Democratic Socialism means business
The Labour Party has a strong track record when it comes to supporting business, trade and enterprise in Ireland.
Labour in the last Government provided a €500 million Jobs Fund, plus tens of thousands of training places, …
And took measures to boost Ireland’s exports, which grew by 28% during our time in office, with Labour holding the trade portfolio.
Labour has introduced a range of legislation to support indigenous enterprise, including our recent Bill, passed from Opposition, to support micro-breweries.
And of course, a Labour Minister for Finance, Ruairí Quinn, introduced the 12.5% Corporation Tax rate.
Labour saw the need for Ireland to attract foreign direct investment, to compensate for our geographical isolation, on the periphery of Europe.
And it worked, at a time when it was needed, and it continues to work.
But our corporation tax rate and regime will not be a major driver of our economy forever.
With changes happening internationally and in the EU, the clock is ticking for Ireland to be less reliant on our corporation tax to attract foreign investment.
More is needed to prepare Ireland’s economy to move to the next phase of our economic development.
That’s what I want to discuss with you this morning.
What is the next step Ireland’s economy, and for Dublin in particular?
And how do we get there?
Labour’s goal is a well-regulated economy along the lines of the North West European norm:
A ‘social market economy’.
These days it’s really a ‘social and ecological market economy’.
Such an economy gets the best of both State and Market, while minimising the known weaknesses of the extremes of excessive State bureaucracy or unregulated market forces.
Labour wants the Irish economy to be three things:
• An engine that generates material prosperity,• A distribution mechanism which ensures everyone has a decent minimum standard of living,• Sustainable: economically and ecologically.
The first step is prosperity.
If we don’t have a strong economy, we won’t be able to meet all of society’s needs.
You can’t divide a non-existent cake!
What we want to achieve is an economy that is constantly aiming to achieve higher-value.
Higher value jobs provide better pay for workers.
Higher value goods and services command a higher price,
And bring in more money as exports.
All of Europe’s smaller, open economies have gone the high value route: Austria, Denmark, Finland, the Netherlands and Sweden.
There was a NESC report in 1992 called ‘The Irish Economy in a Comparative Institutional Perspective’.
It compared Ireland’s economic history with most of the countries I just mentioned.
There was, at the time, a serious conversation about whether Ireland could follow a similar development path.
But then the Celtic Tiger took off in the late 1990s.
Ireland became, in large part, an off-shore component of the globalised American economy.
And after the unprecedented rise and fall of our economy,
We find ourselves now at a very particular moment.
We could be on the threshold of a new economic era for Ireland:
A more mature economy,
A more resilient economy,
And a fairer, more sustainable economy.
But we aren’t there yet.
We used to rely on just one indicator: economic growth.
Measured as Gross Domestic Product.
The ESRI estimates that GDP will have grown by 9% in 2018, but that’s become a practically meaningless statistic.
Irish GDP grew by 34% in 2015.
Economist Paul Krugman called it Leprechaun economics.
But there was no pot of gold at the end of that particular rainbow.
We weren’t all one third richer by the end of 2015.
As you know, our GDP is skewed by multinational corporations’ global activities, centred on Ireland.
Ireland’s GDP in 2015 was a freak anomaly that you won’t find in the statistics of any other OECD country.
It provided a clear example of why we can no longer use GDP as any kind of reliable indicator of Ireland’s economic progress.
And that’s a serious problem.
We need accurate data to inform decision-making,
For policymakers and for businesses.
Our national debt and deficit are not a better indicator, as these were both given an extremely clean bill of health just before the 2008 crash.
That data does not provide sufficient information about how well the real economy is functioning, although we do have to carefully manage indebtedness, private as well as public.
What we need is a dashboard of indicators.
To use an analogy, the earliest airplane just had a single control stick, and if you were lucky an altimeter to let you know how near you were to hitting the ground.
The cockpit of an Airbus A380 has an array of dials and readouts, which increase the safety and performance of the aircraft.
To say the least, our modern economy is a good deal more complicated than even a state-of-the-art airliner.
So it should be no surprise that we can only reliably predict our economy’s ups and downs… and risks of a crash… if we consult a sufficiently complete dashboard of information.
