National economic policy is generally thought to be set through an intellectual battle over social philosophy. Collectivists, with their ideology of greater government control, oppose individualists, with an equally comprehensive theory of limited government—and a nation’s level of taxation, regulation, and government ownership is assumed to reflect the relative strength of these contending forces.
This model has tended to fit England and the United States, which have had a recognizable “left” and “right” in their politics. In most countries of the world, however, ideology does not play such a significant role. Politicians and parties are pragmatic, and government interventions have been adopted not to implement an overall philosophy, but through a day-to-day process of accommodation. And the movement in the other direction, toward less state control, is equally pragmatic. The politicians make what they think are reasonable ad hoc adjustments, without reference to theory or philosophy.
Ireland is a good example of a country with this kind of non-ideological politics. It has not had a meaningful left and right. Over the past century it has adopted socialist policies not because parties and leaders were convinced socialists (most of them were said to be “conservatives”), but because such policies were superficially appealing. In recent years, it has moved somewhat away from these policies and toward the principles of the free market. But this shift has not been the result of any party, faction, or pressure group.
So far as I could detect in weeks of searching, there are no prominent Irish think tanks espousing the cause of limited government. There are no politicians with an underlying skepticism of government action, no talk-radio hosts critical of big government, no one who questions government welfare programs on principle. Names like Hayek and Mises, or for that matter, Jefferson, Thoreau, and Paine, are unknown in Ireland. Practically everyone accepts the general notion that government should be comprehensively involved in national life.
Yet despite this overwhelming pro-government sentiment, and despite the lack of anti-government voices, there is a clear drift against government ownership and control in Ireland! This remarkable tendency cries out for explanation, especially since it is not unique. Many countries with a strongly left-leaning public opinion are nevertheless moving away from systems of government control. They haven’t reached anything like a genuine limited government, of course, yet the trend is significant.
The Potato Famine and the Guilt of Empire
The roots of pro-government sentiment in Ireland reach back many centuries. As an English colony from the days of Henry VIII, Ireland did not have the opportunity to develop strong traditions of self-government and self-reliance. The tendency was to look to the colonial government in England to solve problems. The potato blight and famine of 1845—49 greatly exacerbated that tendency. Although England did send considerable food relief, it was not enough to prevent widespread suffering. For the rest of the century, English elites felt guilty about not having done enough for Ireland, and they instituted numerous relief and assistance schemes that, in their own country, would have been seen as unacceptably intrusive. Their policies included expropriations of lands (which were then practically given away to Irish tenants), and the development of numerous systems of public relief and subsidies. The result was that the Irish developed, as historian Mary Daly puts it, “a strong dependence on government assistance for everything from famine relief to land reform.”
After independence in 1921, the new Irish government took the same paternalistic role, especially under the leadership of Eamon de Valera in the period 1932-48. Motivated by nationalistic and anti-British sentiments, de Valera tried to create a self-sufficient Ireland. To that end he jacked up protective tariffs and prohibited foreign ownership of industry. With investors scared off, de Valera and his Fianna Fail party began creating government firms to fill apparent gaps in the economy. Later, as misguided economic policies put increasing pressure on private firms, the government stepped in to take them over when they went bankrupt. By the 1970s the government owned some 100 entities, including a steel company, a peat-processing firm, banks, and the telephone service.
Undoing this centralized, government-directed economy has been a slow, halting process, but the overall trend is now clear. The first steps of liberalization were taken in the 1960s when tariffs were sharply reduced and the prohibitions against foreign firms were lifted. In fact, foreign firms were given tax breaks to set up in Ireland. Crushing tax burdens were somewhat reduced in the 1980s, when the top income tax rate was lowered from 60 to 48 percent. The 1990s have seen a number of government firms turned over to private ownership, including steel, telephones, and the airline company (Aer Lingus). Competition between government firms and private ones has been introduced in a number of sectors, including banking, parcel delivery, bus transportation, radio, and television. Overall, the relative size of the government sector has declined somewhat from its peak about 20 years ago. In 1980, government expenditures were 50.5 percent of GDP; in 1997 they had fallen to 40.3 percent. In the period 1988-98, as a result of privatization and cutbacks in subsidies, employment in government commercial entities fell by 19.6 percent.
