Budget 2012: Where's the substance?

Peadar Kirby: Amid all the kite flying, the scaremongering and the testing of the electorate’s pain threshold, the central lesson of the preparations for Budget 2012 has been lost. For more clearly than anything that the FG/Labour coalition has done since taking office, the way Budget 2012 was prepared shows that we are back to politics as usual Irish-style.

Two aspects invite attention. The first is the process and the second the content. Budgets should be seen as opportunities to debate national choices for expenditure and taxation, choices that ultimately involve values about the sort of society we want in the future. New left governments in Latin America have over recent decades experimented with forms of participatory budgetary processes that draw wide sections of the population into deliberating on these choices and, in the case of Brazil at least, having a real say in what choices are made. Instead, in Ireland we have a process made behind closed doors with various options floated to gauge public reaction but with final decisions made only by cabinet. We take this for granted but it is an appallingly undemocratic and irrational way of doing things. We might have expected that, with so much emphasis on political reform, the opportunity would be taken to open up the process on this occasion.

Inevitably, such a process undermines any prospect that preparing the budget might at least begin to address the major questions about expenditure and taxation that face this society. We urgently need a public debate on the balance between expenditure and tax increases that should characterise our adjustment and, much more importantly, about the sort of taxation system we need if we are to achieve greater resources for national development and greater equity and fairness in where we get these from. This is perhaps the single most urgent reform we need as a society and, judging from the preparations for Budget 2012, we are not going to get it.

One might be forgiven for drawing the conclusion that our political and economic leaders see a value on so distracting and frightening the citizens, that no one dares raise these wider issues. It is yet another sign, if one is needed, that we badly need the sort of vibrant citizens’ movement that is beginning to emerge in other societies. One issue at the top of its agenda should be the right to have a say in preparing the national budget.

Towards a Second Republic

Peadar Kirby: Despite promises of the imminent announcement of a constitutional convention in the spring of next year and of plans for local government reform, the dynamic of reform has lost momentum since the last election. And, as the staunch defence of Ireland’s low corporation tax rate indicates, the reform agenda remains narrow and has entirely failed to address what needs to be done to move beyond the neoliberal development model that is centrally responsible for the present crisis. In other words, the reform debate needs to be broadened to examine the wider links between the political and administrative system, the nature of the Irish economy and its leading sectors, and the ways in which civil society acts either as an agent for change or for resisting change. We need a focus on Ireland’s political economy options as part of the move towards a second republic.

In our forthcoming book entitled ‘Towards a Second Republic: Irish Politics after the Celtic Tiger’ (Pluto Press), Mary Murphy and I offer an analysis of the ways in which the Irish collapse had its roots in the political and administrative system. Not only did these grossly mismanage the Celtic Tiger boom, but they have created a particular model of development, highly dependent on foreign investment and very resistant to taxing the huge profits made in Ireland so as to fund decent public infrastructure and services. For too long, civil society has acquiesced in this subservience to global capital, failing to put pressure on the state to respond more adequately to the needs of the many vulnerable in Irish society. As a result, we have created a society blighted by gross inequalities and based on a growth model that emitted high levels of greenhouse gases thus making it unsustainable. The book examines the challenges in an all-Ireland context, analysing whether the second republic will overcome partition and be an all-island state.

It identifies two alternative models being promoted by sectors of civil and political society. Foremost among these is a developmental social democratic model, espoused by organised sectors of civil society and by some among the political left while the ecological or Green movement seeks a model that can loosely be called an ethical or ecological socialism. While this latter seems less feasible now, the dramatic impacts of climate change and of peak oil over coming years may well create conditions that make such a model more realisable. Mary and I draw on developments in the European Union and elsewhere in the world to offer lessons for the challenges and possibilities now facing us in Ireland. The book’s final chapters examine what forces exist in today’s Irish politics and society to promote a new model and what the prospects are for its realisation.

A debate on the book takes place in the Oak Room of the Mansion House, Dawson Street, Dublin at 6:00 p.m. on Thursday, November 3rd. In addition to Mary and myself, contributors will include Professor Kathleen Lynch (UCD), Catherine Murphy TD, Fintan O’Toole (Irish Times), David Begg (ICTU). All are welcome. Copies of the book will be available at a special discounted price of €15.