Simple economic growth figures are easier to communicate to the public.
But we have to adopt a more sophisticated analysis or our economy will be left behind.
For simplicity today, I want to mention just three of the indicators that help determine if the Irish economy is delivering on the three goals of prosperity, equality and sustainability:
• Unemployment and employment,• The percentage of citizens who are above or below a Minimum Essential Standard of Living,• And carbon emissions.
Based on just these three indicators, the health of Ireland’s economy is not as good as you might expect from our soaring GDP.
Unemployment of 5.1% is a huge improvement.
It was 15% when Labour entered Government in 2011.
But unemployment needs to fall below 4% for us to be confident that ‘full employment’ has been achieved.
Even 1% of unemployment represents around 24,000 people who can’t find work.
And those who are long-term unemployed are disadvantaged when competing against others, including young school leavers and graduates, for available jobs.
Unemployment is also several points higher outside of the big urban areas, such as my own region of the South East.
While there are undoubtedly shortages of some workers in Dublin, prohibitive housing costs means that in many case suitable workers cannot afford to migrate from other parts of the country to take up available work in Dublin.
Ireland also has a lower employment rate compared to our peer countries in North West Europe:
73% of those aged 20-64 are in work compared to between 77 and 82% in Denmark, the Netherlands, the UK or Sweden, for example.
This implies that one fewer person is at work in Ireland out of every 20 people of working age, compared to these other countries.
The main reason for this is that many parents, especially women, are working in the home as full-time parents because the costs of childcare are prohibitively expensive.
Caring for relatives with disability is another inhibiting factor.
Only 67% of working age women are in employment in Ireland compared to up to 80% in Sweden, which makes a massive difference to economic output and productivity.
The OECD reports that Ireland’s childcare costs are the highest among the OECD countries for single parents and the second highest for couples.
Subsidies for childcare are far lower here than elsewhere in Europe except the UK.
In sum, Ireland unemployment rates are unlikely to reach full employment unless more support is given to people who are long-term unemployed.
And Ireland’s employment rate, especially among women, won’t improve unless more is done to subsidise childcare and other supports so that women can pursue full-time employment if they wish to do so.
The second indicator of Ireland’s economic progress is the Minimum Essential Standard of Living.
It is not a poverty line, but a line of decency, which no one should fall beneath.
Every item of food, clothing, household goods, transport, energy, and so on is carefully added up for families of different compositions, down to the thirty postage stamps a person is expected to buy annually around Christmas time.
The cheapest available prices in shops are used to work out the very minimum amount of money a person needs to meet their basic needs.
Unfortunately, we don’t know exactly how many people in Ireland can actually afford a minimum standard of living.
We have poverty and deprivation rates, which are useful, but we don’t have as much detail as we need about household’s living conditions.
But we do have some useful data.
Research from the Nevin Economic Research Institute (NERI) reveals that some 345,000 workers (equal to 25% of the workforce) earned an hourly rate below the Living Wage of €11.50 per hour in 2016.
So we know that a quarter of workers, if single, could not afford the kind of Minimum Essential Standard of Living that I have described.
The same goes for the many people who cannot work due to old age, disability or because of care duties.
But if the whole point of our market economy is that a ‘market’ is the most efficient mechanism through which people can exchange their labour and meet their needs, there is something seriously wrong with our economy if up to a quarter of our workers cannot attain a very basic lifestyle.
The main driver of the cost of living in recent years has, unsurprisingly, been housing costs.
Finally, carbon emissions.
As you are probably well aware, Ireland is the third worstperformer in the EU.
On average, we produce 13.5 tonnes of CO2 per person.
That’s well above 7.9 tonnes per person in the UK.
And more than twice the best performers, like Sweden, at 5.6 tonnes.
Ireland won’t meet its emission targets.
And faces massive EU fines.
Between women’s employment, decent living standards and carbon emissions, Ireland’s real economy is seriously deficient in a number of important respects.
These weaknesses in the Irish economy are equally present in the seemingly booming Dublin regional economy.
Labour has a different vision for the Irish economy.
