Cassandra Voices

Tag: economics

  • Public Intellectuals: Leonardo Sciascia

    Corruption is worse than prostitution; the latter might endanger the morals of an individual. The former invariably endangers the entire country.
    Karl Krauss

    Leonardo Sciascia or Shaza was an Italian or rather Sicilian political journalist, an elected radical member of the Italian parliament and the most prominent anti-mafia and indeed anti-corruption critic of his time. He was also a voice of moderation in a sea of extremism in the 1970s and 1980s.

    All this features in his famous detective novels which are really anti-detective novels or works of political observation. Along with his masterful analysis of the assassination by the Red Brigade of the Christian Democrat conciliator and former Prime Minister Aldo Moron – a book not unlike the equally masterful News of a Kidnapping (1997) by Garcia Marquez concerning Colombia in the era of Escobar – his oeuvre offers a sustained critique of Italian and Sicilian political and cultural life.

    This reflects the complex interstices of corruption and collusion between extreme-right-wing Catholicism, organised crime and the shadowy self-protection syndicates of big business, politics, as well as a malevolent state bureaucracy deeply embedded in all of the aforementioned. His books also demonstrate the lethal effects of innuendo, smoke, mirrors and the nefarious rumour mill.

    You could cut and paste these, change the names, and apply them to Ireland, the U.K. or U.S. or any country where extreme neo-liberalism or Christian evangelism holds sway.

    Sciascia was a specialist on the mafia, and he demonstrated how they kill and destroy. First, they isolate and disempower and then they denigrate. Often, demonising or scapegoating their prey. And those who seek to investigate them – such as the anti-corruption Sicilian Judge Giovanni Falcone – who act on principle are destroyed. This is exquisitely detailed in Equal Danger (1971), his best book.

    Illustrious Corpses

    In Sciascia’s fiction, it is the detective, not the murderer, who is isolated and suspected, suffering the same fate as whistleblowers around the world today. It is a post-truth doppelganger of good and evil. Thus, those who oppose corruption in the words of the film adaptation of his book become Illustrious Corpses [1976].

    In fact, his current heir, as the anti-corruption conscience of Italian letters, Robert Saviona was placed under police protection after his exposure of the Neapolitan mafia in Gomorrah (2016), and his fabulous text Zero Zero Zero (2013), which was made into a T.V. series that highlights how the practices and modes of organisation of the drugs trade are mirrored in corporate organisation, and vice versa. The same brutality. The same hierarchical structure. The same partnerships.

    Mr Saviona was recently prosecuted by Meloni for calling her a bastard over her immigration views. A cautionary tale perhaps for the revival of the hate crimes bill in Ireland, and our anti-immigrant stance? Who would dare call Jim O’Callaghan a bastard?  I doubt he would sanction a prosecution, but who knows as the centre-right moves even further to the right, just as Starmer has the taken the so-called Labour Party.

    In Ireland, anti-mafia or anti-corruption activists face an uphill not impossible struggle in our present universe. Witness the case of Jonathan Sugerman.

    In a world of statist and corporate authoritarianism, what Eisenhower historically called (in interview with the late great Walter Cronkite at the end of his Presidency) the military industrial complex poses an existential threat to humanity. Meanwhile, on X, Elon Musk perversely uses freedom of speech to undermine the civic space.

    Indeed, Habermas‘ ideal of communicative action is poisoned by misinformation undermining the democratic rights and entitlements of all by pandering to far right-wing extremists and racists and WOK simpletons.

    The film Illustrious Corpses. (1976) begins with the murder of Investigating Judge Vargas in Palermo, amidst a climate of demonstrations, strikes and political tension between the Left under a Christian Democratic government. The detective Rogas is assigned to investigate the case and no sooner has he started then two more judges are murdered.

    He is encouraged ‘not to forage after gossip,’ but to trail the ‘crazy lunatic who for no reason whatsoever is going about murdering judges.’  He focuses mistakenly on a suspect leftist wrongfully convicted by the judges. Whereupon he is advised by the President of the Supreme Court, played in sinister fashion by Max van Sydow, that the court is incapable of error.

    At a party he is advised there will be a coalition of the Communists and the Christian Democrats, and that the murder of the judges as well as Rogas’s investigations were causing tensions, and justify the prosecution of the far-left groups. Rogas also discovers that his suspect, Cres, is present at the party. Rogas meets with the Secretary-General of the Communist Party in a museum. Both are killed.  And the murder is blamed on the innocent detective.

    The film ends with the dictum: ‘The people must never know the truth?’

    Giovanni Falcone and Paolo Borsellino in March 1992. Two assassinated judges.

    Equal Danger

    It is this kind of disrespect for the truth that has led us collectively, in my view, into the present quagmire. The gatekeepers of the system must be above reproach, and the exposure of corruption may lead – as it did to the Italian judge Falcone – assassination by the mafia, although in more ‘civilised’ countries this may consist of a fabricated charge, or some form of propaganda-by-omission where a critic of government policy is no-platformed in the media.

    The salient message of the book Equal Danger is that the system breaks down when one of the canonical features of the Rule of Law is eradicated. This includes when the gatekeepers are no longer independent, as Lord Bingham suggested in his canonical text on The Rule of Law.

    At the core of the ideal of the Rule of Law, the legendary Law Lord and jurist Bingham, suggests is the idea ‘that ministers and public officers at all levels must exercise the powers conferred on them reasonably, in good faith, for the purpose for which the powers were conferred, and without exceeding the limits of such powers.’ Sadly those conditions have been undermined in many jurisdictions.

    Ironically in the end, Sciascia attacked crusading judges for putting civil rights at stake in an article, while on his deathbed, that irredeemably punctured his reputation: attacking Falcone as a celebrity judge which was ludicrous and frankly in bad taste.

    First Edition.

    Anomie

    Another Sciascia theme, particularly evident in his most famous text, The Day of the Owl (1961)’ is the Sicilian trait of anomie or indifference, implying that pursuit of principle, justice and the truth are all a waste of time.

    In controlled societies, such as Italy or Ireland, Sciascia’s books demonstrate the lethal effects of innuendo, smoke, mirrors and the nefarious rumour mill, along with the collective trivialisation that amounts to a resigned admission that the victims of crime had it coming to them in some obscure way. This betrays a latent desire for yourself not to go the same way. What C.S. Jung referred to as the shadow.

    The Day of the Owl also brilliantly shows that to succeed in a mafiosi culture you must pay the protection money or pizzo; just as in Mario Puzo’ s vastly underrated The Godfather (1969) you must kiss Don Corleone’s ass. An understanding of patronage and feudalism remains crucial in our time.

    That book also canvasses another theme of distraction central to our age: the playbook of the false sex allegation. The virtuous are undermined by the crime passional, the allegation of sexual impropriety, including child abuse. Those who carry out the task appear sanctimonious and mask political persecution, often framing their victims. A favourable appointment follows. Robespierre would approve.

    In the context of false allegations Roy Cohn, Trumps lawyer, was barely twenty-four years old when he played perhaps the central role in the Rosenberg’s’ espionage trial, relentlessly and vindictively lobbying the judge for their execution. Both were found guilty of passing information to the Soviet Union and electrocuted at Singh Sing in 1953.

    It was quite clear that this was utterly malicious in that he knew Ethel Rosenberg was innocent but used forged documents, perjured evidence and the art of persuasion – in that he believed her indictment would force Julian Rosenberg to reveal his espionage sources.

    Well whistleblowers and anyone accused of sedition, espionage or treason also come from the fascist playbook. That is now Trumps agenda for even academics and students.

    And people forget. Memories fade. The shadow play moves on. Thus, Sciascia a proper Sicilian communist has much to say about the rule of law and not just in Italy. His work is crucially relevant to our time.

    Roberto Calvi

    Roberto Calvi

    Close to my Chambers is Blackfriars Bridge where Roberto Calvi the former head of the Vatican bank was found dangling. Sciascia’s acidic response was: ‘Why was a good mystery preferred to finding out the truth?’

    But the truth depends on memory, pattern recognition and a sense of history, and as Milan Kundera – as good an exposer of corruption as Sciascia in his way – remarked, the first way of liquidating a people is to destroy memory, or the lessons of history.

    Thus, in contemporary Italy the mayor of Montefalco banned cricket in a village played by immigrants near Joycean Trieste, forgetting that AC Milan was founded as a cricket club. And lest we forget that in the jaw-droppingly beautiful village of Sant Angelo in Ischia Italy gave refuge to one of the great artists and enemy of Pinochet, the Chilean Pablo Neruda, though the film Il Postino (1994) fictionally suggests it was nearby Procida!

    Thus, as I enthused about the country on a train from Perugia, after viewing the Fra Angelica painting Resurrection, an Italian lawyer said yes but what about the government? He reminded me not just about Berlusconi, but Andreotti so closely connected with the corruption I have referred to – Il Divo (2008) to reference Sorentino’s film about him. Surviving into his nineties, he was the reptile like crystallisation of the world’s corruption. A man who sent people to their death via his associations with the mafia, but a pious Catholic. Sound familiar?

    Now let us pave a path for a new resurrection to create a better world based on the Rule of Law and moderation, whether secular or Christian. Let us wonder if the good man Jesus would stand for what has been done and is being done in his name.

    The message of our sceptical and brilliant communist Sicilian friend is most relevant to this age. Keep to the truth and let the heaven’s fall.

    Title Image: Paolo Borsellino with Leonardo Sciascia (Creative Commons).

  • Public Intellectuals: Charles Darwin

    In a court case in Kent recently I detoured to the small village of Down near Orpington where I had the privilege of visiting the Home of Charles Darwin. This is the residence where he wrote both The Voyage of The Beagle (1839) and The Origin of The Species (1859). It is a symptomatic of the controversy his name still arouses that my avowedly religious taxi driver expressed scepticism as to why anyone would entertain a trip to visit the house of The Great Satan, and proceeded to quiz me as to my belief in the bible.

    In fact, Darwin publicly indicated one could be both a theist and an evolutionist in 1879. Shortly before shuffling off this mortal coil he defined his position as an agnostic.

    Since these were not times an atheist would be put to death or socially shunned for declaring themselves there was no overwhelming need to abide by Victorian convention. Further, as is remarkably clear from the visit, he and his family were hugely influential and well connected. They were creatures of the enlightenment. Charles Darwin was a kind of evolutionary apotheosis of his clan.

    The crucial point to appreciate – as I explained to the taxi driver who maintained his vain attempts at spiritual conversion – is that Darwin is and was right. It remains one of the few works of science that has stood the test of time. The qualifier, an idea as old as Lamarck the spiritual father of genetics, is that the environment leads to genetic alterations and random mutations that generate the gene sequence for natural selection to act. Thus, our environment can influence DNA by altering phenotypic and genotypic variation. This is called epigenetics. Nature. Nurture. Genetics. But the citadel stands.

    His ideas evolved gradually. And common design was very much part of the reflection and collection exercise that was The Voyage of The Beagle, which occurred in spite of the reservations of his wealthy father, who funded the trip. On returning he was lionised, becoming a national hero. That almost five-year trip – particularly his observation on the different types of tortoises and mockingbirds and how certain species became extinct – led to the theory of evolution and the notion of the transition of the species. Thus, The Voyage nurtured the fundamental ideas, based on empirical findings of live specimens and fossils in South America.

    He published extensively on his return, but there is a paradigm shift in 1837 In July, with the development of his famous evolutionary drawing The Tree of Life, immortalising his notebook, which I viewed at first hand. The tree is prefaced in his bold handwriting with the words: I THINK.

    Watercolour by the Beagle’s artist Conrad Martens,

    Cartesian

    Well Descartes’ cogito ergo sum is the foundation of all human elevation. Centuries later, freedom of thought was central to Clarence Darrow’s famous speech in defence of Darwinism the Scopes Trial of 1925. Such thought distinguishes us, he said, from the sponge or the amoeba. In defending Darwin Darrow said:

    Can’t you understand? That if you take a law like evolution and you make it a crime to teach it in the public schools, tomorrow you can make it a crime to teach it in the private schools? In addition, tomorrow you may make it a crime to read about it. Soon you may ban books and newspapers. Then you may turn Catholic against Protestant, and Protestant against Protestant, and try to foist your own religion upon the mind of man. If you can do one, you can do the other. Because fanaticism and ignorance are forever busy and needs feeding. And soon, your Honor, with banners flying and with drums beating we will be marching backward, BACKWARD, through the glorious ages of that Sixteenth Century when bigots burned the man who dared bring enlightenment and intelligence to the human mind!

    That seems like a description of what is being done in America and elsewhere in God’s name and, indeed, in the name of secular political correctness.

    After many papers and an exhaustive study of barnacles, Darwin developed the crucial idea of a homologue or variation, for it is variation and adaption that are crucial to evolution. His greatest work was only ultimately published after his fellow scientist Russel wrote to him with the same idea. He did not want to be gazumped, intellectually speaking. This led to a joint paper shortly followed by the bestselling masterwork, The Origin of The Species, which has became a secular bible.

    The book refutes completely creationism, the beautiful poetry of genesis as Darrow called it in The Scopes Trial that the world was created in seven days. Darwin was clearly right, but we are no longer in a secular age. All of this might have seemed trite and taken as accepted fact, save for the recrudescence of evangelical Christianity worldwide, which is creating a new auto de fe and inversion of the truth.

    Harvard Yard.

    The Trump administration is now defunding the academy. Harvard, in a last gasp of American liberalism, is fighting back. Yet its corporate sponsors resile. We are entering a new dark age. In the list of prohibited books of the future I expect The Origin of The Species to appear every bit as much as Nabokov’s Lolita or Joyce’s Ulysses. In the legendary American science fiction writer Ray Bradburys novel Fahrenheit 451 books are burned by firemen. Now we have a social media and controlled media auto de fe,

    Regarding the theory of evolution, it seems that the initial idea may have in genesis in his grandfather Erasmus. In 1794 his polymath grandfather book Zoonaamia made the same point, so the idea was implanted early:

    Would it be too bold to imagine that all warm-blooded animals have arisen from one living filament which the great first cause with animality with power of acquiring new parts, attended with new propensities …….and of delivering down these improvements by generation to its posterity.

    In fact, the entire family, represented by a tree on the wall in the museum, had a significant influence. Another grandfather, Josiah Wedgewood was one of the pioneers of the Industrial Revolution.

    The Darwin Museum is also littered with quotations, including the most obviously true about how one singular fact, or mutation, can lead to survival or the decline of a species, or an individual. In that respect let us confront the gorgons head and assess whether he bears responsibility for what has been done in his name. By that I mean Social Darwinism, the most centrally awful vogueish evil idea of our age.

    Erasmus Darwin.

    Social Darwinism

    Darwin drew a crisp distinction between his ideas as a scientist and social commentator. He never expressed the idea that evolutionary theory was a good idea for social policy. He also argued particularly in The Descent of Man that feelings, or social instincts, such as sympathy for one’s fellow man, and moral sentiments, were intrinsic to society. This is an important, if scientifically detached, concession

    On the other hand, he associated with various people including his cousin Martineau who were proponents of Malthusianism, the strict regulation of breeding and the need to confine the unfit in prisons and insane asylums. Swifts earlier A Modest Proposal (1729) demonstrates the absurd cruelty of these ideas.

    Social Darwinist ideas led the American business caste, including the Rockefellers and the Carnegies, to advocate for the triumph of the fittest, and apply selection criteria and concepts of struggle to the world of business, despising the weak and the defenceless. Richard Hofstadter’s famous 1944 book Social Darwinism in American Thought actually coined the phrase Social Darwinism. He used it to attack unregulated greed, oligarchical capital and racism. He also, in a subsequent book, equated it with populist ignorance. This reaches an apogee of awfulness with the quasi-scientific ideas of Ayn Rand, in books such as The Fountainhead (1943).