The need for diversity in policy advice

Peadar Kirby: When speaking to the NESC on Friday last, the Taoiseach Enda Kenny made a point that, if taken seriously, has the potential to address what has been a major weakness in Irish public policy. According to the report in The Irish Times, the Taoiseach said that council recommendations need not always be based on a consensus view. “It is better to have reports which reflect some variety of views, rather than self-censorship which excludes consideration of difficult questions,” he said.

The Taoiseach’s comments identify what has been a major problem with the policy advice given to successive governments by the NESC, a problem that to my knowledge has never before been identified. This is that NESC reports need to win agreement from the social partners and, as a result, they tend to fudge rather than highlight policy options, often ending up saying quite contradictory things in the same document. Because most of the reports are lengthy, these contradictions tend not to be noticed as different interest groups can find elements that suit their needs. Neither have academics, with a few notable exceptions, studied these reports with the attention they deserve so that they have rarely generated much public debate.

All of this has served to impoverish public debate on the making of policy as quite narrow and technical approaches have tended to dominate, usually limiting access to experts and failing to address the deeper values that inform policies and the goals to be achieved. Enda Kenny’s recommendation of the validity of a variety of views is therefore refreshing and of great significance. Equally, his advice to the council to consider producing more frequent, shorter and more timely reports, if these served to foster debate on the different options facing society, has the potential to make a major contribution to the kinds of debates we so badly need.

In this regard, the methodology followed in Costa Rica is worthy of study. There an annual state of the nation report is drawn up by a team of worthy citizens – usually former presidents and government ministers, retired senior academics and other senior figures, aided by a team of experts. All of this is done under the aegis of the rectors of the country’s public universities. What makes these different to the reports produced by NESC is that they explicitly seek to highlight the different options facing policy makers and the public on specific areas of public policy. Regularly the reports contain dissenting views, making clear the basis for the differences identified. All of this serves to nurture and inform a variety of approaches to public policy, greatly enriching the process of policy making and drawing into the discussion wider sectors of the population.

This may be one reason why Costa Rica stands out in Central America for the quality of its public policy, being a global leader in policies on climate change and avoiding the worst of the recent financial crisis through its regulation of the banking sector and its early stimulus package to maintain demand in the economy. As a result, credit kept flowing and economic recovery kicked in quickly. The main problem now facing policy makers is how to reduce a budget deficit that reached 3.3 per cent of GDP at the height of the crisis!

Corporate tax rate

Peadar Kirby: The issue of Ireland’s rate of corporation tax again dominated the news agenda over the weekend with the standoff between some EU Ministers (notably the Germans) and Irish Ministers being yet again reiterated. It appears ever clearer that the refusal of the Irish side to enter into discussions on the issue is becoming the obstacle to gaining a lower interest rate on the country’s borrowings and, perhaps, other concessions also on the contents of the bailout package. What is most disturbing is the lack of any debate here in Ireland as to whether the dogged stance being adopted by Irish Ministers is in the best interests of Irish development, as to whose interests it most serves, and as to what might be the balance to be struck between moral and economic grounds for continuing the present stance. The extent to which the present policy stance has been elevated into a fundamental bedrock of national policy and the extent to which the media and commentators accept this without the slighted debate or questioning, invites comparison with the worst days of the cosy consensus of the Celtic Tiger period.

There are at least three major dimensions of the issue that require public debate. The first is the economic one and, for most of those who mention this issue, this seems the only dimension that matters. But, in addition, there is a major moral dimension that urgently requires airing, and a dimension relating to international justice and fairness highlighted recently in an interesting analysis paper published by the Debt and Development Coalition Ireland which seemed to get little media attention.

