They won. We lost. Get over it. Now let’s change it.

There are any number of outrages in the 2010 budget - large ones and a plethora of small ones that will only become evident when the details see the light. These will be dressed up in all sorts of fashionable clothes. My favourite is ‘this will instill confidence’. Take a look at these numbers from the ever fascinating Ireland After Nama. Now imagine you own a small business in one of these towns that is reliant upon local consumer spend: nearly half of the local at-work population is getting hammered with a pay cut, on top of cuts in Child Benefit and Early Childcare Supplement; the working age population without a job are also getting hit with an income cut. A significant proportion of your customer base is young, having bought a house in the last few years, with huge mortgage repayments. The Minister has announced that within a few years they will be hit with a property tax (sorry, house-property tax) and mortgage interest relief will be abolished. Oh, and yes, forecasters are predicting that interest rates will treble within two years.

So your customer base has less money and can look forward to higher debt repayments and more taxes. Yeah, those business owners are really getting that confidence mojo happening. I’m sure they’ll start investing in expansion any day now.

But back to the main argument: we have lost the debate. In some cases we weren’t even at the debate. Arguments over alternative strategies or even alternative approaches consistent with the Government’s strategy - all lost. Not only do we have a deflationary, strategy - we have it on the worst terms possible.

If we don’t accept this, we are in denial. If we think that protesting ‘louder’ will have any effect, we are in denial. If we think that it’s the media to blame, for shaping the debate to a particular end (which they have done and will continue to do, in bucket-loads), we are in denial. If we think that soaking the rich (which I have no problem with) somehow constitutes a sustainable alternative strategy, we are in denial. If we think that all we need to do is distribute a few more leaflets, issue a few more statements, and call a few more meetings - we are in denial.

For these are all the fall-out from our defeat, not its causes. We must rethink - again; return to first principles. We must find the fundamental cause of our defeat and address that. If we do, our protests-against can be turned into campaigns-for, we can construct new communications strategies that don’t rely on the whims of editors and current affairs producers, we turn progressive redistributive demands into productive investment. And most of all we can ensure that the principles - ‘agitate, educate, organise’ - become purposeful and common-sensical.

Briefly, I’d like to address two causes of our defeat; one short-term, one long-term. There may be other causes but for me these are central.

Fiscal Contraction

Early on progressives accepted the orthodox logic of fiscal contraction - the idea that cutting public expenditure and/or increasing general taxes was the route out of the crisis we are facing.

In January, ICTU accepted the Government’s strategy at that time - to cut €2 billion. When the economy deteriorated further, fueled by this deflationary approach, ICTU called off it’s national day of action and the Government upped the stakes with a €4 billion contraction. When the Government demanded a cut of €1.3 billion in public sector payroll, while at the same time reducing public sector employment levels by stealth, ICTU tried to negotiate it’s way around. And now social partnership has broken down and it’s public sector workers and social welfare recipients getting soaked, not the rich.

The fault here is not that the trade union leadership actually agreed with this deflationary approach - they didn’t. The fault was that the movement failed to advance an alternative.  However, to do so - a genuine expansionary alternative - would have brought them into irreconcilable opposition to the Government’s programme. And this could not be resolved within social partnership, within collective bargaining. Therefore, ICTU took the safer ground - attacking deflation, but tailoring their demands within the parameters of the Government’s strategy, hoping this would give them negotiating room. That was the thinking, anyway.

Labour, too, embraced fiscal contraction though their route was a little more circuitous. In late 2008, the leadership called for debt-financed investment and a ‘major stimulus programme’. However, by the eve of the April budget they did a U-turn and called for contraction. When the McCarthy Report was published, Labour opposed recommendations to cut social welfare but claimed that cuts in public sector employment was ‘do-able’, failing to appreciate that this was one of the more deflationary, economically-damaging fiscal measure. In the run-up to the 2010 budget they not only accepted the Government’s fiscal contraction targets, they even accepted the Government’s €1.3 billion public sector payroll deduction target. Ultimately, they accepted Fianna Fail’s strategy, only differing in tactics.

In both cases, neither ICTU nor Labour advanced more sophisticated fiscal models that would underline an alternative. But that is because more ‘political’ factors were in play. With ICTU, it was the over-riding desire to conclude ‘a deal’, to keep social partnership in play (though, in regards the public sector pay talks this was merely the traditional employer-employee industrial relations process playing out). With Labour, it was the need to stay close to the ‘centre’. A more thorough-going progressive critique would not only put Labour outside the consensus, it would undermine any potential relationship with Fine Gael.

Fianna Fail’s victory was complete - they and their allies in the academic establishment, IBEC and the media ‘convinced’ (or, at least, trapped) the trade union movement and the main opposition parties that contraction was the only way out of the crisis. The parameters were set - all that was allowed was a debate over the ‘best way’ to achieve this. But fiscal contraction was never about a high-tax regime; the burden of resolution was always going to fall on public expenditure.

Wealth Generation

The second error has been of a long-term nature. In the past, the Left used to talk about how to generate wealth and jobs. From nationalisation to cooperatives we discussed the differing enterprise models, investment strategies, export and sectoral developments, the relationship of finance to the economy, the role of public and private capital, the development of SMEs - in fact, the debates could be quite technical but no less profound.

