The importance of the Public Realm in achieving a Just Society - Colmcille Winter School

28 Feb 2004

Address given by David Begg, General Secretary, Congress to the Colmcille Winter School, Co Donegal on 28 February, 2004

If you listen to "Morning Ireland" regularly, as I do, you will perhaps agree that the most consistent topic of conversation is public services - the inadequacy of them, their availability or the need for them in areas not already provided for. The health service is the most topical, whether it is crowding in accident and emergency, bed closures or nurses leaving to take jobs in Britain, as it was this week. Education comes next and then probably the lack of care for disabled people or elderly people. The Irish Times is currently running a series of articles on the Children's Court and the inability of judges to find suitable places to look after disturbed children. One way or another the availability and quality of public services impinges on all our lives.

The phrase "Just Society" first entered the lexicon of political discourse in Ireland in the 1960's. It was coined by Declan Costello who tried to put the notion of the just society as the foundation of policy in Fine Gael. He was not much rewarded for his pains at the time but he did, I think, have a profound influence on the social democratic wing of the party. Of course the just society is not an exclusively Irish concept. The renowned Oxford development economist, Amatra Sen, puts forward five central freedoms that are instrumental if people are to lead the lives that they would like to lead within his conception of a just society. These are:

  • Political freedom: choosing who governs and how they do so, and freedoms of communication such as speech and writing;
  • Economic freedom: that people can produce, consume and exchange, and that they have opportunities to do rewarding work;
  • Social Opportunities: in the provision of services such as healthcare and education;
  • Transparency: guarantees that citizens have access to clear and truthful information about current affairs and politics, and to the rights and services available to everybody;
  • Protective security: against risks like unemployment, crime, famine or war.

While Sen is describing principles in the context of the developing world, to my mind they are universal aspects of a just society.

In the case of the principles of social opportunities, protective security and transparency, these all require a strong public realm to realise them. If the provision of these were to be left entirely to the private means of "citizens" then their realisation would be in doubt. It is clearly beyond the means of all citizens to provide themselves and their families with healthcare and education. Those who suffer unemployment clearly need a safety net and public broadcasting is essential to transparency in public affairs. It is for precisely this reason that there is a fierce public debate in the UK at present about the future of the BBC and whether the government will try to spancil it in the wake of the Hutton Enquiry. Indeed it is to the credit of the British public that they were concerned about the BBC. I regret that we were not as exercised years ago when Ray Burke tried to damage RTE.

A public realm is the means by which some measure of redistribution is effected between those who have adequate means to live a decent life and those who do not. It is done through the tax system funding welfare payments, healthcare, education, public housing, public transport, and so on. In this way every citizen can, in theory at least, achieve a certain standard of living. Not all public services, of course, are provided through taxation. Postal services, for instance, are funded through the revenue raised by selling stamps but the service is provided on a universal basis. In other words it actually costs twice as much to deliver a letter in rural West Cork as it does in Cork city but everybody pays the same for the stamp. This is generally accepted as fair by society on the grounds that the right to post and receive mail is considered as something that should be available universally and at the same cost to everyone.

Only those who are serious right wing ideologues would contest the need for a public realm. After all, even those who are very rich would not be able to provide their own police force or army. Nor would they want to maintain the roads or provide a private fire service. The question really is where should the parameters of the public realm be set? - to what extent can or should the private sector be involved in the provision of public services?

It is worth my putting it on the record that Ireland has been well served by public servants. A case in point is the extraordinary economic progress achieved in the last ten years. Much of this was due to the effective use made of the eight billon Euros in cohesion funding received from the EU. This was the responsibility of the pubic service and they did a magnificent job.

Nevertheless, it is clear to most observers that, although we have made good economic progress, and achieved a relatively high level of employment, there is no comparison between our levels of infrastructure provision and public services and those of mainland Europe. The reason is simple. For years we have starved these services of investment and even today, notwithstanding our improved circumstances, we are still not investing enough.

We are paying for our infrastructure out of our current account surpluses. Our level of public spending accounts for 33.6 per cent of our GDP overall compared to a European average of 47.5 per cent. Our spending on health, even though much increased in recent years, is only 89 per cent of the EU average and social protection expenditure is only 14.7 per cent of GDP compared to an EU norm of 27.5 per cent.

Interestingly, however, the UK level of public service spending is 42 per cent of GDP. A report published this week by Sir Peter Gershon proposes radical efficiency measures in the public service delivery but not a cut in spending. Mr Oliver Letwin, the Conservative Party Shadow Chancellor, has proposed a reduction to 35 per cent of GDP but even that is ahead of Ireland. It is worth recalling that when Mr Kenneth Clarke contested the leadership of the Conservative Party he said that reasonable levels of public services could not be assured with public expenditure below 40 per cent of GDP.

