Taxpayers’ money must be spent wisely, but have we ever done politics that way?

Governments don’t control how society and the economy evolves — but they can make a difference if interest groups don’t get in the way, writes Dan O’Brien

IN a little over two years, the number of people living in the Republic will hit five million. While most rich countries are grappling with the many challenges posed by falling or stagnant populations, Ireland has the happier, if no less daunting challenge of planning for more people. Comparatively high birth rates and immigration rates explain Ireland’s strong demographics.

Ireland’s demographics differ from other countries in other ways too. Among the countries of western Europe, Ireland has one of the highest share of its population living outside towns and cities. It has remained unusually rural despite having a very low population density, something which makes infrastructure and public services provision more expensive. If rural Ireland was being starved of resources, as some of the more excitable souls in Dail Eireann claim, we would not have such a large and growing rural population.

Over the past quarter of a century Mayo has been the country with the slowest growing population in the Republic. Yet its increase of 18pc is more than double the rate of increase Europe as a whole has experienced.

Every other county has added at least a fifth more to its population since the early 1990s. There are entire countries in eastern Europe which have seen depopulation since then.

How many children people have and where people chose to live is determined by a vast range of factors — history, culture, technological change, the economy, personal predilections and more besides. Although decisions taken by the Government matter, they tend to be overplayed. That is worth saying because the decisions taken by the Government will be the focus of much attention in the coming days and weeks as new infrastructure and spatial plans are unveiled.

Political leaders should communicate such complexities to voters. That doesn’t often happen. It certainly didn’t last Monday when two rural-based politicians — Fine Gael’s Michael Ring, who is Minister for Rural Development, and Fianna Fail’s Eamon O Cuiv, a Galway-based TD — outbid each to stoke grievances.

During their conversation on the Sean O’Rourke radio show, the latter claimed that rural areas have been “starved of investment” and spoke of the slated allocation of resources in the forthcoming investment plan as “crumbs from the rich man’s table”.

Urban areas actually transfer resources to rural ones, via tax and public spending, just as richer people transfer resources to poorer ones. This redistributive solidarity is rarely mentioned and one would not know it happened at all from last Monday’s conversation between two senior politicians.

It is even rarer to hear that deprivation rates in urban areas are higher than in rural ones, according to the CSO’s annual Survey of Income and Living Conditions (SILC), in part because the cost of living, and housing costs in particular, are much higher in cities. The facts need to be aired because it is unfair that those who emote most loudly be allowed to get the most. Not to be outdone, Michael Ring played the rural-Ireland-is-under-attack card.

“People have made a living knocking rural Ireland,” claimed the minister for rural Ireland. He mentioned nobody by name because nobody makes a living in that way.

Despite this, he warmed to his theme and doubled down, stating that “a lot of people out there just keep knocking it, knocking it, knocking it”.

Not only does no one make a living out of bashing rural Ireland, nobody with a public voice in this country says that they want any area to fail or to be ignored. It is depressing that a cabinet minister engages in such divisive fear-mongering. Creating imaginary enemies is what demagogues do. It is downright dangerous in an age of anger when too many people are all too ready to seek others to blame for every ill, real or perceived.

Another aspect of the politicians’ conversation on Monday was the focus on the seemingly omnipotence of the State. Speaking of different rates of development in Galway, O Cuiv talked of growing “the whole county together”, as if somebody, somewhere has levers that determines how an economy and its different parts evolve.

While government can influence economic performance, it plays only a limited role. That some towns and areas in rural Ireland are doing well and others remain in the doldrums is not a simple matter, just as the differences in wealth among the countries of the world is complex and determined by many factors.

The suggestion that growth can be controlled has the logical corollary that when it is different in different places, someone is to blame. This is not the case — most big processes in human affairs are the result of the uncoordinated interactions of people and organisations. That is true of economic development too.

It is also true of urbanisation, one of the most universal processes in human history. People all over the world have been gathering into ever larger conurbations for thousands of years. Technology in the future might halt or even reverse that trend, but it hasn’t to date. It is not the case of “denuding” rural areas, a term O Cuiv used, as if somebody is engineering mass movement of population. Rather, individuals make decisions as to how and where they want to live.

None of this is to say that politicians and interest groups should not lobby for their cause as the new spatial and infrastructure plans are finalised.

Political considerations will always have a role in resource allocation. But the case for the most efficient use of taxpayers’ money must always be made and form the basis for decision making.

Important in doing so is to have transparency about what is spent and as rigorous an evaluation process as possible.

The only way to have any idea of whether the most bang for buck is being obtained is to weigh up the costs and benefits of different projects so that they can be compared. Building a railway that costs €500 per journey without generating new economic activity is clearly a worse use of taxpayers’ money than building a stretch of motorway which ends up more than paying for itself, thanks to the additional business it generates.

That still doesn’t happen as it should. As Colm McCarthy pointed out in these pages last week, there has been no cost-benefit analysis of the circa €500m to be spent on rural broadband rollout — despite the Government’s own rules which state that even projects involving a fraction of that sum must be evaluated.

Just how much money has been wasted in the past was highlighted last year by the International Monetary Fund. It published a report comparing Ireland’s public investment processes to international best practice. The study* found that there had been “shortcomings in the effectiveness of past investment spending” and that the efficiency of public investment has been “significantly weaker when compared to advanced economies”.

How the huge amounts of taxpayers’ money in the forthcoming investment plan is allocated will say a lot about the short-term functioning of “new politics”.

The extent to which the draft plans end up being watered down to keep interest groups happy will say a lot. If green lights are given to unevaluated projects that waste hundreds of millions of taxpayers’ money it will say even more. Watch this space.

‘O Cuiv talked of growing “the whole county together” — as if somebody, somewhere has levers that determines how an economy and its different parts evolve...’