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Ireland's political and cultural magazine
— March - April 2012
I
llegal corruption – in its various forms and
expressions – is hardly a rarity in Irish soci-
ety. This much we know. Perhaps less well
understood are the legally permitted forms
of corrupt behaviour that contribute to social and
economic degradation and undermine democratic
institutions and the legitimacy of the State.
Economists identify corrupt activities to
include illegal abuses of the system, such as bribery,
cartels, collusion, price fixing, and embezzlement.
But corruption also includes activities that fall into
grey areas of the law – tacitly allowed: cronyism,
nepotism, patronage and influence-peddling.
Over the years, the Irish State recognised
these activities and somehow decided unofficially,
of course, to give their perpetrators the strong-
est political representation in the land – direct
access to policy formation. In recent decades our
Government and elites, Left and Right, went so far
as to institutionalise the arrangement.
Since , Social Partnership has constituted
a closed shop with membership restricted to select
organisations, representing certain subsets of Irish
society. Since this membership restriction is codi-
fied and since Partnership is explicitly concerned
with fixing prices for some forms of capital and
inputs into production, it is both de jure and de
facto a cartel. That it is a public cartel, as opposed
to a private one, does not change its corrupt and
corrupting nature.
This cartel actively and with State support
promoted policies that led to gross distortions of
markets and competition; and also led directly to
the relegation of the State’s duty of care to consum-
ers and ordinary investors.
Social Partnership rubber-stamped a pol-
icy of ‘Never at Fault, Never Responsible’ for our
financial regulatory and supervisory regimes. It
trumpeted the culture of unaccountability in the
public and protected-private sectors. Without
Social Partnership support, it is hard to imagine
the State sustaining the very regimes that led to
open, but never-prosecuted violations of the law
(e.g. breaches of regulatory liquidity-requirements),
ethical codes (e.g. loans-for-shares machinations
and misclassifications of deposits), MiFID (Markets
in Financial Instruments Directive) requirements
(e.g. the mis-selling of investment products by at
least four banks in Ireland, uncovered two years
ago) and violations of prudential ethics in financial
regulation (e.g. resistance to full public-data disclo-
sure and investor-suitability testing and protection
in the case of property transactions).
Neither the Unions, nor any other Social
Partners stood up at the Partnership Table in sup-
port of the handful of whistleblowers pointing to
the above failures. The ‘straw man’ argument is that
the Unions always advocated ‘more regulation’. Alas,
history shows that other priorities miraculously
took precedence time and again over the proper
regulation of finance, the protected professions,
quangos and pretty much every other aspect of Irish
governance. These, of course, were pay and con-
ditions for the Unions’ members, slush-funds for
‘training’ and ‘research’ activities, and State-board
appointments, including to the boards of financial
regulation and supervision bodies. Having been
bought by the ‘robbers’, the self-appointed ‘cops’
have, since the late s, stayed nearly silent lest
they damage the regulatory charade performed by
the Government and rubber-stamped by their own
members in charge of the regulatory bodies.
In effect, the Irish State didn’t just tolerate cor-
ruption, it actively managed it. Even debating the
merits of the form of corruption embodied by Social
Partnership shows how instrumental ethics replaces
real values when the cancer of corruption metasta-
sises. Social Partnership is simultaneously a collusive
cartel, a conduit for influence peddling, a vehicle for
patronage and a price-fixing mechanism. Its goal is
to preserve the status quo of wealth and income dis-
tribution, skewed in favour of the Partners.
It should come as no surprise that in ,
Ireland ranked th in the Transparency
International Corruption Perception Index (CPI)
– the lowest of all small, open economies in the
Euro Area, bar Estonia and Cyprus. As the Moral
Sages of our Left ardently decry market econom-
ics, its flagships – New Zealand (ranked st in the
world), Singapore (th), Switzerland (th) and
Hong Kong (th) – are less corrupt than the
Social-Partnership-governed Ireland. In Political
Risk Services International Risk (PRSIR) rankings,
Ireland is placed th-st in the world – along-
side Uruguay, the UAE, Botswana, Israel and Malta.
The only euro area country that scores below us for
overall political risks is Estonia.
Higher corruption overall is associated with
a significantly lower quality of economic insti-
tutions. The correlation between the CPI score,
the Economist Intelligence Unit Country Risk
Assessment score, the IMD World Competitiveness
score and the PRSIR score is in excess of . or, in
statistical terms, nearly perfect. This shows the
costs we pay for corruption in terms of the quality
of economic institutions.
In , trust in the Irish Government as meas-
ured by the Edelman Trust Barometer – another
metric of the quality of democratic institutions
that correlates strongly with CPI – stood at %,
against an average of % for the countries
surveyed in the report, making Ireland the lowest
ranked country in the study.
Years of institutionalised corruption, sanc-
tioned by the State and sanctified as Ireland’s
panacea for industrial conflict and policy stale-
mate – Social Partnership – have definitely come
home to roost.
Dr Constantin Gurdgiev is head of research at St
Columbanus AG and an adjunct lecturer in Finance
at Trinity College, Dublin. He holds a PhD in
Macroeconomics and Finance from Trinity College,
Dublin, an MA in Economics from Johns Hopkins
University and an MA in Pure Mathematics from the
University of California
Social
Partnership is
corruption
interloper constantin gurdgiev
phOtOcall
