Introduction: boom to bust, Irish social policy in challenging times
Mairéad Considine and Fiona Dukelow*
- School of Applied Social Studies, University College Cork
We introduce this special issue of the Irish Journal of Public Policy with a view to offering a broader range of perspectives on the impact of the present economic crisis than those that have dominated mainstream discourse in Ireland to date. The majority of contributions to this issue were originally presented at a conference held in UCC in September 2009 entitled Boom to Bust: Irish Social Policy in Challenging Times, the objective of which was to consider and debate the boom bust trajectory of economic development in Ireland with particular attention to its potential implications for social policy and the welfare state. The conference also sought to provide a counterbalance to the dominance of neo-liberal economic perspectives in debates about the recession, by examining the unfolding issues from a social policy perspective. As Gamble (2009: 141) observes, ‘it matters which explanation of the crisis becomes dominant, because that will shape the political response. Interpretations of the crisis become part of the politics of the crisis’. This foreword briefly maps the context for critically examining the current economic crisis and reflects on the perspectives that have come to dominate assessments of the crisis. The impact on social policy is considered through the contributions of a wide variety of authors to this issue, in a modest attempt to stimulate and broaden the parameters of current debate about the need for, challenges to and prospects of the Irish welfare state.
Ireland has recently borne witness to the most severe economic contraction in its history; the notable economic success experienced since the 1990s transformed by late 2008 into one of the first and most severe cases of economic recession in the recent global economic crisis. The economic success story of Ireland was, until recently, feted internationally for following policies approved by advocates of neo-liberal economic globalisation to harness its potential benefits assumed to result in the unprecedented levels of economic growth. Variously praised for its economic openness, innovation, deregulation and flexible approach to labour supply, Ireland was viewed from this perspective as ‘the way of the future’ (Friedman, 2005) and ‘an oracle to be consulted’ (Casey, 2009: 13 in Kirby, 2010: 187). Formal exposition of the virtues of such an approach were evident in policy objectives such as tax cuts, privatisation, and light touch regulation particularly with regard to attracting a substantial share of the growth in global financial trading activity, even when political interrogation of the concept of globalisation itself was largely absent (Antoniades, 2007). Consciously or otherwise, it seems that such assessments were internalised by government and taken as a necessary and beneficial given to the success of the Irish economic trajectory. Ireland became an enthusiastic player in the world of ‘casino capitalism’, the term Strange (1986) coined to identify a model of capitalism which emerged in the aftermath of the economic crisis of the 1970s ‘in which finance had become the driver, and which involved taking huge risks with the jobs, pensions and savings of ordinary citizens’ (Gamble, 2009: 154) and which is at the core of the current global crisis. In the Irish context, the high risk nature of this approach to economic growth has been exposed as the global financial crisis combined with the bursting of the home grown property asset bubble with the result that the Irish economy has been subject to the sharpest of all corrections.
All of the indications are that the Irish economy lived up to its crisis status with an economic contraction of 11.3 per cent for 2009, the largest annual decline in economic activity ever recorded (CSO, 2010a). Unemployment rose sharply, from an annual average rate of 4.6 per cent in 2007 to 11.6 per cent in 2009 (CSO, 2010b) as did the government deficit, with the revised estimate for general government debt to GDP ratio projected to be 64.5 per cent in 2009, compared with an estimate of 25.1 per cent for 2007 (Department of Finance, 2010). Anglo-Irish bank was nationalised and the two main banks received significant state aid with re-capitalisation during 2009. March 2010 brought with it absolute confirmation of the depth and scale of the failures in the Irish banking system as the roll out of NAMA and the necessity for further bank re-capitalisation made clear the massive long-term costs to be borne in addressing this aspect of the crisis. These costs essentially represent a socialisation of market losses which is indicative of what Harvey (2010) identifies as the pragmatic response of neo-liberalism to the crisis, which readily welcomes state intervention when markets collapse.
On the other hand, the relationship between the crisis and public service expenditure in general and the cost of social welfare in particular has been the subject of much discussion about the need for retrenchment, with a wide range of commentators airing their views on the need to prune the social services and reduce ‘the generosity’ of the Irish social welfare system. The escalation of focus on the social welfare system and especially the tone of much of the analysis, which centred on the monetary burden attached to it, was largely bereft of any consideration of the social objectives of the welfare system, became a key feature of debate. While the welfare system as a whole is undoubtedly in need of reform the one dimensional nature of that debate was striking. It was largely left to civil society groups and non-governmental organisations to defend the need for a reasonable and responsive social welfare system, highlighting the persistent risk of poverty and social exclusion in Ireland.