To deal with the economic issue firstly. To many it seems self-evident that raising our corporation tax rate would damage our attractiveness for foreign investors. Perhaps this is true, but it would be good to have some evidence to back up such a claim. Just what damage might a few percentage points on our low rate do to Ireland’s attractiveness as a destination for investors? In other words, among the many attractions of Ireland, just how important is the present rate of tax? Indeed, the argument of some Ministers that in effect France has a lower rate than does Ireland could lead one to draw the conclusion that the tax rate is not the determining factor after all, given that Ireland continues to attract investment in this situation. Furthermore, the argument needs to be broadened to a discussion of industrial policy, something that is urgently overdue. Numerous reports have been issued over recent decades recommending that the state wean itself off its dependence on foreign investment yet, if anything, that dependence has grown over this period. One wonders what positive advantages for the development of a more robust and consistent policy for the growth of SMEs might result from the raising of our corporation tax rate, particularly if the tax regime could be designed in a way that did help foster greater innovation in this sector. At the very least, a rise in the corporation tax rate would serve to wean our politicians and officials off the instinctive reaction that economic development and export-led growth have to depend on foreign investors.

The second important issue that is entirely absent in consideration of this issue is the moral one. Are there not very strong grounds for arguing that, in a situation where those on average and low incomes are bearing a major burden of the adjustment efforts being made by the state, that those corporations which make huge profits from Irish workers and receive very favourable treatment by the state should make some modest contribution to recovery? It is noteworthy that those many voices that are raised in criticism of the fact that Irish taxpayers are being forced to bail out French and German banks, do not see the similarities between this favouring of corporate interests over citizens’ interests and the consequences of the state’s failure to seek a greater contribution from corporations which have benefited greatly from their presence in Ireland.

A third issue concerns international justice, again a dimension that is entirely missing from Irish concerns on the issue of corporation tax despite the widespread interest among the public in international development. Attention was drawn to this in the report entitled ‘Driving the Getaway Car? Ireland, Tax and Development’ issued by the Debt and Development Coalition Ireland last month. This is a very useful overview of some of the ways in which Ireland’s low corporation tax ‘is open to abuse by multinational firms in a way that directly or indirectly damages the tax take of Southern countries’ (page 41). While the author, Dr Sheila Killian of UL, does not consider the effect of raising the rate of Ireland’s corporation tax, she does recommend a number of actions that Ireland could take to seek more effectively to ensure that these abuses do not occur. The EU’s CCCTB proposal seems designed to address some of these potential abuses.

Each of these dimensions of the issue of corporation tax requires a lively public debate. Furthermore, since this touches on moral and development issues as well as ones relating to industrial policy, it would benefit from a range of voices and concerns finding expression. Yet, I suspect that one of the reasons why this is not happening is the very efficient lobbying being done on behalf of US corporations by the American Chamber of Commerce, a very powerful lobby group. It already made the position of the US corporations very clear just as EU pressure was mounting on Ireland to raise its corporation tax. Lobby groups have, of course, every right to put the position of their members forward. However, when the state adopts a similar position with no public debate, and when the media row in behind this without raising any questions, then we are in a very troubling situation which bears far too much resemblance to the lack of debate and the caving in to vested property interests that characterised the public realm during the Celtic Tiger years.

Crisis shedding light on the Irish state

Peadar Kirby: We may live in very exceptional times, in which the speed of how the Irish crisis is developing is literally breathtaking. Yet, for all that, what is most disturbing is how it manifests just how little has actually changed, illustrating yet again in stark terms some long-standing features of how the Irish state operates. Despite the intense focus on the immediate pressure of events, it is most important that we recognise the very familiar posture adopted by Irish policy makers and by the Irish state, since it highlights what will have to change if we are to have any hope of building a more sustainable and equitable future. Another way of putting this is to state that the largely economic and financial discourse that dominates debate needs to be balanced by a discourse that focuses on the administrative and the political features of the current crisis.

While it is true that a crisis requires crisis management, what we need to examine is how this crisis is being managed, as it is this which is very revealing. What is most striking is that politicians and policy makers give the impression of being dragged along by events to which they are reacting, with little sense of forward planning. While this might be understandable amid a crisis that is far more severe than could have been reasonably anticipated, it also needs to be recognised that the intensity of the crisis right at this moment derives from the fact that the state has a very poor capacity for longer-term forward planning and has failed to even begin to address the challenge of designing a more adequate system of taxation. These failures cannot be blamed on the present crisis as they are very familiar features of the Irish state. Why did it take so long to realise that the present crisis required multi-annual budgetary planning (indeed long before the present crisis, this capacity should have been developed) and, even more glaringly, why have the recommendations of the Commission on Taxation not been used as the basis for a re-design of the taxation system? If this had been done, not only would it help inform the budgetary strategy but it would also have helped give a sense of confidence that the state would be able to deal with the crisis.

