Category Archives: Ireland

Writing in July, I flagged four policy pillars crucial to reducing inequality in Ireland. First of these was to increase women’s participation in economic life. Far from being a women’s issue, society as a whole stands to gain from stronger growth, less inequality and an off-set to the impact of ageing on our workforce. In some jurisdictions, this has been christened ‘womenomics’.

Despite the very real advances in recent decades, the table remains tilted in men’s favour both in the Irish workplace and at home. On average, women do more housework, spend more time taking care of the kids, are less likely to be in employment and, when they are employed, they get paid less. For every 8 euro Irish men earn, mná na h’Éireann earn only 7. While nearly 7 in 10 Irish men participate in the labour force, barely 5 in 10 Irish women do.
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Being ‘in it together’. Sharing the burden. Putting the shoulder to the wheel. Pulling on the green jersey. In Ireland and elsewhere, these are among the euphemisms that have entered the lexicon of politicos in the age of austerity.

At the same time, of course, such exhortations to shared sacrifice have not always been supported by fiscal principles that see the burden matching means. In fact, austerity budgets have often hit the poorest hardest. The UK Chancellor’s recent ‘budget for working people’ was nothing of the kind: slashing working tax credits while cutting tax on corporations and hefty inheritances. Sometimes, inequality happens by accident. Sometimes it’s a matter of policy. By the same token, public policy can make things better – for everyone. It doesn’t have to be a zero sum game.

In May, the OECD launched the third instalment in its inequality trilogy: In it together: why less inequality benefits all. This tome builds on earlier work, 2008’s Growing Unequal?, and its 2011 sequel, Divided we stand. Even the IMF has been getting in on the act, publishing work last year on the links between inequality, redistribution and growth. In short, lower inequality is linked to stronger and more sustainable economic growth, while redistribution doesn’t reduce it.
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Ireland’s economic winter of discontent has given way to the green shoots of spring. While the factor 50 isn’t yet flowing in all regions of the country, and the post-2008 bust still casts a long shadow on certain cohorts of the population, there is a sense that summer is coming.

On 28 May, the government launched its spring statement. Making a virtue of the necessity for all EU members to provide Brussels with an annual update on their public finances and economic projections, the usually-dry ‘Stability Programme Update’ was dressed up in political clothing this year to herald the supposed good times ahead.

Politically, the aim is not only to give voters a heads-up on the tax cuts and spending increases that lie in store. It is also designed, on the one hand, to project the sense that the government has a solid plan for the future and, on the other, to hamstring opposition parties by increasing the risks to their credibility if they step outside the broad fiscal framework set out. It also aims to put a ceiling on the demands of public sector trade unions as part of the forthcoming ‘national economic dialogue’ by establishing boundaries.

Economically, there was little ground-breaking in the spring statement: reasonably optimistic – but not outlandish – economic growth estimates out to 2020 and a stocktaking exercise on the state of the public finances, the labour market and the state-owned banks. There was also a technical – yet important – explanation of the results of recent negotiations on the application of EU rules on Ireland’s public finances. Essentially, this boils down to an extra billion or so for the government to play with in October’s budget if they are to comply with the rules. The government has signaled that the total budget package is therefore likely to amount to €600m of spending increases and €600m of tax cuts. No giveaway, but not to be sniffed at with an election on the horizon.
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At nearly 5% per year, Ireland had the fastest growing economy in the EU or OECD in 2014. 1000 jobs were created every week. Between modest increases in the average wage and falls in the price of consumer goods, people have more money in their back pocket. With house prices rising rapidly, homeowners feel richer. Despite carry a debt bigger than the size of the economy, the government can borrow money cheaper than ever before.

The emerging narrative seems to be: government took the tough decisions, citizens made the necessary sacrifices, and after seven years of brutal tax hikes and spending cuts, we are on the verge of seven years of plenty. And, this time it’s different.

Across the water in the UK, Tory Chancellor George Osborne similarly took great delight in confounding his own critics, from the Labour Party to the IMF, who had said he was slashing the deficit too much and too soon. The UK has bounced back strongly compared to its continental counterparts. Case closed?
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In a political world of superficial soundbites and self-aggrandising short-termism, it may not arouse the passions like the ‘back pocket’ issues of budget day, but the importance of what policy wonks call ‘good governance’ goes far beyond ensuring politicians don’t lose the run of themselves with their expense accounts. And it’s not just because ‘Paddy likes to know the story’, as an Taoiseach put it!

Poor planning, regulatory failure, auction politics, weak leadership, have combined to undermine the institutions of the State and to push Ireland to the brink – and beyond – of economic catastrophe for the second time in a generation.

As a result, the people have lost trust in political parties and public institutions. And, while the majority once looked to the EU for salvation – solidarity, structural funds and progressive social legislation – now they see a more transactional relationship. It’s akin to being trapped in a bad marriage for the sake of the kids. Politically, this is manifested in the rise of Sinn Féin as well as populist independents who have zero real interest in governing the country.
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Writing in these pages 18 months ago, I put forward the then heretical proposition that austerity could have been declared over at last October’s budget if the government upped their adjustment by just €400m.

Painful? Yes. Electorally toxic? Possibly, but that boat had already sailed. Continue reading →

You may not feel it in your pocket, but the wounds of Ireland’s economic crisis really are slowly beginning to heal. GDP figures published earlier this month show that the size of the economy in the first three months of 2014 was bigger than at any time since the end of 2008 and exports hit a new high.

There is certainly no cause to crack open the champagne bottles, but it does show that an ‘export-led’ recovery is gaining traction. The problem is that it doesn’t feel to most people like there is a strong recovery underway.

By far the biggest component of the domestic economy is personal consumption, which has been essentially flat since the start of 2009, despite Ireland having a population that is growing quickly compared to our European neighbours. This means that ordinary people continue to spend less and less, and this is why many people don’t ‘feel’ the recovery yet. Continue reading →