In the panic to contain the crisis and stabilise the economic fundamentals there has been a failure to grasp the severity of the social crisis that presents and the narrowness of the debate on how to address the current situation has yet to be fully interrogated. In short, the obfuscation and hyper-attentiveness to public service cost that characterised the early phase of this economic crisis denigrates the primary functions of welfare state provision both in respect of protective and preventive measures, such as access to basic social services, not to mention any objectives related to equality and poverty reduction, in either the short or long term view. It ignores the fact that the current crisis is evidence, if it were needed, of the precise functions of a robust, responsive and redistributive welfare state. The articles featured in this issue of the Irish Journal of Public Policy demonstrate the need to think more broadly about the long term objectives of economic and social policy.
Taken together the contributions address four main themes. First, a number of articles point to the long term structural failures in Ireland’s development, which bear a direct contribution to the inability of the state to deal with the social impact of the current recession. Second, the articles highlight the social impact of the recession. Third, the contributions highlight various ways in which the responses to date will exacerbate the social impact and long term costs of the recession. Finally, the articles point to the need for alternative responses, a significant part of which entails a paradigm shift in the relationship between social and economic policy in the Irish context.
Both Joe Moran’s and Tom O’Connor’s articles focus in part on reviewing the legacy of long term structural failures in Ireland’s development. Moran suggests that the state has used particular power blocs, namely the Catholic Church for much of the twentieth century and latterly the social partners, to legitimate policies which have limited the potential for welfare state development. Focusing in particular on the social partnership era, he argues that social partnership was adapted to a growing neo-liberal model, to the benefit of an expanding group of local wealthy elites and transnational corporations, with fewer gains for other groups. This view suggests that the trade unions and the community and voluntary pillar had relatively little power within social partnership to steer agreements towards goals such as reducing inequality and positively transforming the landscape of social policy. Moran’s article offers a perspective on why little significant social policy reform, or ‘“reform” without actual reform’, as Sara Burke refers to it in the case of health care, occurred during the years when the financial means to do so existed. A similar issue is evident in Nicola Maxwell and Claire Dorrity’s article which critiques the limited effect of community education policy developments during the boom years illustrating how the challenges the Irish welfare state currently encounters are made unnecessarily more difficult and are part of a repetitive cycle where little changes. O’Connor’s review of unemployment policy since independence mirrors Moran’s broader assessment of an underdeveloped welfare state, showing that successive governments failed to take the challenge of solving unemployment crises seriously, opting for a low taxation regime at the expense of investing in the welfare state and the economy. In assessing the boom years when employment grew at an unprecedented scale and unemployment fell to a low level, O’Connor suggests that this period hid rather than resolved the long term structural problems of the Irish welfare state, the result being that the economic development policies pursued have paved the road to major escalation in unemployment during this recession.
Turning to the social impact of the economic crisis, Katherine Harford, through her perspective as a community worker examines the impact of the recession on individuals living in an area of disadvantage. Harford looks at the impact in a community that did not experience major economic improvement during the boom years, and typically the recent experiences of communities such as this one has been overlooked. The transient impact of economic growth and social policy developments such as anti-poverty strategies, which are also critiqued in Cynthia Martin’s policy review for adopting a relatively minimal approach to reducing poverty and combating social exclusion, mean that the limited gains disadvantaged communities made during the boom years have not buffered the impact of the recession. Martin’s policy analysis is complemented by Harford’s research with local community members which demonstrates the high risk of unemployment and the effect of unemployment on self-worth and community participation within such areas. Living on social welfare requires the ability to cope with a tight budget, and as Harford’s findings show, the ability to do so is highly sensitive to any decrease in income. Recent social welfare cutbacks can therefore seriously affect the ability to make ends meet. The risk of indebtedness poses significant anxiety and pressure which ripples out to other family members such as children and grandparents who worry for others. Such trends are also reflected in the experience of the Saint Vincent de Paul as discussed by Caroline Fahey and Brendan Hennessy. They note that with the onset of the recession, requests have increased from those in receipt of social welfare. Financial assistance is frequently needed for basic living necessities such as food and fuel, while to date, requests from the newly unemployed have not increased to a similar extent. Such trends indicate that the policy of welfare retrenchment runs a high risk of deepening poverty amongst those reliant on social welfare in the long term, while as Fahey and Hennessy also note, the increasing curtailments and conditions attached to insurance based programmes amplifies the insecurities experienced by the newly unemployed.