    Darwin’s half cousin friend, the polymath Francis Galton was the founder of eugenics, and in effect he argued for the coupling of superior minds. He also came perilously close to condoning genocide in arguing for the extinction of inferior races, though he did not consider other races as intrinsically degenerate. He believed immigration was needed and welcome, depending of course on the immigrant. The sense of falsetto superiority is clearly apparent. Such nonsense led to even the legendary socialist judge Oliver Wendell Holmes in Buck v, Bell (1921) – who was cited in the defence in the Nuremberg Trials – upholding the compulsory sterilisation of a mental defective, saying that three generations of imbeciles are quite enough.

    Darwin himself was quite specific that his theory of evolution did not apply to social policy and was undesirable. The Nazis endorsed social Darwinism One key high command proponent Alfred Rosenberg was hanged at Nuremberg.

    The Decline of the West

    Perhaps the most influential text of Social Darwinism came with Oswald Spengler’s The Decline of the West (1926), which suggested that much of the blame for the decline of European civilisation could be blamed on the Slavic and other ‘degenerate’ races.

    The counterpoint of the argument was that Aryan blue blood, whether Germanic or Anglo Saxon, was the emblem of purity and that the other races had corrupted the gene pool. Spengler influenced Hitler, and the snowball of fascism led to the extermination of those undesirable races and the nightmare of the Holocaust.

    Such matters were hitherto of historic concern, which until recently seemed like a distant epoch, but regrettably this form of Social Darwinism is back in fashion, as a new corporatised Shoah of economic liquidation and segmentation beckons, accentuated by the effect of lockdowns and the rise of the far right. In an age of chaos and uncertainty, the power grab of the strongman is evident for all to see.

    Intellectual ideas that gain traction are not necessarily good ideas. Social Darwinism and Malthusian ideas are back in vogue. But do not blame Charles Darwin at least exclusively.

    If forced or available for comment, what would he say I wonder. A contemporary scientist, the Italian physicist Carlo Rovelli, in Seven Brief Lessons on Physics wrote:

    I believe our species will not last long. It does not seem to be made of the stuff that has allowed the turtle, for example, to continue to exist unchanged for hundreds of millions of years; for hundreds of times longer, that is, than we have even been in existence. We belong to a short-lived genus of species. All our cousins are already extinct. What is more, we do damage. The brutal climate and environmental changes which we have triggered are unlikely to spare us. For the Earth they may turn out to be a small irrelevant blip, but I do not think that we will outlast them unscathed – especially since public and political opinion prefers to ignore the dangers which we are running, hiding our heads in the sand. We are the only species on Earth to be conscious of the inevitability of our individual mortality. I fear soon we shall also have to become the only species that will knowingly watch the coming of its own collective demise, or at least the demise of its civilisation.

    The late great Pope Francis’s experiences in the barrios of Buenos Aires appears to have shaped an empathy towards those afflicted with extreme poverty and subjected to degradation. He preached tolerance, engagement and social and economic justice.  Let us hope the liberation theology that is intrinsic in Francis’s legacy is not tainted by the dark money of the Vatican. He died several hours after meeting Mr Vance. Darwin would, I suspect, also have approved of Pope Francis but felt the ideas of Mr Vance deeply inappropriate.

  • Putting the ‘Public’ Back into Enterprise

    Part I of this series examined Mario Draghi’s recent proposals for reforming the E.U.’s economic model. It explained how one key tool was missing from his new industrial policy toolkit. That missing tool was public enterprise. Here in part II, we take a closer look at commercial State-Owned Enterprises (SOEs). Particularly regarding their role at times of market failure, and how they can be used to channel investment into promising new sectors, with positive spillovers.

    The role of SOEs as drivers of Irish industrial policy may seem like a thing of the past, or at least very much peripheral to Ireland’s tax-driven industrial strategy. However, a new debate is starting to take root. Although long overdue, it should be welcomed, particularly when we consider different options for how the €14 billion Apple tax receipts should be invested.

    Note the government’s proposal to use some of the funds for their shared equity scheme is exactly the opposite of what’s needed.

    A New Debate or a New Departure?

    As part of their pre-election campaigning the various Irish parties of the broad left offered different public enterprise solutions for various challenges.

    For instance, both People Before Profit and Labour called for the establishment of a new construction related SOE. There are differences in how each proposed it would operate in practice. Part III takes a closer look at these. It will also briefly touch on the Spanish government’s recent announcement that it’s to establish a new housing SOE, and ICTU’s call for the creation of ‘a new housing semi-state- Housing Ireland.’

    Sinn Féin in their election manifesto called for existing SOEs like the ESB to drastically increase the number of craft apprenticeship places they offer (electricians, plumbers, etc), to help address shortages of key skills and improve workforce planning. They’ve also called for €2.5 billion of the Apple money to be used by the state to take equity stakes in joint energy ventures undertaken by the ESB and private providers.

    The Social Democrats, for their part, called for an increase to Bord na Móna’s capacity to deliver large renewable energy projects (onshore and offshore wind). They also had Dr Rory Hearne elected as one of their new TDs, so it’s possible his previous research on a new national home-building agency could influence party policy in this respect.

    So, it’s clear that we’re noticing something of a shift away from a narrow (and reductive?) focus on tax and spend; toward a more ambitious and positive conception of the role of the state in helping to shape markets, and drive socio-economic outcomes.

    President Michael D. Higgins in a speech last year celebrating the 20th of anniversary of TASC highlighted the ‘dearth of progressive or heterodox policy debates’ over the last few decades. Something he rightly attributed to the ‘dominance of neoliberalism’ and its ‘economic orthodoxies’.

    Mainstream (neoclassical) economic theory says remarkably little about SOEs. This is despite their scale, scope, and importance in the history of economic development and industrialisation. In an Irish context, they have traditionally entered public consciousness at times of some proposed privatisation, or in reflection on the failures of past privatisations.

    It’s time our thinking evolved. Michéal Martin said the Irish left ‘doesn’t get our enterprise economy’. The problem is that there are many people who feel they aren’t ‘getting’ much out of it. Perhaps it’s time we put the ‘public’ back into enterprise.

    The Business of the State

    So, what’s the purpose of the state directly entering commercial activities via SOEs? The most common rationale is correcting market failure, and the OECD/EU provide several theoretical reasons:

    • The private sector’s not providing sufficient goods/services, which are deemed necessary.
    • The need to provide public goods (housing, health, education) which a free-market system won’t provide adequately.
    • The decision to become involved in an activity where the private sector overproduces certain undesirable good with negative externalities (e.g. pollution, carbon emissions)

    Other supportive arguments include the countercyclical function they can serve in terms of investment expenditures/employment during a downturn. Their ability to promote industrialisation by launching new industries that may have significant start-up costs and the requirement for long-term investments. Their use as vehicles for innovation, knowledge dissemination, and technological spillovers. Lastly, for national security reasons and to contend with monopolistic sectors.

    There’s no one size fits all model when it comes to SOEs. In practice there’s significant variation observed. There are commercial and non-commercial SOEs. They can be owned at the national level (e.g. Government Ministry), the sub-national level (municipal/local authority) or through some other entity (e.g. a sovereign wealth/development fund or a Central Bank).

    There’s different levels of ownership and control observed, ranging from full state ownership to a more limited shareholding. Some have shares privately held, with others having some equity traded publicly. The degree of control also varies from those directly answerable to a Minister/Department, to those subject in more indirect control. Part III returns to the variation in organisational structure in an Irish context.

    Despite the large-scale privatisations that have occurred with the ascendancy of neoliberalism, the relative importance of state ownership has increased in recent decades (OECD 2023). Data-driven research over the last quarter of a century has been somewhat limited, but we are currently seeing something of a resurgence.

    This is partly being driven by the ‘renewed interest’ in SOEs amongst policymakers (World Bank 2023). But also, by a multilateral institutional realisation that the footprint of the state in commercial activities is far larger than previously thought (figure 1).

    As the OECD (2023) notes, the number of SOEs in the list of top 500 global companies has tripled, and at the end of 2022 ‘the public sector held almost 11% of global market capitalisation of listed companies, amounting to $10.6 trillion, with public sector ownership in some markets amounting to over 30% of listed equity’.

    SOEs in the 21st Century

    SOEs are major actors in most economies holding assets of $45 trillion, equivalent to 50% of world GDP (IMF 2020). They’re also active across a wide range of sectors (figure 2). China’s sharp rise (see part 1) has supported the ongoing re-evaluation of the state’s role in the economy. But in the West the Financial Crisis (2008), Covid-19 and the energy crisis, which all saw partial/full nationalisations, government backed recapitalisations and a host of other state subsidies, has also fed into the ongoing re-evaluation.

    In 2009 the Harvard International Review argued that there was ‘no reason to believe’ that the SOEs of the 21st century would be like their counterparts from the 1980s/1990s. Criticisms of that period centred on the favouritism shown by the state, governance issues, inefficiencies, and so on.

    This assessment proved to be prophetic as extensive OECD research (2021) found that the ‘noteworthy trend’ has been that ‘states are operating increasingly like professional investors.’ That is, most had a commitment to ‘competitive neutrality’ meaning favouritism was not shown toward SOEs, and competition law and public procurement law were used to create a level playing field.

    They also noted for corporate governance it was now ‘common practice’ to have auditing and accounting standards (International Financial Reporting Standards) equivalent to stock market listed companies.

    MacCarthaigh (2008) in a review of Irish SOEs found that performance indicators were used extensively, with their use having increased significantly from previous years. Financial results and profitability were the focus, but other societal performance metrics like environmental and corporate social responsibility were also observed.

    Notwithstanding the recent work by multilateral institutions, academic research on SOEs over the last quarter of a century has been somewhat limited. The results of extant studies are also relatively mixed and lacking consensus. Table 1 provides an overview of some studies that have been carried out.

    SOEs have been studied across a range of issues, including: profitability performance vs private firms; level of innovation vs private firms; general performance following privatisation; effects on economic growth etc.

    There are some studies which found private firms tend to perform better in terms of profitability, with others finding no such evidence following privatisation, or that this brings higher costs in the provision of formerly public goods. Some found SOEs to be more innovative than their private sector counterparts.

    One study, examining their effect on economic growth, found that it was neither negative nor positive per se. Rather, their effect was conditioned by the institutional environment they operated within, meaning in the presence of good quality institutions their effect was positive, and in the presence of poor-quality institutions their effect was negative.

    This reminds me of something a former professor of mine once said. The answer to any question in economics is always – ‘it depends’! SOEs are not some kind of magic bullet. How they perform will depend on a range of factors. These factors can also apply to private firms.

    Factors like whether its organisational structure is sound. The presence of sound management and a board with a strategic vision, which are in alignment with its shareholder goals;[1] a good understanding of the market conditions they are operating within etc.

    Where they have differed in the past is that private firms could be quicker to exit a market when it was no longer competitively viable.[2] The case of Irish Steel – nationalised to save jobs – is a good case in point. It continued well past its sell by date, despite no longer being economically viable.

    But SOEs like private firms can adapt to a changed environment. For example, Bord na Móna went from being a major peat harvester to making good progress in renewable energy.[3]

    Lastly, it must be noted that SOEs may not be solely driven by maximising profit, measured via financial metrics (gross/net profit margin; return on equity (ROE); return on assets (ROA), etc).

    As commercial enterprises they will still need to make a profit, but they often have a so-called double bottom line, meaning they also look to maximise a second objective, such as capital investment, social impact, environmental performance, etc.

    So, comparing their profitability to private firms which are explicitly profit maximising is not necessarily a fair comparison. Next, we’ll take a brief look at specific Irish SOEs in historical perspective.

    Table 1
    Authors & year Research area/concern Findings Comment/limitations/ implications
    Shirley & Walsh

    (2000)

    		 Reviewed 52 studies (1980s to 1990s) which examined the difference in performance between SOEs and private corporations. They reported that there were only five studies indicating that SOEs outperformed private corporations Only monitored firms in monopolistic utility sectors
    Omran

    (2004)

    		 Examined the performance of 54 newly privatized Egyptian firms against a matching number of SOEs (1994-98) His analyses showed that privatized firms did not exhibit significant improvements in their performance relative to SOEs. These findings questioned the benefits of Egyptian privatization Cautioned that ‘changing ownership’ has no instant magical effect on performance, and greater consideration should be given to market structure or the power of competition
    Anderson (2007) Examined the impact of privatisation in Latin America (Ecuador), in relation to natural monopolies and public goods The privatisation of SOEs in involved in the provision of public goods can head to lower output and higher costs in the long run Noted that for Ecuador to develop the public sector still needed to play a significant role in developing human capital and physical infrastructure
    Mazucatto (2013) Examines the role of the state/public funding in the US economy’s success. Tackles the myth of neoclassical economics which juxtaposes a supposedly bureaucratic state versus a dynamic, innovative private sector The role of government as both a risk-taking funder of innovation and a market creator is widely understood. Public/state-funded investments in innovation and technology has been the driver of success, rather than free market doctrine Correctly recognises that governments form an essential role in the innovation chain. Points out that state has not only fixed market failures, but has also actively shaped and created markets. Sometimes successfully sometimes not.
    Benassi & Landoni

    (2018)

    		 Deals with the role of SOEs in innovation processes through two case studies (STMicroelectronics in the semiconductor and Thales Alenia Space in the space industry Illustrates how SOEs can contribute to innovation by exploring new opportunities and recombining different sources of knowledge. Highlights the conditions under which success can be realised. Highlights how these SOEs succeeded through a continuous wave of agreements, mergers and acquisitions. This has bearing for some of the proposals Mario Draghi has made (see part 1)
    Asian Development Bank (2019) Using a large sample of firms with cross sectional data, compares SOEs to private firms across various financial performance measures Found that SOEs ‘be less profitable than privately owned enterprises’. Argues SOEs should shift to profit maximising behaviour, although this runs counter to the double bottom line they often have
    Lee et al

    (2021)

    		 Examined the innovation performance of SOEs vs private corporations in Asian middle-income countries (2012-15) The authors note ‘somewhat surprisingly’ they found that SOEs in the study population tended to innovate more than private firms Noted the scarce data availability for empirical comparisons, meaning survey data was used instead
    Szarzec et al (2021) Examined the effect of SOEs on economic growth in 30 European countries (2010-16) Impact of SOEs on economic growth is not good or bad per se, but conditioned on the level of institutional quality. SOEs are positive on economic growth in a good quality institutional environment, and negative for poor quality institutional environments
    Castelnovo (2022) Analyses the innovation performance of more than 2000 SOEs vs private firms, using patent applications as a proxy for innovation value Results suggest that cross-industry heterogeneity exists. Overall, SOEs innovative performance is comparable or even superior to that of private firms Paper restricts attention to developed countries (EU Member States). Therefore, its findings cannot be generalized to developing countries

     

    Poolbeg Generating Station Ringsend, Dublin.

    Irish SOEs in Historical and Contemporary Perspective

    In the wake of the financial crisis (2008-10) a report for the Department of Enterprise noted that there was renewed global interest in SOEs in ‘promoting economic development’, and their ‘significant contribution to the economic and social development of Ireland since independence’ (FORFÁS 2011).