Take the issue of corporation tax. What is remarkable about the present debate on these issues is just how successfully powerful vested interests have created a firm consensus throughout Irish society that the present level of corporation tax is untouchable. It is simply ruled out as a possible subject of debate any time it is raised, and the Irish media and Irish society as a whole (judging by the complete lack of debate on the issue) seem to acquiesce in this. Is this not extremely revealing? At a time when we are agonising over cutting back welfare payments, pensions, various supports for the most vulnerable in our society, and core funding for our health and education services, and are being told that the pain must be widely shared, we all seem to accept that powerful global corporations who declare a very high level of profits in Ireland should share absolutely no part of the adjustment. This remarkably benign and subservient treatment is based on the claim that raising corporation tax by a percentage point or two might undermine a core part of the state’s development strategy. But instead of debating whether this might be so, and seeking evidence as to what impact it might have, we simply succumb to a response based on fear.

Long before the present crisis, it was evident that the normal posture of the Irish state, particularly in the social sphere, was reactive crisis-management. There are very few examples where the state proactively instituted an ongoing process of reforming itself so as to avoid the emergence of crises. Indeed, the very term ‘reform’ appears to be equated to a process of cost-cutting rather than to a complex process of institutional design so as to more effectively achieve public goals. One could adduce numerous other examples which illustrate both the lack of policy-making based on hard evidence and also the lack of a process of robust and wide deliberation in the formulation of policy. The first weakness derives in part from the gap that has for too long separated those who make policy from those who could provide evidence that might inform the process; instead, civil servants all too often rely on consultants who are not intimately familiar with the latest research nationally or internationally. The second gap derives from the weakness of a culture of robust deliberation, not only in the political realm but also in the media. One can only hope that the present crisis will make policy makers more aware of the need to draw on social scientific evidence and generate a broader debate on the options facing us as a society. There is some evidence that the latter is happening; I’m not aware of much evidence that the former has begun.

The knowledge crisis

Peadar Kirby: A debate spluttered into life over the last week or so that added yet another crisis to the growing list of crises we are living through. This one focuses on the knowledge crisis: who knew what and why didn’t they act on it. Perhaps the most extraordinary intervention of the debate was the admission by Professor Frances Ruane, director of the ESRI, in a Primetime interview that the Institute lacked the expertise to recognise the crisis that was coming. This was handy as it took the focus off the Institute’s persistent optimism right to the point where the economy went over the precipice – lack of expert technical knowledge avoids neatly the question of conforming to a dominant ideology and being seduced by its myopia. Yet Dan O’Brien’s revelation in The Irish Times on Monday last (June 28th) badly holed the argument that what was lacking was expert knowledge, this time in the Department of Finance.

O’Brien referred to an EU report of 2007 which showed that Ireland came last out of the 19 countries studied for its deficiencies in having arrangements in place to manage the public finances. Furthermore the report found Ireland to have a total lack of foresight capacity, having not one of the five measures that insulate the public finances from crisis or set warning lights flashing if one approached. So the Department of Finance was alerted to the deficiencies of its regulatory and supervisory arrangements and did nothing about it. The question therefore is clearly not lack of expert knowledge but rather why the knowledge available was not acted upon. To this extent, there is a neat parallel between the crisis of ecclesiastical authority in the Catholic Church, where senior churchpeople didn’t act on their knowledge of the activities of sexual predatory priests and brothers, and the inaction of senior officials in the Department of Finance and the regulatory authorities.

In attempting to answer why this was the case, one must examine deeply rooted cultural traits. Foremost among these is the authoritarian legacy of the Catholic Church which has deeply marked Irish intellectual and public culture. The sheer intolerance of dissent during the Celtic Tiger years, epitomised by Bertie Ahern’s advice that the critics go and commit suicide, illustrates a public culture that still lacks a fundamental pluralism of viewpoints. As John Kurt Jacobsen put it in his excellent and much neglected 1994 book ‘Chasing Progress in the Irish Republic’ Irish political culture is marked by ‘a high degree of deference … a high propensity by non-elites to defer to policy prescriptions’ (p. 95). Our failure to break this and develop a genuine pluralism of debate is certainly one of the reasons for the mess we are now in.

