Government Policy Turned Boom to Bust
7 Oct 2009
Congress Economic Advisor Paul Sweeney said today (October 7) that Government policy over recent years had transformed a genuine boom into a catastrophic bust and left Ireland as the world's worst performing economy in 2009.
Speaking at the AGM of the of the Defence Forces representative association - PDFORRA - Mr Sweeney said that between 1994-2000 "Ireland had enjoyed great economic success. But since then, Governments' economic policies had simply undermined that success. Much of the modern economy in the Tiger Era is still there, but it is buried under the rubble of collapsed banks and property speculators' corporations.
"The tax-cutting, liberalisation, deregulation and privatisation polices pursued by Governments led to disaster and the near collapse of the Irish economy. Today, Ireland is the worst performing economy in the world in 2009, worse even than Iceland on some counts," he said.
Mr Sweeney continued: "The free market has failed. Those supposed to regulate it failed too, because they believed in it, almost as slavishly as cult members. Markets were so free that new rules were written by the key players, by themselves, for themselves. Regulators failed, government failed. There was a lack of coordination internationally - with no Financial Regulator in the Eurozone, for example."
He said that many of the same policies which wrecked the Irish economy were now in vogue again and this could prove very dangerous: "We must learn from their mistakes, the profound mistakes of the ultra free marketers," he explained.
"In learning from their mistakes, a Stimulus Package is difficult for a small open economy, but if we cut public spending too much, we will undermine the recovery. In this context, the proposed McCarthy Cuts are a dangerous Deflationary Package.
"Cutting wages will not restore competitiveness in a world where trade has collapsed, but more importantly where labour costs are not out of line. They are still relatively low and productivity here is high. Cutting wages will simply deflate the economy. And cutting welfare is both heartless and bad economics. It will not improve things for the economy and will hurt the old, the poor and the sick. Cutting wages, cutting welfare, cutting essential public services and cutting investment in the NDP will simply make things much worse."
Mr Sweeney told delegates that the solution was to be found in social dialogue, "through working together and carefully making some cuts and raising taxes on those who can best afford to pay, collecting the billions in outstanding taxes and prolonging the 'Adjustment Period' by a few years. Solutions of this nature will work. Slash and Burn economics will not. But we also need new governance for Irish firms, to ensure that the business elite can never destroy our economy again," Sweeney said.
Paul Sweeney is available for interview, contact 086 2052572
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