    At the time there were calls by ICTU to establish a strategic investment bank ‘to address the collapse in domestic demand’, to help support infrastructure investment and address the loss of jobs.[4] Such calls went unheeded. Instead, we got the below value sale of An Bord Gais and the attempted privatisation of our water services.

    Let’s briefly consider some of our current and former SOEs in historical perspective (see below), before considering some of the impacts of privatisation.

    • the ESB,
    • the Irish Shipping Company,
    • the National Building Agency,
    • Telecom Éireann,
    • ICC Bank,
    • Aer Lingus

    ESB

    At the time of independence/partition agriculture was Ireland’s main industrial sector. Yet most farms had no electricity or light, severely hampering profitability, productivity, and incomes (Schoen 2002). The ESB in helping to electrify the state had an immediate impact on economic, social, and industrial development, and average sector level income.

    Today it remains a large employer (supporting 0.5% of total employment). It’s a major capital investor (€6.7bn in the period 2018-23) and continues to provide strong returns to the state in the form of taxes, payroll, purchases, and dividends (€2.7bn in 2023). 

    The Irish Shipping Company

    The outbreak of WW2 threatened supply chains as many private shipping operators were unable to service Ireland. According to the old Department of Industry and Commerce, in 1939 only 5% of the total tonnage required for the Irish import and export trade was provided by Irish-owned vessels. During World War II, the U.S. initially refused to enter the warzone around Irish waters, meaning they couldn’t transport directly to Ireland.

    Other ships moved to the British register leaving a crisis in the availability of ships for transporting imported/exported goods. The establishment of the Irish Shipping Company was vital for the continued importation of energy supplies, as well as supporting exporting businesses in maintaining their trade routes, incomes, and employment. It was also considered essential to the preservation of Irish neutrality.

    National Building Agency

    The shift toward trade liberalisation and our FDI-led model in the 1960s was at first impeded by a lack of housing, as neither the private sector nor local authorities could meet demand. The National Building Agency was established for ‘facilitating industrial expansion through the provision of houses and ancillary services.’

    It soon undertook multiple large-scale developments and won plaudits from across the aisle. Even Fine Gael’s arch-conservative T.D. Oliver J Flanagan stated: ‘In my own constituency the NBA have provided what I consider to be the best type of houses that I have ever seen erected, in record time and to a plan and a design second to none.’[5]

    It was noted during one debate of the period how it had worked closely with the IDA, and after a decade in existence it had constructed multiple large scale developments, having ‘brought new techniques to Irish workers’, and ‘coordinated very well with the trade union movement’. The NBA was also an early pioneer in modular built structures and underfloor heating.

    Telecom Eireann

    The onset of the Celtic Tiger has multiple explanatory factors, but one often neglected was the quality of our telecommunications network infrastructure (Harris 2005). Thanks to the heavy capital investment of Telecom Eireann, by the early 1990s the network was amongst the most digitalised and modern in the world, and essential to attracting emerging ICT and financial services industries.

    At its height it provided employment to 18,000 workers, and by the mid-1990s the telecommunications infrastructure had become 100% digitised. It was privatised in 1999 as Eircom (now EIR).

    ICC Bank

    The Industrial Credit Corporation (ICC Bank), first established as a strategic industry lender, later became key to the SME sector. It made strategic equity investments in venture capital in the software sector, which was one of the successful indigenous export industries to emerge from the Celtic Tiger period (Kirby 2011).

    It expanded steadily, enjoying consistent profitability, and made equity investments totalling £36.9 million. At the time of privatisation (2001) it had grown its balance sheet to €3 billion.

    Aer Lingus

    Aer Lingus when it was an SOE was very entrepreneurial in its diversification activities, designed to mitigate the cyclical nature of the aviation industry (Sweeney 2004). It diversified into activities like financial, computer and engineering related services.

    It established successful subsidiaries like Airmotive, TEAM, Aviation Traders Engineering, Aer Turas, Pegasus and Futura, to name but a few. Aer Lingus, and its then employee Tony Ryan, can also lay claim to leasing one of the world’s first aircraft, which helped to create a global industry (aircraft leasing) in which Ireland now holds a 65% market share (PWC).

    Today Ireland’s remaining SOEs continue to contribute to the Exchequer, not merely in terms of employment and taxes paid, but also in terms of the dividends they have returned to the state. For example, in the period 2013 -2020 they contributed almost €2.5bn (Table 2). To put this in perspective, that is somewhere around where the final cost of the new National Children’s hospital will land.

    We can see from the foregoing the significant contribution that public enterprise has played throughout the state’s short history. And whilst there will always be those who assert that ‘the state has no business in business’, the above examples should demonstrate how erroneous that thinking is.

    It should, however, be said that when it comes to economic planning on the part of the state, it has often been found wanting (Casey 2022). The relationship between SOEs and the Irish government has often lacked ‘clearly articulated policy or objectives’ meaning public debate has rarely evolved beyond ‘the issue of privatisation’ (MacCarthaigh 2008).

    Table2 : Dividend payments to the exchequer from SOEs (2013-2020)

    Irish Privatisation in Perspective

    The importance of SOEs in Ireland has declined in relative and absolute terms since the early 1990s, through a combination of privatisation and the growth in the economy. In the 1980s SOEs employed ninety-one thousand people, accounting for 8% of total employment, falling to less than half that number and 2% of total employment by 2008.

    The wave of privatisations, with the ascendency of neoliberalism, saw major state divestment in sectors like construction, transport, telecommunications, other utilities, and finance (Parker 2021). In Ireland, arguably the biggest privatisation since the foundation of the state wasn’t from the sale of a single SOE, but rather the sale of more than half of all the public housing stock (Sweeney 2004).

    Ireland’s experience with privatisation largely mirrors the mixed results and disappointments seen elsewhere, as Table 3 sets out.[6] Despite promises of greater efficiency, cheaper and superior quality services/infrastructure, etc; often the reality failed to match the hype.

    In certain instances, privatisation had very costly consequences for households, businesses, the state, and its competitiveness.[7] As we can see below (table 3), four of the six SOEs (TE, ICC, IS and BG) were all profitable at the time of their sale, one of which had reached record profitability, and were returning dividends to the state.

    Of the two which were loss making; the Irish Shipping Company had been ‘a viable and successful state enterprise’ (Barrett 2004) before it made significant losses from speculative charter agreements, entered into by management without the approval of its shareholders (Minister for Finance/Transport).

    In the case of Irish Steel, major changes in global steel markets beginning in the 1980s, meant it became a significant loss maker and was no longer commercially viable. It was sold for £1 in 1996 and the new private entity would shut its doors in 2001.

    The impact of the privatisations of late 1990s/early 2000s were particularly acute. The sale of Telecom Eireann led to two leverage buyouts (think private equity) with much asset stripping and loading the company up with debt. There was then significant underinvestment meaning Ireland lagged behind EU peers in broadband connection for a long time.

    This privatisation was described as the ‘the biggest own goal’ for the state, next to the blanket bank guarantee. Although some of the proceeds of the sale were used to capitalise Ireland’s first sovereign wealth fund (the National Pension Reserve Fund), this of course would later be raided to bail out the banks.

    ICC bank was sold in 2001 despite being quite profitable and returning increasing dividends to the state. The proceeds of these sales were used ‘to cut direct taxes, incentivise property investment and so boosted the Crash’ (Sweeney 2018). In other words, successful public enterprise was sold off, partly used to lower taxes, and fuel the crash, and partly put aside in a new sovereign wealth fund, which would then be used to pay for the cleaning up of the mess.

    Bord Gáis, which was described as ‘extremely efficient in operational terms’, was sold under pressure from the Troika, and for less than its worth. Between 1976 and 2009 it had returned €689 million in dividends to the state. At the time it was still in public ownership, Ireland had one of the lowest energy costs in the EU, a situation which has now been drastically reversed.

    Table 3
    SOE, lifespan & industry Rationale for existence Max employees Performance prior to privatisation Aftermath of privatisation
    Telecom Éireann

    (1983-99)

    Communication

    		 To roll out digital telephone switching technology along with extensive fibre optic. 18,000 ·        Went from loss making (-£83 million) in 1983-84, to earning profits of £94 million by 1990-91.

    ·        In 1998 it made pre-tax profits of IR£223m, up 9%, on turnover of IR£1.35 billion.

    ·        By the early 1990s, the Irish network was amongst the most modern and most digitalised in the world and by the mid-1990s had become 100% digitally switched.

    ·        In 1999 it had debts of €340 million which rose to €4.27 billion by 2007 after privatisation.[8]

     

    		 Underwent two leveraged buyouts (LBOs), asset stripping, loading company up with debt, significant underinvestment, Ireland lagged behind EU peers in broadband connection for a long time.

     

    A report by ICTU noted that next to the blanket bank guarantee, the privatisation of Telecom Eireann ranked as “the biggest own goal” for the state.
    Industrial Credit Corporation – ICC Bank

    (1933-01)

    Finance

    		 Setup as strategic lender for industrial expansion.

    Later acted as key lender to SMEs, indigenous businesses, and venture capital.

    		 358 ·        Expanded steadily, enjoyed consistent profitability, and made equity investments totalling £36.9 million.

    ·        Grew its balance sheet through its own efforts to almost £3 billion at the time of privatisation.

    ·        Paid regular and increasing dividends to the Exchequer over the previous two decades.

    ·        In the five years before privatisation, dividend payments amounted to £14 million, while corporation tax payments in the same period came to £10 million.

    ·        The bank made a profit of €47 million the year before it was sold.

    		 Return on assets (ROA) declined after privatisation, asset size increased (Reeves).

     

    Post-crash, loss of ICC cited in support for establishing State Investment Bank (NESC 2013), (ICTU 2011).

     

    Credit demand muted after GFC, accessing finance today for SMEs remains a challenge with 66% having difficulties.[9]
    Irish Shipping Company

    (1941-1984)

    Transport

    		 Setup to protect imports and exports during WW2, to promote greater self-sufficiency and protect neutrality. 300 ·        Liquidated following significant losses from speculative charter agreements entered into without the approval of its shareholders (Minister for Finance/Transport).

    ·        Liquidation cost £101 million, which was £13 million more than allowing the company to keep trading.[10] Its ships were sold off.

    ·        Prior to this mistake with the charter agreements it was “a viable and successful state enterprise” (Barrett 2004).

    ·        It was described as having “offered good careers to many” and brought “benefits to our commercial reputation as a nation”.[11]

    		 Claims cost of liquidation would be £50 million whereas C&AG reports for 1984, 1985 and 1986 estimated in excess of £100 million.
    Irish Steel

    (1947-96)

    Basic Materials

    		 Initially nationalised to “save jobs” 1,200 ·        Loss of competitiveness from other EU markets and declining steel prices.

    ·        Although modest profitability in the 1950s/1960s, problems emerged in the 1970s and despite significant state investment in 1980s, and workforce changes (90s) it made a loss of £20.7 million (1993-94) and a loss of £5.8 million (1994-95).

    ·        Serious environmental damage caused from dumping of toxic materials.

    		 Often cited as a “white elephant” project.

    Was not viable as a commercial enterprise. Firoz (2003) argues that the significant drop in steel prices in the 1990s was a major problem for producers without trade protections, strong state subsidies, and increased competition from the developing world (China).
    Irish Sugar Greencore

    (1933-91)

    Agribusiness

    		Commercial and wider social reasons like promoting regional development and employment in the West 1,757 (1991) ·        Experienced rapid growth and improvement in the pre-privatization period.

    ·        Heavy investment in the 1980s and diversified into other agribusiness streams.

    ·        Turnover in the year ending September 1990 was £271 million, which was also a record year for net profits £18.4 million.

    		 In the decade post privatisation, its performance was not strongly associated with improved financial performance and productivity.[12]
    Bord Gais Energy

    (1976-13)

    Energy

    		 Established (Gas Act 1976) as owner of the national gas transmission & distribution systems, mandated with development and maintenance of the natural gas network. 1000 est. (2013) ·        Under pressure from the Troika the lucrative energy supplier valued at €1.5 billion was sold for only €1.1 billion, because no reserve auction price had been set.[13]

    ·        BGE had yielded rising profits with an EBITDA of €91 million in 2013.

    ·        It paid dividends of €689 million between 1976 and 2009,[14] the paid €30 million (2010), €33 million (2011) and €28.3 (2012).

    ·        It lost its profitable wind farms, plants and the right to supply gas to nearly a million customers in Ireland.

    ·        The SOE was a heavy infrastructural investor and was described as “extremely efficient in operational terms”.[15]

    		 Sold for less than valuation amidst much parliamentary/public criticism.

     

    Advisers’ fees for the privatisation amounted to €27 million.

     

    Irish electricity prices were 26% above EU average (Eurostat 2022), with Bord Gais like other suppliers having raised prices multiple times in 2022.


    Conclusion

    The late great Tony Benn once said there will always be those who don’t want public enterprise to survive, even where it succeeds. For instance, David Luhnow of the Wall Street Journal, recently issued sharp criticism of Mexican President Claudia Sheinbaum for saying she wanted her country to place a greater focus on its SOEs. He said it was like the economic evidence of the last half century had been forgotten.

    But what evidence does he think she has forgotten? Joseph Stiglitz recently pointed out that after forty years the numbers in: ‘growth has slowed, and the fruits of that growth went overwhelmingly to a very few at the top. As wages stagnate and the stock market soared, income and wealth flowed up rather than trickling down’.

    It’s not enough for the broad left to say that neoliberalism and privatisation has failed. We need to have a coherent program to start reversing it. One element of such a strategy could be public enterprise. The point here is not that the Irish state should return to direct involvement in previous areas it operated in like agribusiness or steel production, or even that SOEs are always the best option for addressing socio-economic problems or promoting industrial development.

    Rather it’s to recognise that in certain circumstances SOEs are the only actors capable of doing this when the private sector fails. It’s also to acknowledge that they can also be entrepreneurial actors, making the necessary long-term investments in transformational infrastructure, technologies and industries, when the private sector is unwilling or unable.

    [1] For mismanagement and misalignment can lead to ruin, as in the case of the Irish Shipping Company, which prior to its engagement of speculative charter agreements had long been a profitable and successful company.

    [2] Irish Steel is clearly an example of this where political pressure kept the entity alive well past its sell by date.

    [3] It recently announced the biggest change of land use in modern Irish history, 125,000 acres of bog land will soon be repurposed for wind, biomass and solar energy.

    [4] https://www.ictu.ie/news/jobs-plan-fails-deal-demand-deficit

    [5] https://www.oireachtas.ie/en/debates/debate/dail/1969-10-29/41/

    [6] Other SOEs privatised but not dealt with in Table 3 include Irish Life, TSB, the Agricultural Credit Corporation, Irish National Petroleum, British and Irish Line, BOI/AIB and Aer Lingus.

    [7] Poor access to broadband, housing crisis harming competitiveness, loss of dividends to the exchequer, proceeds of sale of privatisations of 2000s was used to reduce direct taxes rather than reinvestment, this helped to fuel property speculation, at time country was running surpluses, exacerbated the crash, etc.

    [8] https://www.ucd.ie/geary/static/policy/econconf/Reeves_Palcic01022013.pdf

    [9] https://p2pfinancenews.co.uk/2022/02/17/two-thirds-of-irish-smes-struggle-to-access-credit/

    [10] Recalling Irish Shipping liquidation – The Irish Times

    [11] https://www.oireachtas.ie/en/debates/debate/dail/1984-11-14/28/?highlight%5B0%5D=financed&highlight%5B1%5D=finance&highlight%5B2%5D=bill&highlight%5B3%5D=1932

    [12] https://www.tandfonline.com/doi/abs/10.1080/00036846.2015.1061643

    [13] https://www.tni.org/files/publication-downloads/tni_privatising_industry_in_europe.pdf

    [14] https://www.oireachtas.ie/en/debates/debate/seanad/2009-02-03/7/

    [15] http://www.irisheconomy.ie/index.php/2009/11/04/the-benefits-of-increased-investment-and-efficiency-in-public-infrastructure-and-utilities/

  • The Missing Link in Draghi’s E.U. Plan

    This article is the first in a forthcoming three-part series by Cillian Doyle on the role of the state in a mixed economy.