Aiding and abetting this authoritarian public culture has been the media which treated dissenting voices during the Celtic Tiger boom with little short of contempt, denying any legitimacy to their critique. This was not absolute but it was very widespread. Instead of keeping a critical distance and asking hard questions, the media were all too willing to latch on to seeming evidence that those were the best of times for Irish society. My favourite was the astonishing treatment by The Irish Times of the ESRI book ‘Best of Times?’ (2007) making it its lead story on the day of its publication, publishing a lengthy opinion piece by its editors and devoting an editorial to it, all in the same edition of the paper (29th June 2007). Never in the annals of the Irish social sciences must a book have been given such high profile and kids glove treatment by a key organ of the media. And this for a book that contained little that was new to anyone acquainted with the work of ESRI welfare economists and sociologists except that it was wrapped in a comforting message that this was the best of times for Irish society, a message that was far from supported by the scientific evidence provided in the book. So the lack of a critical media is a second dimension of the knowledge crisis.

A final dimension concerns our universities. If we accept that they play a privileged role in any society in the generation of knowledge, then the failure to generate more critical knowledge in Irish society over recent decades does raise serious questions for our universities. One might expect that this would stimulate a debate within the universities and among those who make public policy for our universities about how they have failed in their role to offer more critical knowledge for our society. Such a debate one would expect to focus on the role of the social sciences and why they are not playing the role they should. Yet, far from this happening, the paradox is that there is an ever more determined assault by state bureaucrats and certain politicians, ably aided and abetted by most of those who run our universities, to integrate them as functional agencies in the dominant commercial technological paradigm that so dominates our society. Of course, I am not denying that one role of universities is to create cutting-edge technological knowledge some of which can be used by commercial groups to create goods and services that drive economic progress. However, what shocks and frightens me is the complete failure by those who fund research in our universities to recognise that all technological and scientific knowledge is mediated to society through social institutions; therefore neglecting the social sciences and the Humanities means that we are simply avoiding the challenges of creating the social (including the political and economic) structures and policies that could integrate scientific and technological knowledge into a wider strategy of national development. One consequence is the pressure on the social sciences to provide technical forms of knowledge and to neglect what has always been their main contribution to society, namely critical thinking. Indeed, the ever more vigorous implementation of matrices of ‘impact’ on us academics is driving us back into narrow disciplinary silos and creating incentive structures that make it far less likely that our universities are going to produce critical social thinkers, the public intellectuals we so badly need.

Interrogating the Irish model

Peadar Kirby: This week saw a rare mention of political economy models entering the debate on the future of Irish society. Carl O’Brien’s series on the trade unions quoted David Begg as advocating a Nordic model for Ireland to replace the current ‘neoliberal path that we’re on’. Begg added that ‘what’s clear is we don’t have any future in the current model’ (The Irish Times, Jan 26th 2010). It’s not the first time that Begg has tried to stimulate a public debate on political economy models; he made a valiant and lone effort in the run-up to the 2007 election which fell on deaf ears.

It is remarkable how little attention is devoted to interrogating the political economy model that has led us into the present crisis; indeed, it is rare indeed to even find acknowledgement that such exists. For example, in reading the range of recent books by journalists and commentators on the present crisis, what is striking is the personalist nature of the analysis advanced. By this I mean that the many ills analysed – the poor quality of governance, the too close relationship between politicians and so-called ‘developers’, the failures of regulation, the growth of a banking culture that threw caution to the winds in its lending practices – are ultimately attributed to the failures of individuals. There is a deeply ad hominem quality to it all.

