1 Introduction 2 Katzenstein's World
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Notes 1 Introduction 1. In June 2013, taped conversations between top executives of Anglo Irish Bank were revealed in the media. In one exchange, the executives candidly admit asking for 7 billion from the Financial Regulatory Authority despite knowing that the needs of their troubled bank were much larger. Had truth been told the authorities might have let the bank fail. Moreover, the bankers appeared to have abused the guarantee by chasing deposits from the United Kingdom and Germany. These revelations, in their content and tone, caused enormous anger and damaged Ireland’s diplomatic campaign to secure an EU recapitalisation of the banking system via the European Stability Mechanism. 2. The phrase ‘Celtic Tiger’ was coined in 1994 by Kevin Gardiner of US invest- ment bank Morgan Stanley, who suggested that Ireland’s high growth rates were comparable to those of the East Asian ‘Tigers’ (Smith, 2005:37). 3. The 1990s saw rapid growth in the indigenous software industry driven largely by people outside the business establishment who had gained experienced in the high-tech multinational corporation sector (O’Riain, 2004). 4. Perhaps the two most egregious examples of this are (i) Irish banks in 2003 borrowed the equivalent of 10 per cent of GPD from foreign banks to fuel a credit expansion, and by 2008 it was the equivalent of 60 per cent of GDP (Honohan, 2009). (ii) Between 2001 and 2008, capital stock expanded by 157 per cent; most of it went into property, with only 14 per cent went into productive investment. 5. The countries used for comparison purposes by Mjoset were Austria, Denmark, Finland, Sweden and Switzerland (Mjoset, 1992:5). 6. The original terms of reference included a second stage of investigation intended to achieve two things: First, the analysis would move towards a causal account based on comparative reasoning, and, second, specific issues for in-depth analysis would be identified. This second stage could not be completed within the time allowed (Mjoset, 1992:5). 7. The States included were Sweden, Norway, Denmark, the Netherlands, Belgium, Austria and Switzerland (Katzenstein, 1985:21). 8. Hemerijck (2013:44) also suggests that evolving cognitive understanding of policy elites, changing beliefs of politicians and changing normative orien- tations with respect to social justice issues can be important factors affecting welfare state reform. 2 Katzenstein’s World 1. Nationalism is a common feature in the respective histories of Ireland and Finland. Mjoset (1992:61) argues that among the smaller European countries Finland is the only one that experienced a nationalist mobilisation similar to Ireland to liberate itself from Russia. 206 Notes 207 2. Interview 28 September 2012. 3. Interview 27 September 2012. 4. Interview 28 September 2012. 5. Interview 22 May 2012. 6. The Danish manufacturing sector is very diverse. In 1991, only about 100 firms employed more than 500 people. Due to the lack of indigenous raw materials, industry is mostly confined to reprocessing and light indus- try. The dominant sectors were food processing, chemicals, furniture and engineering. The value of industrial goods sold in 1991 was equivalent to $64.8 billion (Economist Intelligence Unit, 1993/4). 7. Interview 12 September 2012. 8. Smaller and medium enterprises are represented by MKB (the literal trans- lation of SME). The overall organisation rate of employers is about 85 per cent. On the union side there is also the Dutch Christian Unions (CNV) and a smaller union for medium and higher skilled workers (De Unie/MHP). Union density was 22 per cent in 2006. (Houwing and Vandaele, 2011:28). 9. Interview 12 September 2012. 10. The author is indebted to Mr Padraig O’hUiginn, former Secretary General of the Department of an Taoiseach for providing him with a copy of this paper in December 2010. 11. A Constitutional Referendum on the abolition of the Seanad on 4 October 2013 was narrowly rejected. 3 1994–2001: The Age of Employment Miracles 1. The purpose of the Act was to protect depositors’ money against specula- tive investment activity by banks. It was repealed in the US Senate by the Gramm-Leach-Bliley Act in 1999. The banking industry had been lobbying for the repeal since the 1980s. Ultimately this contributed to the 2008 crisis. 2. Interview 28 September 2012. 3. Interview 28 September 2012. 4. Interview 28 September 2012. 5. Interview 27 September 2012. 6. Interview 26 September 2012. 7. Interview 21 May 2012. 8. Interview 22 May 2012. 9. Interviews 21 and 22 May 2012. 10. Interview 22 May 2012. 11. Interview 22 May 2012. 12. In 1993 Ireland expected support from Germany for the Irish Punt within the ERM against speculative attacks. It was not forthcoming and Ireland had to devalue by 10 per cent. However, Denmark was supported (Connolly, 1995). 