Be smart: Jobs first, smart economy second

Abandoned Factory in Raheen, Limerick
Image by slinky2000 via Flickr

The smart economy is a nice idea, perhaps even a good idea. But like most nice ideas, when exposed to reality, the smart economy just breaks down. The smart economy as a concept takes no notice of the detail: who is looking for what type of job right now, and how long will it take those people to train for new ones?  When confronted by the facts, we have to augment our industrial development strategy if we want to protect the real, on-the-ground, economy.

A smart economy is supposed to drive economic growth by bringing in or creating 'high value added' jobs for well-qualified people, who, because these jobs pay really well, make and spend lots of money locally, and pay lots of taxes, thus boosting the local and national economy. The smart economy idea has merit, but if we created the smart economy in full, no-holds-barred, tomorrow, if the smart economy succeeded beyond our policy makers' wildest dreams, it wouldn't help most of the people in the Mid West region who are unemployed for 3-5 years. This is because the idea of the smart economy is at variance with the facts of the type of unemployment in the Mid West right now.
The fact of the matter is that most of those newly unemployed come from construction and services, and will require significant and costly retraining, which may take years, to make them elligible for 'smart economy' jobs, even if those jobs were plentiful. The reserve of labour the Mid-West has right now, to be clear, is best helped by intensive retraining and retooling of a portion of the workforce, while providing state-stimulated projects to help workers and the local economy while retraining. Three infrastructural projects with long-run benefits to the region that are shovel-ready are the Links project, the expansion of Foynes port, and the Regeneration project, not to mention the 20+ recommendations of the Mid West Taskforce. Implementing large capital projects concurrent with up skilling, retraining, and business development programmes takes care of the time lags involved in training workers, boosts the local economy, and does not overly harm the debt: GDP ratio of a country running headlong into +100% debt: GDP territory in any case. The question to answer when thinking of borrowing for these types of projects is: does the long term social benefit exceed the long term social cost? If the benefits are a halt or reduction in the increase in unemployment, the creation of new capital and a reduction in social maladies like poor health and lawlessness, combined with an increase in local consumption and investment, coupled with the retraining of a large portion of the unemployed workforce, then, set against the cost of borrowing a fraction of the cost of NAMA's €54 billion to achieve those ends is, for me, worth it. I'd welcome any costings on such projects--if the long term benefits turn out to be less than the costs, I'll shut up.
You might ask why the MidWest is different, why it should receive special treatment ahead of other regions with similar, if not worse, problems. The answer is historical. The MidWest has underperformed economically relative to the rest of Ireland throughout the boom years. There are many reasons for the region's underperformance, but the fact remains. To focus exclusively on creating high-value added jobs is to disenfranchise tens of thousands of unemployed persons in the Mid West region, because they just won't get those jobs. The smart economy, rather than helping the newly unemployed, has  hurt them, by diverting funds which could have helped them to other uses.
I'm not arguing for a return to the days of the construction boom: those days are gone, and good riddance to them. I'm asking that we look squarely at the data first, talk to people on the ground, and ask them what they need. Couple that to local and international expertise, and get something credible, accountable, and practical started inside of 6 weeks. Not 18 months. Not 24 months. Certainly not 3-5 years. Our unemployed can't wait that long.

Regeneration project must be accelerated-but with care

Here's an article I wrote for the Moyross Voice.

Two intertwined facts convince me that the Regeneration project must be completed, and ahead of schedule. First, more than 20,000 people are signing on the Live Register in Limerick alone. Second, nearly 6,000 of these are young men under 25, with no more education than a Leaving Certificate, most likely unemployed for the first time following the collapse of construction in the region. These men are builders. The regeneration agency wants in the business of building and rebuilding. The local community, and Limerick’s wider community, will benefit if the government targets funds for the immediate fulfilment of the agency’s plans.


Figure 1: Numbers of young men on social welfare have increased sharply. The Regeneration project could alleviate much of this type of unemployment. Source: CSO Live Register tables.

If it did nothing else, the Regeneration project would provide employment for thousands of these young men—not to mention young women—and so inject much needed capital into the local economy through their wages at a time when local consumption of goods and services is flagging, forcing employers to reduce their staff levels and rein in inventory orders, further contributing to the economic malaise we find ourselves in.

