A FIANNA Fáil Progressive Democrats government established the National Competitiveness Council (NCC) in 1997 to advise it on policy measures to ensure the Irish economy could continue to compete effectively against its international counterparts. For part of the period since then - up to 2002 - the economy expanded rapidly, productivity increased and competitiveness greatly improved.
Subsequently, however, Ireland’s performance has declined steadily, albeit with some recovery last year. As the NCC notes in its latest report, “we took a wrong turning later in this decade when strong growth in the domestic economy replaced exports as the key driver of economic growth”.
For much of its 13-year existence, too much of the NCC’s advice has been ignored. But undaunted, the council has once again returned to its basic theme: the importance of export led growth as the basis for sustained economic recovery and as the best means of job creation and helping to reduce the numbers out of work.
NCC chairman Don Thornhill points out that the improvement in Ireland’s competitiveness last year “reflects the sharpness of the recession rather than competitive advantages arising from structural change”. Stabilisation of the public finances is critical to economic recovery. But so too are the steps the Government must take to achieve structural change.
An economic crisis presents a challenge. It also creates an opportunity for reform and innovation. Here, the NCC has identified four areas for attention by the Government: skills development, to support the competitiveness of existing firms; a lowering of business costs through a reduction in professional fees and utility charges; a prioritisation of infrastructure investment to support enterprise; and a further broadening of the tax base to help stabilise the public finances and so ease pressure for higher taxes on income – which are more damaging to growth.
If success was measured solely by its influence on government, then the NCC has been a failure. But on that basis so too has the OECD. Over recent years, all too many of its policy recommendations on competitiveness measures have been either ignored or implemented in piecemeal fashion. Difficult economic times call for tough decisions. In stabilising the public finances, the Government is making the necessary changes to prepare the way for economic recovery. But for a sustained impact, it should not just listen to the council’s advice. It should take it.