What are the factors that make an economy successful?

By what measure should we consider an economy to be performing successfully? Is it growth? This has been the default assumption for many economies for many years.

The Irish economy grew at some of the highest rates in the developed world for a number of years not so long ago, and was presented as a model for others. We now know that this growth was unsustainable, and its consequences highly undesirable.

Defining lessons
One significant conclusion to be drawn is that when formulating economic policy, it is neither feasible nor desirable to separate an economy from the societal framework within which it operates – especially when defining appropriate measures of success.

An economy is dependent on a sustainably successful society, just as a society requires a sustainably successful economy. This, if anything, is one of the defining lessons of the crisis.

Policy formulation in this context has become more complex. We live in a hyper-connected world. Technology is just one of the factors which has accelerated our interdependence in a global sense.

Our economic wellbeing in Ireland will depend on how things are going in Europe, in the US, and increasingly in China, Brazil, India and Africa, to name but a few.

The factors which influence the world on a global basis will influence virtually every society in that global community. Energy, climate change, resource scarcity, demographics, economic rebalancing.

Policymakers in every country now have to take account of these factors, seeking to ensure that economic policy for a particular country will deliver societal outcomes which reflect global connectivity and interdependence.

Good society
In the last several decades, many governments, especially in the West, retreated from many sectors and spheres, feeling that the "private sector" was better placed to operate in these areas. Perhaps in many cases this was true.

However, we now also know that governments cannot retreat completely – they cannot retreat from dealing with major issues when they arise, quite simply because governments have to step in to support their citizenry when the economy doesn’t do so.

So does this mean that it is the turn of business to “retreat”? Categorically not. Business must “lean in” to work to deliver on the sustainable societal outcomes which governments must foster.

A good business needs a good economy needs a good society. There cannot only be mutuality of interest – there must also be mutuality of purpose.

There is a need to encourage research to support policymakers to respond to these challenges. A more holistic view is required of the relationships between fiscal policy, economic policy, and sustainable and desirable societal outcomes.

The purpose of the Miriam O’Hederman O’Brien prize, sponsored by the Foundation for Fiscal Studies, is to encourage fresh thinking in these areas.

Challenges
The inaugural prize has been awarded to Gerard Brady, an economist with Ibec, and it reflects the innovative nature of his paper.

His paper is focused on employment activation, and the potential for policymakers to improve the potential for job seekers to find employment based on social networks.

Policymakers in Ireland and elsewhere are not short of challenges and we hope that the Miriam Hederman O’Brien prize will provide further contributions to support their efforts in the coming years.

Colm Kelly is chair of the Foundation for Fiscal Studies, and a vice chair and global operations leader of PricewaterhouseCoopers International Limited. The views expressed are his own.

Details of the Miriam Hederman O’Brien prize for 2014 and how to enter are available at fiscal.ie/activities.php#research