The current version of the free market model is broken and Ireland needs to develop a response, writes Joe Carr

AS 2008 came to a close three major documents were published:

• the ESRI quarterly report which sets out in depressing detail the extent, depth and momentum of our economic downturn;

• a document called Transforming the Public Serviceswhich clearly demonstrates, in quite diplomatic language, of course, the extent of the changes now required in the public sector;

• Building Ireland's Smart Economy, a Government framework document which outlines the direction our economy should take over the next few years.

We have seen a number of moves by the Government in an attempt to restore stability and confidence particularly through intervention in the banking sector. However, it remains difficult to see how all of these pieces fit together to create a coherent plan which can be implemented at the pace now required.

The current version of the free market model is broken and Ireland needs to develop a response. Although one of the most efficient models is in the organisation and provision of goods and services, the model has failed in some of its broader responsibilities such as protecting the public interest; providing a long-term and stable economic environment; minimising the use of fossil fuels; and dividing the resources of the world in a sensible and sustainable manner.

The role of the State in the operation of the free market will be enormous. These are uncharted waters and the Government needs to articulate how it is going to approach and play its role in advancing our economy and in integrating with the global world. It is crucial we adopt the right approach to deal with the crisis.

Ireland is clearly faced with three options: to bury our heads in the sand and wait for the EU/IMF to take us over and effect whatever change is necessary; to let the free market take its brutal course where only the fittest will survive; to renegotiate at a personal, commercial and political level our expectations of reward and agree to take some bitter medicine to get us through.

The latter is the best course, but to take it we must be realistic about the measures required including a significant reduction in earnings for all.

Without strong vision and leadership we are lost - in order to mobilise and enthuse a nation, make the big decisions, prioritise expenditure and position ourselves in the global world we need to agree what we, as a nation, stand for. We must be clear about our objectives, articulate our values and culture and say what each citizen can expect from the State and what the State expects from its citizens. We need to move on from "Berlin or Boston" - as one of the oldest nations in Europe it is unacceptable that we still do not have a sense of who we are and what we stand for.

Securing the Irish banking system has to be a priority. The system provides access to international funds; is a source of working and investment capital; is a source of secure credit for consumers; and is a major industry, creating significant employment.

As we move to reform banking, the Government must focus on these areas to ensure each receives appropriate attention and protection. We must recognise that fixing the banks alone will not solve the problem. Until the economy starts to recover, until consumers feel the confidence to spend. until business has the appetite to invest, things will not change significantly.

A 360-degree analysis of Government is necessary. High-level patterns of public expenditure over the past few years reveal that history and political expediency seem to play too significant a part and influence on the allocation of resources. The Government let all boats rise within the public sector regardless of the changing circumstances or any real objective analysis of need.

The Government's first action should be to ensure the country is positioned properly and that risks are anticipated. It should build a sense of consensus and common purpose among people. It should formally allocate the resources of our State on a rational and transparent basis to the areas of most importance.

Ireland needs to retake control of its economy. And it needs to do it now.

• Joe Carr is a managing partner at Mazars consulting