Rundale

Conchúr Ó Maonaigh

During the global financial crisis, the Irish government introduced sweeping austerity measures to reduce government expenditure. In this article, I examine how austerity helped to hollow out the Irish state and deepen its reliance on management consultancy firms. I highlight how these unelected firms help to advance market-oriented environmental, social, and economic policies. In doing so, I argue that these firms fortify the ‘relations of dependency’ that characterise the Ireland’s relationship with multinational capital. 

Consultancies and the Business of Austerity

Ireland receives four times the European average in FDI, which represents 22 per cent of total tax revenue. Management consultancies have played a longstanding role in helping to establish this FDI-led growth model. According to the IIEA:

…from the end of the Second World War […] US consultancy firms were invariably commissioned to advise on FDI-related matters […] this proved significant in making Irish policy makers aware of the steps needed to attract US firms […] US consultants familiarised Irish policymakers with the intricacies of the US tax system and how American firms benefitted by exploiting the asymmetries.

Hardiman and MacCarthaigh point out, however, that it was not until the Celtic Tiger (1995-2007) that these firms “had become more of a permanent feature of government”. During this period, consultancies played a role as quasi-architects of the strategies that helped spark the Celtic Tiger, and later as enablers that provided policy validation which fuelled Ireland’s property bubble and subsequent economic crash. The result was one of the harshest economic downturns in history. 

This crisis helped to create the condition to deepen the role of management consultancies in Irish statecraft. Between 2007 and 2012, Ireland’s national income fell by 10 per cent and its debt quadrupled. This led the Irish government to implement sweeping austerity measures resulting in a contraction of public services. From 2008 until 2015, the government reduced public spending by €20.5 billion and increased taxation and levies by €11.5 billion. These cuts were excessive by international standards, with the Irish government becoming the “poster child for the implementation of fiscal consolidation”.

One way the government administered budget cuts was through public sector employment controls, which included recruitment embargos, voluntary redundancy schemes, the non-renewal of temporary contracts and wage decreases within the public sector. These controls proved effective, reducing total employment in the sector by 10.5 per cent, most of which occurred within Non-Commercial State Agencies (22 per cent) and Local Authorities (21 per cent). These cuts coincided with the withdrawal of major infrastructure projects. Capital investment in 2017 remained 39 per cent lower than 2008.

From 2008 until 2013, a quarter of Irish firms also cut wages and more than half froze pay. These measures had the effect of weakening labour power, lowering wages, and forcing the working class to accept worse social conditions in pursuit of economic growth. Hence, scholars argue this period is marked by “deepening neoliberalism via austerity and reform”. 

In the years that followed, Ireland’s economy went through a period of ‘recovery’ (2014–2019). This so-called recovery involved socialising private financial debt into public debt and introducing policy instruments to attract international investors to acquire commercial and residential assets. 

The number of people employed within the public sector did not return to pre-recession levels until 2018. Today, the sector employs 90,000 more staff than pre-recession levels, with the highest proportion of growth (~30 per cent) occurring in the health sector following the Covid-19 pandemic. However, employment in the local authorities, justice and defence sectors remain below pre-recession levels. At the same time, a significant skills gap remains within the public sector. Augustenborg, et al., highlight how progress on climate policies continues to hindered by an “insufficient work-force and specialist skills”. Regaining capacity, then, has not meant that public bodies could pick up where they left off. The state is still compensating for over a decade of arrested development, population growth, and the escalation of the housing and climate emergencies. 

For some researchers and think tanks, the strategy which would help to address Ireland’s fiscal model is progressively raising corporation and income tax. However, the political establishment tends to sideline this strategy over fears that it would ward off multinational capital. Moreover, comments from the Minister for Public Expenditure that budget 2027 will “make choices and trade offs” suggests that a politics of austerity is alive and well. The question for Ireland’s political establishment, then, is how the state can develop the capacity needed to address complex policy challenges while balancing the need for inward investment and fiscal consolidation. This challenge, I argue, is where management consultancy firms come into play. 

Consider during the recession, the Department of Enterprise, Trade and Employment rewarded 102 consultancy contracts (worth €3,930,893) because “[the] appropriate skills, knowledge or expertise [were] not available within the Department”. More recently, the Department of Agriculture rewarded 81 consultancy contracts (worth €4,775,656) for “additional expertise […] for delivery of the services”. In the past, government departments reasoned management consultancies were employed to “flex up and flex down in terms of the experience and capacity of a particular type needed”. Yet, between 2012 and 2024 – the period of austerity and recovery – the payments by state bodies to major consultancy firms grew from €35 to €363 million, exceeding €2 billion over that time.  

The supporters of this state-consultancy relationship might argue that the end justifies the means: the works gets done. If the state must draw on operational expenses for project-specific needs, that is an acceptable trade-off for reducing long-term employment liability. If senior public leaders are facing capacity constraints or hiring freezes, management consultancies offer, for a time at least, a ‘fix’ that can help to address the pressures surrounding workforce planning. As I now discuss, however, this accountancy logic should be viewed with a high degree of scepticism. 

