| NESC study says Ireland faces five closely-related crises |
|
In its latest report published on March 10, 2009 the National Economic & Social Council (NESC) claims that Ireland faces not one but five closely-related crises at this time: a banking crisis; a fiscal crisis; an economic crisis of competitiveness and job losses; a social crisis of unemployment, income loss and indebtedness; and a reputational crisis. In this report, entitled: Ireland’s Five-Part Crisis: An Integrated National Response NESC has called for an integrated national response to these current crises and argues that such a response must be widely understood, command support and, most importantly, engage the ability and energy of the Irish people. The Council further notes:
The Limitations of Partial and Sequential Responses The pressure of events has forced the Irish government to react to various aspects of the unfolding crisis. We should not berate ourselves, or each other, because these reactions to fast-moving events do not yet constitute Ireland’s considered, integrated and agreed response. But a further series of partial and sequential measures, some of which are undoubtedly necessary, will not be sufficient and effective:
Towards an Integrated National Response to the Five-Part Crisis The Council believes that we must recreate our common purpose. This common purpose must include a willingness to fund public systems and a relentless insistence that public bodies respond to the changing and diverse needs of individuals, families, neighbourhoods, enterprises and sectors. An effective Irish response would have a number of characteristics: address all five dimensions of the crisis; be based on social solidarity and a positive perspective on Ireland’s future prosperity; combine high-level coherence with maximum engagement and local problem solving; and take short-term measures that have a long-term logic. 1. Stabilising the Banking System NESC does not offer an independent expert view on how to solve the banking crisis. It emphasises that the policy response to the banking crisis must also address:
The Government has set the objective of bringing the deficit below 3 per cent in 2013. This will require a combination of tax increases and expenditure reductions. The area of public spending and taxation illustrates more than any other the limits of partial and sequential reactions and the need for individual measures to be placed within the framework of an integrated national response. The cascade of expenditure reductions and tax increases to date have left many groups and individuals in the population confused. This confusion encompasses not only the logic of particular measures but also the distribution of the burden of adjustment. In this context, it is relatively easy for groups to be persuaded that they are bearing the largest burden of adjustment. Retrenchment and Reform In discussing the public finances, investment and social policy NESC places the highest priority on public sector reform. The Council endorses the role of the new public expenditure review group in identifying opportunities to achieve better value for money. However, it urges that this retrenchment should be consistent with the process of long term structural change necessary to make public services more responsive to the changing and varying needs of citizens. 3. Restoring Ireland’s Economic Competitiveness The high media profile of the banking and fiscal crisis has led some to overlook the economic crisis. The severity of the economic crisis is evidenced in company closures, job losses and short-time working. A coordinated national approach to income determination is critical at this time. It must take account of the unusual depth of the business and employment crisis and of important new developments, such as falling prices and the incidence of debt problems among both firms and households. The Irish price level has to adjust if Ireland’s economic growth it to be led by exports rather than domestic demand. The Council emphasises that this will require that the full range of costs, charges, fees and rents that make up the Irish price level be reduced relative to those in our trading partners. In addition, a coordinated approach to incomes—and other adjustments in the private sector (in prices, cost and employment)—must be accompanied by retargeting of the NDP to support employment and enterprise, enhanced activation measures to support those who lose their jobs, and measures to repair Ireland’s reputation. 4. Responding to the Social Challenge
Ireland’s small size, location and model of economic development make it highly vulnerable to any loss of influence or status in the EU. Ireland now faces a reputational crisis because of uncertainty about our commitment to EU membership and the perception that Ireland’s public finances are vulnerable to default. Most damaging is the perception that Ireland has had a lax and ineffective system of regulation of the financial sector and our response to the banking crisis may not include sufficient change in personnel and governance arrangements. NESC points out that there is a close connection between a country’s international reputation and the credibility and effectiveness of its domestic governance arrangements. In the case of banking and financial regulation, the requirements for repairing Ireland’s international reputation would seem to overlap with what is required to address several of our domestic crises. International reputation is linked to the ability of a society to act collectively, recover and reinvent its economy. Since Irish citizens and civil society organisations are damaged by Ireland’s loss of reputation they have reason to take ownership of the issue. It is not in their interest to assume that government alone will take care of the country’s international reputation, while they maximise their leverage on domestic issues. Wide societal engagement At national and international level, the current crisis poses profound challenges to many existing theories and models. The high degree of uncertainty—particularly about the impact of conventional policy measures—provides further reasons for constructive, collective discussion of problems and solutions. Countries capable of conducting such dialogue and implementing a coherent and agreed response quickly are likely to come through current difficulties better than those in which profound and protracted debate on diagnosis and cure occur. An effective integrated response needs wide societal ownership of the need to respond to all five dimensions of the crisis and of the framing, implementation and adaptation of the response. Framing a shared analysis and understanding of the crisis is only a first step in creating such wider ownership. NESC – some information NESC was established in 1973 and reports to the Taoiseach on strategic issues relating to the efficient development of the economy, the achievement of social justice and the development of a strategic framework for the conduct of relations and negotiation of agreements between the government and the social partners. The Council is chaired by the Secretary General of the Department of the Taoiseach, Dermot McCarthy, and comprises representatives of trade unions, employer bodies, farmers' organisations, community and voluntary organisations, key Government departments and independent experts. Fr Seán Healy, Director of CORI Justice has been a member of NESC since 1997 as one of the representatives of the Community and Voluntary Pillar of Social Partners. To access the full NESC Report. To access the Executive Summary. |