Making policy: insights from the 1950s
Research by Trinity Business School’s Frank Barry has challenged public servants to recover their historic attitude of independence and challenge.
Economic historian Professor Frank Barry has identified three key weaknesses in the Central Bank, the Financial Regulator and the Department of Finance leading up to the current crisis: a tendency towards ‘group think’; an unwillingness or failure to challenge each other’s analysis and conclusions; and an attitude of deference and diffidence.
“Each of these weaknesses reduces the scope for the clash of ideas that drives progress,” he commented on his paper on politicians, bureaucracy and decision-making when Ireland’s economy was transitioning in the 1950s.
TK Whitaker has recalled how civil servants gave their views on ministerial proposals “fearlessly, critically, honestly” but then carried out the Minister’s decisions “as loyally and efficiently as you could.”
Barry does not blame the bureaucracy for the Celtic Tiger’s errors – some of which were driven by ministers – and also recognises the value of a meritocratic Civil Service, which is missing in many countries.
He recalls how Central Bank Governor Joseph Brennan resigned in 1953 rather than retract its views on the economic situation, after intense political criticism. The Department of Finance and the Department of Industry and Commerce were respectively restrictive and expansionist on economic policy. In the industry and commerce brief, this translated into economic protectionism (defended by Fianna Fáil ministers) but also policy innovation.
Export profits tax relief was first proposed by that department in 1947 but was “defeated” by the Department of Finance and the Revenue Commissioners who saw it as a windfall for existing exporters and setting a potential precedent for other forms of special treatment. It then enlisted the support of newly formed public bodies (including the IDA) and eventually persuaded Taoiseach John Costello to overrule finance in 1956.
Civil servants were uneasy with the idea of private sector representatives sitting on the IDA board but the idea found favour with Costello; it was originally proposed by Dublin businessman Eustace Shott. Independence from government allowed the board to ignore Seán Lemass’ request for a more protectionist policy.
By 1957, TK Whitaker was urging “some independent thinking” at the Department of Finance where he was Secretary-General. Two years later, Whitaker had been won over to the pro-inward investment side of the argument and was backing membership of the new European Free Trade Association (EFTA). His counterpart in the Department of Industry and Commerce, JCB MacCarthy, feared that increased competition from other European economies would be highly damaging. The argument was resolved when the Department of Agriculture questioned EFTA membership as it could give other European farmers a level playing field when trading with Britain. Whitaker accepted the department’s view.
While debates within the Civil Service were vigorous, external advice was usually shunned. The Department of Finance and Department of Foreign Affairs joined forces to oppose the appointment of a special adviser, Louis Smith, in 1948. Smith later went on to become Professor of Economics at UCD.
Barry suggests that ‘group think’ can be overcome by employing external economists and exposing commissioned research to peer review prior to publication. A ‘regulator of financial regulators’ would encourage a greater degree of challenge in the conversations and correspondence between public bodies.
Barry finds that the independence of the 1950s bureaucracy “stands in sharp contrast to the behaviour of its successors” and explains this by referring to Charles Haughey’s “intimidatory tactics” and the appointment of senior civil servants by ministers.
He concludes by suggesting that the traditional reliance on generalists is outdated due to the increasing complexity of the modern economy. However, simply employing more professional economists would not resolve the problem and, in his view, a paradigm shift in culture is needed.