It was an interview of two halves. On Morning Ireland, FAS economist Brian McCormick made an excellent point in the first half of the interview, discussing the inexorable rise in unemployment. When considering the property boom we usually focus on the over-emphasis on construction activity and the misdirection of investment money, the wild-west market in land prices and the speculative activity that enriched the few. But Mr. McCormick put forward another thoughtful perspective:
‘One of the downsides of the construction boom over the last number of years was that it usurped the Government’s strategy to increase the number of young people with ICT and science qualifications. Because a lot of them were lured by the high wages that were offered in the construction sector. And they would have left education at Leaving Cert or pre-Leaving Cert. And now a lot of these apprentices are unable to complete their apprenticeships with their employer.’
Mr. McCormick rightly highlighted the issue of so many people – especially young people – being lured into a sector that was unsustainable, with no controls and no Government policy (except to let it rip until it ripped itself apart). Now, out of school with no other qualifications, what are these people to do? It was a waste of financial and investment resources, and it was a waste of human resources.
But in the second half of the interview Mr. McCormick made a strange claim regarding the wider economic decline:
‘It behoves everyone, including the social partners, to think of new, innovative solutions to this problem. To put it in context, in 1987 when there was new thinking in terms of low taxes in exchange for moderation in wages, which worked, we were facing a situation where unemployment was 17 percent.’
Yes, it was bad back then. But it’s getting bad now because the model of low wage increases in return for tax cuts failed. Because of the priority given to cutting taxes, we failed to establish a free health care system, a world-class education system, and public transport system on a par with other European countries. Tax cuts undermined our capital infrastructure – to such an extent that it now ranks at nearly rock bottom in the OECD (I think we are slightly ahead of Mexico). We held back on economic investment, social investment and the ‘social wage’. And now that property-related taxes are nose-diving, we have nothing to fall back on except more cuts – in wages, in expenditure, in living standards. We are now in the end-game of that model and the sooner we admit to having employed bad tactics, the sooner we can readjust the line-up.
Fortunately, Manus O’Riordan of SIPTU was also being interviewed. He highlighted:
(1) the risks involved in cutting wages and income: retail spending will continue to plummet and, with it, jobs, tax revenue and profits.
(2) the absolute imperative to increase investment into retraining, life-long learning and education generally.
Mr. McCormick strongly supported this latter argument. So, in the end, the two economists retrieved the match which, after a good start, was in danger of getting lost.
Notes on the Front 
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