The proportion of Irish GDP absorbed by current public spending was in fact cut during the Nineties by the astonishing amount of over two-fifths. However, one half of this reduction was painless, being attributable to a sharp reduction in the share of GNP required to pay interest on the national debt and to finance unemployment payments - the reduction in each is due to the beneficial consequences of economic growth.

Nevertheless, and even in conditions of unprecedented economic expansion, this huge reduction in the share of GNP devoted to public spending also required that between 1985 and 2000 the overall growth of current spending be held down to 2.5 per cent a year. Given the huge increase in economic activity during these years and the consequent rise in the demand for public services, this tight constraint on spending inevitably contributed to deterioration in some of these services, notably the heath sector.

Thus, within fifteen years Ireland moved from being an economy bedevilled by excessive public spending and a very large budget deficit to being one marked by inadequate public spending and a temporary large surplus, with taxation reduced to a level one-tenth below that of the rest of the EU. The burden of indirect as well as direct taxation was significantly reduced.

Most striking of all, however, is the fact that in the year 2000 Ireland not only spent on social transfers a one-third lower share of its GNP than the Continental EU, but also one-sixth less than the share spent in the neighbouring UK. The total amount of Irish current public spending had in fact been reduced almost to the US level, one-seventh lower than in the UK and almost one-quarter below the Continental Europe average.

In considering the question of funding for public services one has to consider where the money is to be found for it. There is but one source and that is taxation. As we all know, nobody wants to pay more tax and, in truth, people burdened with high mortgage repayments, childcare costs and so forth cannot afford to. My own view is that our tax base is too narrow and that we have gone too far in providing tax shelters and low business taxes. This point was identified as a general problem in the world today by the Nobel Prize winning economist, Joseph Stiglitz. Writing in the Financial Times on 25 February he said: "Tax competition for business has weakened the tax base and put more of the burden of taxation on workers".

Let me now turn to the possibility of contracting the scope of the public realm by introducing a greater degree of privatisation of public service provision. Ireland has been relatively slow to privatise state-owned enterprises and it is worth noting that the Irish boom occurred in an economy that had, up to the second half of the 1990's, largely bucked the trend of privatisation.

The one major exception was Telecom Eireann, now eircom. While I was involved myself in discussions relating to this decision in the early stages, I have no doubt that it was a major mistake and contrary to the public interest. Most people think in terms of the loss suffered by investors but actually the worst part of it was to end up turning a public monopoly into a private one. There were many reasons why this happened which would be too tedious to go into now, but suffice it to say that the damage done to competitiveness by our failure to develop broadband is a clear outcome. A more immediate manifestation in the eyes of the ordinary customer is the recent 25 per cent hike in line rental charges.

If the experience of Eircom is not enough to cool our ardour for privatisation there are plenty of examples on the international stage.

I remember in the early Nineties a group of eleven government Assistant Secretaries went to New Zealand to study the privatisation programme there. The group were dubbed "The All Blacks" because of their enthusiasm for what was going on there. I have to admit that their evangelising of neo-liberal economics rather detracts from the accolade I bestowed on the public service earlier. Anyway, New Zealand at that time was something of an economic laboratory and was of particular interest to Ireland because of its size, culture and population density being so akin to ours.

The important point is that the privatisation programme in New Zealand eventually ended in tears. Fintan O'Toole in his recently published book, "After the Ball", recounts a speech given by the country's Deputy Prime Minister, Jim Anterton, to the Commonwealth Business Forum on 10 May, 2002. In it he detailed the market failures, sector by sector:

  • Attempts to create a market in the electricity industry led to blackouts lasting several weeks in 1998;
  • In telecommunications, privatisation brought net disinvestment in technology (just like Ireland) for most of the Nineties and a near monopoly firm could charge what it wanted;
  • In 1993 New Zealand Rail was privatised and by 2002 it ended passenger services;
  • In 1988 Air New Zealand was sold for €660 million but it made a disastrous decision subsequently to acquire Ansett which it subsequently had to write off with a loss of €1.3 billion.

Jim Anderton made the point that Airlines, like railways, roads, telecommunications and financial architecture are part of the cement that enables the market to function. They have to be there when you want to use them. The market failures in the service sector in New Zealand knocked over many efficient businesses. In all cases the government had to re-enter the market.

