Shane Coleman last week expressed concern that, unless we continue on our path of deflationary policies, we might end up like Greece, on the brink of bankruptcy. Unfortunately, if the ESRI is to be believed, that is exactly where we are heading. Even under moderate growth rates the Institute estimates that by 2020, employment will still be below pre-recession levels – a decade-long job drought; debt levels will be 134% of GNP and rising – a crushing level of interest payments, and investment will stagnate below 2007 levels.
And our public finances? Current policy will fail to bring the deficit under control. It will remain above Maastricht targets, even by 2020. And that's not counting bank bailout money. We may not be technically bankrupt but it will be a bleak economic landscape of high debt and high unemployment. If this doesn't count as failure – fiscally, socially, economically – I can't imagine what would.
The government's deflationary policies have been a major driver in our recession. They have cut growth and economic activity, reduced employment, driven down tax revenues and driven up unemployment costs. And all throughout last year – despite three effective budgets – borrowing costs increased. It's like running in quicksand – the more the government cuts, the more we sink. The dole queues, the emigration lines, and the vacant shop-fronts are a testament to government policy.
How do we get out of this deflationary-debt trap? Last year UNITE published a comprehensive alternative programme, 'Growing the Economy'. We identified investment and employment as the key drivers. This is not a traditional stimulus programme, whereby the government temporarily boosts demand until such time as the private sector gets back on its feet. It is an investment-led programme constituting a major drive to modernise our economic base and boost productivity. It will increase job numbers and profitability throughout the private and public sectors.
Take the example of our physical infrastructure; our transport, telecommunications and energy networks are ranked as among the worst in the industrialised world. This is a major drag on growth, productivity and competitiveness. An investment drive that delivered next generation broadband to every house and business, a coherent public transport system, a water network that didn't leak and an upgrading of our building stock to the highest possible energy rating is the type of bold, creative vision we need.
The best thing is that this will not cost the country any real money. Investment in wealth-creating and cost-reducing assets does not create debt – it creates an economic return which, in turn, reduces deficits and debt. We must invest our way to a balanced budget – investing in activities we would have to do anyway, regardless of the recession, taking advantage of low tender prices. European countries which succeeded in containing unemployment also contained their deficits. It is obvious that keeping people in work and creating jobs increases tax revenue and consumer demand.
In Ireland, however, employment collapsed – falling nearly five times more than the Eurozone rate. It is no coincidence that this collapse in job numbers mirrored the collapse in our public finances. Had we, from the outset, invested in growth we would have greatly limited job losses, kept more people in work, reduced the recessionary slide and kept the deficit at manageable levels. That didn't happen. And here we are now – looking into a lost decade of high debt and high unemployment.
There is strong evidence that an investment programme would work here – even in a small, open economy. Evaluations of past NDP and EU-funded investment programmes show high domestic multiplier effects – which means that money invested here remained here for the most part. A disproportionate amount of 'leakage', or imports, comes from the multinational sector, reliant upon global events. In recession these positive multiplier effects on the domestic economy will be even higher.
It is heartening that more commentators, analysts and economists are starting to question the direction we have taken. We will still face difficult budgetary decisions and financing investment will require new creative vehicles to coordinate Exchequer, public enterprise and private resources. But if we embed investment, rather than debt and deflation, into our economy we will find it easier. Most of all we will embed into society and every household something that is in desperately short supply – hope.
Irish Regional Secretary, UNITE