The Rise of Analysis
One important explanation for this movement away from government control has been the rise of economic measurement and calculation. Cost-benefit analysis is the nemesis of socialism. Any number of government schemes can look attractive when you don’t know the numbers behind them. At first glance, a government firm like Ireland’s Bord na Mona—the peat authority—looks like a wise and humane undertaking. It digs up peat, which is used to warm homes and generate electricity, and at the same time gives work to people in areas of high unemployment. It is only after you call in the fellows with the green eyeshades that you discover the waste and harm of such entities. By adding up the (generally unnoticed) costs, they reveal that Bord na Mona can survive only through a huge tax subsidy. If that same amount of money were spent on cheap coal and more useful employment, Ireland would have more jobs and cheaper electricity.
It is only recently that Ireland has developed capabilities to analyze and evaluate government programs. Perhaps the first unit to work in this field was the Irish Economic and Social Research Institute, a nonprofit think tank started in 1960 with help from the Ford Foundation. In 1973 the government set up its own evaluation unit, the National Economic and Social Council, while other analytical units have sprung up in the Department of Finance, the Central Bank, and in connection with the universities. The agencies of the European Union, to which Ireland belongs, constitute another source of economic analysis. None of these entities can be classified as ideologically favoring free markets, but their studies of the costs and inefficiencies of government enterprises have had a strong effect in nudging policymakers toward market approaches.
In housing, for example, the introduction of accounting methods and cost-benefit analysis has revolutionized government policy. Earlier, local authorities built and rented housing simply as one of those nice things that government could do to help people. Then analysts began to make economic and budgetary studies of housing programs. These revealed that maintenance and management costs of government housing were so high that the government would come out ahead if it just gave its houses away to the tenants! The findings prompted authorities—always hard-pressed for cash—to institute programs to enable tenants to buy their dwellings on highly favorable terms (usually at 50 percent of their market value). The overall result has been a major decrease in government involvement in housing. Since 1961, there has been a 50 percent reduction of families living in government housing, and today over 80 percent of Irish housing is owner-occupied. This is just one of many instances where the new awareness of economic realities has led politicians toward private solutions.
How Happy a Family?
The second force that seems to be pushing Irish policymakers away from government alternatives is the desire to avoid conflict.
The doctrines of collectivism tend to see a nation as one big happy family, with the government acting as the father, taking “from each according to ability,” and giving “to each according to need.” Unfortunately, this vision contains two fallacies. First, it assumes that the citizen-children will respect the government-father who is doling out the benefits. Today, this condition of public respect is not met in any country. In Ireland, when people are asked what they think about their politicians, most wriggle their noses and call them “gangsters”—not violent gangsters, they hasten to point out, but thieving ones. (A recent string of corruption scandals involving the highest officials has strongly reinforced this view.) Hence, people do not believe that the officials who determine benefits act with justice or integrity. No matter what the policy decision is, it is viewed with cynicism and hostility.
The second error in the “one big happy family” view is that it overlooks the tendency of human beings to squabble about what they need and deserve. Even in families, children make resentful comparisons: “Johnny’s balloon is bigger than mine”; “Ellen gets to stay up later than I do”; and so on. In a national community where people are free to form pressure groups and to air and inflame grievances, social spatting becomes a major problem. When you make government the arbiter of benefits and privileges, the politicians and administrators become the “bad guys” who stand between each group and what it believes it deserves. Naturally, this is a role they do not enjoy, and therefore they seek ways to escape it. One solution is to turn the problem of deciding who gets what over to the free market.
Consider government housing projects. According to socialist ideology, the occupants are supposed to be grateful and content. But real-world beneficiaries turn out to be grasping and impatient. They are upset by inadequate facilities and irritated by poor maintenance. Furthermore, they generally think that their rents, even though subsidized by taxpayers, are too high. Eventually, politicians who thought they would earn adulation and votes by providing public housing realize this involvement is making them objects of abuse. They begin to see the wisdom of moving out of the housing business. Ireland saw a great deal of tenant-government friction in state housing units: angry demonstrations, as well as a prolonged strike by the National Association of Tenants’ Organizations in 1973. The politicians’ desire to avoid this animosity was, I believe, another important motive for privatizing government housing.
