Category: Archive

Dublin Report Rush to privatization is creating an island of capitalists

February 16, 2011

By Staff Reporter

By John Kelly

Since he became taoiseach, Bertie Ahern, the man whom Charles Haughey once described as being more "devious" than them all, has shown a sure hand in achieving something that Margaret Thatcher failed to do.

Without causing hardly a public ripple, he has slipped through legislation that has opened the door to privatization of Ireland’s semi-state bodies. Such a move would have caused major political strife just a few years ago. But Ahern has managed to do it while also keeping the public on his side.

The majority of Irish people are now quickly becoming avid capitalists. They are shareholders. Those who had a few bob in the bank, or could talk a willing manager into providing a copper-fastened loan, have made profits ranging from 20 percent to as high as 36 percent on the recent Telecom Eireann share flotation.

The new shareholders are happily awaiting the day when their telephone and communications company, Telecom Eireann, once noted for the highest charges and poorest service in Europe, will link up with a multinational, most likely a British or American company, thus perhaps doubling their share prices.

So much for principles in the land where the Celtic Tiger now roams. There was a time when Ireland was noted for its emphasis on state-owned companies that jealously guarded their monopolies against all potential private competitors.

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What we are now experiencing is a rush to privatization, the same sort of rush that almost brought the UK to its knees with a full-blown miner’s strike.

The Tory government Thatcher headed won the fight at a price the party still pays in the electoral hustings. It also helped to trigger a huge economic crisis. One of the riskiest innovations Thatcher introduced was to encourage British householders living in rented public accommodation, provided by city corporations and local councils, to purchase their dwellings at cut-rate prices.

While the move was not solely responsible for the huge dislocation of the market, putting homes out of the reach of all but those on the highest incomes, it was a serious factor in the consequent roller-coaster slump that then stripped the homes of their value almost overnight. Some suspect that the same pattern will repeat itself in Ireland.

Homes, especially in the Dublin center city area and certain suburbs, have become extraordinarily expensive. Values have increased at almost a steady 30 percent per annum for almost all of the decade. The result is that young Irish professional couples with combined incomes exceeding £40,000, people who would otherwise be generally considered as well-off, simply cannot afford to buy a home.

Until quite recently, rented accommodation was not the norm in Ireland. Local authorities, county council, urban councils and their big city counterparts built houses for those who were clearly in need. Others, the vast majority, could readily afford the deposits necessary to secure mortgages from building societies usually on the basis of secure employment.

Security is becoming a word of the past in the modern Ireland and the day of the guaranteed pensionable job has all but vanished.

Young Irish people are becoming accustomed to the concept of renting, rather than owning. Those who do wish to own can find themselves paying anything from £120,000 to £200,000 plus for tiny, two bedroom apartments.

There has been major social change as the result. Couples, forced to be money conscious, live together rather than marry, desperately trying to raise the money for the dream house that seems to stretch further and further beyond their reach. Into the midst of this unsettled and unpredictable economy has come Ahern and privatization.

The Telecom Eireann share flotation slipped through without a discernible growl from trade unions, even those that represent public-sector workers. Traditionally, and understandably, those powerful unions, which retain a grip on the Irish Congress of Trade Unions, representing the great mass of Irish workers, were jealously protective of public-sector jobs. Their British counterparts were the bitterest opponents of Margaret Thatcher’s privatization. To date, there has not even been a squeak of protest in Ireland.

Now the government has embarked on the privatization of two major Irish public companies, Aer Lingus and Aer Rianta, the organization responsible for managing domestic airports.

Both are to be floated publicly in the same way as Telecom Eireann. The ultimate aim is also the same, a merger with a bigger, more powerful multinational. Presumably, the new generation of Irish shareholders will be only too happy to join in the subsequent profiteering. The only noise we have heard has come from the direction of Shannon Airport. Even that has been muted, as though the workers there feel that they are on a hiding to nothing.

All of the stuffing seems to have been knocked out of them since the government decided to end its insistence on ensuring that Shannon no longer had to be the final port of call for all domestic trans-Atlantic flights. But now, there is alarm at the plan to float Aer Lingus to allow it to merge, most likely with the joint One World, the alliance between American Airlines and British Airways. Consultants for Aer Lingus have agreed that the company will require an urgent capital injection, more than £150 million-plus next year, if it to keep itself airborne.

Mary O’Rourke, who perhaps should be styled the minister for privatization rather than the minister for enterprise, has announced that the government will obtain this funding through a public offering of the shares.

While it will not be in the same league as Telecom Eireann, which floated more than £3 billion worth of shares, the Aer Lingus flotation is sure to generate huge public interest. More Irish people will become full-blown capitalists as the result. Some pessimistic Shannon estimates are that passenger movements could drop from 600,000 to 180,000. In the long term, a trend like that would spell curtains.

Yet – wait for it – the unions have backed the plan by Ireland’s answer to Maggie Thatcher. Verily, things have changed a lot in the old country.

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