It must say something about just how badly we social scientists have educated generations of our students that the most fundamental insights of our trade are largely missing in the public debate – namely that power is structured and that individuals and groups are greatly constrained by the structures in which they operate. During the years of the Celtic Tiger, the term ‘Irish model’ began to be used to describe the state-market relationship in the Irish case, though it was used much more outside Ireland than within. It was a relationship that came to be envied among other latecomers to development in regions such as central and eastern Europe, the Middle East and Latin America where significant effort was devoted to learning and emulating the lessons. Yet, while basking in the international attention, Irish policy makers, politicians and the academic community made no attempt to recognise the nature of structured power that constituted this model. David Begg was very much a lone voice in advocating that a different model was needed.

Even after the collapse of the model, debate remains characterised by an almost total failure to examine the nature of the way that the state-market relationship came to be structured in Ireland, the origins and trajectories of this relationship, and what needs to be done to change it, as advocated by Begg. My own forthcoming book Collapse of the Celtic Tiger (Palgrave Macmillan, April 2010) has as its subtitle Explaining the Weaknesses of the Irish Model and is an attempt to examine the interrogate the particular ways that political, economic and social power have come to interact and mutually constitute one another, particularly over the course of the Celtic Tiger period, the legacies of which enormously constrain the sort of path that Begg advocates that Ireland now take, namely a social democratic Nordic-style model.

Examining the Irish model requires a recognition of the ways in which political power constituted a particular kind of market economy in the Irish case, one characterised by an enormous dependence on multinational capital. This is arguably the most fundamental constraint on moving in the direction that Begg champions; for example, there is a substantial literature in Irish political science, sociology and the more enlightened corners of economics that gives evidence of the ways that this dependence constrains Irish public policy across a wide range of areas. We urgently need more recognition of this and more public debate about it.

Various weaknesses of the Irish political system have come to feature in the current debate but little attention has been devoted to how reforms advocated might result in turning Irish policy making into a space of real deliberation of political economy options. Another feature of the Irish model is the weak and dependent nature of civil society organisations, drawn into far too close and subservient a relationship with the state especially over the course of the economic boom, with the result that it has almost entirely abdicated its function of being the incubator of alternative models from outside the dominant power structures. O’Brien’s two articles in The Irish Times this week illustrated well how the trade union movement is now grappling with overcoming this legacy. The very interesting project entitled Is Féidir Linn is doing something similar for a range of civil society groups. In these spaces the task of moving to a new model is beginning in the most initial, tentative and fragile of ways. It needs recognition and much support.

It is to be hoped that Begg’s advocacy of a Nordic model does not encounter the silence on this occasion that it encountered in mid 2007. For his recognition of the unsustainable nature of the present Irish model and therefore of the need for a new political economy model, relating public and private power in a new and more socially just way, is identifying a framework to analyse our situation that is vital if we are to get to the heart of the current crisis and find a sustainable way out of it. He himself recognises just how difficult it is going to be to move beyond the present model but a necessary first step is to begin to acknowledge that such a model exists and to begin to interrogate its many features.

Political lessons from Iceland

Peadar Kirby: With the forthcoming local and European elections opening the first opportunity for the political impact of the economic crisis to find expression, a look at Iceland offers salutary lessons.

Speaking at a seminar at the University of Iceland last week on the Irish and Icelandic crises allowed me to learn about the similarities in the depth of the economic recession in both countries. Iceland has a budget deficit of about 14% of GDP, a little greater than that of Ireland, GDP is expected to fall by 10% this year and bottom out next year, its unemployment rate is around 9% and though its inflation rate is falling fast it is still around 12%.

The big difference, of course, is that Iceland now has a currency which economists expect can never be traded feely again. To gain foreign exchange, Icelanders have to present an airline ticket out of the country, and Icelandic companies are suspected of keeping as much of their capital as possible abroad in order not to have to exchange it for krona. Discussion therefore centres on what currency to adopt with the Norwegian and Swedish krona being mentioned and the Canadian dollar. Most informed observers see no option other than adopting the euro, and for this membership of the EU is necessary. However, suspicions remain widespread that the EU is after Iceland’s natural resources, particularly its fish, and it is by no means certain that the government would win a referendum on EU membership, which is likely to take place in 2011 or 2012.

