Notes on the Front

‘The tide of regulation had gone too far. The increasing burden of regulation is  threatening the entrepreneurial zeal that had made the Irish economy the envy of the world. It is time to shout stop to this corporate McCarthyism.  Our wealth-creators should be rewarded and admired, not subjected to the levels of scrutiny which known criminals would rightly find offensive.’

We expect to hear this from IBEC, ISME the Small Firms Association, etc. ad naseum (the above was stated by AIB Chairman Sean Fitzpatrick).  After all, they can hardly complain about high corporate taxes or high payroll taxes or high wages and labour costs or how Irish workers take off so much time. We’re already a low-taxed, low-leave, relatively low-waged economy. So what new frontier can be conquered for neo-liberal orthodoxy? Why, government regulation of business, of course. This is the new whinge – how such regulations stifle entrepreneurial initiative; how, if only the red tape were cut, a hundred enterprise flowers would bloom. We expect this line from business lobbyists and right wing pundits. After all, that’s what they are paid to do.

What we don’t expect is to hear this same mantra from someone on the Left, a former advisor to a Labour Party leader. That makes it all the more depressing.

In the Sunday Business, Post Ronan O’Brien offered a recipe for future Labour Party success. Some of it was quite provocative (not many are willing to stand up these days for good ol’ fashioned class analysis), some of it was the usual unsubstantiated fare (‘It’s time to let the unions go’). But one ingredient stood out:

‘The knee-jerk response of all politicians to any problem is to impose further regulation. We must regulate for the compliant majority, not the wrongdoers. Excessive regulation stymies initiative and cannot cater for 100 per cent of situations. ‘

‘Knee-jerk’? ‘Impose’? ‘Excessive’? ‘Stymies?’ These are the buzz-words of the right, creating an image of a ravenous bureaucracy suffocating enterprise development under a mountain of paperwork, regulations and statutory instruments. The main political parties’ election manifestos all had substantial references to ‘cutting the regulatory burdens’ on business. Right wing pundits have gone further, denouncing ‘burdensome regulations.’ So is this the case?

There is no doubt that there are some regulatory mechanisms that can be streamlined. Regulations emerge from many social and economic needs – consumer protection, occupational health and safety, environmental needs, etc. Given that both the State and the EU are involved in laying down regulations, at any given time there is likely to be different agencies pursing their agendas in isolation, giving rise to overlapping bureaucracy. But how critical is this in Ireland?

Not very. In fact, we have one of the least regulated business environments in the EU and the OECD. Forfas’s 2006 Competitiveness Challenge and Annual Report shows that Ireland has the 4th least regulated business environment in the 26-nation OECD. If anything, Ireland’s regulatory regime – relative to other nations – is weakening (in 2005 Ireland stood at the 5th least ‘burdened’). In its 2006 Annual Report Forfas goes further:

Regulation of product and labour markets in Ireland is not perceived by industry to significantly impede business operations.

In the World Economic Foundation’s Global Competitiveness Report, Ireland ranks low on the scale of regulatory ‘burdens’ – only Denmark and Finland in the EU-15 rank lower. With specific regard to product market regulation, Ireland ranks 2nd least restrictive, behind the UK, while measured under labour market regulations Ireland ranks well below the EU-15 average. Forfas, quoting from an IMD Survey, states:

. . . labour market regulations in Ireland are not believed to have a significant impact on business activities.

When we turn to the Doing Business Report of the World Bank the focus is even sharper. Ireland ranks 3rd for the overall ease of doing business among the EU-15 (for you types who can’t get enough of rankings – Ireland stands 10th out of 175 nations in the world and 8th in the 23-member OECD rankings).

There are some worrying areas – particularly ‘Trade Across Borders’, especially as Ireland needs export platforms to create sustainable wealth. But the general picture is of an extremely easy environment to do business in.

Of all the issues confronting enterprise development, ‘excessive’ regulations ‘imposed’ on business hardly feature. So what can we make of this ‘regulation-is-stifling-entrepreneurship’?

It’s very simple. Business lobbyists dare not point the finger at the main culprits behind the lack-lustre (to put it very mildly) performance of indigenous enterprise: the lack of world-class managerial skills and the failure to create a dynamic engagement between public planning and enterprise development within the rubric of a pro-active social and economic partnership model. For to acknowledge these two main points would mean jettisoning neo-liberal prescriptions and the dominance of the wealth-creating sectors by the private managerial class. Ideological attacks on regulations are a smokescreen to divert attention from the real problems facing enterprise development.

That doesn’t mean the Left should be complacent about the issue of regulation. But what it should not do is give succour to right-wing mise-en-scenes that have no basis in reality. It is noteworthy that, of Mr. O’Brien’s ‘starter list of high-level principles for the new party (Labour Party) leader to consider,’ the only one that directly refers to enterprise development is the ‘regulations stifle’ argument. Whatever about the other high-level principles, I would strongly urge the new Labour Party leader to ignore this one.

That is, if he wants Labour and the Left to make some kind of meaningful impact on the economic debate.