From birth rates to climate change: the unstoppable forces that will define our future

Reinventing Irish social models is a tricky task for a small country that is heavily influenced by external factors

Sat, Oct 26, 2013, 01:00

Any effort to reframe our society is necessarily an internal process of self-improvement. But as a small, peripheral island nation in a rapidly globalising world, we are vulnerable to major economic, political and climatic forces beyond our control. Successfully negotiating these larger trends and global risks will absolutely depend on our ability to function as a “smart society”.

Global economic forces
In part, the financial and political crisis we are still recovering from was the creation of domestic factors: our own bankers, politicians, developers and regulators were culpable. But it occurred in the context of worldwide financial instability, with Ireland a particularly serious victim of the malfunction of the global economy.

Avoiding such a malfunction in the future is a convoluted process that hasn’t shown much sign of success so far, as legislators in Washington and across Europe face the intransigence of an unapologetic financial industry.

Furthermore, the nature of our fragile recovery has been shaped to a large extent by our status as a small, open economy – the actions of the troika and the Department of Finance have been explicitly deferential to the abstract, capricious power of the “markets”, the modern and somewhat malevolent offspring of Adam Smith’s disinterested “invisible hand”. The reality appears to be that senior politicians fear the omnipresent power of the markets more than they fear the intermittent power of the voters, a misalignment of motives that can cause suffering for citizens.

The recent travails over the so-called debt ceiling in the US is a clear warning that political dysfunction in Washington poses a medium-term risk to the global economy that can’t be ignored. And the increasing systemic importance of China as an economic powerhouse depends on the continued success of its previously untested brand of “state capitalism”, which could very easily collide with economic reality in as disastrous a fashion as the West’s deregulated capitalism did in 2008.

Rising inequality
A corollary of 21st-century globalised capitalism is a rise in income and wealth inequality. The US leads the way: the top 10 chief executives in the US take home $4.7 billion between them.

The perception of Ireland as being relatively classless is a convenient myth in most regards, but it speaks to an underlying recognition that an egalitarian society is a more desirable society.

The crisis, however, has led to a dramatic spike in Irish income inequality, though it has been somewhat offset by the redistributive effect of taxation. Income inequality is toxic to the health of a society. But keeping it in check might prove difficult. In his recent book Average is Over, US economist Tyler Cowen envisages a hyper-polarised disparity in the workforce, with 10-15 per cent of workers earning the lion’s share of the total income. “The labour market troubles of the young – which you can observe in many countries – are a harbinger of the new world of work to come,” he writes.

Changing work patterns
A key factor in the rise of income inequality is the changing nature of working conditions worldwide. Trade unions are a declining force across the western world, and are virtually unknown in large, developing economies.

While more flexible labour regulations are potentially desirable in some respects, a widespread shift to short-term, insecure employment conditions would have a profound effect at a societal level.

The vibrant middle class that is a prerequisite of a supposed “smarter society” can function only if enough people have secure, guaranteed work. In the absence of those conditions, birth rates will decrease, home ownership will decline, and emigration to countries that offer such prospects will increase.

Ireland has the highest birth rate in the EU, at 2.05 births per woman, and the youngest median age at 34.5 years of age, but the larger demographic concern is that of Europe itself – the median age is growing ever older, projected to be nearly 48 by the middle of the century.

There will be little benefit having a relatively youthful population here if the likes of Germany and France are struggling to provide pensions for huge numbers of retirees. Just look at Japan’s demographic crisis to see how this might pan out in the coming decades.

Climate change
And all of this is nothing compared with the unpredictable impact climate change will have on the country, particularly given the importance of agriculture to our economy and identity. Nor can we foresee what future the European Union would face if far-right, anti-EU parties continue to gain more mainstream support across Europe.

These are just some of the external factors that could conceivably have an unpredictable impact on our efforts to foster a so-called smarter society, but thriving in a global context will require that we make very definite decisions about how we want our society to function.

If we fail to do so, Ireland will be all the more vulnerable to the vagaries that might arise.

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