In October 1999, the country saw more social conflict caused by economic centralization. The occasion was perhaps a welfare state’s worst nightmare: a nationwide strike of nurses. After all, when government takes over the health-care system, as it largely has in Ireland, it does so in the name of guaranteeing medical care for everyone. When the nurses walked out of the government hospitals around the country, they left unattended children crying in the wards and cancer patients without their chemotherapy. Parents, doctors, and hospital administrators struggled to fill the gaps but with only partial success. In one psychiatric ward, an unattended young woman committed suicide.
The public sided overwhelmingly with the nurses and against the government, which was criticized not only for underpaying the nurses, but also for underfunding the entire health-care system. (One consequence of the funding shortfall is that waiting times for many operations are over two years.) The cabinet members, for their part, had no desire to appear stingy and certainly didn’t want the nurses to strike. But they were constrained by the problem of “tit for tat” wage demands. As the employer of many other groups of workers, the government had negotiated a general wage-restraint package with all of them. If it broke the agreement and boosted the pay of the nurses, then, as one columnist explained, “everyone else will be looking for more . . . . Paramedics, junior doctors, teachers, the army, and the guardai [police] have all been circling this dispute waiting to pounce.”
The position of paramedics was an especially sore point with the nurses. The nurses believed they should be given the same pay and benefits because they had the same qualifications and responsibility. “We’ve been doormats for too long,” one nurse told a reporter. “Now it’s time we got fair recognition for our work.” But the paramedics, with a union even bigger than that of the nurses, had had a strike in 1997 to boost their compensation above that of nurses. It was clear that they would not allow nurses to catch up.
In the end, the strike hurt everyone. After eight days, the nurses grudgingly went back to work, accepting a compromise offer from the government. They were both embarrassed and bitter at having been forced to deny the high ideals of their profession—caring for the sick—to make their demands heard. Relations with hospital colleagues deteriorated. The doctors, who had been forced to cover for the nurses, condemned them for leaving patients in the lurch. Opinion polls showed that government leaders had lost support. Calling them “greedy and corrupt,” one letter writer to the Irish Times concluded, “If patients die, it’s the politicians who kill them.” The minister of health, Brian Cowan, was especially singled out for criticism. One of the striking nurses’ favorite picket-line placards said, “Help Stop Mad Cowan Disease.” For the minister, who certainly hoped that a career in politics would bring him approbation if not glory, this could not have been pleasant.
In a centralized government health-care system, there is no solution to this problem of strife. The government is always in the position of determining the relative rewards of different groups of employees and deciding which services to give different groups of customers. All these groups will hold it responsible for every shortcoming, real and imagined. It is significant to note that private hospitals (with 16 percent of all beds) remained open during the strike. Some said this was unfair, that nurses should have struck these hospitals too, so their patients would suffer equally with patients in the government hospitals. But since these hospitals were willing to pay nurses more, the nurses could hardly close them down out of socialist spite. The success of the private hospitals in bypassing the dispute inspired one columnist—Ellis O’Hanion of the Irish Independent—to spot the free-market solution to destructive conflict in the health-care industry. “Perhaps it’s time,” he wrote, “to start exploring the possibility of privatizing the health service in its entirety. This would instantly take all decisions on nurses’ pay out of the political arena. Competition between various sectors of a privatized industry for the best staff would ensure that nurses’ pay found its natural level.”
The politicians are unlikely to take this advice immediately, there being too many socialist shibboleths to be overcome. But gradually the system is likely to head in this direction. As strikes, bickering, funding shortages, and waiting lists make government hospitals increasingly unattractive, both patients and staff will continue to migrate to systems of private care. Politicians are likely to allow this movement, and even facilitate it, as a way of shedding the blame for health-care problems.
There may be no partisans of limited government in Ireland, but that doesn’t mean government’s role won’t be reduced. People don’t like to waste resources, and they don’t like conflict and bitterness. These pressures would seem to lead, in the long run, to scaling back government systems of economic and social management.