    Last month there were two seemingly unrelated events which in an Irish context can be connected. On September 9th Mario Draghi’s published his 400-page report on improving E.U. competitiveness. The report provides a series of recommendations for how the E.U., in the face of changing geopolitical realities, can acquire new industrial policy tools to deal with its ‘existential challenge’.

    A day later the Irish government was given the awkward news it had lost the Apple tax case. Despite its legal advisor Paul Gallagher describing the Commission’s case as ‘fundamentally flawed, confused and inconsistent’, that’s not how the ECJ saw it. Its punishment – €14 billion in additional tax revenue. As a result, it now has a financial war chest available for investment, but a dearth of policy ideas.

    This series deals with each in turn.

    Europe at the Crossroads

    Draghi’s report was intended to provide some harsh truths to E.U. leaders, by making them confront the reasons for Europe’s decline. Placing this within the wider geopolitical context, his report stresses that the E.U. continues to fall further behind the U.S. and China, whose successful innovation is being driven by ‘subsidies, industrial policies, state ownership and other practices’.

    Writing in the Financial Times Adam Tooze argued that the report’s real target was ‘not China but the U.S.’. Perhaps Draghi and other E.U. policymakers felt catching China was a step too far but that matching the U.S. was a more realistic prospect. When we look at the share of global growth over the last ten years (2013-23) accruing to China, versus that of the U.S. and the E.U., we can see why (Figure 1).

    Figure 1

    % Share of 10 year global growth: China vs U.S. vs E.U. (2013-23)

    Source: World Economics Database

    Speaking shortly after the publication, Draghi seemed to underscore Tooze’s point, stressing that the E.U. was not only looking to defend itself from China, as much of the media commentary suggested, but also from the U.S..

    This recalled the discussion around the need for ‘strategic autonomy’ that was flirted with during the Trump administration, when it was argued Europe was best placed serving as a third pillar and bridge between the U.S. and China. Something hastily forgotten with the election of the Biden administration and the Russian invasion of Ukraine.

    Since then, the von der Leyen Commission has stood firmly behind the U.S., so much so that even Foreign Policy magazine stated she ‘Might be too pro-American for Europe’. The world is increasingly bifurcating into two blocs; ‘Team Unipolar’ led by the U.S. along with the E.U. and other G7 members, and ‘Team Multipolar’ led by the BRICS group, the relatively new intergovernmental organisation, which is growing in confidence and size (see figure 3).

    Figure 2

    % Share of 10-year global growth: the West vs BRICS (2013-23)

    Source: World Economics Database

    This hasn’t gone unnoticed by the E.U. institutions. The E.U. engages with BRICS, although it stresses on an ‘individual basis’. Last year the E.U. Parliament’s Committee on International Trade as part of their engagement with the Commission ‘underlined the need to keep an eye on the group’s expansion, especially considering the effect of a potential BRICS+ currency and the consequences for E.U. trade policy.’

    Figure 3

    BRICS expansion 2023-2024

    BRICS encourages members to transact in domestic currencies for bilateral trade, as opposed to transacting in dollars and to a lesser extent the euro. They’re also trying to develop an alternative payment system to Belgian-based Swift. The dollar and Swift are key to the U.S. sanctions regime, and hence seen as posing risks.

    The Washington Post pointed out that the U.S.’ is currently subjecting around one third of countries in the world to some form of economic or financial sanction. Many of these are developing countries now looking towards BRICS as an alternative to the U.S. Rules Based Order, and Western dominated multilateral institutions (IMF/World Bank).

    Earlier this month U.S. Secretary of State Anthony Blinken stated that through its ‘human rights’ based foreign policy, the U.S. succeeded in rallying ‘the international community’ behind its Russian sanctions policy. However, as the Quincy Institute pointed out, ‘the large majority of countries around the world that have refused to join in sanctions and have called for an early peace — a call that has been repeatedly snubbed by Washington’.

    It was primarily the other members of Team Unipolar which rowed in behind the leader, with the von der Leyen Commission being particularly enthusiastic. As research by Thomas Fazi has shown, she used this exercise to assume more competencies for the Commission at the expense of E.U. Member States.

    Some portray this growing global divergence as one between democracies and autocracies. As Joseph Borrell recently acknowledged, however, this framing is used for political reasons. As he said himself, the West is allied with plenty of autocracies on the basis that they’re aligned with Western foreign policy.

    Super Mario World

    Where the E.U.’s future lies in all of this remains to be seen. But in the meantime, it must confront its challenges which are real, severe, and somewhat self-inflicted. Draghi’s report sets out in stark terms its relative decline in output and productivity growth. The latter singled out as a primary cause of its sagging growth. His report couldn’t have been published at a more appropriate time with the likes of Germany, Austria and Sweden falling into recession.

    Figure 4: GDP growth rates Q2 2024

    % Change over previous quarter (seasonally adjusted)[1]

    His report attempts to shift the E.U. away from what’s often seemed like a single-minded focus on competition policy, toward a new focus on industrial policy (hereafter IP). Whether such sweeping changes are possible in the absence of significant E.U. treaty change has been debated by legal scholars (see here for one critique).

    I’m more concerned with its proposed economic reforms, and in particular one which was curiously absent. It’s true these present something of a departure from established E.U. policy thinking and the conventional (neoclassical) economic philosophy which has generally underlain it.

    It’s also worth noting that up until quite recently, IP was described as ‘the economic practice that dares not speak its name’. Or as one leading member of the profession once said, ‘the best industrial policy is none at all.’

    Yet with the success of China’s IP and the U.S.’ recent adoption through the CHIPS Act and the hilariously misnamed Inflation Reduction Act, the E.U. had to act in kind. For students of history, those with an interest in development economics, or a general disdain for market fundamentalism, this move may have seemed long overdue.

    Every major power that developed did so through successful IP. The rapid recovery of Western Europe after WW2 was built on the back of it. The East Asian Tiger economies managed rapid industrialisation and technological advancement through a developmentalist approach, which often shirked the dictates of the Washington Consensus.

    But if you were thinking Draghi’s proposed ‘new Industrial Deal’ portends the return of state capitalism in a ‘post neoliberal’ world – not so fast. It was as interesting for what it didn’t say, as much as for what it did. The five most common tools of IP are (1) state-owned enterprises (SOEs), (2) trade policy, (3) public R&D, (4) long-term financing and (5) targeted supports for business.

    Table 1: Key recommendations of Draghi Report

    Industrial Policy

    Instrument

    		 Draghi Report? Recommendation(s) Comment
    State-owned

    enterprises

    		 No N/A N/A
    Trade policy Yes

     

    		 A new “Foreign Economic policy”.

    Coordinate purchases based on the European Union’s large internal market.

    Greater focus on need for E.U. Strategic Autonomy

    		 Use of preferential trade agreements to help facilitate direct investments in resource rich countries. More E.U. common procurement.
    Public R&D Yes

     

    		 Creating a European Advanced Research Projects Agency (ARPA), suggests increasing R&D spending, investing in research infrastructure, and fostering a more innovation-friendly regulatory ecosystem Says there’s a need to tackle fragmented public R&D spending. Increase public R&D spending. Streamline multi-country trial management to make the E.U. a more attractive location for clinical R&D
    Long-term

    Financing, investment

    		  

    Yes

     

    		 Common E.U. borrowing framework,

    Need for additional investment (€800m p/a)

    E.U. Capital Markets Union,

    Banking Union

    		 Common borrowing could be a powerful tool but likely to draw resistance from certain E.U. states (i.e Germany). Desire to shift E.U. away from bank-based finance to market based finance (shadow banking).
    Targeted business

    support

    		  

    Yes

    		 Replacing state aid with European aid, simpler and more flexible regulation for SMEs, reduced administrative burdens GDPR legislation to be re-examined in the context of companies working on AI. Increasing computational capacity dedicated to the training and fine-tuning of AI models for innovative E.U. SMEs

     

    As we can see above, there’s a glaring omission from ‘Super Mario’s’ toolkit. Any serious discussion of the role of SOEs was absent. But we’ll return to this in part 2 and 3. First let’s deal with some of the report’s big takeaways.

    The headline figure which stands out was the call for increased investment of around €800 million per annum to ensure the E.U. meets its key competitiveness, climate and defence targets. This equates to the E.U. investing around 5% of its income on an annual basis. There’s something of an historical irony here.

    You might recall a certain former Greek Finance Minister proposing this very measure. Yanis Varoufakis once proposed allowing the European Investment Bank (EIB) to issue bonds which would have been purchased by the ECB to fund a Green New Deal. Despite presenting his proposal to E.U. Finance Ministers and Central Bankers, he was given short shrift.

    Whether such a measure is now possible seems unlikely. As Varoukafis points out, the disillusionment with the much smaller sized issuance of bonds by the Commission – as part of its NextGenerationEU – means there’s unlikely to be much appetite from investors or member-states at the more ambitious scale outlined by Draghi.

    Investors doubt the Commission’s ability to sufficiently expand its fiscal powers, and member states – particularly groups like the German ordoliberals – are cautious that such borrowing would be a Trojan Horse for the Commission to massively expand its tax competencies.

    In terms of trade policy, it argues for a new ‘foreign economic policy’ explicitly described as ‘statecraft’. This would marry decarbonisation with support of direct investments in resource rich countries. Preferential trade agreements could serve as bargaining chips to encourage such resource rich countries to open up to E.U. investment.

    It doesn’t hide the sense of urgency behind this, stating bluntly the E.U. has ‘lost its most important supplier of energy, Russia.’ It’s less the case that the E.U. has completely lost access, and more that due to sanctions it’s now purchasing Russian energy at a higher price via secondary countries (Turkey, Azerbaijan, etc), albeit at reduced levels.

    This coupled with rising tariffs on China (e.g. from 10% to 45% on EVs over the next five years) means the German economy – the E.U.’s workhorse – has, on the one hand, been starved of cheap energy inputs. On the other, its main trading partner (China) is demonstrating less demand for its high-quality outputs (cars, chemical products, etc).

    Germany is thus undergoing deindustrialisation. The U.S., thanks to its new IP turn and the manufacturing subsidies it’s now providing, has been one of the main beneficiaries. Deloitte found that two thirds of German companies had moved some of their operations overseas. That’s good news for the U.S., but bad news for Germany.

    Member states are also incurring high costs from the construction of LNG infrastructure (terminals, storage, and regasification units). Over 50% of LNG imports are from the U.S.. Again, good news for the U.S., but bad news for member states bearing the higher costs associated with LNG, placing it at a competitive disadvantage.

    One thing that seems to have been lost on the E.U. Commission is that they’ve replaced the energy risk associated with one overly dominant supplier (Russia), with that of another (the U.S.), whilst locking in higher prices for supply. If some future U.S. administration were to tax LNG exports to the E.U., then it could find itself at an even further competitive disadvantage.

    The report sets out various recommendations to boost public R&D and thereby help E.U. companies to innovate, particularly those in the tech sector. As we can see from table 2 of the top 10 public research institutions according to Nature Index Research Leaders 2024, seven of these were Chinese institutions, with just two from the E.U. and one from the U.S..

    In terms of the top 10 technology companies and banking institutions the situation for the E.U. is worse again. It’s not represented in the top 10 in either category. Draghi thus wants to allow for greater ease of mergers between E.U. tech companies which it’s hoped would see them rival their U.S./Chinese counterparts.

    Table 2:

    Top 10 Research Institutions, Tech companies and Banks

    R&D (2024)[2] Technology (2023)[3] Banking (2024)[4]
    Rank Institution/Country Company Financial institution
    1 Chinese Academy of Sciences (China) Apple

    (U.S.)

    		 JP Morgan Chase

    (U.S.)
    2 Harvard University

    (U.S.)

    		 Alphabet

    (U.S.)

    		 Bank of America

    (U.S.)
    3 Max Planck Society

    (E.U.)

    		 Samsung

    (South Korea)

    		 Industrial and Commercial Bank of China

    (China)
    4 University of Chinese Academy of Sciences

    (China)

    		 Foxconn

    (Taiwan)

    		 Agricultural Bank of China

    (China)
    5 University of Science and Technology China

    (China)

    		 Microsoft

    (U.S.)

    		 Wells Fargo

    (U.S.)
    6 Peking University

    (China)

    		 Meta

    (U.S.)

    		 China Construction Bank Corp

    (China)
    7 French National Centre for Scientific Research

    (E.U.)

    		 Dell Technologies

    (U.S.)

    		 Bank of China

    (China)
    8 Nanjing University

    (China)

    		 Huawei

    (China)

    		 Royal Bank of Canada

    (Canada)
    9 Zhejiang University

    (China)

    		 Sony

    (Japan)

    		 Commonwealth Bank of Australia

    (Aus)
    10 Tsinghua University

    (China)

    		 Tencent

    (China)

    		 HSBC Holdings

    (U.K.)

     

    Financialisaton: Problem or Solution?

    Draghi sees a ‘lack of finance’ as being at the heart of the problem, unsurprising given his former roles in investment banking (Goldman Sachs) and central banking (Italy/ECB). He thus stresses the need to complete the E.U. Capital Markets Union (CMU) as a remedy for this.

    The CMU is intended to bring about an E.U.-wide union for market-based forms of financing (think asset managers, hedge funds, private equity, pension funds, etc), to provide an alternative to what has been traditionally, predominantly bank-based finance in Europe. This could allow for more equity-based financing as E.U. companies choose this over initial public offering (IPO) their stock.

    But it will also mean a single European market for the alphabet soup of obscure acronyms which denote the various complex, opaque, and risky financial instruments that got us into trouble during the Financial Crisis of 2007-2008. Essentially, more shadow banking. Is this really what the E.U. needs? It’s certainly taken as axiomatic that it is.

    The assumption is that the CMU would help to drive capital to SMEs and the real economy, which they see as overly dependent on bank finance. However, in the run up to 2008 U.S. capital markets had become highly developed, and it’s not clear at all that this led to increased lending to their SMEs or the real economy.

    What’s clear is that it led to huge levels of debt, the risk of which was masked in the system through opaque and poorly understood financial engineering techniques. And when it went sour it led to massive contagion effects, which brought down many financial institutions leading to costly public bailouts.

    One of the main problems the E.U. faces, although not alluded in the report, is that it’s allowed itself to be turned into (to a varied extent among member states) a high-cost, financialised economy with declining public provision, largely privatised primary health care services, high-cost housing, and childcare, and poor and deteriorating public infrastructure.

    Financialisaton has rightly been criticised on the basis that it can lead to increased financial fragility and the risk of financial crises. But it’s also identified as shifting the ‘orientation of the non-financial sector towards financial activities ultimately leading to lower physical investment, hence to stagnant or fragile growth, as well as long term stagnation in productivity’ (Tori and Onaran 2017).

    Figure 5: Growth of Financialisaton in Europe

    Total Financial Assets (TFA) as a % of GDP (2000-23)

    Source: ECB Data Portal

    The Fingerprints of Institutional Investors

    Another issue with financialisaton is that it provides financial elites with more power.

