Primacy of financial goals is 'ludicrous'

DEBT AND how it is addressed is a political choice not an economic one, while giving political primacy to the financial over the social is “ludicrous”, according to one of the State’s foremost economists.

Prof Tony Fahey, head of social policy at the Geary Institute in UCD, was speaking at a conference in Dublin hosted by Social Justice Ireland.

The conference, entitled “Does the European Social Model Have a Future?”, heard arguments that a gradual reduction in the working week to 30 hours would reduce unemployment, improve family relations and increase equality.

The conference examined the model for postwar European socio-economic planning, which stressed protecting the common good. It was argued that this had been undermined since the 2008 financial crisis.

Prof Fahey looked at lessons from the European response to national debts after the war. Debt in Britain and France approached 250 per cent of GDP, and in Germany 300 per cent of GDP.

While a “burst of inflation” reduced debt to 40 per cent of GDP in France by 1950, and Germany, which he described as the “Greece of the day”, obtained generous debt forgiveness through the intervention of the US, Britain was determined to protect sterling’s status and refused to default.

“It thus represented a massive cumulative drain on British resources” and the economy grew far more slowly than those of France or Germany. “Real economics in Europe could have been swamped by financial obligations, but the decision was made to liberate the economies to grow and liquidate the debts,” he said.