Scant praise for Coalition as recovering economy soars

There are many reasons for us to be confident about our economic future

Minister for Finance Michael Noonan. ‘In many respects, the Irish economy is now on autopilot: the policy parameters are known and set by our European masters.’ Photograph: Collins

Minister for Finance Michael Noonan. ‘In many respects, the Irish economy is now on autopilot: the policy parameters are known and set by our European masters.’ Photograph: Collins

 

It’s almost as if Ireland’s economic success story is happening to a different country: it is as hard to find another economy – almost anywhere in the world – growing at 5 per cent as it is to find commentators willing to jump up and down in celebration.

One of the few unequivocally effusive headlines last week had to be found in a Rupert Murdoch-owned outlet that declared: “The Celtic Tiger is roaring again”.

And hardly anybody is prepared to give the Coalition any credit for all of this. After all, any administration capable of making a mistake as big as Irish Water cannot have got anything else right.

In the UK, it has been fun for a long time for centre-right commentators to mock the “self-loathing” liberal intelligentsia that has yet to forgive the electorate for re-electing a Tory government. So convinced is the Labour Party that the country shares its sense of unfairness over its recent election loss that it now looks ready to lurch to the hard left – they have never forgiven Tony Blair for making the party electable.

It is tempting to suggest there are similarities with our own politics, except for the fact that hardly anyone here is willing to poke fun at our own commentariat that sees nothing that is either good or fun about modern Ireland, including its roaring economy.

Franklin D Roosevelt famously said, in 1933, that “we have nothing to fear but fear itself”, exhorting the US to put the past – including, especially, fretting over badly behaved bankers – where it belonged. He understood the importance of confidence, something modern economists rightly obsess over.

There are plenty of reasons for us to be confident about our economic future, notwithstanding the grim experience of the financial crisis. Hard as it might be to believe, we have done quite a few things right.

Confidence should be flowing, if only because of what has been achieved already. Nobody – nobody at all – forecast anything like the growth rates we see currently. And forecasters are now steadily upgrading their expectations for the rest of this year and next.

The fastest- growing economy in Europe was delivered in spite of much gloomier prognostications: just imagine what we could do if we started to believe in ourselves a little more.

Of course, we can debate forever how much of our current success is down to luck rather than judgment. We certainly got lucky with our links to the US and UK economies, where policy achieved so much more than in Europe over the past five years.

In many respects, the Irish economy is now on autopilot: the policy parameters are known and set by our European masters. Provided no great disaster befalls our major trading partners, the future will be as good as we now, finally, expect it to be. Full employment should be restored in a short number of years. We have the ability to mess things up, but only really by making political choices similar to those made by the Greeks or the Labour Party in the UK.

Looking to the future rather than the past doesn’t mean that we shouldn’t learn from mistakes. In the face of an economic crisis that was worse than the Great Depression of the 1930s, the institutions of this State essentially raised taxes and cut capital spending. We have learned that it is next to impossible to seriously cut current spending, even in the most extreme of circumstances. What could actually force significant cuts to the current budget is tough to imagine.

When the next bout of trouble arrives – hopefully years from now – we will, if our recent history is any guide, once again be forced to raise taxes and slash public- sector investment. In the interim, therefore, the fiscal leeway granted by rapid economic growth should be devoted to cutting taxes and raising spending on public infrastructure. Simple really.

It won’t happen, of course. But, thankfully, the so-called fiscal space granted by the strong economy isn’t so big that extremely damaging spending commitments can be made. If there are few benefits these days from membership of the euro, fiscal rules that constrain “giveaways” to a billion euro or two are welcome. Those sorts of numbers, in the context of the overall budget, won’t frighten the horses.

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