What a good news week for Fianna Fail was last week. It wasn’t just the latest Irish Times poll even if it’s only a honeymoon result. There was also that report– the ESRI’s Medium -Term Review: a little rough patch and then clear skies and calm waters for . . . well until 2025 minimum. Are we looking at another 20 years of Fianna Fail rule? Should we be preparing ourselves for more ‘ideology-free’ politics? Is this the end of history?
Let’s not hasten. Let’s examine what the ESRI report actually said; and more importantly what it didn’t say. And let’s take another gander at that poll.
It starts provocatively:
‘When we wrote the last Medium-Term Review in December 2005 we were concerned that a sense of economic invincibility had taken hold and that the very real dangers facing the economy were being ignored. While we did not want to overdo the sense of foreboding, mindful of the fate of Cassandra, we still wanted to alert readers to our concerns. For this Review the task is rather different . . . our essential message . . . is upbeat, recognising that there is a danger that Irish society could be transfixed by the current very real difficulties, missing the opportunity to plan and prepare for a better future in the next decade.’
187-pages long – covering a range of subject and projections: caveats, conditions and alternative scenarios to give everyone pause for thought: the Review is not a mechanistic prediction. Rather, it outlines opportunities, serving as an antidote, to prevailing gloom-laden commentaries. It is not a meteorological forecast as if economic developments are some kind of natural phenomenon. It charts avenues without fully knowing (and who possibly could) what roadblocks or diversions or dead-ends may be in store. To use another classical reference – the ESRI is trying to steer the debate safely through the Charybdis of despondency and the Scylla of blind sanguinity.
Most of all, it is a macro-economic analysis and, as such, holds out macro-economic promise. But as to how we fulfil that promise, it is silent. It refers to ‘properly managed’, ‘appropriately managed’, ‘appropriate policies’, ‘actual policies’, ‘implementation of policies’, ‘structural policies’, ‘policies will need to be implemented’, ‘if policies could be found’, etc. etc.
What does the ESRI propose? Not much in detail – that’s not the point of the Review. Yes, we must increase productivity, improve competitiveness, create a modern physical and social infrastructure ‘for a rich country in the 21st century’, and protect the environment. But how, or through what mechanisms, using what policies, within what structures – the Review leaves that for political debate.
For instance, we know that broadband infrastructure is essential to a successful modern economy. We also know we trail, sometimes badly, in a number of international measurements on this score – in coverage, price, and speed. What prescriptions does ESRI offer? It doesn’t – because that’s not part of this particular brief. Do we hope that an Australian equity firm will prioritise
On the assumption that the current global credit squeeze will be short-lived, the ESRI projects upturns in the
‘Provided the domestic productive base can remain competitive, the international environment for
contained within this Review is broadly favourable.’ Ireland
That’s a big, big provided. This has two twists – one, it assumes that our domestic productive base is already ‘competitive. Secondly, improved competitiveness is what will determine whether the international environment is ‘favourable’. This was a big omission in the immediate commentary on the Review, assuming as they did that there was a mechanistic relation between international conditions and our own growth rates. In other words, this ain’t a given.
Again, we all know that our export base is almost wholly reliant on multi-nationals which make up 90% of both manufacturing and service exports. Given such a dependence, it is noteworthy that the Review didn’t reflect on our continued ability to attract foreign investment (FDI) – not directly, anyway. While the World Investment Review suggests that Ireland can look forward to higher FDI over the next three years, there are a number of storm clouds gathering: increasing support for a consolidated corporate tax rate among EU members, the inexorable decline in average corporate tax rates in other countries (reflecting a race-to-the-bottom in terms of taxing mobile capital), increasing concern in the US over lost tax revenue from American companies transfer-pricing in Ireland, etc. A number of reports (e.g. the Enterprise Strategy Group) have stated that our ability to attract FDI through low corporate tax rates is unsustainable in the long-term.
What will be the effects of this unsustainability? In addition to paying little attention to this problem, the Review doesn’t comment at all on our indigenous enterprise prospects. For instance, there is a relationship between investment and enterprise development. So will the Irish investor turn away from the quick-buck property markets abroad and start taking risks on new and expanding companies at home in the productive sectors? Would you risk your money on that prospect?
None of this takes away from the ESRI analysis for the simple reason they weren’t dealing with these issues in the Midterm Review (they deal with them in other papers and reports). But what it does point to is that the promise of future growth must be matched by the policies to make that growth happen. The Report – which has some fun with mythological metaphors – points out that the modelling programme they use goes by the name of Hermes:
‘In Greek mythology HERMES was the messenger of the gods and one of his tasks was to bring dreams to mortals. We feel that the medium-term forecasts for economic growth are not merely “dreams” but, with appropriate public policies, they can be turned into a reality over the coming decade.’
And there’s that essential, if unelaborated, caveat again – ‘but with appropriate public polices’. How should the Left respond? Let’s start with the other good news: the poll. Labour has jumped back up to 15%, its rating shortly after the last general election. Interestingly, it has closed the gap with Fine Gael by 8% points, drawing closer to the larger party than it has been for over two years. Even more interesting is that the combined progressive party support has drawn even with Fine Gael – in core points (it’s still 1% behind in adjusted support). Whatever about the dominance of Fianna Fail, the contest over who will lead the opposition has become, if only temporarily, slightly more interesting.
If the Left wants to shed it’s half-party status, drive forward with confidence and ambition, and start to act like it wants to lead the opposition – it has to start telling a story; a story that both rubbishes Fianna Fail’s ability to actualise the ESRI’s Hermes-inspired forecasts, and position itself as the party people can trust. It would start like this:
Just when Celtic Tiger growth, driven by public sector policies, was starting to emerge, along came Fianna Fail with policies that constituted crimes against the economy. With swashbuckling fury that Errol Flynn would have admired, they recklessly wasted the proceeds of growth on letting the speculative property market rip, squandering billions of Euros, leaving behind a low-waged, poorly-serviced and infastructurally impoverished economy. That’s what they did the last time – are we going to trust them again when favourable conditions are starting to return?
Of course, that’s one side of the story – one which will I address in upcoming blogs. The other side is the actual policies that will win people’s confidence – policies which they have yet to address.
The one thing the Left must absolutely avoid is falling into the same trap as it did in the boom years – the self-doubt and apprehensiveness to talk about a growing, successful economy. Never again should we leave the concepts of ‘competitiveness’, ‘enterprise development’, and ‘economic efficiency’ to the Right. If we do, not only will we fail in the economic debate (because we won’t be there, our chair will be empty) we will fail to shed our half-party status and overcome Fine Gael as the natural opposition to Fianna Fail.
Were that to happen, then the Left will be faced with the choice of continual opposition or going along in yet another Fianna Fail coalition, convincing itself that it matters.
Now that would be history’s end.