    It’s interesting to note who Draghi consulted as part of the research that fed into his report. The economist Isabella Weber pointed out the list of stakeholders consulted lists four pages of “trade and business associations”, “professional consultancies” and “companies and groups”, but just a single trade union.

    There was a total of 82 companies/corporate groups which fed into it. These ranged from large PLCs, to established private companies, to even newer start-ups. But they also included some current or former commercial SOEs (25), which makes the lack of consideration of public enterprise even more noteworthy.

    These companies/groups covered a broad range of industry sectors including: finance, extractive, transport, pharma, tech and so on. Table 3 examines 72 of these, for which some or all data could be compiled, and looks at that their level of institutional ownership, notable institutional owners, and state-owned shareholdings.

    The reason for doing this is simple. Over the last few decades, the ownership landscape of companies has changed radically. Whereas in the past large companies were owned by individuals, pension funds, insurers and indeed states, today they’re overwhelmingly owned by asset managers. These are financial intermediaries investing on behalf of wealthy individuals, pensions funds or other financial institutions.

    Today they’ve extraordinary levels of assets under management (AUM). By one estimate they own €1.8 trillion worth of real estate in Europe. Brett Christophers’ book Our Lives in their Portfolios highlights how asset managers have also become major owners of public infrastructure throughout Europe. He describes our current juncture as being one of ‘asset manager society’.

    Many Europeans have some sense of this, but may be unaware of the extent to which they’ve come to own such large shareholdings in companies across most sectors. This explains their description as ‘universal owners’: their portfolios are so large and diversified that they represent a chunk of the entire economy.

    Of the companies that fed into the report a significant level of institutional ownership is observed, with the highest being NXP Semiconductors (95.37%). Excluding those which had no institutional ownership (5 cases), the average level of institutional ownership was 40%. As we can see Blackrock, Vanguard, and State Street feature heavily.

    Table 3- Ownership structure: Institutional owners vs state owners
    Corporate body group % shares held institutional investors Notable institutional

    Shareholders (Big Three italicised)

    		Former SOE? % shares held state investors[5] Notable state

    shareholders
    Airbus 32.80% Amundi, State Street Yes? 25.7% France, Germany, Spain
    Air France KLM 6.08% Vanguard Yes 41.7% France, Netherlands, China
    Alstom 71.20% Vanguard Yes 25.04% Canada, France
    Amazon 50.81% Vanguard, Blackrock, Fidelity, State Street No 0% N/A
    Amundi 6.08% Vanguard, Blackrock, Fidelity No 0.47% Norway
    Ariston Group 34.76% Schroder Investment Management, Vanguard, Blackrock No 9.94% Norway
    ASML 21.10% Capital Research and Management Company, Blackrock, Amundi No 0% N/A
    BASF 43% Amundi, State Street 0% N/A
    Bayer 44% Blackrock, Vanguard, Oakmark No 6.67% Norway, Singapore
    BMW Group 17.61% AQTON SE, Vanguard, Amundi No 1% Norway, Australia
    BNP Paribas 82.60% Blackrock, Amundi, Vanguard, Oakmark, iShares (Blackrock) Yes 7% Belgium, Luxembourg
    Bolt 26.00% Fidelity, Sequoia Capital No 0% N/A
    Clarios 30% est. Brookfield Asset Management No 25% est. Canada
    Deutsche Telekom 69.40% Vanguard, Goldman Sachs Yes 27.80% Germany
    DHL Group 0.04% Altrius Capital Management, Amundi, State Street Yes 17% Germany
    Dompé Farmaceutici 0% N/A No 0% N/A
    EDF 0% N/A Current 100% France
    Enel 58.60% Vanguard, Goldman Sachs Yes 23.6% Italy
    ENGIE 21.18% Blackrock, Vanguard, Capital Research and Management Yes 23.64% France
    ENI 51.35% Morgan Stanley, Blackrock, Natixis, Goldman Sachs Yes 30.50% Italy
    Equinor ASA 6.60% Vanguard, Blackrock, State Street, DNB Asset Management Current 71% Norway
    Ericsson 9.30% Hotchkis & Wiley Capital, Morgan Stanley, Vanguard No 0% N/A
    Euroclear 21.47% Fidelity, Citibank No 32.50% Belgium, France, NZ, China
    Euronext 61.02% CDP Equity SpA (Private Equity), Amundi, Capital A Management BV, Vanguard No 8.03% France
    ExxonMobil 57.82% Vanguard, Blackrock, State Street No 0% N/A
    E.on 60% Blackrock Yes 4.90% Canada
    Ferrovie 0% N/A Current 100% Italy
    FINCANTIERI 4.20% Vanguard, Blackrock Current 71.44% Italy
    Flix 35.00% EQT Future. Kühne Holding, Vanguard, Fidelity No 0% N/A
    Glencore 41% Blackrock, Vanguard, EUROPACIFIC GROWTH FUND No 8.60% Qatar
    Google 61.98% Vanguard, Blackrock, State Street, Morgan Stanley No 1.83% Norway
    Iberdrola 77.80% Blackrock, Vanguard, Fidelity No 12.15% Qatar, Norway
    Infineon Technologies 24.70% iShares (Blackrock), Blackrock, Amundi No 0% N/A
    Investor AB 25.42% Vanguard, Blackrock, Fidelity No 2.65% Norway
    Leonardo 50.30% Vanguard, Dimensional Fund Advisors LP, Capital World Growth and Income Fund Yes 30.20% Italy
    Lufthansa Group 54% Vanguard, iShares (Blackrock), Goldman Sachs Yes 0% N/A
    LyondellBasell Industries 73.18% Blackrock, Vanguard, State Street, Dodge & Cox No 0% N/A
    L’Oréal 37.33% Amundi, State Street No 0% N/A
    Maersk 25.19% Vanguard, iShares (Blackrock) No
    McPhy Energy 17.14% Global X Hydrogen ETF No 19.14% France
    Mercedes Benz 45.95% Amundi, State Street No 15.50% China, Kuwait
    Meta 79.06% Vanguard, Blackrock, State Street, Fidelity No 0% N/A
    Meyer Burger Technology 19.52% Vanguard, Scupltor, Credit Suisse No 2.99% Norway
    Neste 31.69% Vanguard, iShares (Blackrock), Fidelity Yes 44.77% Finland
    Nokia 6.17% DANSKE INVEST FINNISH EQUITY FUND, Blackrock, Goldman Sachs No 5.7% Finland
    NovoNordisk 71.80% Jennison Associates, Morgan Stanley, Bank of America, Vanguard, Fidelity No 0% N/A
    NXP Semiconductors 95.37% Fidelity, JP Morgan, Vanguard, State Street No 0% N/A
    Orange 16.52% Vanguard, Blackrock, Thornburg, UBS Yes 22.9% France
    Ørsted 10.71% Blackrock, Amundi, Vanguard, iShares (Blackrock) Current 50.1% Denmark
    OVHcloud 12.62% KKR, Towerbrook Capital Partners No 0% N/A
    Renault 29.04% Vanguard, Blackrock, Paradigm Asset Management Company Yes 15% France
    Repsol 33.61% Blackrock, Vanguard, iShares (Blackrock), Fidelity Yes 3.20% Norway
    Rolls Royce 32.16% Vanguard, Blackrock, Causeway Capital Management Yes 0% N/A
    RWE 88% Blackrock, Fidelity, Vanguard No 9% Qatar
    Ryanair 48.38% Capital International Investors, Fidelity, Vanguard No
    Safran 41.90% Europacific Growth Fund, Aristotle Capital, Vanguard, Fidelity No 11% France
    Sanofi 77.80% Dodge & Cox Stock Fund, Morgan Stanley, Blackrock, Fischer Asset Management No 0% N/A
    SAP 6.30% Blackrock, Dietmar Hopp Stiftung GmbH, Vanguard No 0% N/A
    Shell 11.73% Fidelity, Vanguard, Morgan Stanley, Blackrock No 3.03% Norway
    Siemens 67% Blackrock, Vanguard, EUROPACIFIC GROWTH FUND No 2.98% Qatar
    Sobi 77.25% Investor Aktiebolag, Morgan Stanley, State Street No 1.24% Norway
    Spotify 62.07% Baillie Gifford & Co, Blackrock, Morgan Stanley, Vanguard No 0% N/A
    Stellantis 47.88% Blackrock, Vanguard, Amundi, JP Morgan No 7.29% France, Norway
    STMicroelectronics 14.85% Blackrock, Goldman Sachs, Grantham Yes 27.51% Italy, France
    Telefónica 1.26% Blackrock, Morgan Stanley Yes 9.9% Spain, Saudi Arabia
    TenneT 0% N/A Current 100% Netherlands
    Thyssenkrupp Steel E.U. 85% Amundi, Merill Lynch, Vanguard, iShares (Blackrock) No 3% Norway
    TotalEnergies 6.94% Fischer Asset Management, Morgan Stanley partial
    Uber 83.54% Blackrock, Vanguard, Fidelity, State Street No 0% N/A
    Vodafone 17.27% Vanguard, Blackrock, Legal & General Investment Management, UBS No 18.01% UAE, Norway
    Volvo 54% Vanguard, Oakmark iShares (Blackrock) No 0% N/A
    ZF 0% N/A No 0% N/A

     

    According to Braun (2020), ‘Asset Manager Capitalism’ is dominated by the ‘Big Three’; Blackrock ($10tn AUM), Vanguard ($9.3tn AUM) and State Street ($4.3tn AUM). The Harvard Business Review points out ‘One of either Blackrock, Vanguard, or State Street is the largest shareholder in 88% of S&P 500 companies’. They’re also some of the largest shareholders in each other. Institutional investors (passive/active funds) now own 80% of all stock in the S&P 500.

    In a study of the Britain’s FTSE350, the 350 largest companies in Britain, the authors found a 20% of its total value was controlled by just ten investors, 10% of which was controlled by Blackrock and Vanguard. The largest foreign owner of the Milan Stock Exchange is Blackrock. According to the OECD in Ireland, Sweden and Poland just three institutional owners control around 20% respectively.

    Naturally, concerns have been expressed that such concentrations of economic and financial power leads to a concentration of political power. With the sector today managing an estimated $100 trillion or so in assets (about two-fifths of the world’s wealth) – how could it not?

    The Big Three have been described as the “most powerful cartel in history“, with journalists from Bloomberg describing Blackrock as the ‘fourth branch’ of the government. Some have even described asset manager capitalism as an entirely new corporate governance regime. However, the source of this power and the way its wielded is still a matter of contention amongst legal scholars, economists and political economists.

    There’s no question that the Big Three want to influence politics at the highest levels. Blackrock has been pouring record amounts into U.S. political campaigns. The same applies in the E.U., where by one estimate they spend an annual €30m lobbying E.U. institutions to ensure their voices are heard.

    What the Asset Managers Want, they Get

    What do they want when it comes to a new IP approach? In a word, they want assurance of ‘investability’. But not just any kind of investability. To quote Mark Blyth, the want the state to operate as a kind of ‘insurer of first resort’ whereby it uses the public ‘balance sheet to insure private investors against losses’.

    Accordingly, this is done by ‘tinkering with risk/returns on private investments in sovereign bonds, currency, social infrastructure (schools, roads, hospitals and houses, care homes and prisons, water plants and natural parks) and most recently, green industries’ (Gabor 2023). This is what political economist Daniela Gabor terms the ‘derisking state’.

    A practical example is public private partnerships (PPP). Here private investors commit to finance public infrastructure projects (hospitals, schools, accommodation, etc) and manage them for a long-time horizon, in return for the state bearing certain risks stipulated in the PPP contract. Risks like an increase in the minimum wage, higher taxes, some new regulation, emissions reductions, etc – anything which might negatively impact cashflow.

    You see with higher institutional ownership of companies comes higher dividend pay outs. In a study by Buller and Braun (2021) of the largest companies listed on the British stock exchange, they found shareholder pay-outs as a proportion of profits rose substantially ‘reaching nearly 80% of pre-tax profits at the end of 2020’, but productive investment fell.

    Asset managers have also engaged in, and rightly been criticised for, extensive efforts at ‘greenwashing’—misrepresenting investment products as more environmentally sustainable than they really are, while refraining from enforcing ESG principles at their portfolio companies. So, I’m not sure how helpful they will be with Draghi’s decarbonisation efforts.

    As should be clear from the above, the investability relationship forged between the state and capital is one where capital dominates. It’s certainly not the kind of arrangement witnessed during the ‘golden age’ of capitalism, or what was seen in the East Asian Tiger economies, when capital was disciplined and directed toward the industries thought most productive.

    As Gabor points out; derisking and capital discipline are fundamentally at odds ‘because the former relies on private profitability to enlist private capital while the latter forces capital into pursuing the strategic objectives of the state even where these may be at odds with changing market conditions or profit calculations.’

    The latter occurred during periods when states were willing and able to do so through means such as nationalising banks to regulate their financial markets, and having their Central Banks impose credit quotas to drive bank lending to what were deemed strategic sectors, often in the presence of capital controls.

    The only real prospect of E.U. member states nationalising banks today would be to bail them out in a crisis, I’m not sure whether credit quotas have ever been employed by the ECB’s constituent Central Banks, and capital controls violate one of the E.U.s four freedoms (free movement of capital).

    There is, however, another way to take a more direct approach: through the capitalisation of new SOEs. Although Draghi is famed for his ‘whatever it takes’ approach from saving the euro, he clearly doesn’t apply this to IP, as demonstrated by the absence of any serious discussion on this.

    Despite the large wave of privatisations that occurred in the 1970s and 1980s, and indeed the more recent reduction in the number of SOEs in places like China, the relative importance of state ownership has actually been increasing. As the OECD points out, ‘the share of SOEs in the list of the top 500 global companies tripled’.

    Part 2 takes a closer look at this missing tool from Draghi’s proposed new toolbox, with part 3 considering what possible options Ireland could have with the €14 billion additional tax revenues it now enjoys, some of which could be used for such investment.

    [1] https://ec.europa.eu/eurostat/web/products-euro-indicators/w/2-06092024-ap#:~:text=In%20the%20second%20quarter%20of,by%200.3%25%20in%20both%20zones.

    [2] Nature Index 2024 Research Leaders

    [3] Tech companies ranked by total revenues for their respective fiscal years ended on or before March 31, 2023

    [4] 10 biggest banks as measured by market capitalisation.

    [5] These shareholdings are variously held by government Ministries, Central Banks, state pension funds, Sovereign/Public Investment Banks, Sovereign Wealth Funds, Sovereign Development Funds and SOEs.

  • Ivor Browne R.I.P

    It’s hard for those of us who work in the field of psychedelic-assisted therapy to put into words how much of a visionary Dr. Ivor Browne was. He was a pioneer of LSD psychedelic-assisted therapy in San Francisco and London in the 1950s. He also pioneered the therapeutic use of LSD, ketamine and holotropic breathwork in the 1980s in Dublin, when he was the Chief Psychiatrist at the Eastern Health Board, and ​​Professor of Psychiatry at University College Dublin.

    He worked with LSD and ketamine group therapy in St Brendan’s Psychiatric Hospital in Dublin in the 1970s, 80s and 90s. Dr. Ivor Browne was a maverick and, I would say, a truly great man, in many ways a man before his time.

    I had the privilege of getting to know him personally when he was running a regular meditation group every Tuesday in the Lantern Centre Dublin City near where I lived. Even though he was in his late eighties or early nineties at the time, his wisdom, compassion and wicked sense of humour radiated when in his presence. Despite showing up every week, I recall that he could never remember my name, due to his great age, failing hearing, and the staggering amount of people he had met over his lifetime; yet he greeted me and all the other participants each week with a beaming smile, like we were long lost friends.

