Slí Eile: From a Financial Times editorial (The Luck of the Irish) of 10 August on the current state of the Irish economy:
‘The next few years will be harsh, and the burden of the adjustment will be borne by those least able to cope. Dealing with the fiscal crisis will mean it will be difficult to protect the country’s most vulnerable people. But, as the wreckage of the boom is washed away, older, safer sources of growth will be uncovered.’
Let’s parse this:
‘The next few years will be harsh’
You will search hard to find an industrialised country in the West that has seen a fall of around 15% in national output in the space of two years (2009-2010). Any recovery in global conditions will, most likely, lead to ‘jobless growth’, last seen in this country as we pulled out of the 1980s recession and before lift-off in employment levels in 1993.
‘.. and the burden of the adjustment will be borne by those least able to cope…’
Exactly. That is the whole point of the Dublin Consensus.
‘… Dealing with the fiscal crisis will mean it will be difficult to protect the country’s most vulnerable people.’
In other words, per the Dublin Consensus, There-Is-No-Alternative line, either because the political progressive wing is too weak in electoral terms (or too divided in terms of what to do), or because a rapidly shrinking cake means some adjustment in real income of social welfare recipients. This is the nub of the McCarthy et al argument – incomes have fallen all over the place – it is only inevitable (and fair?) that the incomes of those at the bottom of the income distribution should take a hit.
‘…. But, as the wreckage of the boom is washed away, older, safer sources of growth will be uncovered’
Interesting point which challenges us to think about how recovery can be generated. What will be these ‘older’ and ‘safer’ sources of growth – more foreign direct investment in pharmaceuticals, information technology? Back to horticulture and wind power? Or, green agriculture and food? New manufacturing technologies? New types of services? A reformed and re-equipped public service ready to deliver a better service?
We need to start thinking this through. For all its limitations and vagueness, the ‘Smart’ Report (remember?) of December 2008 contains some useful ideas particularly in regard to new sustainable technologies.
In previous contributions to this debate, Paul Sweeney, Jim Stewart and Sean O Riain have pointed to the importance of high value added, innovative enterprises as the mainstay of industrial policy. Key to this is an innovation-rich environment, with universities, research institutes and state agencies all providing support, skills and knowledge. We will still need foreign direct investment but we need to give much more attention to growing indigenous enterprises trading on home and world markets.
The State has a vital role to play in providing a more rigorous regulatory environment, as well as a complete overhaul of banking and finance. The Property-Financial-Political Complex has been dealt a blow and is on the floor. Let’s make sure that it doesn’t resume business ever again. Somehow, I fear that the lessons of history are often missed for lack of proper analysis and understanding.
In reference to the McCarthy Report, in the Irish Times on 10 August, Chris Horn of Iona Technologies (Our economic future lies with innovative exporters) said:
However, while the report tells us where we can cut back, it has not told us where we could focus our investment for recovery. In all the hubris and grappling for position after the publication of the McCarthy report, I have been surprised by the absence of public discussion on just how we now expect to drive growth in our economy.
The nub of his argument (in contrast to the strategy of relying on the safe, old and big investors) is that we should be focused on creating a culture and environment of a very large number of innovative, export-led companies at the heart of our new economy.
I agree. I would argue that we need to defend the income of those in relative, and especially consistent, poverty through a Basic Income for all citizens and residents, while at the same time, using fiscal policy to redistribute income and wealth, while at the same time using a reformed state infrastructure to enable private and public firms to compete on the basis of new ideas, technologies and markets.
That's the business of any future Government committed to economic development and social justice.