This was a very candid admission by a labour minister when the major part of the privatisation debacle had happened under an earlier labour government. Further, the New Zealand economy went into a tailspin after the harsh ultra-Thatcherite medicine for several years. In short, it did not work!

While New Zealand is the most dramatic story of market failures it is by no means isolated. Other cases come to mind too, e.g.:

  • The effective re-nationalisation of Railtrack in the UK;
  • The bail out of British energy, the UK air traffic control company and the Channel Tunnel (the latter was always in the private sector but it had to be rescued by the state);
  • The re-nationalisation of Dutch Railways;
  • The Californian blackouts in which Enron was rigging the electricity market to keep prices artificially high.

There is now such an abundance of evidence against privatisation internationally than one would expect it to be and idea whose time has passed. Not so. The privatisation of ESB, Aer Lingus and VHI are still at least under consideration by the government. I would be totally opposed to any of them being sold.

Nothing in what I have said should be interpreted as complacency about public services. Ireland is the most globalised, most open economy in the world. We have no choice, if we want to continue to improve our situation, but to constantly look to ways of becoming more competitive. I constantly say to my colleagues that the best antidote to privatisation is to make our public services as efficient and as responsive to public need as possible. This undoubtedly needs investment but it needs innovation too.

It would be nice if the debate about the future of public services in Ireland could take place in a neutral environment in which the only question was what was best for the country. But let's be realistic; there is a powerful advocacy at work against the whole idea of the role of government in the economy. It is an agenda which is pushed by most national newspapers, with the general exception of the Irish Times which preaches orthodox economics but does not evangelise as the others do. It is also championed by about seven or eight economists who seem to have free access to the newspapers and the airwaves. The mantra is "private sector good, public sector bad". When trade unions enter the debate they are invariably characterised as pursuing sectional interest, feather-bedding or worse. This is not paranoia. In truth there are times when we fall into the trap of acting in a way that undermines our own case. For all that, I believe passionately that a strong public realm is a requirement for a just society.

My life's experience has made me a convinced social democrat. I believe in the social market model of capitalism which is a characteristic of European values.

The United States, on the other hand, is a powerful force in the world and the current administration makes no secret of its desire to export its values for universal acceptance. Those values are very radical and very ideological and are unashamedly neo-conservative. But it would be a mistake to look at America exclusively through the prism of the Bush administration. There is now, and always has been a rich stream of progressive opinion in the United States. It would equally be a mistake to assume that American Democrats and European Social Democrats are the same. They are not because the American and European heritage and value systems are different.

Nevertheless, the concept of a just society supported by a public realm has been central to the thinking of people like John Kenneth Galbraith. When he wrote "The Affluent Society" forty odd years ago he railed against what he saw as "private affluence and public squalor".

Likewise Lyndon Johnson, who had a vision for a just society too, except he called it "The Great Society". In a speech at the University of Michigan on 22 May, 1964 he said this to the students:

"Your imagination, your initiative, and your indignation will determine whether we build a society where progress is the servant of our needs, or a society where old values and new visions are buried under unbridled growth. For in your time we have the opportunity to move not only towards the rich society and the powerful society but upward to the Great Society.

The Great Society rests on abundance and liberty for all. It demands an end to poverty and racial injustice, to which we are totally committed in our time. But that is just the beginning.

The Great Society is a place where every child can find knowledge to enrich his mind and to enlarge his talents. It is a place where leisure is a welcome chance to build and reflect, not a feared cause of boredom and restlessness. I t is a place where the city of man serves not only the needs of the body and the demands of commerce but the desire for beauty and the hunger for community".

If such sentiments seem foreign to the present polity of the United States we must remember that what changed once can change again.

Either way it would be disastrous for Europe to allow itself to be seduced by the doctrine of the of the American neo-conservatives.

While the United States has been able to escape - so far - the social consequences of its economic structures, both because of the commonly accepted myth of its exceptional social mobility and also because of its profound cultural attachment to particular ideas of liberty which excuse social suffering, no such avenue is open to Europeans.

Belief that the wealthy and propertied have reciprocal obligations to the society of which they are a part goes back to early Christendom. It can rationally be asserted from this that capitalism does not exist independently of society, and that it is proper for the democratic will to be asserted over business and private power. This is the core of the European value system reflected in the social market model of capitalism.

There is currently a debate in process about what is known as "services of general interest". The question is what level of public service provision should remain the responsibility of the government in order to ensure a basic quality of life for all European citizens. It is important, I submit, that this public realm be sufficiently broadly defined to underpin the concept of the just society of which I have spoken tonight.