were doing, but ignored the signals, and for others we never even bothered to assess our performance.
2 Wealth creation capacity
Ireland has an enviable record in attracting foreign direct investment, and through the efforts of the IDA we continue to gain more than our fair share of foreign direct investment in the current environment. Multinational groups, a rebounding agrifood sector and the indigenous software industry are among several bright spots on the enterprise map.
The chief executive conference held before Christmas by Ibec, the major employers’ body, presented a positive, upbeat picture of the capacity of the productive sector to drive economic recovery. Speakers presented an impressive picture of the diversity and resilience of Irish industry, illustrated with several first-hand accounts of companies which had responded to the crisis by cutting costs, innovating and expanding markets.
On the debit side, the National Competitiveness Council produces a comprehensive annual report on the strengths and weaknesses of Ireland’s wealth creation engine. Every year from 2002 to 2008 the report had flashed orange and then red lights to warn of the rapid loss of competitiveness, and other worrying signs including the grotesquely expanding construction sector.
But the repeated warnings were ignored, as were the warnings about the wild lending by banks. As a consequence, thousands of small and medium-sized businesses continue to go to the wall because of a credit famine.
Running through the otherwise upbeat tone of the Ibec conference were deep regrets that a blind eye was turned towards clear signs of imminent danger to the viability of large sectors of the economy, for example, hotels and manufacturing.
3 Quality of infrastructure
Modern infrastructure is vital if business is to flourish, and it provides the essential conditions whereby citizens can enjoy a decent quality of life. On the plus side we are moving up the league table in broadband access and quality, railways have been modernised, roads have greatly improved, and there is a commitment to increase rapidly the proportion of energy generated from renewable sources.
On the negative side, for far too long we have been fed an inflated view of our educational system; it is not world class. The health service remains beset with endless problems. Light-touch regulation has had disastrous consequences. Flood defences promised years ago have got to be built, and the same goes for many sewage systems.
The people of Galway do not yet have a reliable supply of clean water. Integrated public transport ticketing in Dublin remains a pipe dream. Prisoners will be slopping out in Mountjoy for another generation, while weeds grow in the fields at Thornton Hall.
And so on, through a long list of unfinished or never-started infrastructure projects.
Quality of infrastructure as an indicator of national wealth on the whole rates very poorly compared with, say, Finland, Denmark, Austria and other peer countries.
4 Social justice and quality of life
While we were being cited as the second most wealthy country, Ireland was also rated as the second “most unequal” country in the world after the United States, as measured by the size of the gap in income between the highest and lowest paid. The scale of the economic collapse is matched only by the shameful social legacy of the previous government.
Platitudes about “protecting the most vulnerable” ring hollow when we find after a decade of abundant funds our health and education systems fail poor people in particular. A stream of revelations about the abuse and neglect of children, elders and people with mental health difficulties are an indictment of Irish society.
The ghettos in all our major cities are destined to remain with us for at least another decade, with the collapse of several public/private regeneration projects. Last year, a report revealed children in State care had been dying of unnatural causes at the rate of one to two per month over the past decade. What is the current rate? We need to measure and report systematically on the key indices of social justice and quality of life. Otherwise, it’s a case of “out of sight, out of mind”.
5 Ethical, competent, accountable government and public service
Ireland’s Five-Part Crisis (as the National Economic and Social Council – NESC – termed it in 2009) was ultimately caused by failures of government and public service management. The seeds of our economic collapse and social crisis were sown during the corrupt regime of Charles Haughey, and nourished by the brainless, primitive philosophy of that other Charlie, “If I have it I will spend it” McCreevy, and his boorish value system, which prompted him to dismiss contemptuously advocates for social justice as representing the poverty industry.
An inquiry into the performance of the Department of Finance over the past 10 years reveals a deadly combination of irresponsible government and administrative incompetence and impotence. Several other inquiries, not least the annual reports of the Comptroller Auditor General, reveal the depth of the malaise in the public service.
It is a hopeful sign that the main opposition parties, Fine Gael and Labour, have committed to establishing a full cabinet ministry to drive a comprehensive public service and political reform programme.
In the balanced scorecard ethical, competent, accountable government and public service are placed at the centre because they are the key to ensuring the country performs well on all the other dimensions of national wealth.
The collapse of public finances, loss of competitiveness, infrastructural deficits and shameful failures to provide a decent quality of life for all our people all occurred because of incompetence, corruption and lack of accountability at the heart or our political system and public service.
Apart from a periodic sanitised report by the Organisation for Economic Co-operation and Development (OECD), we never measure and report on the health of the nerve-centre institutions on which we depend for sustainable economic and social progress.
A recommendation
As mentioned, we get regular reports, particularly from the National Competitiveness Council, on many of the vital indicators – but these and other informative reports are a one-day wonder, consigned to the shelf. By requiring a simultaneous account of their performance on all five indicators of national wealth, the government would be forced to show a balanced view of progress.
The adoption of this five-part framework would serve another useful purpose. It could be adopted to articulate a comprehensive, easy-to-communicate vision for Irish society, and not only a vision of restored public finances and banking. Furthermore, this perspective points up the inherent instability of any political programme that leans too heavily either to the left or to the right. There is compelling international evidence that fair societies are prosperous societies.
The achievement of social justice and quality of life for all citizens is in the interests of business, and building an internationally competitive wealth creation sector is in the interests of people whose primary concern is achieving social justice. There is a symbiotic relationship between business and society. In this context, a Fine Gael-Labour coalition government augurs well.
In order to reduce the risk inherent in a two-dimensional view of the wealth of the nation, I would suggest there be a statutory requirement to report annually, on the same day, on the state of the nation as measured by all five elements of the scorecard set out here. Instead of the drama-filled budget day, let us have an annual report of how we are doing as a society – and not just as an economy.
Addendum – nothing new in the idea
As far back as the year 2000, John FitzGerald of the Economic and Social Research Institute and Brendan Walsh of UCD were urging the removal of the tax incentives and grants that were fuelling growth in GNP/GDP, and advocating investment in facilities that would enhance quality of life and infrastructure.
Recognising the need for balance in how we measured progress, they urged a slowdown in growth and attention to the other dimensions of national wealth.
In separate reports they said: “It is timely, therefore, to ask what is gained from further, rapid output in itself. We should now focus on raising the living standards of the population rather than trying to maximise the level of employment . . .
“Grants, tax breaks and public investment aimed at creating jobs, the priority for the last 50 years, are no longer appropriate.”
Top priority should be given to investment in public physical infrastructure – roads, public transport, sanitary services, social housing and social, cultural and recreational infrastructure. They continued: “While social, cultural and recreational infrastructure has not been viewed as a separate category of investment in the past, we feel nonetheless that it will be important in enhancing the quality of life . . .
“Among other measures, we recommend increased provision for early-childhood education for disadvantaged children; for tackling early school leaving; for curricular reform and improving progression paths for disadvantaged pupils, and for second-chance education.”
Eddie Molloy is a director of Advanced Organisation, which specialises in innovation and change management