In Ireland you would have tripped over all the alternative strategy documents and arguments that were produced. There was the Socialist Economists Group, the Workers’ Party ‘Irish Industrial Revolution‘ and Labour’s ‘Labour’s Agenda’. ICTU published ‘Confronting the Jobs Crisis‘ in the early 1980s. While historians see this as one of the contributors to the foundation of social partnership, it should not be forgotten it proposed a strategy around national planning, additional taxation and borrowing for productive purposes with emphasis on the development of indigenous enterprise, especially public enterprise.

We stopped doing that - sometime around the Celtic Tiger Boom. All that wealth was being produced by multi-nationals flooding in. And in that second phase, all that wealth from the property bubble: every year was growth after growth. Geez, maybe these capitalists knew what they’re doing.

With all this growth and job creation we stopped talking about how to create wealth and retreated into discussions about how to redistribute the wealth that capital produced. We argued over raising taxes (or not, actually, under social partnership), argued over where they money should be spent - on education, health, social protection. But we left the issues of competitiveness, productivity, the creation of new markets, the development of new sectors, etc., for others - for IBEC and the Irish Times business page.

It used to be that progressives never saw any difference between the creation and distribution of wealth. That’s because there isn’t. We forget the fundamental maxim - who influences wealth generation influences its disposal. That was the triumph of neo-liberalism - the de-limiting of the public realm. And while social partnership gave the veneer of ‘participation’ it was no replacement for genuine local and sectoral tri-partite structures or an interventionist social democracy. Illusion covered up over, not only cracks, but the vacuum.

So when the markets broke down progressives didn’t have the language anymore. We forgot that the state can be an open public space where different social constituencies come together, negotiate, agree and implement their future. This forgetting meant that progressives were shy about using the levers of the state to address the economic crisis. This led, for instance, the Labour Party, to advance training and cutting employers PRSI as a ‘job-creation’ policy - a policy that made almost no reference to direct job-creation, whether through the state (public enterprise, public sector payroll) or led by the state (investment, increased purchase of private goods and services). And it helps explain why progressive have been hesitant about advancing ‘stimulus’ a major state tool for wealth generation.

2010: Year of Fight Back

If we don’t want next year to look like this year, there are two, among many, things we must do. First, progressives must draw up a concrete model and programme for stimulating the economy through productive investment. The Government’s deflationary approach has the capacity to lead us into a low-growth, high debt future with degraded investment in our economic capacity. At the same time we must attack the Government’s strategy - not because it is unfair - it is, in bucket-loads. But because it won’t work. On its own terms - bringing debt levels under control - it won’t work. We must meet the orthodoxy on its on terms - on borrowing and deficit and debt - and battle it out.

If we do that - we can win. Remember - no other government in the industrialised world is pursuing the half-baked prescriptions our home grown orthodoxy dreams up. They may have a stranglehold on the debate here. But if we take a step back and see Ireland in the wider European debate we’d find that these same deflationists represent a fringe group in Europe. If they were to bring their advice to the German Christian Democrats or the French Gaullists, never the mind the British social democrats, they’d be laughed out of court. Maybe the Tories might buy into it. Maybe Silvio Berlusconi - when he takes time out from subverting the Italian justice system. But that’s about it.

That work of developing a new framework-is being done, but in a piece-meal fashion - a little bit here, a little bit there. There are gaps and not all the strands have been brought together. We must resolve to bring that work into coherence and consistency and this requires an organising agency - a political party, a trade union, a think-tank or a group who will just start the work themselves.

Second, we must return to the discourse of wealth creation and the vehicles through which that can be achieved. There is one party that has advanced such a proposal - combining the strengths of current public enterprises while creating new ones, all to deliver an €18 billion infrastructural investment programme that will modernise our degraded infrastructure and open up new export opportunities; and create 100,000 jobs in the process.

It is to the shame of progressives that it was Fine Gael that has proposed that - a party whose endgame is mass privatisation. Why didn’t we have the imagination and courage to propose this and similar policies.

But it’s more than just advancing statist strategies (and there’s nothing wrong with a little statism given our weak enterprise sector). We must enter the debate on developing the private indigenous sector. If it was just a matter of keeping taxes and regulation and labour rights low, our indigenous sector would have conquered the world long ago.

The reality, however, is that we face issues of fragmentation and scale resulting in limited R&D, innovation, skill training and investment; managerial ineffectiveness; difficulties in accessing capital; the high cost of accessing export markets and poor labour relations strategies which undermine productivity. We should start discussing the resolution of these in concrete ways. The programme of the Right has little to say about this - as it relies on more mystical strategies of the free inter-play of market forces. That’s a busted flush. Why do we hesitate to step in?

But we can go further and propose more innovative models and experiments that are taking place throughout the world - local responses to multi-national globalisation and recession: community-owned companies, non-profit companies, municipal enterprises, co-operatives, employee ownership. A myriad of forms that can emerge from a new localism and regionalism and which confound the traditional demarcations between the private and the pubic.

* * *

This is the work that awaits us in 2010. This is one of the places where the fight-back can begin. If we can get this simple message across:

Growth is the pot of gold and investment stimulus is the road that will take us there

We can start to climb back into the debate. If we fail, we can protest and rail against the spirits, but this time next year we will be right back where we are now: suffering a savage budget.

And suffering it impotently.