Concentrating on the public finances is a necessity in our current economic crisis, but it must be coupled with more ambitious targets in the real economy if we are to engineer a new future for the national economy.
Our crisis is not simply located in the “public finances”. It is in the national economy. The cause of our crisis is not too much expenditure but too little revenue. Thus, to tackle the public finances the government should be pursuing policies that increase revenue.
In terms of the real-economy, the primary objective of policy-makers should be to develop clear strategies for maintaining existing employment through creative measures that treat lay-offs as a last resort. The second objective should be to create new employment by utilising the skills of the existing workforce. Again, this requires fiscal creativity and prudent decisions. Equally, to develop a strategy for economic recovery we have to stop concentrating on cutting public expenditure. We need to increase revenue through an increase in taxation. There is no escaping this fiscal reality.
The 10-point plan issued by the Irish Congress of Trade Unions, while not perfect, contains a framework for a genuine national recovery. It combines fiscal measures with broader economic ambitions. The framework is based upon the comparative economic crisis of Sweden in the mid 90’s. Whilst Ireland has a completely different instiutional context/background to Sweden (most importantly they have a high-tax economy and Ireland a low tax economy) this should not defer policy-makers from pursuing a new socio-economic trajectory. A critical juncture to put Ireland on a new sustainable path should not be constrained by previous domestic policies.
In order to make possible this path, the Government should abandon its ad-hoc, short term crisis management and return to the social partnership talks.