I propose that the Regeneration agency be given priority over all capital spending projects in the country for this simple reason: quite aside from the potential benefits to the populations of Moyross, Southill, Ballinacurra Weston, and St. Mary’s Park, building the Northside and Southside projects simultaneously over a three year period will result in a regeneration for the wider community.  If increased borrowings by the Irish government are required to achieve this aim, then I believe the potential benefits outweigh the costs of servicing any borrowing to fund such an expansion of the project.

Great care must be taken when rolling the Regeneration project out. The project aims to achieve the laudable ‘soft’ targets of reducing criminality, increasing social inclusion, more effective public service provision, increasing population health and the general quality of life for residents, increasing literacy, and, perhaps most importantly, allowing the communities the freedom to decide their own route to economic and social prosperity, as they define it.

The Regeneration project itself is an exercise in ‘hard’ targets: numbers of buildings built, community gardens planted, infrastructural initiatives set up. It is not clear to me how the introduction of these hard targets maps onto the soft targets the vision statements for both Northside and Southside strands of the project clearly wish and hope for. Even the vision statement for the Southside strand defines the physical environment as “the facilitator of regeneration”, but there is no clear link between the physical environment and the social benefits this new environment might generate.

I don’t deny the need for a new and well-imagined space to live and work in. Houses are machines for living in, and you need good houses to live well. But, I believe we are not precise enough on how much benefit these new houses and other ‘hard’ targets will be to the local communities. There is means to gain that precision.

There is an urgent need for benchmarking of the current health states of the local population, their median literacy rates, and so forth, as well as articulating clearly their expectation of what ‘success’ might look like, in a much more concrete from than the vision statements currently do. Only then, with a clear measure of where these diverse communities are, can we judge the successes and failures of the large-scale changes to the residential landscape the Regeneration project envisages.

I believe the Regeneration agency will work, and it should be funded as a matter of urgency. I also believe an untested and large-scale resettlement plan created many of the areas currently requiring Regeneration in the early 1970’s, and so I advise caution, careful thinking, and most importantly, research and benchmarking.  UL is in a position to provide these services, and my colleagues’ collective expertise should be put to use in surveying and assessing some of the communities the University was created, in part, to serve.

Prudence in the face of the unknown is key

Cross posted at the TASC-blog.

It is almost never correct to sacrifice a present benefit for a doubtful advantage in the future. Ireland’s political classes understand this truism at the genetic level. In a world where less and less seems predictable, Ireland faces multiple uncertainties: we cannot afford to splurge on one by neglecting the other.

The coming budget will unhinge whatever remains of social partnership, and may even bring down the government. The coming wave of mortgage defaults will ensure our banking system remains under extreme pressure and international scrutiny, no matter how well NAMA does or does not perform in cleaning up the balance sheets of recalcitrant banks. It is uncertain how many indigenous Irish businesses will weather the unprecedented economic storm they find themselves in, and what the resulting level of unemployment may be. The slow, but steady, international recovery may leave many parts of Irish society not directly tied to export industries behind. These are short-term concerns.

The negative social consequences of mass unemployment are starting to be felt. The cost to families and communities of increased domestic violence and criminality is incalculable. The security of every family against unnecessary hardship is an invisible social asset on which our culture is dependent: we don’t see this asset until it is gone. These are longer-term concerns.

In the midst of these uncertainties, the government must display prudence in the face of the unknown. Freeing up resources through increased efficiencies in the public sector will take time. One swipe of a pen can reduce incomes of public sector by thousands. A cut in public sector pay is inevitable. An increase in efficiency in the public sector—doing more with less—is not. Which course of action is more prudent, and which more likely to save taxpayers’ money in the long run?

In attempting to be prudent in some areas—fiscal policy, for one—the government may lose the good will of its citizens. By being extremely imprudent, in the cases of NAMA, the stalled reform of the taxation system, the crawl toward accountability, and most of all in a claw back of frontline public services, the government may damage the long run interests of its citizens.

The government has a duty to provide the highest standard of living for its citizens the nation can afford. That appears to be at 2003 levels of income at the moment. Our spending remains at 2009 levels. Prudence dictates the most likely course of action for the government in the coming budget. Actions are not without consequences, however, and a prudent public will do well to remember the choices made on their behalf come election time.