13. The President of FNV Trade Union Confederation, Agnes Jongerius, did not agree. She argued that workers and employers were paying the bill through their social insurance contributions. She referred to her own experience of restructuring the inland shipping industry and said she had no moral qualms about using disability to cover people who might have lost their jobs after 30 years. But she acknowledged that high insurance contributions made labour 208 Notes costs very high. The issue was one of sustainability rather than morality (interview, 12 September 2012). PvdA Chairman, Ruud Vreeman, added the important point that the restructuring concerned older industries predom- inantly and that the disability allowance was higher than unemployment benefit (interview, 12 September 2012). 14. Prior to the initiation of reforms, 27 per cent of Dutch citizens were in receipt of a transfer payment of some sort (Esping-Andersen, 1996; Lindert, 2007; Visser and Hemerijck, 1997). 15. Interview 12 September 2012. 16. What happened in the Netherlands with the emergence of a Temporary Agency Workers’ employment placement industry almost certainly informed the EU Lisbon Strategy and the eventual emergence of an Agency Workers’ Directive. Wim Kok was a major player in that process. 17. Interview 12 September 2012. 18. Interview 12 September 2012. 19. Interview 12 September 2012. 20. Interview 11 September 2012. 21. Interview 12 September 2012. 22. Interview 12 September 2012. 23. Interview 12 September 2012. 24. Interview 12 September 2012. 25. Interview 11 September 2012. 26. According to O’Sullivan (2006), this was a major embarrassment to Ireland’s policy making community who had tried to be exemplary members of the ERM. He observes that Mr Trichet (subsequently President of ECB) was indif- ferent to Ireland’s plight. Interestingly, the Bundesbank intervened at that time to support Denmark’s currency. Former Secretary of the Department of Finance, Tom Considine, recalls how this period was when the power of markets in a world of free movement of capital manifested itself. He was struck by the fact that Britain had available a fund of £20 billion Sterling to defend the currency but this was swept aside by markets. Asked about the failure of Germany to come to the aid of the Punt when they had supported the Danish Krone, he opined that this could be explained by the realisa- tion that Denmark was a lot more stable – it would not have been affected by movements in an adjacent currency – whereas Ireland was exposed to Sterling. He posed the question; how would the Bundesbank know that Sterling might not drop again and expose the Punt to further speculative attack? If they had tried to help Ireland there was no knowing how far and for how long they would have had to back to Punt (interviewed, 24 May 2012). 27. Interview 13 January 2012. 4 2001–2008: European Integration Intensifies 1. Lindgren (2011:62) is careful to point out that this trend towards corpo- rate governance liberalisation should not be overstated. It has not made much impact on the dispersion of ownership. Ownership is still quite heavily concentrated in family-owned firms. Notes 209 2. This phenomenon was identified also in the multinational sector in Ireland by McGuinness et al. (2010) who showed how the FDI sector was a significant beneficiary of the various Social Partnership agreements. 3. In 1993 Danish workers were entitled to receive 90 per cent of their wages prior to unemployment. This was subject to a ceiling of 162,000 DKK (21,800 Euro). 4. In 2005 Parliament decided that all employees should have a statutory right to occupational pensions (Mailand, 2011:87). 5. Interview 22 May 2012. 6. Interview 22 May 2012. 7. Interview 22 May 2012. 8. Interview 12 September 2012. 9. Interview 11 September 2012. 10. An employment rate of 74 per cent in 2007 was in line with Nordic achievements but a very high proportion of jobs (60 per cent) are part-time (Houwing and Vandaele, 2011:135). 11. According to the Minister for Finance, writing in The Financial Times on 24 November 2010 Ireland’s productivity in 2010 was the second highest in the EU. The Central Statistics Office (2010) also state that Ireland’s productiv- ity is 30 per cent above the EU average. However, O’Sullivan (2006:68) draws attention to the divergence in productivity between indigenous and foreign transnational corporations (TNCs). The former cannot match the achieve- ments of the latter. To compound the problem he asserts that transfer pricing for tax purposes makes it look as if the amount of added value to goods pro- duced in Ireland by TNCs is greater than it really is – hence productivity is overstated. 12. The most notable involved a dispute in 2005 in which the Irish Ferries Com- pany replaced its Irish crew with non-nationals earning half the minimum wage. 13. Legislative commitments to regulate the labour market were not fully hon- oured.