Laissez faire, or just plain lazy?

Notes from the Western Periphery

ASLEEP AT THE WHEEL A vintage engraving from 1854 shows a captain asleep at the wheel of the ship during a storm, an apt analogy for repeated governmental failure to act in the public interest,  precipitating both the banking crisis and, more recently, the pyrite and mica scandal. Pic: D Walker

Government is the solution to our problem; lack of government is the problem

John Bradley

President Ronald Reagan had a great way with words. He could deliver his message in devastatingly pithy and compelling phrases. His most famous put down of big government was:
“In this present crisis, government is not the solution to our problem; government is the problem.”
There is no need to fret about what his ‘problem’ was. The solution to any ‘problem’ in President Reagan’s eyes was always to cut taxes, reduce the size of government and embrace self-regulation.
There is a tendency among interest groups in Ireland to favour this Anglo-American approach to governance in preference to the EU approach. The more regulatory form of EU governance is blamed for strangling innovation and entrepreneurship.
In Ireland, we tend to frame our debates on government failures in terms of ‘waste’ of resources through profligate and unconstrained spending of our taxes. To be sure, there is often waste. The purchase of expensive voting machines that were never used; defective hand sanitisers that had to be binned by the HSE; cost over-runs on projects like the Dublin Luas Light Rail and the National Children’s Hospital.
Media reporters and columnists find it easy to castigate government in terms of bad things they did, and should not have done. It is more challenging to castigate government over things that they should have done, but did not do. President Reagan’s assertion could be turned around as:
“In this present crisis, government is the solution to our problem; lack of government is the problem.”

Regulatory failures
Let me illustrate this by drawing on two recent massive failures of governments to act in the public interest: The banking crisis and the pyrite and mica scandal.
In both cases, governments were not running amok, wasting our money. They were asleep at the wheel – and the collateral damage and expense of their inaction was incalculable and affected not just our finances but also our wellbeing.
The first example was regulatory failure to prevent Irish banks from engaging in uncontrolled lending activities. This failure ultimately bankrupted the country. By mid 2007 it was abundantly clear that the Irish property market had tanked, although the terrible consequences of extravagant bank lending to the soon-to-be bankrupt developers had only just started down the path of destruction of the State’s banking system.
In a culture of hubris and ignorance – a truly lethal combination in politics and business – there did not appear to be any room for wisdom and experience. In mid 2008, immediately after assuming the role of Minister of Finance, Brian Lenihan was the first to realise that drastic fiscal action was urgently needed, even if, as we now recognise, it was far too late to save the ship.
Since then, we have learned nothing about what politicians thought they were doing as the bubble economy churned up during the first seven years of the new millennium.
We are given no insights into what degree of responsibility for the fiscal and monetary implosion they accepted might be theirs; nothing of their reflections on how the crisis might have been avoided or how the transmission of the impacts of the global recession into the Irish economy might have been attenuated by better policy choices; nothing about why such precautionary policy actions were never triggered when there was still time to do so.
If I may use a hackneyed metaphor, their focus was narrowly on what happened to the Titanic after it struck the iceberg and ignored almost everything that preceded that unfortunate event.

Under-active oversight
The second example of egregious failure of government to act in the public interest concerns the failed system of regulatory oversight that permitted the construction of thousands of houses – mainly in the North West region – using flawed materials (sand contaminated by pyrite and mica), the use of which violated existing building regulations.
There are 171 quarries operating in Donegal. Responsibility for ensuring that building regulations are followed, including testing the sand used to make bricks, is devolved to the local authorities. Incredibly, these authorities appeared to be so under-funded and under-resourced that they were either not able, or not willing, to enforce the regulations proactively.
The conclusions reached about Donegal in the Report of the Expert Panel on Concrete Blocks (2017) was damning:
“Based on information received, the Panel is of the opinion that the reason for the widespread pattern cracking in private dwellings in County Donegal is primarily due to the excessive amount of deleterious material (in the form of muscovite mica) in the aggregate used to manufacture the concrete blocks.”
Similar conclusions applied to Mayo, where the contaminant was pyrite rather than mica. The terms of reference for the expert panel were so narrowly drafted that only weak generalised policy recommendations could be made. There was to be no ‘perp walk’ for the TV cameras. Rather, the panel was constrained to say merely that “reactive market surveillance is not sufficient to guarantee consumer protection.”
Doing absolutely nothing and leaving it to the unfortunate house owners to complain when their houses start falling down around their ears is a crazy way to run a country.
It would prompt one to ask whose interests are being served by such carelessness? Or is it more than carelessness?

John Bradley was a professor at the ESRI and has published on the island economy of Ireland, EU development policy, industrial strategy and economic modelling.