Management Consultancies and Corporate Power

The role of management consultancy firms in ‘corporate capture’ has become a prominent theme in non-fiction literature, with books such as The Big Con and When McKinsey Comes To Town documenting the strategies these firms deploy to interfere with, and manipulate, the public institutions in the interest of corporations. The concept of ‘corporate capture’refers to the ways in which “large companies or private industry actors exert strong and undue influence on public institutions, regulatory frameworks, the law and public opinion”. The international track records of management consultancy firms match this description. 

Consider the PricewaterhouseCoopers (PwC) tax scandal in 2015, when the consultancy giant advised the Australian government on drafting tax laws while also sharing confidential information from that process with corporations to help them avoid taxes. Consider also the role of McKinsey in guiding the Food and Drug Administration (FDA) on drug policy in the United States while also advising the pharmaceutical industry on ways to ‘turbocharge’ sales of addictive opioid drugs. These high-profile examples illustrate the undue influence consultancy firms can have over public institutions in the interests of corporate profits. 

In fact, Molotch and Mazzucato note that this capture follows a pattern: consultants offer their service to the state at a lower cost to secure a contract and gain control of knowledge resources, in turn, producing ‘client dependence’ on their services and allowing their firms to charge the state significantly higher fees over time. The issue of management consultancies keeping the knowledge generated through public funded contracts “on a tight leash” is well documented. According to Brundell, this ‘tight leash’ helps to depoliticise knowledge creation and decision-making:

[T]he state retains the power to define the larger policy boundaries and objectives while delegating responsibility for the progression and realisation of these broad policy objectives to non-state agents, such as private consultants, who work at a discrete distance from the political arena and its attendant political considerations, responsibilities and sensitivities. 

For Brundell, then, the issue is not so much how management consultants help multinational capital evade governance and accountability; rather, it is how these firms work in concert with the state to guide policy objectives in the interests of capital. 

An instructive example relates to Brundell’s research on urban regeneration projects in post-crash Dublin. This work examines how Dublin City Council (DCC) drew upon the expertise of management consultancies as a “skilled body of urban-regeneration professionals” to advance planning interventions in working class areas, which aimed to create a favourable investment environment for multinational capital. These private consultants did not capture the state’s objectives but acted “in accordance with the directions of their client […] to articulate the urban-development strategies to which DCC had been gravitating for a number of years.” Today, foreign finance makes up 70 per cent of property investment in Ireland. 

Another example concerns the Irish government’s first climate action plan, specifically, the use of the Marginal Abatement Cost Curves (MACCs). This plan was designed around the MACC, a framework popularised by McKinsey, to achieve the most cost-effective pathway to reduce emissions. McKinsey is of course a company which continues to support investment in fossil fuels (see Figure 1). Despite this contradiction, Ireland’s climate action plan was based on the MACC framework, including the 950,000 electric vehicle (EV) 2030 target.

Figure 1. McKinsey consultancy news on covering oil and gas industry’s A.I. strategy

At the time writing there were 164,662 EVs on the roads. Considering the Irish market only sells 100,000 new cars annually, the reality is this target was never achievable but became the core policy for decarbonising transport based on framework advanced by the management consultancy sector. The MACC framework assumed that private automobility would remain the dominant mode of transportation (business as usual). The framework also overlooked public transport interventions because they carried a higher capital cost per ton of CO². However, the MACC omitted the enabling infrastructure costs for EVs, which made private automobility the more cost-efficient approach on paper.

According to Mercille and Murphy Ireland is “a prototypical neoliberal state”, meaning the state itself must be understood as a prime force in maintaining or expanding class power. In many ways, multinational capital can be confident that Ireland’s political establishment will work of their behalf. Consider recent studies on the ‘revolving door’ between government jobs and private companies, where one-third of former cabinet ministers end up sitting on corporate boards or get employment in the consultancy industry. The challenge for state actors, then, is creating the place-specific conditions to attract and maintain multinational investment.

The work of management consultancies, of course, is diverse in nature. However, the approach is consistent: use hard-to-pin-down expertise to justify policy solutions that enable the privatisation of key sectors and attract multinational investment streams. The examples charted above bring into focus how the management consultants, in short, translate the interests and rationalities of global capital into authoritative forms of state knowledge, allowing the state to pursue economic objectives in the vision of capital. 

Conclusion

Taking stock on theme of this issue, I argue this interplay between the Irish state and consultancy firms resembles ‘relations of dependency’. The Irish state’s capacity hinges on employing consultants from these firms, which further hollows capacity and depoliticises statecraft. Ireland’s dependence on FDI is fortified through the inner workings of management consultancy firms, which provide the expertise to legitimise foreign capital investment. For small states like Ireland, this state-capital relationship is seen as essential to attracting highly mobile capital and unlocking economic growth. As charted above, this relationship requires the flexible capacity and intellectual resources of consultancies to make the place-specific conditions for investment.