It is, though, the politics of the present moment that are most interesting to observe and may be an indication of what is likely to happen here. Icelandic politics had been dominated since independence by the Independence Party, a conservative nationalist party which had always been the largest party in the Althingi (the 63-seat parliament). Unlike its Scandinavian neighbours, Iceland had never had a left-wing government. All this has now changed. A general election was forced by sustained popular protest, with angry protesters camped outside the parliament building and effectively forcing the government to resign in February. The general election in April saw the Social Democrats emerging as the largest party for the first time and they have now formed a coalition with the Left-Green party; together these have 36 seats giving them a comfortable majority. Even the new Citizens’ Movement formed by the protesters, won four seats.

The new Althingi met for the first time last week and is showing a determination not only to resolve the economic crisis but to implement fundamental political and economic reforms. While the decision to apply for EU membership has got most attention, equally momentous is the decision to re-write the country’s constitution and a constituent assembly is to be put in place to undertake this task. Negotiations have taken place with employers to raise the wages of the lowest paid so as to ensure they carry less of the burden of the crisis. Industrial development policy is being fundamentally redrawn as the government has decided to move away from dependence on foreign-owned aluminium plants, attracted to Iceland by its low energy costs, and instead to strengthen the indigenous small and medium-sized sector as well as some large Icelandic companies that continue to be very successful abroad. While the country faces some very painful years of increased taxes and budget cutbacks, there is a sense that the general election has taken control from those who were responsible for the crisis and brought a new political direction to the country. It has created the necessary political conditions to move forward and renew a sense of hope and self-confidence.

What about R&D policy?

Peadar Kirby: Amid all the focus on the flood of different reports on the Irish economy, and the battle between the slash and burn brigade and the stimulants, the new Science Foundation Ireland strategy on 'Powering the Smart Economy' seems to have slipped under the radar of many. This is surprising, as it remains probably the only sector of Irish public spending now that seems to be ring fenced against spending cuts and, of course, it is regarded by the official view as being the centrepiece of trying to position Ireland for economic success once we get ourselves out of the current mess.

Yet, as with so many of the sacred cows of Celtic Tiger Ireland that few dared criticise (stimulating a booming economy, opening the flood gates of credit, establishing new agencies for any problem that emerged, national planning that was simply a list of goodies to be funded), current policy towards R&D does little to stimulate confidence that it can achieve the lofty goals it has set for itself. A more critical examination is greatly overdue.

I have little doubt that the huge increase in state spending and the development of an elaborate institutional infrastructure for it is stimulating worthwhile research. Yet, the links between this research and a wider project of national development are what require more critical interrogation. I have three main concerns:

1) It seems to have escaped notice that Ireland has chosen areas to prioritise for research spending that are exactly the same as those chosen by numerous other countries around the world. I was at a Unesco workshop on research policy in Paris last week and was amazed to hear speaker after speaker referring to ICT and biotechnology as the two priority areas of research for their governments. At least this shows that Ireland isn't out on its own, but it raises major questions about the widsom of concentrating major public spending on areas in which there is intense competition, some of it from countries with much more established research cultures than we have here. Does it not run the risk that the benefits of such research funding will be realised elsewhere with minimal benefits for the Irish economy?

2) To realise its developmental promise, an active and well-resourced research culture requires national companies to avail of the research. In the past, developing countries often developed high-tech research capabilty not in their universities but in public companies. Yet, in an economy so dependent on foreign companies, it seems that much of our research funding ends up as a subsidy by the Irish taxpayer to the research and development capacity of multinationals. As these move their labour-intensive operations to lower-cost locations, we need a much more critical cost-benefit analysis of the developmental benefits to the Irish economy of the priorities that have been set as part of our research policy.

3) To the social scientist, the nature of the research culture that has grown up in Ireland appears far too technical in nature, as if technology alone can result in development. What is missing is any appreciation that all technological or scientific inventions are always embedded in social organisations (companies, services) which structure the ways they are utilised and who profit from them. Yet, to those who fund research in Ireland, these social dimensions seem of no importance. As a result, it is hardly surprising that we get islands of research excellence amid a society of growing social strains and inequalities.

Much more could be said about the nature of the official approach to developing research. Not least would be the observation that a highly instrumental view governs the whole process, which is the very antithesis of the creativity that should drive any true innovation, particularly an innovation that has a concern with broad and sustainable social outcomes. Perhaps the time has come to include research funding in those areas of public funding that require some critical scrutiny.

