2004-2005 Academic Year

Nigel Boyle, Distinguished Author and Scholar of Public Policy

Professor Nigel Boyle’s book FAS and Active Labour Market Policy was officially launched in Ireland on March 14, 2005 at a gathering of Irish dignitaries. Following is a review by Ireland's leading economic commentator, Brendan Keenan.

How FÁS kept the Tiger well-trained even if it didn't look before it leaped

Reprinted from Irish Independent
Thursday March 24th 2005

The self-serving and accidental use of EU funds over a decade ago for training may have been the best way to spend them

THERE is, it seems, not an elephant in the living room, but a very large octopus. And, just like the aforesaid elephant, no one seems to have noticed.

Sometimes it takes a visitor to notice such things, or at least to mention them. In this case, the visitor is Nigel Boyle, Associate Professor of Political Studies at Pitzer College in California. The octopus is the State training agency FÁS.

He compares FÁS to an octopus because it is "all tentacles, relatively small brain, invertebrate, omnivorous and uses an ink-based defence when attacked" - the latter a reference to the FÁS fondness for glossy public relations materials.

This is unkind to octopuses, which scientists now regard as remarkably brainy creatures indeed, but Professor Boyle is not being unkind to FÁS. On the contrary, in a fascinating new study*, he sees the training agency not only as a key element, but perhaps the key explanation for the Irish economic phenomenon.

This seems strange - not only turning FÁS into a great read, but making it sound so important. FÁS is big all right, with an annual budget of €600m. Training people is clearly important work. But I cannot recall it being included in the list of explanations for the Irish miracle along with such items as foreign investment, low taxes, social partnership or membership of the euro.

But one statistic leaps out to justify his claims. Seventy per cent of Ireland's remarkable employment growth has been concentrated in five sectors - none of which involve foreign multinationals. They are construction, sales, hospitality, transport & communication and finance.

Each has recorded jobs growth of more than 30pc since 1987. With the exception of finance, all drew heavily on FÁS programming and trainees to feed this extraordinary expansion. So the agency seems to have done a good job.

If that were all there was to it, Professor Boyle's paper would be interesting and useful. But he goes much further, seeing FÁS as a reflection of the weaknesses of the Irish State and paradoxically arguing that it is those weaknesses, as much as any strengths, which produced the Celtic Tiger.

It bears repeating that what was remarkable about the Tiger was not the growth in output, which was produced largely by multi-national investment, but the growth in jobs. Employment increased by a half from 1990 and the projections are that it will have doubled, to reach two million, by 2010. This is what fascinates outsiders.

Professor Boyle is one of them. He notes that Ireland spends little on social security and relatively little on education, despite the supposed national ambition of becoming a knowledge economy. The spending is regressive, being particularly low at primary level but above average at third level.

So much is well-known, and subject to a certain amount of argument as to what the figures mean. I am indebted to Professor Boyle for pointing out what is not so well-known; that Ireland ranks sixth in the OECD for spending on labour market measures and is the only member apart from Sweden which spends more on active measures, such as training, than on passive ones such as unemployment benefit. Spending on such active measures peaked at more than 2pc of GDP in the mid-1990s.

The main reason, of course, is that EU funding was available for this very purpose. Indeed, in order to maximise the amount which Ireland could get from the cohesion funds, the Government had to spend a lot on "human resources", ie on education and training. Almost €4bn in today's money was received under this heading in the two tranches of 1989 and 1994.

As with the roads programme, EU funding was sought, not to meet agreed needs of the economy, but to meet the Commission's requirements for handing out cash. The irony is that this self-serving and accidental use of the funds may well have been the best way to spend them.

I confess that I was hostile at the time to the idea of so much money being spent on human resources, believing it would be better to devote more to "hard" infrastructure such as roads, public transport and telecommunications.

But I may have been wrong. I did not foresee the enormous demand for skilled workers which the 1990s would produce. But then, neither did FÁS nor its political masters. Some said explicitly that it was better to have trained people emigrating than untrained ones.

It is also a new take on the benefits of EU structural funds. The money on its own would have had limited effect. But it obliged the State to spend it in ways it would not have dreamt of doing, left to its own devices.

The heart of the book is, in fact, the nature of the Irish State. One of the reasons FÁS grew so large and influential is that its executives understood the nature of that State and how to use it to their advantage. They cultivated the EU Commission directly, they exploited the perennial rivalries between government Departments, they pandered to the Dept of Finance's fear of public spending commitments by outsourcing, when no one had heard of the word. And they made sure TDs got what they wanted in their constituencies.

One can sense the good professor's puzzlement at the contradiction between the dysfunctional nature of the Irish State and its economic success. He mulls over the infighting which surrounded the apprenticeship training scheme. Sean Lemass complained of the inadequacies of the old system in 1943, but nothing ever happened and nothing ever looked like happening.

The employers would not pay for anything, the unions opposed any change to the old craft-based regime, the Dept of Education and the colleges wanted to lead any new system but were unable to reform their procedures to deliver what was required.

It is a story which could be repeated across the spectrum. Despite being a small country, where all the key players know each other personally, "joined-up" government has proved beyond us. Success has come where agencies are created which stand outside the process, such as the IDA and, in their heyday, Bord Fáilte and Shannon Development. It is hoped the new Health Services Executive will repeat the pattern but, as with all of them, the Dept of Health will be waiting in the long grass.

FÁS, meanwhile, fights on. It appears on the point of winning another ferocious turf battle to award degrees to its apprentices. One criticism of the book is that it is too kind to FÁS - even if it does also liken the agency to a Swiss Army knife, which does a lot of things, but none of them well.

But that might be to miss the point, which is the description of Ireland as a "competition state", neither social democratic nor free market, combining a "Swedish appetite for intervention with a Texan willingness to pay for it".

* FÁS and Active Labour Market Policy, 1985-2004, by Nigel Boyle. Published by The Policy Institute, TCD, at €16.

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