We have a vision for dynamic, forward-looking indigenous Irish enterprise.
Labour is in favour of Ireland remaining an open economy, at the heart of global flows of trade and innovation.
That is consistent with Labour’s internationalism.
But we will oppose a global race to the bottom.
Our vision of future growth and development is based on an economy that achieves ever higher added value.
In this context, I would like to persuade you at this early hour of the morning that what business in Dublin needs now is a dose of democratic socialism.
Specifically, business needs an interventionist State that will:
• Resolve the housing crisis,• Subsidise childcare costs,• And invest in a range of infrastructure from transport to basic research in third level institutions.
Housing costs are the single largest driver of the rising cost of living.
We are getting to the stage where people from around Ireland simply cannot afford to take up low to middle income jobs in the Dublin region because they cannot afford housing.
Or they can’t even access housing at any price.
I know that the lack of housing has been raised as a concern at the National Competitiveness Council by leading multinationals.
And I have no doubt that housing is a barrier to recruitment for SMEs across Dublin.
Subsidised childcare is a way of releasing potential employees to the economy, many of whom have good qualification and skills but who are not currently available.
Of course, subsidised childcare and affordable housing are ways in which we can make our economy fairer and more productive.
Labour’s housing plan is for State-led investment of €16 billion, which would provide 80,000 homes within five years, many of which would be for rental at cost to workers who would not qualify for traditional Council housing.
At least a third of these would be built in Dublin.
Some employers provide crèche facilities but it’s obviously a significant additional cost.
Labour’s solution is to move towards municipal pre-school education as the ultimate goal.
But in the meantime, we would support and extend existing schemes that subsidise childcare.
Finally, we need to talk about investment.
While private investment is vital to the economy, there are complementary forms of investment that only the State can provide.
For example, only the State can deliver the needed investment in transport infrastructure.
We need a coherent transit system for all of Dublin, not isolated or semi-detached projects.
This is also a way that Dublin’s carbon footprint can be reduced,
And reduced commuting times improve the efficiency of the economy.
Copenhagen has a comprehensive public transport system and is cycle friendly, despite the weather.
They are on target to be carbon neutral by 2025.
Dublin is nowhere near that kind of achievement.
Yet Dublin’s peers and competitors are precisely city-regions like Copenhagen and countless other European cities that have invested in better planning, affordable housing and world-leading university research.
Those are the deciding factors that Dublin needs to catch up on if the economy is to move forward.
Labour’s goal is a well-regulated economy along the lines of North West European social and ecological market economies.
I’ve already outlined a number of ways in which the State can help reduce the cost of living for workers while simultaneously making improvements for businesses and for the environment.
But I want to make one further point about how social and ecological market economies function:
Good regulation is good for business.
Take the example of the humble plastic straw.
They are an example of a wasteful use of a one-use plastic item that will continue to exist for thousands of years.
According to one analysis, plastic straws cost about half a cent and paper straws cost around 4 cents.
As you well know, these price differences matter.
The Irish population uses millions of straws every year.
So if one restaurant chain uses one million straws, it is facing an annual cost of either €5,000 for plastic or €40,000 for paper straws.
If all that restaurant’s competitors are using plastic straws in the highly price sensitive fast food industry, it might not be viable to do the right thing.
But if the State bans plastic straws, and every business has to use paper or some other ecologically sustainable alternative, there is no competitive disadvantage.
Standards have been raised across the board,
And the playing field remains even for all businesses.
Around Europe, democratic socialist policies…
Civilise the economy,
And they assist businesses to do the right thing,
Without damaging competition.
Good regulation pushes the whole economy to higher added value, and reduces the space for poor quality employment practices and unsustainable environmental practices.
Obviously, governments sometimes introduce stupid rules, or unnecessary paperwork.
But we expect that we’ll be hearing from organisations like Dublin Chamber to make the political system aware of any problems with regulations.
The ideal economy for Ireland’s future growth and development has to be one where the State and the Market are more self-conscious about their mutual dependence.
And where the State and private enterprise co-operate,
To co-create a dynamic and efficient economy that is prosperous, more equal and sustainable.