The potential of the policy responses to the recession to deepen poverty points to the wider observation made by many contributors that the responses will exacerbate the social impact and social costs of the recession. At a broad level Mary Murphy argues that the current discourse centred on the necessity of a low-tax, low-expenditure regime to steer the country out of recession and into growth would deepen the social impact of the recession in terms of prolonged mass unemployment and structural inequality. With regard to particular policy areas, Burke for example observes that cuts to health care impact on the users of the public health system, particularly the poorest groups who need it most. These are made at long term cost, as diminished health care provision impacts on health and well being. Maxwell and Dorrity’s article point to problems with the current emphasis on education and the aspiration to become a smart economy, which has the potential to displace focus on the education needs of disadvantaged communities and perpetuate structural inequalities within the education system.
Given these problems there is clearly a need for alternative policy responses and an alternative to the neo-liberal thrust of debate. This task is taken up in particular in O’Connor’s and Murphy’s articles. O’Connor’s proposals for an economic stimulus represent an alternative to neo-liberal economic discourse, and present a set of policy options which would address several facets of the social crisis as well as pointing the country in the direction of a more sustainable economic future with less exposure to risk. While such proposals contrast markedly with the current climate of fiscal austerity and the mantra of no alternative, they play important part in shaping a different vision for Ireland’s future which is potentially more enabling, equal and sustainable than heretofore. Committed to similar objectives, Murphy’s article addresses the question of what kind of welfare state we will have post-recession and what options exist for a more active social policy. Viewing the present as a critical juncture which presents opportunities for a change in direction, Murphy argues for a more active model of social policy, designed to equip people to cope with what she considers an inevitably riskier global economy in the twenty first century. This is based on a key point that people cannot take work risks without baseline security. This implies a maximal rather than minimal role for social security in the creation of a sustainable economic and social model.
Both O’Connor’s and Murphy’s articles demonstrate the interdependent relationship between social policy and the economy. Acknowledging and acting on this in the Irish context would mean a paradigm shift. This would involve a departure from the assumptions that have informed social policy in the past, which are predicated on a linear model of economic growth or economic competitiveness first, as opposed to accepting that effective investment in social policy is conducive to a sustainable and flexible model of economic development. This alternative way of formulating social and economy policy requires, as Murphy recognises, strong political leadership. This connects the crisis to the Irish political system, which in Michael D. Higgins’s commentary is examined in terms of the system’s part in the banking crisis, the speculative nature of much of Ireland’s growth during the 2000s and the concomitant regulatory deficits. Clearly in need of reform, Higgins argues for a political system which would open a space beyond the Cabinet to initiative and develop legislation, which would foster a stronger sense of citizenship and end what he calls the ‘hegemony of the Department of Finance’ in matters of policy making and provision. Many long standing institutions of (and apart from) the state, have been sought to account for the current crisis, but key questions about the future, about where we seek to get to in social and economic terms, and precisely what needs reform and to what purpose, also demands our collective consideration if any such paradigm shift is to take place.
- Antoniades, A. (2007), ‘Examining facets of the hegemonic: The globalisation discourse in Greece and Ireland’ Review of International Political Economy, Vol. 14, no.2, pp.306-332.
- CSO (2008a), Quarterly National Accounts, Quarter 2, 2008.
- CSO (2010a), Live Register February 2010. Available from: http://www.cso.ie/releasespublications/documents/labour_market/current/lreg.pdf (accessed 29 March 2010).
- CSO (2010b), Quarterly National Accounts Quarter 4 (2009) and 2009 (preliminary). Available from: http://www.cso.ie/releasespublications/documents/economy/current/qna.pdf (accessed 29 March 2010).
- Department of Finance (2010), Monthly Bulletin March 2010. Available from: http://www.finance.gov.ie/ViewDoc.asp?DocId=-1&CatID=2&m=f (accessed 29 March 2010).
- Friedman, T. (2005), ‘Follow the Leapin’ Leprechaun’, New York Times, 1 July.
- Gamble, A. (2009), The Spectre at the Feast, capitalist crisis and the politics of the recession, Basingstoke: Palgrave Macmillan.
- Harvey, D. (2010), The Enigma of Capital and the Crises of Capitalism, London: Profile Books.
- Kirby, P. (2010), The Celtic Tiger in Collapse: explaining the weaknesses of the Irish model, second ed., Basingstoke: Palgrave Macmillan.
- NESC (2005), The Developmental Welfare State, Dublin: NESC.
- Strange, S. (1986), Casino Capitalism, Basil Blackwell: Oxford.