Sense of unease in an incomplete recovery

The OECD report highlights growth, stabilisation and reducing unemployment but for many on the ground, austerity and emigration continue to take their toll, writes Ray Kinsella

THE publication of the Government’s capital spending programme, and the imminence of what is expected to be a positive and very political 2016 budget, has moved the economy to centre stage.

It should be happy days for the Government. This raises the important challenge of how to explain the widespread sense of unease that recovery is incomplete. Something unsettling is in the air. In rural Ireland, people will point to empty shops on the main streets as a fact and a metaphor.

The OECD, in its recent report, highlighted growth, fiscal stabilisation and a reduction in unemployment. CSO data reinforces this perspective across a number of indicators. Even so, the sense of unease is very real.

Psychology has always been an important dimension of economics. It impacts directly on consumer sentiment as well as decisions about investment. From Adam Smith to John Maynard-Keynes and on to more recent developments in the field of behavioural economics, psychology helps discern the true state of an economy.

It provides important insights into the way that individuals and families, classes of soon to be graduates, as well as the many at the sharp end of recovery, feel about their future.

In a detailed analysis of recent demographic trends, the OECD report highlights the scale, and the changed nature, of emigration.

Sense of unease in an incomplete recovery

The scale of emigration precipitated by the crisis is unlike anything seen in recent decades. A key driving force in this exodus has been the austerity-driven cuts in jobs, as well as the embargo on recruitment and promotion in healthcare and teaching.

This has scarred those who went, shaped the feelings of those who stayed. It goes deeper. A higher number emigrants are in the 25-44 age bracket. There has been a shift away from the traditional emigration destinations of the US and UK towards Australia, New Zealand, and Canada.

Also, a high proportion (as much as 60% initially) were individuals who had jobs in Ireland but felt compelled to leave by the sheer scale of the cuts both in salaries and terms and conditions.

Young, highly educated professionals — many with young families —left a country where they felt they could no longer live because of a lack of future for them and their children. But, equally, the same individuals were targeted by other governments with well- articulated programmes to welcome and retain them. This is important.

Sense of unease in an incomplete recovery

There is compelling evidence, seldom discussed but deeply felt, regarding the impact of emigration on national morale, at the micro level and across an economy. The converse is true — returning migrants bring important skills with them.

But there was — and is — a new consciousness that the view that “we’ve seen this emigration craic before and, sure, won’t it be grand when they come back” provides a poor alibi for this haemorrhage of talent and opportunity.

Morale is one thing. Of course, many still believe that this kind of austerity was inevitable and necessary and has paved the way for the recovery. But there is also is a deep understanding, based on authoritative views of both international institutions and macroeconomists that the austerity that drove this whole process was misconceived and counter-productive.

One persuasive argument in favour of this view is the fact that the ECB has been engaged, to little avail, in a massive QE programme, reinforced by unprecedentedly low interest rates, precisely to counter the entirely predictable negative effects of austerity. This should have come much, much earlier.

Of course, the country has moved on. But, there is awareness that the true costs of austerity — over and above the usual suspects of water charges and other direct and indirect costs — have impacted our national psyche.

Third-level fee increases and a government levy on, of all things, PLC courses, have never been fully quantified. They have to be balanced against recovery. They are very evident in the scars that endure, especially in rural Ireland.

This whole experience has sensitised the country to anomalies that were long taken for granted. For example, the nonsense whereby teachers who have graduated (in many cases a number of years) still being caught up in the “CV and subs” cycle, denying them the opportunity to establish a decent career.

Sense of unease in an incomplete recovery

There are other reasons for this sense of uncertainty. One of the pressing challenges identified in the OECD report is the importance for a recovery which is characterised by “inclusion”.

Here, the experience across the country is daunting.

But there is a deeper side to this; Inclusion is not alone about having a very necessary and tangible empathy with the marginalised. It’s about actually seeing economics, and therefore economic recovery, in a very different way. The Nobel prize-winning economist Amayrta Sen has highlighted the fact that maximising the economic growth of an economy is simply a proxy for what economics should really be about: Namely, developing the capabilities of every individual. Everything else follows — sustainable growth and a new dynamic generated by the capacity of many marginalised individuals to contribute to a new wave of innovation.

The prevailing economic model of corporate capitalism has simply not been re-thought. On the face of it this is extraordinary. Why would one rebuild a car that always lets you down and endangers your welfare? Nor has there been any rethinking of the dominant banking orthodoxy.

There is a sense, therefore, in which the underlying strains have been deferred — have been postponed but not addressed. The massive dislocation in China is simply one example of this. The nihilistic response by the eurozone to the crisis in Greece is yet another.

Sense of unease in an incomplete recovery

But these have been reinforced by a number of factors that are reshaping the economic and political environment in which Ireland’s economy must operate — and therefore its future. These include the failure of the ECB to engineer traction across the eurozone economy and the long-deferred but inevitable rise in interest rates (a double edged sword if ever there was one).

They include the volatility in the financial markets so evident over the course of this year and a precipitous decline in the price of oil.

These are telling us something important. They are symptoms of something bigger. They are part of a mosaic of uncertainty and unease which have seeped through to Ireland — arguably the economy that has been most impacted by austerity and its legacy.

Europe is under enormous strain from the unprecedented inflow of migrants from the Middle East and Africa — both in what is driving the humanitarian catastrophe and the possible ideological nightmares. Europe is divided. Truly there is no leadership.

The old politics failed and there has been no rethinking of a better way to engage with people than governance dominated by big countries and global multinationals. This has added to political strains which have been suppressed by the prevailing political orthodoxy —and which are likely to see the UK exit a Europea that has been subject to a reverse takeover by the eurozone.

And it is here that the sense of denial that breeds unease is most tangible.

In his recent authorative book on the crises, the distinguished Financial Times journalist Martin Wolf pulled it all together: “The economic troubles of crisis-hit economies are evident: huge recessions, extraordinarily high unemployment, mass emigration and heavy debt overhangs.

“The constitutional disorder that has resulted remains insufficiently emphasised. Within the eurozone, power is now concentrated in the hands of the governments of the creditor countries, principally in Germany, and a trio of unelected bureaucracies — the European Commission, the European Central Bank, and the International Monetary Fund.

“The peoples of adversely affected countries have no influence upon them. The politicians notionally accountable to them are powerless. This divorce between accountability and power strikes at the heart of democratic governance.”

That’s why people are uneasy, in the midst of “recovery”.


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