Job creation needed despite 'game-changer'
The deal reached by EU leaders in late June has been hailed as a game-changer for Ireland. Yet at the same time, the government has maintained that there will be no immediate or short-term benefit for the country. The public is told that if any benefit does arise this will be accrued over the longer-term with a fall in borrowing costs for the country. The fact that economics as practiced is primarily concerned with the future means it is perhaps understandable that policy makers consider this a positive development. The government's perspective, however, raises some important questions about the current state of public policy in Ireland and the EU.
First, it is now obvious that the permanent-emergency economic crisis in Europe has engendered a shift in the central concern of public policy from the need to provide employment to the need to re-enter the markets at some future date. The consequences of this shift are clear. It is only when governments have the ability to borrow at sustainable rates that the secondary or associated elements of public policy i.e. providing employment can realistically be achieved. This reasoning was central to the government's argument in the recent fiscal treaty referendum. The primary concern for the government was to ensure a stable investment environment for the markets in the first instance. The employment that may or not accrue from the potential investment decisions of the markets thereafter, can can only be understood as an attendant concern – despite rhetoric to the contrary. This is an important reversal in economic attitudes from twenty to thirty years ago and represents a dangerous inversion of democrat ideals that the interests of the people are paramount.
Second, it could well be that the specifics of the EU deal when finalised by governments do satisfy the markets and do lead to financial investment in Ireland. However, the more pressing public policy issue should be around the immediate need for growth and job creation in the economy, instead of a focus on some possible future investment that may or may not emerge, depending on whether investors deem Ireland to be a good bet or not. Designing public policy in the pursuit of attracting the interests of financial investors is not good governance and will not produce good public policy.
Moreover, in the context of the current condition of the EU economy, the idea of relying on the export sector for growth in Ireland should give us some pause for concern. According to a recent Eurostat statement, overall unemployment in the EU is currently at 11%, with youth unemployment having reached a staggering 22.6%. This represents a decreasing demand in the EU for Irish exports and a year-on-year increase in unemployment. This development does not augur well for Ireland's over-reliance on export-led growth.
The current shape of EU policy is no better. While economic austerity has proven inadequate for fostering growth, the EU has now turned, at least rhetorically, to the need for stimulus. However, the decision by EU leaders to approve a 120 billion-euro stimulus package in order to assist the economic recovery should be placed in context to fully appreciate its whimsical futility. This 120 billion-euro figure represents less than 1% of the overall EU economy and for the most part is not likely to include any new monies. To put this in comparative context, the US adopted an economic stimulus package in 2009 which worth approximately 7.5% of its overall economy. This stimulus, according to the non-partisan Congressional Budget Office, had the primary effect of preventing approximately an additional two million people from losing their jobs, but it had only a marginal impact on economic growth. Thus, at its current level, it is clear that the EU announcement will not stimulate economic demand or create any employment throughout the union. However, the fact that EU governments are unwilling to countenance any substantial stimulus spending does reaffirm the truism that economic public policy ideas are very much a product of their time, place and the result of powerful vested interests - in this case the markets.
Finally, there is a fundamental dilemma for those attempting to articulate an alternative public policy strategy – one that places the interests of the public first. We need to challenge the tendency to accept the premise of the questions or problems as posed by those in power. Instead we should attempt to redefine the questions or the problems themselves. There is an unfortunate propensity to become involved in the so-called "expert" debate questioning the particulars or merits of one economic or public policy proposal over the next, when the problem is actually structural in nature. This is not an easy solution, but if we are to have real and meaningful change we must challenge the intellectual framework from within which our so-called problems stem today.