Thursday, 10 June 2010

FEPS / TASC Seminar on 'Stimulating Recovery'

Speakers at a seminar organised by TASC and the Foundation for European Progressive Studies (FEPS) today emphasised the need for an investment strategy to grow the economy, create jobs and counter the current deflationary spiral. The emphasis was on ‘investment towards fiscal consolidation’, and the speakers presented a set of complementary arguments demonstrating that the Government’s fiscal policies have failed, are failing and will continue to fail.

The papers (by Professor Ray Kinsella of UCD, TASC Head of Policy Sinéad Pentony and Michael Burke) can be downloaded from the TASC website (


Antoin said...

A lot of the idea seems to be to increase taxes and then spend the money on capacity and infrastructure that is not needed under current projections in the hope that if we build it the demand will come. This is not a new strategy, it is more than of the old strategy of irrational exhuberance, but transferred to the public sector. If we do this, further generations will be left to pick up the pieces.

You cannot borrow your way out of debt. You cannot spend your way to a sustainable economy.

It is very unlikely that you can stimulate entrepreneurship and innovative thinking by transferring money from people's pockets into centralised spending funds.

Rob Kitchin said...
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Rob Kitchin said...

Antoin, this is an assertion that does not engage with the ideas in the papers or with broader notions of stimulus, which just about every other country has been doing. There is absolutely no doubt that we do need a more sustainable tax system. This, if anything, is a taxation crisis. We are in a deflationary cycle; the policies of the moment are leading to further deflation and job loss and have done nothing to alter the fiscal deficit of the state. There has to be a break put in and stimulation to the economy that will have multiplier effects across the private sector. There is absolutely no doubt that we need infrastructure such as broadband, green energy, public transport, schools, etc. Infrastructure is needed to attract new FDI and aid indigenous companies. It is in fact demonstrated globally that you can stimulate entrepreneurship and innovation through state support. If you couldn't then government's around the world wouldn't do it and it wouldn't be such a big success (nearly every major innovation of the last century received state aid of one kind or another in its development). Putting 10bn into education and innovation is likely to yield far more benefits than pouring 10bn into the hole of Anglo that we will never see again. Systematically deinvesting in our education system, which is known to have huge multiplier effects over the life of a graduate, is a disastrous policy. You can in fact borrow your way out of debt, if what is borrowed is wisely invested. If your complaint is that our government won't invest it wisely, then I would tend to agree. That's been a hallmark of their time in office, pre and post crash.

Michael Burke said...


You're right, it's not a new strategy. In Ireland it's been around years since and is what unerlies the NDPs.

In the piece on the TASC site, an ESRI chart is reproduced showing the huge positive impact of the NDPs.

It is incorrect to state that investment amounts to building capacity in the hope that 'demand will come'.

Investment is a component of final demand. But government investment also causes the private sector to increase its own activity. It also has a long-run impact on supply, increasing capacity and improving efficiency.

Take a look at the ESRI chart.