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Austerity fatigue is growing

For the first quarter 2013, retail sales came in much lower than expected.

The reason – ongoing reduced consumer confidence, as one authoritative economic commentator noted: “As things stand, all consumers are seeing is more austerity, more taxes and less disposable income”.

The Coalition’s response to the rejection of Croke Park 2 also prompts concern. If no agreement is reached, public servants will inter alia face potential pay cuts, a permanent freeze on increments and loss of protection from compulsory redundancy.

In the US, Bivens and Shierholz of the Economic Policy Institute assert that public sector job cuts also cause job losses in the private sector.

First, public sector workers need to use inputs into their work that are sourced by the private sector. Second, the economic ‘multiplier’ of state and local spending is sizeable.

For every dollar cut in salary and supplies of public sector workers, another 24 cents is lost in purchasing power across the economy.

These findings, alongside a weakening of Rogoff and Reinhart’s position, are salutary given our Government’s attachment to austerity policies.

Clearly, there needs to be some reduced public spending on the pay side, especially for higher paid public servants. Fairness and equality, however, decrees that there also needs to be reduced pay for high earners in the private sector, especially those on exorbitant incomes.

Austerity fatigue is growing. On Saturday, Apr 28, the Independence and Progressive parties were returned to power in Iceland after years of biting austerity measures. Significantly perhaps, from the FG/Lab Coalition’s perspective, the Icelandic electorate returned a centre-right government that had ruled over their country’s financial collapse just five years previously.

On the same day, a Red C opinion poll showed that most voters, including those in the private sector, have more sympathy for the public service unions than perhaps might be expected.

Fundamentally, there is increasing awareness that the well-being and prosperity of us all, both in the private and public sector, is inextricably linked. The continued pursuit of austerity, however, erodes social and economic solidarity and thus national recovery.

Often, the public are far ahead of the curve on public policy issues. Perhaps, despite the considerable challenges, it is time now for the Government parties to catch up?

Dr Margaret O’Keeffe

Mayfield

Cork


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