Remarks at the recent National Economic Dialogue held in Dublin (28-29 June)
"On behalf of the Nevin Economic Research Institut, I would like to welcome this opportunity to debate the choices and priorities for Ireland as we, hopefully, head towards a period of economic and social recovery and development. I think we need to adjust our language away from a single-minded focus on ‘growth’, namely an increase in just one measure of human well-being, to the notion of ‘development’ which better matches the thinking and values of the generation of Lemass, Whitaker and others. Thomas Kuhn famously used the term ‘paradigm shift’ to describe fundamental a change in the basic concepts and experimental practices of a scientific discipline.
In Ireland, up to now, we have relied very heavily – I would say almost exclusively – on a notion of indiscriminate growth in GDP and employment – any type of employment – along with the notion that, at all costs, we must rely on a low corporation tax regime to drive investment and associated social progress. We paid lip service to innovation and development of the indigenous manufacturing and service enterprise sector but we put nearly all of our eggs into the Foreign Direct Investment basket. What worked in the past will not work in the future. However, we need to be clear that:
- Growth in GDP is good
- Growth in employment is good
- Growth in foreign investment is good.
However, we also need to rebalance and rethink our models.
Ireland’s exceptionally high dependence on fossil fuel imports to power our economy will be challenged as never before by Brexit – assuming that Brexit will happen.
Reducing the size of our public services on foot of ever lower rates of personal and corporate taxation is not a realistic option as our population grows and becomes more diversified as well as somewhat older.
By the time most of this in this room retire we will be among one million persons over the age of 65 or 68. We will be supported by very roughly two and a half million people ‘at work’. Move that forward another few decades it is likely to be more like 3 million workers for 1.5 million retirees – depending on what exact demographic assumptions you make. Whatever the exact outcomes we can be sure that there will be a lot more elderly people alive in receipt of pensions, in need of health services and, in a small minority of cases, in need of intensive long-term care.
At the same time, our school-going population is growing and for some reason we continue to have lots of children – more than in other parts of Europe. Still, births are down significantly even since 2010 when they peaked at 75,000 per annum. At around 63,000 this year we will be looking at significant challenges ahead in terms of how we organise our education, health and pension systems.
There is a clear need to not only reform public services but transform the way they are run. This must involve a much greater role for employees and the wider community in leading innovation and change in how services are delivered.
We can generate more quality employment by investing in skills and ensuring that the national minimum wage moves towards a living wage for 21st century Ireland.
Given the environmental, demographic, technological and other changes coming our way we have no alternative to investment – public and private – in areas from early childhood care and education to lifelong learning, primary health care in the community, health education, public transport, renewable energy, rural broadband and more besides.
This is not the time for tax cuts.
This is the time to reform taxation along with public expenditure and social protection to provide people with the supports, opportunities and incentives. We can generate a more entrepreneurial culture in Ireland by provide greater security and protection in guaranteed income and training support. Presently, we are way out of step with the rest of Europe in terms of what pay in social insurance. Employer social insurance, for example, is one of the lowest. Investing in quality services and income protection is not a cost on business when we consider the potential boost such investment gives to Ireland’s competitiveness in an increasingly difficult external environment.
We better watch out, We better not cry, We better not pout, I'm telling you why: The big Agencies and Companies are coming to town! They’re making a list, And checking it twice… and its not about our weather but about houses, transport, schools, health, childcare
I would like to conclude by welcoming the views expressed by the new Taoiseach in regards to a medium-term goal of a debt to GDP ratio of 55%. If adhered to, this leeway – which would still leave us well within the EU fiscal debt brake of 60% - could open up €40 billion over the coming decade for the purposes of productive investment with long-term benefits for everyone.
The choice is ours.