Troika exit must lead to people focused economy

During the last General Election, I will never forget calling to a door, where a woman twice my age broke down, not just in tears but in sheer despair. Her entire retirement savings in bank shares were wiped out and she knew she wasn’t far from leaving the workforce.

There are countless more examples, of those who built lives around careers in the construction sector and watched them fall apart. Those who broke their backs to buy modest homes whose values collapsed.

The departure of the Troika from the Irish political landscape on Sunday December 15 signals the beginning of the end of Ireland’s greatest economic crisis. ‘Getting rid of the troika’ has been a national priority ever since they arrived. Their exit creates a space to focus on the economic direction we now take.

A people focused economy

The imperative of our time isn’t just balancing the books. It’s making sure that the economic model we now construct is different from that which failed us so terribly. I call it a people focused economy. Essentially it is one which places real work at the centre of our economic thinking, and proposes a meaningful relationship between State and citizen. One which measures and plans our progress as a people - not just in narrow economic terms - but also in terms of societal development.

To do this, we need to agree a new economic understanding, encompassing politics, civil society, business, and most crucially, the citizen.

A people focused economy encompasses five main points. The first places workers at the heart of our decisions. This is the person who gets up every morning, goes to work, earns a living, and pays his/her tax. It is these people who generate the economic activity that creates the wealth and enables us to pursue nobler societal goals. Workers must be well remunerated for their work. Income must be taxed and taxed progressively, but never in a manner that disrespects the effort that went in to earning it.

The second point involves Ireland getting to grips with the social contract. I believe in the role of the State as the provider of public services, ensuring a floor of decency in society and empowering citizens to participate fully in society. The State must therefore promote the concept of the social wage - the idea that expenditure on services and benefits forms part of income rather than dead money wasted in the tax system. And the citizens must have confidence in this notion, that paying their taxes is, in turn, providing them with a secure, dependable, and efficient public service.

Moral values must trump market values

Third is the belief that moral values must trump market values. The housing bubble is the significant factor in the economic collapse that devastated our country. Economists talk of low interest rates, poor lending practices, portfolio expansion, and an asset bubble. This was the factual cause of our woes.

But something political also happened. It was deemed acceptable that those purchasing a home should have to pay up to 10 times their annual income for the privilege. Prices skyrocketed and this pushed up wage demands by workers which led to wage inflation.

Deciding what market results we accept, tolerate, and refute is a matter for politics. It should never be unquestionable. That discussion must begin with those aspects of the economy which are central to people’s lives and wellbeing – housing, education, and health.

A renewed call to internationalism is the fourth point. The fact of a globalised world is now accepted. It is true to say job displacement to low cost economies, increased demands to competitive markets, and the ability of global capital - and jobs - to move with a whim have tipped the balance of power in favour of big business.

Ireland alone will always be subject to, rather than masters of, the international economic order. It is only through working within the European Union that we can flex economic muscle on a world stage, and ensure a strong, social democratic, voice fights for the social economy on a global stage. We must build alliances with like-minded allies to hold transnational business to decent standards.

Finally, we must redefine our national priorities. The boom saw improvements in Irish income levels. GDP and GNP soared while the wealthiest in society became wealthier. Stresses on families increased. Work-life balance deteriorated as commutes increased, and child care costs soared.

In a post troika world, as we reorientate our economy away from the failed model of the past, it will be necessary to move away from singularly focusing on GDP, GNP, and debt ratios to a much broader level of economic growth and social progress.

Similar to the recommendations of the Stiglitz Report, we should switch the emphasis from measuring economic production to measuring people’s wellbeing. Altering the remit of the Fiscal Advisory Council to include broader measurements in its deliberations would change the impetus of economic strategy and challenge decision makers in their choices.

Ireland is on the verge of waving good-bye the troika, and in doing so achieving a historic national objective. Now it is time to set a new objective - the objective of building a new economy, one which is people focused.

Derek Nolan is the Labour Party TD for Galway West.

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