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25/08/2016

Aidan Regan: ‘The Troika had nothing to do with the Irish recovery’

Euro & Finance

Aidan Regan: ‘The Troika had nothing to do with the Irish recovery’

Dublin is home to a number of tech multinationals.

[LenDog64/Flickr]

The Irish recovery was the result of the country’s attractive business environment, not the demands of the Troika, Aidan Regan explains. Our partner La Tribune reports.

Aidan Regan is the director of the Dublin European Institute (DEI) and teaches economics at the School of Politics and International Relations at University College Dublin. He spoke to Romaric Godin from La Tribune.

In February you published an article on the reality of Ireland’s economic growth. The most striking characteristic of this economic growth is the inequality that has developed alongside it.

Yes, we cannot deny that the Irish economy has grown strongly, but it has not benefitted everyone. Far from it. One figure is enough to illustrate this point: 65% of Irish households earn less than €50,000 per year. They are very angry, and the government’s statements about the economic recovery simply don’t wash with them.

You say that growth is concentrated in the big technology and pharmaceutical multinationals. Is this exacerbating inequality?

The jobs created in these big multinationals, which set up shop in Ireland because of the low corporate taxes and labour market flexibility, are very well paid jobs for highly qualified people. But that has led to a growing gap in Irish society between the high-tech and high-paid, and the low-tech and low-paid.

And only a small part of this growth actually benefits the Irish. Many of the jobs created by multinationals are, logically, taken by expatriates. While these companies create jobs in Dublin, young Irish people continue to emigrate.

So is the miracle of Irish employment real?

Since 2012, the number people of people in work has risen by 135,000. Large numbers have found jobs in industry, exported services or pharmaceuticals. But many jobs are temporary or precarious. And 82,000 people are still employed in jobs subsidised by the government.

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Do you believe that Irish economic growth is the fruit of the “structural reforms” imposed by the Troika?

The Troika’s logic was to say that we needed to enact structural reforms, to privatise services and shrink the state. These measures were supposed to bring economic growth. But none of this was really done in Ireland. If we really look at the policies that were carried out, while spending and public investment were cut, the minimum wage was raised and the labour market was more strictly regulated. In Ireland we did the opposite of what the Troika recommended, and the country’s strong growth is based on the creation of well paid jobs. In short, the recovery really owes nothing at all to the Troika.

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You also highlighted the importance of the state in Ireland’s attractiveness to multinationals…

This is a vital factor in Ireland’s success. The state has taken the lead in bringing companies to Ireland. Two state agencies, Enterprise Ireland and the Industrial Development Agency (IDA), have played a decisive role in increasing the country’s attractiveness by identifying developing trends and key businesses in various sectors, in order to help them establish themselves in the country.

The public money invested in these agencies has been money well spent. These two agencies are behind the “clusters”, the groups of businesses, arranged by sector, that are so important to Ireland’s success. They have been essential to the Irish economic model, and thanks to their work, Ireland has been able to take opportunities as technologies evolve, which other countries, like Finland, have been unable to do. It is thanks to these two agencies that the sectors dominated by multinationals were able to navigate the crisis without suffering any real damage.

So the Irish crisis was above all a banking crisis, not a crisis of competitiveness?

It was a banking crisis, but also a crisis of a political model based on tax cuts. Once the recession hit, the state budget was unable to cope with the reduced revenues and had to impose severe tax-hikes. But make no mistake: the only aim of budgetary austerity was to keep Ireland in the eurozone. That had nothing to do with the private sector and the national economy.

Ireland is in the middle of an electoral campaign. What parts of the different parties’ programmes do you find the most inspiring?

What is most striking, apart from the statements of the prime minister’s party on the recovery, is that the politicians have not learned their lessons from before the crisis. They are still proposing to cut taxes, as if Ireland’s European-style public services could survive on American-style taxes.

I believe that the Irish electorate is now ready to accept that they have to pay more taxes in order to fund the kinds of public services that the country really needs. And it is these public services that add to the country’s competitiveness and that are essential to keep the multinationals and their employees in the country in the long term. It is infuriating that Fine Gael [the prime minister’s conservative party] continues to push tax cuts to please its well-off voters, when the lack of public investment is a real danger for the Irish economy.

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