Slí Eile: So writes Michael Casey, former chief economist with the Central Bank and currently board member of the International Monetary Fund. He then makes the extraordinary claim that (‘The reputations sent up in smoke’)
“..Our Government and the EU Commission have sold out to the rating agencies, none of whom cares about unemployment or emigration.”Whatever one may think of our Government or parts of the current EU Commission it has to be pointed out that we owe much to the European Union not least because of the excesses and poverty of ambition of our native gombeen classes. (Where would gender equality be, today, were it not for the EU)
Take these statements in conjunction with what another economist, Pat McArdle, wrote recently Irish Times (‘Effective measures are needed to stop the rot from spreading’)
‘With hindsight, we were fortunate to have gone down the road we did. The alternative of job creation schemes or expansionary measures would have been disastrous.’‘Job creation schemes’ and ‘expansionary measures’. What a terrible vista.
The single-minded focus on correcting Ireland’s fiscal stance, reducing the public sector deficit and competitive devaluation (i.e. cutting wages) is now the only moral narrative in town. Jobs, migration, living standards of the poor – are secondary to the One Policy Target = reduce the fiscal deficit to a much lower level. But, how much lower? At least two interesting facts seem to be emerging in the current debate and debacle over Greece and associated ‘high debt’ countries:
- The Stability and Growth Pact targets are dead, long live the SGP
- There is a very widely shared consensus that all roads must lead to fiscal rectitude and all roads to poverty reduction, sustainable growth and full employment (if people care about these things) lead from a balanced or near balanced budget – in the long-run.
- The degree of unemployment and wage reductions needed to ‘clear markets’ and balance the public sector books may be too much for people to take. We still live in a democracy.
- The world recovery may be a lot slower and lot more jobless in a way that offer little solace to a small open economy stuck with a dysfunctional banking system and a low-tax regime.
But, suddenly, the spin is turning to the following type of meta-narrative:
“…in the year of 2008 the world economy collapsed and plucky Ireland went down fast as output and tax receipts went into free fall…but while other countries in a similar situation dithered the brace Irish and their unpopular Government took brave (and painful – everything must be painful) decisions ….and hey presto from 2011 onwards Ireland was rewarded with a reducing deficit, increased exports and stabilisation in unemployment…too bad many had to emigrate and other indices of social strife, poverty and ill-health went up for a while…that’s life”Time will tell. However, missing from the debate up to now:
- A comprehensive, progressive, convincing, numbers-backed Alternative Economic Strategy
- A political movement with the backing of more than 40% of the population and with enough electoral backing positioned to implement such a Strategy not in some distant future election but at the next one which has to be within the next 27 months.
What can be learned from the fiscal debacle of the noughties?
In a paper presented by Philip Lane at the Statistical and Social Inquiry Society of Ireland, recently (A New Fiscal Framework for Ireland) a case is made for
- New Fiscal rules
- A Fiscal Policy Council to monitor and manage fiscal adjustments (the never-again agenda)
Would such a mechanism assess the wider social and economic benefits and costs of spending and taxes as a necessary corollary to judging the appropriate level of borrowing, spending and taxes taking into account, in so far as data permit, the likely monetary and non-monetary value of adjustments to societal assets and liabilities. Reducing current state liabilities through public sector downsizing as advocated by most mainstream economists may very well corrode valuable public assets not to mention social solidarity and cooperation – which are assets in themselves.
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