Scandinavia holds a lesson in fairness for Ireland

The Eurozone's response to yet another economic crisis harks back to the flawed economic model of the 1990s.  A new social and economic model is needed if Ireland is to develop a sustainable and equitable route out of the recession. By Anne Costello of the Community Platform.

The political debate is changing. For the Government and its supporters there is a renewed emphasis on how to restore Irish economic competitiveness.

A growing chorus of politicians and interest groups are calling for reductions in the cost of energy, rents, rates and wages.

Their logic is simple: Ireland’s economic recovery must be export-led. Reducing the cost of doing business is a prerequisite to ensuring that Irish exports can compete globally if and when the recession comes to an end.

This chorus is a call for a return to the economic model that produced the first phase of the Celtic Tiger in the 1990s.

While there is less emphasis on attracting inward investment, there is the same mistaken assumption that low taxes plus low wages equals ‘competitiveness’ and are preconditions of any return to economic growth.

Unfortunately this model is part of the reason why Ireland is experiencing a deeper and longer recession than many of our European neighbours.

The low-tax model of economic growth pursued by all governments since 1992 was a double-edged sword.

It created employment and real increases in living standards for thousands. But it rested on a chronic underinvestment in social and economic infrastructure.

As a consequence we have unacceptably high levels of poverty and inequality and low levels of public service provision.

In 1994 16% of the population lived in relative poverty. That figure rose steadily to 22% in 2000. The figure then declined from 2001, falling to 14.4% in 2008.

It is truly astonishing that after 15 years of unprecedented economic growth relative poverty levels have dropped by only 1.6%.

In addition to the continued existence of poverty our society has actually become less equal during the last 20 years. A recent report on income distribution by TASC, the think tank for action on social change, demonstrated income inequality has steadily risen since 1987.

In 2006 a quarter of households lived on an annual household income of less than €20,000, while half the population lived on an annual income of less than €40,000.

In the same year, according to The Bank of Ireland, the top 1% of the population owned 20% of the wealth. When the value of residential property is excluded the top 1% owned 34% - or more than one third.

Inequality in access to services, employment and public life is also well documented. For example, access to health services depends on your ability to pay not on medical need.

These levels of poverty and inequality deny hundreds of thousands of people the chance to live better lives.

There is also a substantial body of evidence to demonstrate that unequal societies are bad for all citizens, even for those who are better off.

Inequality and poverty place a heavy burden on the economy, as human talent is wasted and much needed resources are diverted to mitigate the human cost.

A return to the low tax low wage model that drove the early years of the Celtic Tiger will only serve to deepen these problems.  It cannot provide a long-term route to genuine competitiveness and recovery.

The Community Platform believes that Ireland needs a new social and economic model if we are to ensure that our economic recovery is sustainable and equitable.

We need to put the economy at the service of society as a whole rather than see narrowly defined economic growth as an end in itself. This means placing social wellbeing at the centre of economic policy. Success would be measured against social and environmental outcomes that assist in realizing the true potential of our people rather than per capita growth and GDP.

This will require a real reform of our tax system to ensure sufficient revenue to invest in quality job creation; universal public service provision; and structural wealth redistribution aimed at ending inequality and poverty.

It will require investment in and diversification of our indigenous business sector, with a specific focus on developing the social and environmental economies.

It will require investment in and better management of our poor social infrastructure to address deficits in childcare, early childhood education, primary and community care and provision for our aging population to ensure a better-educated and healthier population.

It will require real investment in healthy, vibrant and active communities, with a particular focus on those experiencing disadvantage, social exclusion and poverty.

Crucially it means moving Ireland away from the Anglo-Saxon model of economic development that has dominated political and policy making circles for decades and towards a more Nordic model, albeit one tailored to fit the specific culture and context of 21st century Ireland.

The Anglo-Saxon model advocates a competitive race to the bottom irrespective of the social cost. The Scandinavian model combines sustainable competitiveness with equality and sustainability.

The choices we make as a society today will determine the shape of our countries future for decades to come.

Do we want to return to the economic model of the 1990s with its inherent structural inequalities?

Or do we want a better future for ourselves and our children, in which all sections of society have an opportunity to live a full and equal life?