Revealing assumptions of former senior civil servant

Peadar Kirby: The article by Cathal O'Loghlin in today's Irish Times headlined 'Union response to public sector levy fails to find a better way' is more revealing for what it doesn't say than for what it does. Essentially, this former assistant secretary in the Department of Finance and director of the International Monetary Fund (presumably Ireland's representative in the 13-country group through which this country is represented in that organisation) criticises the ICTU's alternative proposals to deal with the current crisis on two grounds, both of them disingenuous.

The first is his claim that ICTU fails to make any case against the planned public pension charges and the second is that the trade union group fails to put forward a comprehensive plan for reforming our taxation system. The first claim overlooks the fact that union leaders consistently affirm that they are not against cuts in public sector pay but that they want to see any cuts being implemented in a fair way with those who have contributed most to the present crisis being the ones who pay the most. Secondly, it beggars belief to expect Congress to design a comprehensive reform of the taxation system when the government itself is failing to do this. Most astonishingly O'Loghlin dismisses ICTU's call for a tax on high earners by stating that the 'net yield might reach €3 billion' while asserting that cuts in the order of €15 billion are in fact needed!

But the most revealing thing of all is O'Loghlin's inability to grasp the essential core principle of ICTU's position, a core principle that finds a ready response among many ordinary Irish people to judge by Saturday's huge march in Dublin. This is the principle of fairness. He fails to mention ICTU's call to introduce a tax on properties other than the principal family residence, its proposal for a 48% tax band for high earners and its call to end the general tax subsidies for the hospital co-location scheme. Indeed, his comment on tax relief for union subscriptions (a petty issue indeed) is perhaps most revealing of a hostility to trade union membership. All in all, his article seems to be motivated by an attempt to argue that public service pay needs to be cut back, missing any of the points made by Paul Sweeney in his recent contribution to this blog. While ICTU's plan may not amount to a full strategy for resolving the huge crisis our political and economic elites have landed us in, it is by far the best beginning towards some equitable and fair way of addressing the crisis.

Return to Growth Paradigm in Petrochemical Economy not an Option

Peadar Kirby: The focus of public attention and debate on recession and cutbacks at the moment indicates the extreme poverty of public discourse in this country. Essentially it confirms that at the heart of our current crisis is a crisis of ideas and imagination. Those academics contributing to the debate seem to be vying with one another in describing the cuts in living standards facing us all (though, of course, those whose actions created the bubble economy have so far not suffered in any direct way at all), but few are offering a way forward beyond the vacuous mantra of ‘competitiveness’.

A number of key debates are urgently needed:

1) What sort of state do we want? All attention so far has been focused on cutbacks to the current state apparatus – through the actions of the so-called An Bord Snip Nua, through public spending cuts and through cuts to the incomes of all public employees. But this begs the question of devising an agenda for reform of the state, fashioning a state that can effectively carry out the tasks that are required of it. Indeed, it needs to be acknowledged that the Irish state is constantly managing crises and has developed very little ability to plan proactively across the range of public policy areas.

2) Answering what sort of state we want requires us to debate how the state and the market should relate to one another: in other words what is the role of the state in configuring the market for social development and how should the state play that role? This raises another set of very important issues which most Irish economists seem completely unable to address because of their neo-classical training.

3) Setting the context for economic and social recovery: commentary on our current situation fails most of the time to take any account of the fact that decisions in Copenhagen in December will require us to reduce carbon emissions very substantially and very fast. The only way we are addressing this is through presenting the ‘green economy’ as a possible source of new jobs. Yet, while this is true, there is no chance whatsoever that we can achieve anything like the necessary cuts in carbon emissions by that means alone; huge changes in how we source our food and drink, in our patterns of mobility, in our sources and uses of energy will also be required.

If we could begin debating these wider issues, realising that some attempt to return to a growth paradigm within the petrochemical economy is simply not an option if we are going to survive as a species, we might free the imagination and generate some really creative thinking about what future we can build for ourselves.
Professor Peadar Kirby teaches at the University of Limerick