The Irish Economic Recovery Experience – Some lessons for Barbados?

In 2008 there was an almighty crash in Ireland resulting in a five-part crisis involving the implosion of the banking system, over-night collapse of the government’s finances, a loss of competitiveness, a social crisis with 17% unemployment and mass emigration, and an international reputational crisis. Since then another crisis has emerged, the crisis of unpayable […]

By Eddie Molloy

August 5, 2014

In 2008 there was an almighty crash in Ireland resulting in a five-part crisis involving the implosion of the banking system, over-night collapse of the government’s finances, a loss of competitiveness, a social crisis with 17% unemployment and mass emigration, and an international reputational crisis. Since then another crisis has emerged, the crisis of unpayable household debt. Tens of thousands of people are in mortgage arrears of more than 90 days with no hope of a resolution of their painful predicament.

The underlying cause of this calamity was the failure of the Institutions of the State, the political system (such as giveaway budgets that the country could not afford before elections), key institutions like the Central Bank that failed in its oversight role, and the Civil Service which, such as, was shown to have too many ‘gifted generalists’ and not enough expertise in vital areas. The Civil Service not only lacked the necessary competence, they also lacked the character, that is the confidence and courage to ‘speak truth to power’ .

Against this background a General Election took place in early 2011, the incumbent government parties were decimated or wiped out and a new Government took over the task of addressing these crises. A crucial innovation was the establishment of a dedicated Ministry for Public Expenditure and Reform (DPER). Its remit has been to reduce and control government expenditure and to drive a wide programme of political and public service reform. The DPER minister is a member of a powerful inner core of the cabinet that includes the Prime Minister, Deputy Prime Minister, the Minister for Finance their Permanent Secretaries. The staff of DPER is a mixture of career civil servants and outsiders (including the P.S.), who have particular expertise.

The DPER innovation has been a success. While there is still a very long way to go, they have implemented a range of measures to improve political and administrative transparency and accountability; such as, new legislation on freedom of information, protection of whistle-blowers and political lobbying; new powers of investigation to parliamentary committees; and a long list of modernisation initiatives grouped into 14 major programmes to do with property, public procurement, rationalisation of state agencies, harnessing the power of ICT, introducing authentic performance management, establishing a senior public service and shared services. In addition there are programmes of privatisation of state–run services and enterprises and moves to create more competition in protected professions such as legal services.

There were deep cuts in social welfare payments, cuts to public services and a range of new taxes Such was the severity of the impact on every one of six consecutive ‘austerity budgets’ that many external commentators wondered why there were no riots in the street. Perhaps it was because most people realised that they had no choice but to knuckle down and deal with the problem

Crucially, DPER reports publicly, at least every six months, on progress on all of its reform projects and to ensure everyone’s feet were held to the fire we have had the Troika of the IMF, The European Central Bank and the European Commission landing in Dublin every 3 months to check on progress. The continuing flow of bailout funds was dependent on meeting very specific targets on reducing the national budget deficit and delivering specified reforms.

The Troika has departed and Ireland is now able to borrow money on the international markets at remarkably low rates. There are green shoots in the economy; a steady flow in new jobs and a corresponding drop in unemployment levels. Exceptional creativity and innovation is evident in all sectors like tourism and the food industry and there is an explosion of entrepreneurial start-ups. The country is on target to meet the 3% budget deficit set down by the Troika by 2015.

A beneficial by-product of this national trauma is that the general public has learned a lesson they are unlikely to forget regarding politicians bearing gifts and the need for prudence in the management of their own affairs. There is much more penetrating media scrutiny of government and the civil service.

Ireland has pulled back from the brink and made significant progress on the road to recovery but the job is by no means done. Only this week we had a highly critical report on the workings of our Department of Justice and many other departments face similar reform challenges. Some of the political reforms have fallen short of what were promised in the heat of an election and personal and Government debt repayments will be a burden for decades to come.

In summary, some of the key elements in what by any yardstick has been a remarkable turnaround were the establishment of a powerful ministry dedicated to reform, manned by hand-picked internal and external people and with strong implementation skills; the discipline imposed by an external body, the Troika in return for bailout funds; wide-ranging political and administrative reforms; painful measures to reduce the budget deficit; and a stoic acceptance by the general public that we had little choice but to endure all of this, however unfair to those who did not cause the crash or over-indulge at the party.

Eddie Molloy

Dr. Eddie Molloy is a management consultant with 40 years experience of large-scale change in all sectors. He lived in Barbados in the early 80’s when he was a partner of Systems Ltd. with Dr. Basil Springer. Since then he has spoken at several conferences in Barbados on the topic of this article. He is Hon. Consul for Barbados in Ireland.

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