    Browne’s work on trauma

    In his book Ivor Browne, the Psychiatrist: Music and Madness, based on work he had originally published in 1985, he speaks of the concept of trauma stored in the body as ‘the frozen present,’ which involves unprocessed emotions. To help process the unprocessed he referred to the use of altered states of consciousness, cathartic states, music and group therapy.

    This concept received very little attention from the psychiatric profession at the time, and a paper he published in the Irish Journal of Psychiatry, entitled ‘Psychological Trauma, or Unexperienced Experience’ in 1985, received zero citations at the time. This work, nonetheless, paved the way for the subsequent work of Dr. Gabor Mate, Dr. Peter Levine and Dr. Bessel Van der Kolk on trauma, somatic trauma therapy and psychedelic assisted therapy. In the 1980s – in recognition of the importance of his pioneering work – Dr. Stan Grof came to Dublin to collaborate with Dr. Ivor Browne, as did R.D. Laing.

    Thus, decades before later-day pioneers on somatic trauma therapy like Dr. Gabor Mate, Dr. Peter Levine and Dr. Bessel Van Der Kolk, Browne was speaking of trauma as the ‘frozen present’, using altered states of consciousness to help people process trauma frozen in their bodies, and using group psychotherapy, breath-work, bodywork and music as a means to do this.

    In a 2017 article published in Network Ireland magazine, Browne explains his attitude to trauma :

    Once that shut down (through a traumatic experience) happens, then that experience is frozen. So it is not a case of a threatening memory being repressed, it is that it has never gotten in properly. Once it is frozen it is outside of time, so twenty years later this can activate – some everyday event can trigger it – and you then experience it as if it is happening now. You don’t think about it and remember it – you feel it and experience it. And, of course, at that point you think you are going nuts because you look around and nothing traumatic is happening, yet you experience this traumatic feeling. That is why I called it “the frozen present”, because when it comes, it comes through as the present, not as the past. Eventually when it works its way through and you experience it a few times then it moves into the past.

    He continued:

    The best example is grief. If you have lost someone you have to do a lot of work over time in order to integrate that to allow it to become a memory. Then it becomes less threatening. When my wife died five years ago, the first year was absolute hell, and I couldn’t imagine feeling any joy. The second year was bad, but not quite as bad as the first. Now after five years I am quite contented. I have a different life. By processing the trauma, it has shifted into memory, but this approach is not possible in the current psychiatric model.

    Vocal critic

    Browne was a  vocal critic of the reductionist, purely bio-medical model of psychiatry. An outspoken critic of the mental health discourse, he said: ‘we are living in a society that is driving people mad’, emphasising that

    Psychiatry is a reductionist system that explains everything by the parts……The tragedy of psychiatry is that this is the only way you can think. Because in the psychiatric model you cannot ask how the behaviour or upbringing of a person is affecting their biochemistry – you can only ask how is the biochemistry effecting the person. Psychiatrists don’t take a history, so they don’t understand the problem in the context of the individual’s life.

    What is even more extraordinary is that he did this at a time when Irish society was incredibly conservative and the Catholic Church still held tremendous power. Professor Ivor Browne was censured by the Medical Council over his role in the Father Michael Cleary affair in 1996 after he had spoke out in support of one of his patients, Phyllis Hamilton, who revealed her affair with Fr. Cleary.

    The relationship with the heart

    He also proposed the heart, rather than the head, as being of central importance in mental health, and wellbeing, and that love was essential in the processing of trauma:

    Key to processing trauma is cultivating a relationship that allows it to be processed, and that ultimately involves love, and the deepest traumas we can experience involve a separation from love.. the truth of all this is that the heart is the centre, and if our heart is closed we cannot experience love.. if your heart opens, then you can connect.

    A deeply spiritual man, who became a devotee of an Indian spiritual guru, Browne believed, ‘These are the kind of things that we can talk about through poetry, or through the therapeutic model, but we can’t deal with these concepts through the psychiatric model. At the deepest level, a lot of our problems are spiritual.’

    In Ireland, we sometimes do not celebrate our own. Today we celebrate Dr. Ivor Browne as a truly great man. He was offered a professorship at Harvard University, and I have no doubt if he had taken it he would be much more well known outside of Ireland.

    Instead, he choose a life of service, helping his patients, and reforming the psychiatric services in Ireland, and Greece. Browne also played an important role in the closure of the infamous Leros island psychiatric hospital in Greece, infamous as one of the most brutal psychiatric hospitals in Europe.

    Here is a link to a paper he co-wrote in 1960 with Dr. Joshua Bierer, the pioneer of social psychiatry in the UK, on the therapeutic use of LSD and group psychotherapy.

    Browne also recognised the healing power of psilocybin, and the ancestral Irish use of magic mushrooms, mentioning in a podcast in 2017 that: ‘Magic mushrooms were probably available to the druids, back at that time, so several thousand years later, similar, to the sort of relationship you have (with ayahuasca) in Peru or Brazil.’

    Freud reputedly said that the Irish were the only people impervious to psychoanalysis, and that may be true, certainly in previous generations due to the ancestral trauma that was so prevalent. But Ivor Browne is the closest thing we have to an Irish Sigmund Freud or Carl Jung.

    Thank you Dr. Ivor Browne, from all the people you helped and for your visionary qualities.

  • Responsible Business

    The ten principles of the U.N. Global Compact, formed in 2000, sought to realign business as a force for good. They include compliance and support for human rights; upholding good labour practices and eliminating discriminatory and forced labour; taking up proactive environmental stewardship; and fighting corruption.

    Several institutions across the planet joined the Compact, including large corporations, SMEs, universities and think-tanks. These principles are now starting to inform corporate, business, and operational level actions and strategies. In some cases, these principles are considered at every stage and improved responsible practices have been introduced.

    Broadly, ‘responsible businesses’ that embed sustainable practices take a number of different initiatives. These can firstly be classified under actions that do not harm people or the planet while making profit; secondly, those that focus on their ESG (environmental, social, governance) investments.

    In order to make a larger impact on society and the environment, businesses can work on improving the lives of the people they impact. e.g. by creating green services, and making value chains more sustainable and inclusive.

    This could also come about through investments that promote and support social sustainability. Also, firms in any given sector may consider choosing to work with ‘responsible businesses’ who are their partners, investors, and suppliers. So, in the end, it is not only about the firm in question, but also its partners and wider associates, who share similar values and goals.

    Businesses caring about their wider stakeholder groups and not simply shareholder wealth, has led to increasing recognition and action around people-planet-profit, or The Triple Bottom Line. Some of the largest corporations, including Amazon, IBM, and TESLA have all set net-zero targets and micro-level reduction of carbon footprints. In addition to this, business goals such as using only ethically sourced materials, becoming more energy efficient, streamlining logistics practices, and applying the components of industry 4.0, offer the prospect of ‘win-win’ situations.

    Environmentalism on United States stamps.

    People-Planet-Profit

    Empirically, high shareholder value is considered an indicator of success. Today, however, more than ever, it’s about scoring highly on indices such as sustainability, managing employees responsibly, supporting (instead of exploiting) other stakeholders in the supply chain, and looking after the well-being of community members.

    Values-driven business tends to have better public perception and P.R. images than traditional ones with a narrow focus on profit. These are important variables that feed into success today.

    In 2017, a sustainability survey by Cox Conserves, revealed that 88% of small and midsize businesses, across various sectors have already implemented sustainable activities. It can be argued that the triple bottom line needs to be a part of every company’s culture and values to be successful in the long run, and to manifest responsible practices in various forms.

    Broadly, ‘The triple bottom line’ can be defined as a sustainability framework that examines a company’s social, environmental, and economic impact. The following definitions in this context might prove useful.

    People: the positive and negative impact an organisation has on its most important stakeholders.

    Planet: the positive and negative impact an organisation has on its natural environment (reducing its carbon footprint, responsible usage of natural resources, etc).

    Profit: the positive and negative impact an organisation has on the local, national and international economy (includes creating employment, generating innovation, and paying taxes, amongst others). It is important to remember that organisations need to remain solvent in order to do good! Hence ‘profit’ remains integral to success.

    Managing the paradox…

    The question, therefore remains: how can the Triple Bottom Line [“3BL”] be a lucrative and long-term strategy?

    Well, for starters, having 3BL raises transparency that mitigates shareholders’ concerns about concealed information. In fact, it helps fulfil one of the pillars of corporate governance too – transparency. Moreover, it involves accountability around organisations’ actions, while delivering growth and improved economic situations/opportunities for a business

    It also lines up a business to be a part of ‘world betterment’. At a local level this should translate into boosting community development through better practice. Finally, 3BL improves a company’s competitive advantage vis-à-vis its peers.

    For most businesses implementing reforms come at a cost, thereby creating a paradoxical scenario. There are paradox theories that identify such conflicting situations and which argue that organisational tensions remain latent until environmental factors of scarcity, plurality, and change demonstrate the contradictory nature of the tensions, making them salient to organisational actors.

    Conditions of scarcity refer to limitations on the resources available to the organisation, such as factors of production and finances. Plurality represents conditions of uncertainty as to organisational goals and the strategies necessary to achieve them. For example, as mentioned earlier in the article – the 3BL need to become part of the values, culture, and strategy of an organisation to function effectively in most markets. Finally, change signifies shifts in contextual conditions, which leads organisations to adapt and adopt new practices.

    A paradoxical approach understands that long-term success requires continuous efforts to meet multiple demands, not by trading off or prioritising one goal over others, but by a dynamic process of splitting and synthesis, as explored in a study by Smith and Lewis in 2011. However, synthesis means that this short-term splitting process is repeated cyclically, with new priorities emerging in each cycle, and in the long run, a dynamic equilibrium emerges.

    This involves “purposeful iterations between alternatives in order to ensure simultaneous attention to them over time”. In essence, this means that organisations can attend to the competing demands of the triple bottom line to varying degrees over time, thereby reaching a dynamic equilibrium to effectively manage all three objectives.

    Doing so promotes “…a virtuous cycle of tension and resolution as the firm responds dynamically to the changing and competing demands of sustainability management”. This is one way to overcome the paradox, which is applicable in many circumstances.

    Former tennis player Anna Kournikova in 2009.

    Become a role model…

    It pays to be good! A study surveying thirty thousand people in sixty countries conducted by Neilson explores the factors shaping consumer perception towards brands. One of the key findings of this work was that about two-thirds of the respondents would be willing to pay for sustainable products.

    Particularly, the millennial groups are willing to pay between ten and twenty-five per cent more for sustainable products, and be grouped under ‘responsible consumers’. However, the results were not consistent in certain advanced economies, where some of the major social ills are less evident, such as income inequality, limited job opportunities, and a lack of safety at the workplace.

    Good business practice builds a competitive advantage for firms. Selected large corporations address inter-connected global goals and improve their operations, some being more innovative and cost-efficient than others.

    This is generally reflected in an improving share price over time. The competitive advantage arrives not only from how businesses are conducting their operations more responsibly but also from increased stakeholder engagement. Sustainable businesses, who tend to normally fall within the ‘responsible business’ category anyway, create value for all stakeholders, including employees, supply chain partners and wider associates, civil society, and the environment.

    Michael Porter and Mark Kramer proposed the ‘shared value creation’ theory proposing exactly the above, i.e. that a business can be a force for good and simultaneously generate economic value by identifying and addressing social problems which intersect with their business.

    The struggle is often to balance the trade-off which makes a few stakeholders better off at the cost of others. There is rarely a pure ‘win-win’ scenario. However, regular dialogue with stakeholders should lead to reduced conflicts and increased cooperation. Revising business practices and running new iterations gradually helps a company to be better positioned and maintain its niche competitive advantage, aligned with a core sustainability agenda.

    Finally, another critical advantage to working closely with wider stakeholders on ESG issues helps build critical support mass over the long term. This also allows businesses to deal with external forces that assists with risk management strategies.

    Besides a focus on planet welfare, alongside keeping shareholders content, consumer interest in sustainable products is another significant dimension. Consumers value transparency, fairness, and explore the global impact of brands they associate themselves with. This has become a matter of perception, in the sense that there is no real scorecard that is used to measure these impacts quantitatively.

    However, the footprints of large corporations in particular is far easier to identify today than a generation ago. Several studies by Deloitte and Global Economic Forum demonstrate that consumers are more loyal to brands that have a positive ESG image. Another study shows that about two-thirds of consumers studied in six countries believe they “have a responsibility to purchase products that are good for the environment and society” — 82% in emerging markets and 42% in developed markets.

    We await a reliable scorecard…

    Moving forward with such sustainability and social strategies is a requirement for almost all businesses nowadays. Thus, organisations are creating newer forms of partnerships, and alliances with other actors such as governments, local agencies, and community groups to work together and contribute towards larger objectives.

    It is advisable that companies do not over-promise on these wider societal goals, and instead focus on delivering on a small number of actionable ones that leave an obvious impact. This is largely, also, because the resources of any organisation are limited. Therefore, investing selected key resources aimed at a few high-impact goals will also maintain shareholder confidence.

    Companies should consider re-framing their sustainability strategies in the current global economic environment, where the complexity of change is increasingly overwhelming. What is still missing, however, are more reliable scorecards that convince stakeholders and consumers. The challenge remains to quantify evidence of ‘where is the impact’.

    Feature Image: The California Academy of Sciences, San Francisco, California, is a sustainable building designed by Renzo Piano.

  • Fine Dining in Ireland During WWII

    Dublin was the second city of the British Empire until end of the eighteenth century. After the Act of Union of 1801, however, many prosperous land owners departed the city and, indeed, by the end of the nineteenth century Belfast’s population was greater.

    The former did, however, retain a residual aristocracy who formed the clientele for the few restaurants that emerged towards the century’s end; albeit, the absence, of a significant bourgeois class over the course of the twentieth century meant there was little demand for restaurants for those on middling incomes.

    It was perhaps unfortunate for Irish gastronomy to have been colonised by the English who Voltaire described as being a nation of forty-two religions but only two sauces. Besides, Ireland was a poor country by European standards in the nineteenth and much of the twentieth century. The Great Famine was among the most devastating of its kind in human history. Culinary celebration was muted.

    Nonetheless, numerous French chefs had already emigrated to Ireland to work in aristocratic households and gentlemen’s clubs by the time the first recognisable restaurant emerged in Dublin in 1861. The Café du Paris on Lincoln Place was intriguingly linked to a Turkish baths on the same premises. They advertised both dinners ‘a la carte and table d’hote; choicest wines and liqueurs of all kinds, [and] Ices.’

    Jammet’s

    Any history of Dublin restaurants lingers on the legendary Jammet’s which was founded by two brothers from the Pyrenne,s Michel and Francois Jammet in 1901. They purchased the Burlington Restaurant and Oyster Saloon on Andrew’s Street in 1901 and renamed it Jammet’s. Michel had been chef to the lord lieutenant so knew all about what appealed to the aristocracy whose descendents continued to patronise the establishment until its demise in 1967.

    In 1908 Francois Jammet returned to Paris leaving his brother in sole charge until 1927 when he handed the reigns to his Belvedere educated son Louis. By that time it had moved to Nassau Street to the site of the Porterhouse Central.

    One observer from the 1940s describes the interior of the restaurant: ‘the main dining room was pure French second Empire, with a lovely faded patina to the furniture, snow white linens, well cut crystal, monogrammed porcelain, gourmet sized silver-plated cutlery and gleaming decanters.’ It was the hangout for artists and the literary set such as W.B. Yeats, Michael MacLiommar and Dudley Edwards as well as wealthy professionals and men of commerce.

