Review from Socialist View, No.14, Spring 2005

Selling out? Privatisation in Ireland Paul Sweeney and Reviewed by Orla Drohan

DESPITE FIANNA FAIL'S attempt to tone down its neo-liberal image following the drubbing it got in the 2004 local elections, the government is still pushing ahead with its privatisation agenda. A critical study of the Irish experience of privatisation then, could not be timelier. In Selling Out? Privatisation in Ireland, Paul Sweeney, economic advisor to the ICTU, attempts an analysis of Irish privatisation.

Sweeney maintains that the Fianna Fail/PD government has been the main political force for privatisation. He also acknowledges that the opposition has been "somewhat divided and unclear" on this issue. Successive governments have starved state companies of investment. Recently, the government has discouraged the ESB from building new power plants. Instead, the company has had to hire expensive generators because the country was close to blackouts for the past three winters.

Sweeney describes several companies including the ESB, Bord na Mona, the Irish Sugar Company, RTE, Aer Lingus and Aer Rianta as "national champions". While he concedes that the original 24 state companies were sometimes overstaffed, this had the positive impact of maintaining jobs during recessions. Employment in commercial, non-financial state companies peaked at 8% of total employment in 1980, compared to just 2.5% today. As a group, state companies are profitable and in 2003, their net profits in aggregate amounted to €506 million.

In its desire to privatise, the Irish government often concluded what, in purely business terms, were very bad deals for the taxpayer. INPC, the state oil company, was sold for €106 million, less than it was worth, to US oil company TOSCO in 2001. As if this wasn't bad enough, the state took over all the company's debts and potential future liabilities to the tune of €173 million. In other words, it was sold at a potential cost to the taxpayer.

Sweeney devotes a whole chapter to Eircom, the largest privatisation in Ireland. He makes no criticism of the sale by the "Rainbow" government of 35% of the company in 1996, claiming that it was government policy to maintain "state direction" over the company through a 50.1% shareholding. In this opinion, he is at one with ICTU President David Begg, who in the backlash that followed the Eircom debacle was forced to admit that the full privatisation of Eircom was a "major mistake" but that part - privatisation would have been beneficial.

Sweeny is more comfortable when attacking the Fianna F‡il/ Progressive Democrat government, which persuaded 575,000 people in a massive publicity campaign to buy shares in a company that they already owned. Sweeney notes that while high earners made up more than half of investors, members of the skilled and unskilled working class made up almost a third of purchasers. A little over two years later, Eircom was bought out by venture capitalists. Most investors lost 30% of their investment and the state was to lose control over a key utility.

"Sir" Anthony O'Reilly's Valentia consortium sweated Eircom's assets, maintained prices as high as it could and cut investment as low as possible before selling the company off in 2004. The top four managers were paid a staggering €29 million for the period between the Valentia takeover in late 2001 and the second flotation in March 2004.

Sweeney credits the trade unions with playing "a superb hand" in the contested bid for Eircom. The deal was so good for trade union members, he notes, that it provoked hostile comment from a few financial journalists who seemed to resent "ordinary workers controlling a block of shares collectively." The deal was certainly good for Con Scanlon, General Secretary of the CWU, who received a package of €1.8 million.

Sweeney does recognise that the Eircom Employee Share Ownership Trust (ESOT) did little to advance long-term employee interests. The right-wing trade unions bureaucracy was more than willing to do the government's work for it by dangling the ESOT carrot to neutralise any opposition to privatisation. Workers can hardly be blamed for accepting shares when they have not the slightest indication that their union is willing to fight for their job security, pay and conditions by taking a principled stand against privatisation.

Sweeney concludes by drawing boundaries to privatisation. He argues that natural monopolies such as fixed line telephony, water and electricity transmission and distribution; companies of strategic importance to the national economy such as Aer Lingus; and critical infrastructure such as railway lines should never be privatised. He puts forward the idea of "public space" as a sphere where the public sector must be dominant or where the private sector should have no role at all. Drawing boundaries however, implies an acceptance of privatisation up to a point.

While Sweeney's account contains much useful information, he makes no suggestions as to how privatisations might be stopped. The least hint of independent action to stop privatisation on the part of the trade unions does not figure in Sweeney's thinking. As far as he is concerned, all the trade union movement can hope for is a hearing on the issue at the "partnership" table. The weaknesses in Sweeney's account are not incidental but are rooted in the right-wing trajectory of social democracy. Workers in state companies and people depending on public services should be left in no doubt that in order to prevent future privatisations, they will have to fight government plans and not expect their union leaders to defend their jobs and public services.



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This article is from the 2005 Spring edition of Socialist View (it was printed in March '05).

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