From top: The International Monetary Fund (IMF) October 2018 fiscal report; Eamonn Kelly
There are a couple of startling contradictions to Fine Gael fiscal policy contained in the Executive Summary of the IMF’s latest fiscal monitoring report: “Managing Public Wealth”.
The first is that, according to IMF economists and measurements gleaned from their global survey, privatisation of public properties is always a sure-fire loss-maker.
Contrast this with Fine Gael’s eagerness to privatise everything as the main plank of fiscal management.
The IMF conclusion was arrived at by using a different approach than that normally used in order to measure a nation’s wealth.
Rather than simply looking at income versus outgoings, the new approach uses a balance-sheet method, taking assets into account; publicly owned bodies and natural resources.
The problem identified by the IMF under the old approach was that it invited governments to focus on debt rather than taking a wider assessment of a nation’s wealth.
The report says:
“Balance sheet strength is not an end in itself, but rather a tool to support the objectives of public policy. The long-term aim of government is not to maximize net worth, but to provide goods and services to its citizens and possibly to create a buffer against uncertainty about the future. Current net worth should be seen in this context.”
Notice that in this assessment, the citizenry in and of themselves are also considered to have a net worth value.
Contrast this with the results of privatisation policy as they have impacted on health and welfare in Ireland during austerity. The casualties speak for themselves.
There may be a visible and measurable short-term gain in privatising public utilities for instance, creating the kind of figure-happy stats that Fine Gael rush to press with, but the overall value of national assets will be naturally reduced.
It’s a bit like burning the furniture to keep the fire going and pointing at the blazing fire and exclaiming, “Are you all warm now!”
The IMF report goes on:
“Similarly, cutting back maintenance expenditure reduces the deficit and lowers debt, but also reduces the value of infrastructure assets, which could cost more in the long term.”
So, cutting public spending and services and contracting out to private concerns will, as many people have already worked out, cost more in the end.
Though again the initial figures will look “nice”. Until, that is, the private contractor settles in and nails everyone to the wall with a price hike, slyly cutting level of service while they’re at it to maximize profits. Before you know it, you’re paying dearly for minimal or even no service.
And you’re stuck with it because the cost of restoring the original public service is prohibitive.
The UK Independent, reporting on this fresh approach by the IMF, said that the UK had
“…undergone one of the most drastic privatisations of any economy since the early 1980s…incentivising departments and local authorities to sell off assets to fund day-to-day spending under the premise that such an approach is necessary to cut the deficit…”
This is a similar approach to the one Fine Gael-led governments have been taking to balancing the books.
The IMF however have now contradicted this approach, warning that focusing on debt “misses large swaths of government activity and can fall victim to illusory fiscal practices”.
… that serve two functions: one, it provides conservative government with selective short-term figures that look like positive gains; and two, it delivers future profits of public assets into private hands.
Eamonn Kelly is a freelance journalist