    The family first lived in Queen’s Park, Monkstown but moved to the sixteenth century Kill Abbey in the 1940s where vegetables were grown for the restaurant. A 1928 article in Vogue describes Jammet’s as ‘one of Europe’s best restaurants … crowded with gourmets and wits, where the sole and the grouse was divine.’

    It was during the years of the Second World War that Jammet’s really came into its own as the location for the ‘finest French cooking between the fall of France and the liberation of Paris.’ Like other Irish restaurants, Jammet’s managed to evade restrictive rationing and serve customers the fare they were accustomed to. According to one observer ‘American servicemen, cigar-chomping and in full uniform, were streaming across the neutral border to sample the fabulous food in the prodigious quantities available here.’

    Red Bank

    If Jammet’s was the location for Allied excess another long-established restaurant the Red Bank was the place of Axis intrigue. On April 22 1939 the German colony in Ireland celebrated the birthday of Adolf Hitler there. The Irish Times records: ‘A large portrait of Herr Hitler occupied special position in the special decorations. On either side of it were swastikas and every guest wore a swastika or Nazi party badges.’

    Disturbingly in May 1940 as the Nazis Blitzkrieged through Europe, the ‘Irish Friends of Germany’ (aka the National Club) held a meeting in the restaurant that was attended by fifty people. George Griffin, veteran anti-Semite and ex Blueshirt, spoke on the subject of the ‘The Jewish Stranglehold on Ireland’. Griffin mentioned many Jews by name and went onto advocate that … we should never pass a Jew on the street without openly insulting him’.

    The Blueshirts salute their leader Eoin O’Duffy.

    The Unicorn

    But Jewish émigrés were themselves involved in the restaurant trade and could dish out their own retribution. It is said that revenge is a dish best served cold but for Austrian Jews Erwin and Lisl Strunz from Vienna it could be salty too.

    They escaped from Vienna in 1938 and purchased a premises on Merrion Row which they called the Unicorn. They bought it for a song as Irish people thought the premises was haunted after W.B. Yeats had supposedly conducted séances there.

    Lisl would cook her mainly Austrian dishes while Erwin entertained at the front of house. He reminisced ‘during Christmas 1940 when all the lights had gone out over Europe I played my guitar in the restaurant and sang Christmas carols and folk songs in eight languages.

    But not all comers were welcome. When Edouard Hempel and his acolytes from the German legation visited Erwin became apoplectic with rage. But he kept his wits about him and calmly took their orders. Before each plates was delivered he doused each one with enough salt to clear a frosty driveway. Hempel nearly choked and the whole table walked out and never returned.

    After the war the Unicorn was sold to an Italian family the Sidoli’s and it brought exotic ingredients like pasta to its Dublin clientele. It also involved females chefs which was unusual for the male dominated profession in Dublin.

    Another immigrant who came to Ireland to work in the restaurant trade was Zenon Geldof a Belgian citizen who set up a restaurant called Café Belge. His grandson Bob retained an ambition to feed the world.

    Steeped in the haute cuisine tradition of Escoffier Jammet’s continued to prosper after the war when it was joined by other restaurants including The Russell.

    Ireland’s first phD in the history of food, Máirtín Mac Con Iomaire argues that on a per capita basis in the 1950s Ireland was the gastronomic capital of the British Isles. Although this may not have been that great an achievement as given the nadir that English food had reached by the 1950s. Elizabeth David wrote of her experience in one English restaurant of the time: ‘there was no excuse, none, for such unspeakably unpleasant meals as in that dining room were put in front of me. To my agonized homesickness for the sun and southern food was added an embattled rage that we should be asked – and should accept – the endurance of such cooking.’ Perhaps she should have visited Dublin.

  • The Restaurant Experience

    The anthropologist Jack Goody pours scorn on modern dining habits. Solitary consumption he says reverses the customary habit of ‘public input and private output’, making eating alone ‘the equivalent of shitting publicly.’

    Dining, after all, as the great gastronome Jean-Anthelme Brillat-Savarin, put it: ‘is the common bond which unites the nations of the world in reciprocal exchanges of objects serving for daily consumption.’

    The restaurant emerged as a distinctive forum for public consumption in eighteenth century France. Prior to that it was the simple table d’hôte, where a traiteur would present a large pot to the assembled diners, who arrived at the appointed hour.

    This could present difficulties, however, if agreed conventions were lacking on how diners were to participate. On his travels in France, the agronomist Arthur Young bemoaned the greed of his dining companions in hostelries, saying, ‘the ducks were swept clean so quickly that I moved from the table without half a dinner’. In the wake of the French Revolution, an upwardly mobile bourgeoisie sought a more recherché experience.

    Originally, restaurants (deriving from the verb restaurer ‘to restore to a former state’) sold medicinal broths. In her history, The Invention of the Restaurant (2000), Rebecca Spang recalls how the restaurants of eighteenth-century Paris differentiated themselves from other eateries by offering sustenance at any time of day. Eventually they began offering more solid fare, thereby encroaching on the traiteurs.

    The strict laws regulating the division of business between the different food guilds in France at the time led to a landmark court case in which the restaurateurs carried the day. This allowed the restaurant-style of dining, ‘characterized not by commonwealth but by compartmentalization’, to emerge as the dominant form of eating out in the Western world.

    Fine Dining,

    Elitist Quality

    Today, restaurants invariably ‘plate’ each dish before presentation to the individual customer a style known as service à la russe, which replaced the more medieval display of service à la Francaise during the mid-nineteenth century.

    The elitist quality of the restaurant experience is part of its appeal. Indeed, according to Sprang, the ‘restaurant fantasy implicitly required the presence of somebody outside: some poor devil with his nose pressed to the window’.

    Thus, a restaurant is more than merely an establishment where food is served. It involves the division of diners into parties and, generally, serves separate portions to individuals. It remains synonymous with French food, and the dominance of French cuisine is apparent in the early history of Dublin restaurants, although this has changed radically in recent decades.

    Apart from chefs, waiting staff and often indulgent investors, the most important person for a restaurant’s survival is the food critic. A bad review can sink a restaurant, while praise can bring customers flooding into the next big thing, although in recent times food criticism is being overtaken by online reviewers that are subject to manipulation.

    Grimod de La Reynière

    The First Gastronome

    A food critic may also be referred to as a gastronome. The first of this kind was Alexandre Balthazar Laurent Grimod de la Reynière who wrote his Almanach des Gourmands in the wake of the Revolution.

    He issued his pronouncements in the name of tradition as a member of the departed ancien regime. The son of a rich farmer-general, in his early life he displayed liberal tendencies but became disillusioned with the new order, condemning ‘everything that is despicable and vile; there in two words you have the Revolution’.

    He asserts: ‘I will never be the friend of a democrat. It is atrocious that men of letters should think as the majority do today (MacDonogh,1997).’

    According to his biographer MacDonogh, he began to write about food after being told to write about something harmless, or give up writing altogether. In this medium he ‘masked his vicious attacks behind harmless idioms’. Gastronomy became a vehicle for his reactionary views.

    An awareness of ‘good’ food revealed the true aristocrat. After the Revolution he founded what he referred to as a Jury des Degustateurs, and between 1803 and 1812 set about writing his Almanach des Gourmands. The aristocratic display of pre-Revolutionary France could re-emerge in the new forum of the public restaurant.

    De la Reynière was also alive to the possibility that he could be labelled a glutton, asserting: ‘Let it be said that of all the Deadly Sins that mankind may commit the fifth appears to be the one that least troubles his conscience and causes him the least remorse.’ Henceforth a glutton would be one who eats too much rather than a refined individual with an interest in talking about food.

    The gastronome in his or her most evolved form is not a professional cook. He or she is a man of letters. His or her real table is not the one where he eats but where he or she writes. It is with the flourish of the pen that he or she achieves success rather than through their knowledge of the arcane culinary arts, as ultimately the gastronome is not the one who knows the most, but the one who speaks, and writes, best.

    Garden café of the Hôtel Ritz Paris (1904), Pierre-Georges Jeanniot.

    ‘Lightning Sketches on the Table Cloth’

    Curnonsky, the pen name of the great French food critic Maurice Edmond Sailland who was elected Prince Elect of Gastronomy by Le Soir magazine in 1927 describes the role as follows:

    There are those who stare with gluttonous resentment, and those who snap impatient fingers at every passing waiter: those who flap huge newspapers in their companions’ faces, and those who shake defiant powder-puffs in their neighbours soup; those who devour bread to repletion, and those who chat so gaily, to the restaurant at large. But there are others, a chosen few who, having developed to a fine degree the study of physiognomy and, coupling this with a skilled pen or pencil, combine their talents in lightning sketches on the tablecloth.

    Pascal Ory poses the question ‘Does the chef make the gastronome or vice versa?’. Culinary evolution is largely independent of gastronomic evaluation, but without a critical audience chefs may be insensitive to diners’ tastes.

    Moreover, just as when we cook for ourselves we don’t tend to perform heroics, a cook without a responsive audience might take a more functional approach. But innovation and high standards become an imperative when the food critic is there to evaluate.

    Even if they may claim to have nothing but contempt for the breed, virtuoso chefs usually seek the validation of critical approval, and boundaries are only broken when gastronomes are there to describe them as such. More to the point, the imprimatur of the critic brings great rewards. Perhaps unfairly, the pen is often mightier than the kitchen knife.

    Notwithstanding increasing costs in a fraught business, the back breaking labour of chefing, improved takeaways, the strains of Covid and the distortion of food criticism through sites like TripAdvisor, restaurant dining endures as a sought after experience. After all, where else would anyone refer to me as “Sir”.

    Feature Image: Daniele Idini

  • Hitching the Plough to the Stars

    Paul O’Brien’s biography, Sean O’Casey, Political Activist and Writer (Cork University Press) is a timely re-assessment of an often controversial, figure whose place in the literary canon is, O’Brien argues, is insufficiently acclaimed.

    It coincides with the hundredth anniversary of Druid’s production of O’Casey’s Dublin Trilogy: ‘The Plough and The Stars’, ‘Juno and the Paycock’ and ‘The Shadow of a Gunman’ which opened recently at the Galway Arts’ Festival and will tour Belfast before coming to The Abbey in September. But, with the publication of Timothy Murtagh’s new book Spectral Mansions on how the once graciously lofty Henrietta Street turned into tenements adding to the mountain of scholarship about Dublin tenement life, O’Casey’s plays, are, on that basis alone, destined for immortality.

    As enduring testimonies of the unflinching reality of Dublin tenement life, no playwright evokes and captures the life of Dublin’s tenements as does O’Casey and that is the central theme of this tour-de-force of scholarship.

    Sean O’Casey was born in 1880 into a lower middle class Protestant family – the youngest of eight children – and was raised in Lower Dorset Street, where the family enjoyed a relatively comfortable lower middle-class life until after his father’s death in 1886. His father had been employed in the Irish Church Mission and his older brothers attended the Central Model School in Marlboro Street for which a small fee was required.

    In reduced circumstances after his father death, and when O’Casey was nine, the family moved to the East Wall – a hot bed of the Irish Citizen Army (ICA) and the ITGWU. His entire oeuvre dramatizes with unflinching realism and lack of sentimentality the grim realities of tenement life in Dublin, infusing his characters with compassion and humanity.

    By the 1930s, Dublin’s tenements were among the worst slums in Europe with a very high mortality rate, rampant prostitution and disease reflected in ‘The Plough and The Stars’ in the character Mossler Gogan dying of TB and the prostitute Rosie Redmond. Indeed, according to O’Brien ‘[i]n 1914 it was believed that tenement dwellers had a better chance of survival on the Western Front than in the diseased-ridden hovels of Dublin.’  Thus, O’Casey became ‘a life-long activist for the preferment of dwellers of tenements, reflecting their lives with scrupulous realism and compassion, their humanity always shone through as did their heroism and their promise.’

    Henrietta Street, Dublin.

    Excruciating Detail

    Paul O’Brien biography on O’Casey charts with intense and excruciating detail the development of O’Casey’s politics and how those politics fused and informed his writings, especially his dramatic works. In that sense, O’Brien’s book takes a thematic rather than a chronological approach to O’Casey’s life.

    While O’Casey’s older brothers attended the model school in Marlboro Street, Sean, a delicate child was largely home schooled, self-taught and, for a time, taught by his older sister, a teacher. Later, O’Casey was immersed in all the key political movements of his time, the ICA, the Gaelic League, the GAA and was a big admirer of, and influenced by, Parnell.

    He mastered Irish, hence the change in his birth name from John to Sean and he studied the Classics. From early in his life, he was interested in the national movement but it was the emergent labour movement, gaining momentum under his life-long hero, James Larkin that really gripped him and the entire dynamic of his subsequent political and writing life revolved around his failure to find a synthesis between Irish Republicanism and the international struggle of the working classes.

    In other words he never could accommodated the ‘green’ of Nationalism with the ‘red’ of Labour and this unreconciled tension remained the central dilemma of his entire life and, in exploring it in minute intensity, Paul O’Brien uncloaks it as both the triumph and tragedy of O’Casey’s life too. While Paul O’Brien clearly admires his subject, he is candid about the unjustified personal animosity of O’Casey towards James Connolly. O’Brien does not shirk from revealing any of O’Casey’s flaws in judgement and personality, while never losing sight of his overall genius.

    Imbrications between the cause of the working classes in Dublin and accelerating nationalism were unavoidable after Parnell and were so fused as to often be indistinguishable; the overlaps were everywhere, not least in the Irish Citizen Army (ICS) of which O’Casey was a member until he finally severed all ties in 1914. He also derided the Irish Volunteers which emerged in the South, in parallel with the formation of the Ulster Volunteers in response to the Home Rule Bill of 1912.

    James Larkin.

    James Larkin

    James Larkin arrived in Dublin in 1907 and inspired O’Casey to use ‘words as weapons against exploiters of the Dublin poor.’ O’Casey first gave vent to his rage in Larkin’s paper The Irish Worker. Later, in his biographies, O’Casey lacerated the corruption of Dublin Corporation.

    From an early age, O’Casey’s love of literature was manifest. The hope that Irish life would be transformed died with the early and tragic death of Parnell in October 1891. In the aftermath, the prospect of peaceful evolution along the lines of Dominion Status enjoyed by Canada and Australia receded.

    O’Casey saw Larkin as the greatest Irishman since Parnell. ‘The Plough and The Stars’, O’Casey’s most controversial play premiered in the Abbey in 1926 and was well received on its first night. But on the second night, a combination of 1916 widows and Republicans escalated into full blown riots with added moral consternation at the prostitute Rosie Redmond awaiting clients and the un-named figure in the window, identifiably Patrick Pearse extolling the sanctity of bloodshed.

    The first two acts of the play are set in 1915 looking forward to the liberation of Ireland, but the second two acts are set during the 1916 Easter Rising.

    In the evolution of his political ideals, O’Casey had a number of influences aside from Parnell; the writings of James Fintan Lalor (1809-1849) and John Mitchell (1915-1875) influence him. The 1913 Lockout in Dublin was a watershed moment for O’Casey.

    Parnell had provided a vision for Ireland with no conflict between the Protestant religion and the principles of freedom which had a democratic and libertarian pulse, rooted in Constitutionalism. But contemporary conditions would sweep O’Casey away from family and Protestant traditions.

