Attitudes to public enterprise are currently being distorted both because of the present Government's interest in relieving pressure on public borrowing by selling off assets and also by pressure from the employees of state bodies either to maintain state monopolies in order to protect their jobs, or alternatively to secure shareholdings for themselves in the event of privatisation, writes Garret FitzGerald
The question of whether a particular service to the public should be provided by the state or by private enterprise ought, however, to be decided on the merits of each case, and should never be allowed either to become the victim of such self-serving pressures or the subject of ideological prejudice.
If we look back to the origins of the state enterprise sector in Ireland, we can see that between the late 1920s and the 1960s the Irish State become involved in the provision of an extraordinarily wide range of goods and services for an almost equally wide range of reasons - some of them good and, in the post-war period, some of them bad.
On the one hand, three-quarters of a century ago our new state badly needed amongst other facilities a national electricity grid, a radio service, an airline linking it with Britain and eventually the Continent, specialised banking facilities for industry, and marketing services for agriculture.
In the absence of private entrepreneurs prepared to invest in such services, our first two governments filled these and other gaps by state action. Such was the dearth of private entrepreneurship at that time that even as late as the 1960s some of our state bodies - such as Aer Lingus and the ESB - were not only amongst our most efficient enterprises but were also at the forefront of Irish technological development.
For that reason many dynamic young people then preferred employment in such enterprises to private-sector jobs. Indeed I recall one UCD MA class that I taught in the mid-1960s from which seven out of the eight students chose to enter public employment - where most of them subsequently remained.
However in the post-war era much state involvement derived from a different and perverse source - an often futile and costly attempt to keep alive failing private enterprises.
It is true that in the case of the railways there was clearly a strong case for state action to secure the continuation of inter-city and commuter rail services - whatever about branch lines! But other state take-overs of failed private enterprises were much more dubious. Did we really need to have state-owned factories producing, usually inefficiently and at a cost to the taxpayer, such products as industrial alcohol, processed fruit and vegetables, glucose, sugar, ground limestone, condensed milk, toffee, toys, tweed, and steel from scrap? And did we need hotels owned and operated by the state? I think not. Almost all of these projects have rightly been privatised since the 1960s.
Some state-owned services are, of course, natural monopolies - for example our electricity and land-line telephone systems. In such cases privatisation merely turns them from public into private monopolies, which will seek to extract excess profits from the public unless they are tightly regulated - which, as we are currently seeing in the case of Eircom, may prove very difficult to do effectively.
The privatisation of Eircom was in any event badly mismanaged, probably because it was undertaken for the wrong reasons - in part ideological, and in part with the aim of maximising the amount of money the Government would receive. As a result, many members of the public lost heavily through having been persuaded to pay more for shares in the company than these were likely to be worth in what was then becoming a highly competitive telecommunications market.
One state company that has moved from having first been a monopoly, and then part of an oligopoly, to facing the full blast of competition, is Aer Lingus. In 1986, on the advice of Jim Mitchell, Minister for Communications, I authorised Ryanair to compete with the national airline, as a result of which we now have two efficient air companies. It is true that Aer Lingus almost failed to survive competition because, left too long as a monopoly carrier on many routes, its board and management let its costs rise to absurd levels - but eventually under new management it re-emerged as an efficient State-owned company
There has been a lot of talk in recent years about privatising Aer Lingus. But now that the airline is competing successfully in an open market, where fares are not longer fixed by the international airline cartel, IATA, one must wonder why privatisation is still being contemplated.
The Government has seemed to want to justify such a move by suggesting that EU law prevents it from investing in the further growth of our national carrier, and that it is only through privatisation that Aer Lingus can grow. It should be made clear that this is quite false.
Of course, the Government is no longer permitted to subsidise losses by Aer Lingus. But Aer Lingus is no longer loss-making. And, as the EU Commissioner for Competition made clear recently, in response to a question I posed to him at a meeting in the Institute for European Affairs, the Government, as the shareholder in the airline, retains the right to make any further genuine investments in Aer Lingus that may be needed in order to secure its continued expansion.
It is most important to scotch once and for all what has become a quite prevalent myth about an EU ban on further State investment in Aer Lingus - and indeed in other successful and competitive State enterprises. The apparent continued inclination on the part of some Ministers to contemplate selling off Aer Lingus has nothing whatever to do with the European Union. Rather it reflects a dangerous combination of an ideological anti-state stance on the part of the PDs and Charlie McCreevy, and a desire by the latter as Minister for Finance to ease budgetary pressures by selling off valuable State assets.
In such a narrow and ideologically-biased approach there are real dangers for our national interest. For example, a likely purchaser of Aer Lingus is British Airways, and that airline could make more money by reallocating Aer Lingus's valuable "slots" at Heathrow to its long-haul services out of London - at the expense of crucially important access to and from our island via London's principal airport. And in the light of what has happened in the case of Eircom, let no one be taken in by "assurances" on issues of national concern that may be sought and given at the time of privatisation.
An island like Ireland, dependant to an almost unique degree on air services for access to and from the rest of the world, has a need for a national airline with a wide remit, usefully supplemented and paralleled by a low-cost point-to-point carrier like Ryanair. So far as the airports are concerned, despite the Government's somewhat unhappy experience with nationalised Aer Rianta, the Government appears to have ruled out privatisation.