    A Dublin Tram conductor and an Abbey actor introduced him to rawer politics. This, combined with the ICA and the ITGWU provided different currents on O’Casey’s development. In terms of his literary work, Dion Boucicault remained a strong influence in how he used songs and comedy to lighten the tragedy of his own writings. (O’Casey wrote many, long forgotten, ballads)  While Boucicault’s plays are traditional melodramas there is also a ‘political ambivalence that challenges the stereotypical image of the stage Irishman; ‘Arrah-Na-Pogue’ and ‘Peep O’Day’ are about the 1798 rebellion. Boucicault created a more trustworthy image of the Irish, replacing the racial stereotype in English literature which was finally killed off by George Bernard Shaw in Larry Doyle in ‘John Bull’s Other Ireland.’ O’Casey draws on the techniques of Boucicault, Shakespeare’s history plays and on Shaw to create a unique synthesis of his own. O’Brien argues that O’Casey’s conclusions are ‘open-ended.’

    Dion Boucicault.

    The Boer War

    Defining nationhood was intensified by anti-British sentiments after the Boer War, the centenary celebrations of 1798 and the Jubilee celebrations in 1889.

    O’Casey imbibed the sentiments of the Gaelic League like many other Protestants. The plough and the stars was the flag of the Irish Citizen Army, and O’Brien identifies O’Casey’s problem was to ‘hitch the plough to the stars.’

    He joined the Gaelic league in 1901 and took up hurling. He became an apprentice bricklayer and worked for a number of years on the Great Northern Railway Line. In 1908, he became secretary to the Drumcondra branch of the Gaelic League and spent ten years promoting Irish language and culture but increasingly he saw the chief enemy as the crushing force of capitalism, and, as he matured, he rejected romantic nationalism.

    James Connolly was able to unite nationalism and socialism, but O’Casey could never fuse them into a cohesive theory remaining haunted by the voice of the urban poor. O’Casey resigned from the IRB in 1913 when they refused to take the workers’ side in the Great Lockout.

    He ditched the Gaelic League for Larkin and the momentum behind Larkin radical labour movement became the driving force for his plays. This transition is reflected in his earlier plays The Harvest Festival, The Stars Turn Red and Red Roses For Me which deal with the labour history of the 1913-1914 Lockout. After the failure of the Great Lockout O’Casey’s views were crystallised into the view that the ‘struggle was not one of English Imperialism versus Irish Republicanism but between international capitalism and the workers of the world’ and this is reflected uncompromisingly in his plays.

    In 1914, Larkin went to America to organise the international workers of the world and was jailed for criminal anarchy. The Ulster Covenant saw 4,000 Ulster volunteers sign up and the respondent Irish Volunteers were despised by O’Casey who saw it as dominated by ‘overfed aristocrats’.

    He clashed with Tom Kettle and Pearse and wrongly accused them of not supporting workers. In 1914, along with Larkin, he drafted a new constitution for the ICA but the problems of aligning the red of Labour with the green of nationalism persisted for O’Casey.

    Countess Constance Markiewicz.

    ‘a spluttering Catherine Wheel of irresponsibility.’

    When Connolly expressed his vision for the re-conquest of Ireland in a pamphlet in 1915, O’Casey saw it as Connolly lowering the red flag in favour of the green and made a sudden and final split with the ICA. The Countess Markievicz joined the Irish Volunteers and the ICA.

    O’Casey was intensely hostile to her ‘hauteur’: ‘she whirled into a meeting and whirled out again a spluttering Catherine Wheel of irresponsibility.’ His motion, however, to expel her from the ICA failed. According to O’Brien ‘he rushed headlong into one dispute after another, damaging himself and alienating his friends.’

    O’Casey published a book on the ICA in 1919 but, according to O’Brien it lacks balance and is saturated with vitriol and opinions. His core argument was that nationalism gained and labour lost as a result of the ICA’s involvement with 1916. ‘O’Casey was alone is seeing Irish history from a working-class perspective when, after 1916, The Labour movement was subsumed into the struggle for independence.’

    When Connolly joined the Volunteers in 1916 it completed the fusion with the ICA. 220 members of the ICA rose on Easter Monday 1916, but 1,200 Irish Volunteers did. As O’Brien points out, Connolly had little choice but to fight on nationalist terms in 1916.

    Connolly had grasped the importance of a united front where O’Casey failed. O’Casey never acknowledged Connolly’s attempts to unite Labour and Nationalism but in later years he did acknowledge Connolly’s standing in the Labour movement but ‘he never lost an opportunity to denigrate Connolly in favour of Larkin.’

    O’Casey became ‘a disgruntled outside, a hurler on the ditch, shouting the odds as history passed him by.’ Many critics put O’Casey’s vitriol against 1916 in ‘The Plough and the Stars’ down to ‘survivor’s guilt.’ The summary execution of Francis Sheehy Skeffington, a socialist and passivist abhorred him. He felt successful revolution on nationalist terms only empowered the new Irish ruling classes – the very people who had reduced the Dublin poor to abject poverty.

    O’Casey was in sympathy with the views of Ernie O’Malley who resented the legendary status that emerged in the aftermath of the 1916 martyrs as they were twisted and idealised by a new state to consolidate its position. O’Brien argues that ultimately O’Casey neither deified or vilified the 1916 heroes but rather projected the realities of the new Free State that emerged, and, in that, he saw it as advancing commerce over the plight of the poor.

    In ‘The Plough and The Stars’ he ‘inverted the nationalist myth … and summoned his characters from the margins of history and placed them in the spotlight.’

    ‘The Shadow of a Gunman’ was influenced by Ernie O’Malley’s views in the character of Davoren, an opportunistic carpetbagger who capitalised in the new Free State which the play mocks. The rhetoric of romantic nationalism is ridiculed and critiqued.

    In all of O’Casey’s plays his characters are overwhelmed by events outside of their control. Unlike ‘The Dublin Trilogy’ his plays ‘The Cooing of the Doves’ and ‘Kathleen Listens In’ supports the pro-treaty side. Kathleen also counters the glorification of dead heroes and martyrdom.

    Bertolt Brecht.

    Influenced by Brecht

    ‘Juno and the Paycock’ (Abbey 1924) fuses tragedy and comedy: Captain Boyle, a figure broken by poverty and drink is still a sympathetic character. The life of the tenements is always pitched against the life outside and many saw the play as a condemnation of all war.

    Juno too has been seen as an attack on the Republican movement. The character Juno is Brecht’s Mother Courage of Dublin with her strength and humanity. O’Casey was influenced by Brecht, Ibsen and other experimental dramatist.  In common with Shaw and Joyce, he despised the cult of Cathleen Ni Houlihan as symbol of Ireland. In a feminist twist, Juno does leave her abusive husband and goes off to make a new life with her unwed pregnant daughter.

    O’Casey moved to London in 1926 to receive the Hawthornden prize and produce the London production of Juno. He met and fell in love with actress Eileen Carey and he married her and the couple moved to Devon where they went on to have three children.

    Yeats refused to produce The Silver Tassie at the Abbey in 1928 causing an irrevocable breach between the Abbey and its most successful playwright. When Juno opened in London O’Casey was a minor celebrity and controversially hobnobbed with a succession of high society grandees, especially with Lord and Lady Londonderry, even spending a week at their residence, Mount Stewart, on the Ards Peninsula in 1934.

    They were the direct descendants of Lord Castlereagh, ruthless executioner of the United Irishmen in 1798. He rubbed shoulders with figures as controversial as Oswald Mosely. On the other hand, his Communist activities led him to clashes with George Orwell who, in 1949 supplied O’Casey’s name as part of a secret list of about a hundred writers, artists and intellectuals who should not become ‘cheerleaders in Britian’s fight against communism’ to British intelligence (see issue 3, History Ireland, Autumn 1998).

    O’Casey’s was unable to deal objectively with the Stalinist pogroms and took the Russian side against Hungary in the uprising of 1956. For all his human lapses, O’Casey emerges largely as mostly being on the right side of history and was an ardent supporter of Noel Browne. His later plays too were polemics against Nazism and Fascism. He was bitterly disappointed by the failures of his expressionist plays, ‘The Silver Tassie’ and ‘Within the Gates’.

    Dublin, 1916.

    An Exhaustive Feat

    Paul O’Brien’s book, with some occasional unavoidable repetition is an exhaustive feat of research and scholarship that should become an indispensable handbook to all aficionados, practitioners, academics and teachers of Irish drama. In addition to existing scholarship, O’Brien opens a new window of insight into O’Casey’s passion, commitment and motivations while never eschewing his human flaws.

    This is also an indispensable history of the development of the Irish labour and nationalist movements and their fraught and intricate interface in the aftermath of Parnell and into the early twentieth century; through The Easter Rising, The War of Independence, The Civil War and its aftermath.

    As a writer, O’Casey developed his own unique style and never failed to move with the modernism of Ibsen, the Expressionism of Ernst Toller – the German anti-Nazi playwright – Brecht and Shaw who were early influences. He disliked pessimistic theatre but made an exception with Beckett. Paul O’Brien makes a compelling case that O’Casey’s expressionist and modernist plays are overlooked. His book certainly inspires a fresh look at O’Casey overall oeuvre.

    With ‘The Dublin Trilogy’ currently enjoying a successful run as part of the decade of centenaries his place in the pantheon of Irish dramatists seems assured, and, as the history of Dublin tenement life continues to burgeon, his plays are set to endure as visceral, dramatic slices of that life. Perhaps the most astute accolade O’Brien accords O’Casey is to observe that; ‘he was one of the most sensual writers of his era’ where ‘sexual love is always presented as positive, joyful and life affirming’ and that was the common humanity that placed the characters of Dublin’s tenements on a par, as O’Brien suggests, with ‘Maud Gonne, the Countess and their aristocratic circle.’

    Paul O’Brien richly deserves the accolade of O’Casey’s biographer, Dr Christopher Murray, Emeritus Professor of Drama at UCD who greeted, ‘An extraordinary achievement bringing O’Casey centre-stage again with supreme skill. Bravo!’

    Sean O’Casey Political Activist and Writer by Paul O’Brien is published by Cork University Press in hardback at €49. It is 297 pages with a Foreword by Shivaun O’Casey. There are an additional 100 pages of notes, bibliography and index.

    Feature Image: Study of Seán O’Casey by Dublin artist Reginald Gray, for The New York Times (1966)

  • Unmasking the Tawdry Yarns

    In the essential Boomer text, Zen and the Art of Motorcycle Maintenance one of the chief ideas was the difficulty of defining what we mean by “quality”. Almost everyone knows what quality is and can easily spot the presence or lack of it in something. But the word itself, the concept, the thing of it, is difficult to describe. So, in the absence of a clear definition, the presence of quality can become a claim by a person selling a thing which, their patter maintains, possesses the elusive attribute.

    So even though everyone knows what quality is, it is possible, with a good enough story, to convince someone that something which may not actually possess quality, does possess quality. The key is the story. With a good enough story, anything is anything. You can even sow doubt in a person’s mind, making them believe that they actually lack the ability to discern quality, but that luckily, you are there to help them; for a small fee.

    The old story of the emperor’s new clothes is an illustration of what happens when a lie reaches critical mass to leave an entire herd deluded. If everyone claims to be able to discern the quality of the invisible garment, it takes balls to go against the herd, and, herds being what they are, the balls to differ is rare. So, an attribute which is difficult to define, leaves wriggle room for the unscrupulous and the potential danger of delusion for the naïve. You can almost hear Arthur Daly or Dell Boy spin it, “Look at that! That’s quali’y that is.”

    Value

    This is where Mariana Mazzucato starts out from in her book on economics, The Value of Everything: Making and Taking in the Global Economy. In Mazzucato’s thesis the word “value” is in many ways a synonym for “quality”, and she shows how some clever-clever salespeople have sold a pup to the entire world with a fancy story that somehow has the effect of equating value with price: if a thing is expensive it must be good, right? “Look at that! Now that’s quali’y.”

    Mazzucato shows how this simple con has allowed the Arthur Dalys of big finance to enrich themselves and their friends by extracting value from goods created by the wider working community. They do this primarily by blurring the distinction between value creation and value extraction. This is the Making and Taking aspect of the book.

    We see it all the time in the arts. Irish musicians and actors will be more than familiar with the publican who asks them to work for nothing because, unlike him, they “enjoy” their work. Therefore, so his thinking goes, that is reward enough and the publican can extract the economic value from the skills of the artistes. The story the publican spins in this transaction is the implicit suggestion that the arts are actually worthless.

    Mariana Mazzucato 2016.

    The Con

    Everyone can see the con when it’s that glaring, but in the wider world of high finance it’s all a bit faster and meaner: worker’s wages stagnate while shareholders extract fat bonuses. Energy company shareholders holiday in the sun while families decide between food and heat. Mazzucato’s book is a reveal of the stories and patter and understandings used and exploited by corporations and swallowed by the public and by governments, that results in wealth being sucked to the top while wages stagnate and inequality increases.

    Mazzucato’s goal is to unmask the tawdry yarns of modern capitalism’s snake-oil salesmen who profess to be the high priests of identifying value: the bankers and corporations essentially claiming welfare in the form of tax breaks while creaming from the top of community-created wealth to transfer to their shareholders, all with the connivance of a bought-out political class, many of whom are corporate shareholders themselves. She writes:

    “If the assumption that value is in the eye of the beholder is not questioned, some activities will be deemed to be value creating and others will not, simply because someone – usually someone with a vested interest – says so, perhaps more eloquently than others… If bankers, estate agents and bookmakers claim to create value rather than extract it, mainstream economics offers no basis on which to challenge them, even though the public might view their claims with scepticism.”

    Side Street in Dignity Village, Portland, Oregon.

    Fake Stories

    Derelict American cities are a living example of wealth extraction, leaving a trail of destruction in its wake while the top 1% live the high life. It is in untangling these stories, these modern myths of economics, that Mazzucato hopes to bring clarity in the necessary project to somehow reimagine capitalism, so that it works once more for the benefit of all, creating a thriving world rather than a dying one.

    At the centre of this entanglement of fake stories, spun by the elite like so many spider-webs, she shows that what is afoot is nothing more than a cheap con being perpetrated by groups of people with stories so shoddy that as soon as you see the move and the angle you can’t unsee it. Theirs is a strategy that depends essentially on the manipulation of one human weakness: convincing people that they are solely to blame for their own condition. Not the system. But their own character defects.

    And people buy it, every time. It’s not unlike the original sin the church used to so successfully sell. In the end, they claim, it’s all your own fault. So, while the poor sit self-tortured in self-flagellation for their own condition, which is almost always an outcome of social and economic inequality, the sales shaman steals away with the pensions and anything else he can manage to capture.

    Quality

    Robert Pirsig, author of Zen and the Art of Motorcycle Maintenance spent a book trying to get a grasp on the meaning of the term “quality”, an attribute whose presence or absence is clear to everyone. That was the mystery he was trying to pin down. How is it everyone knows when something has quality but can’t quite describe it?

    In the same way, you don’t need a PhD in economics to see that the attribute of quality is severely lacking in today’s capitalism. You have only to look at the manner in which business is being conducted that it is delivering neither quality nor value, just endless bonuses to a select few and endless grinding poverty to the many, no matter how hard they might work.

    Marianna Mazzucato has unmasked the shoddy yarn driving this fountain-pen theft of communal wealth, in a book so timely and revealing that it simultaneously exudes the twin attributes of quality and value while providing much-needed insights into the vexing question: why is capitalism only really working for a select few? The answer is simple: the herd has been deluded by clever economic patter: “That’s quali’y, tha’ is.”