The Strong Economy and the Weak Society

The president of the European Central Bank, Jean-Claude Trichet has praised Ireland as a model for showing how strong economic growth was possible in the Euro area.  He indicated that if other countries undertook similar "structural reform" they would be able to replicate our success.  Even the leader of the Labour Party agrees that Ireland has a strong economy but, as I noted before, I'm much more sceptical.  It's a consensus that will not come under sustained political challenge for the foreseeable future.  Hence the shifting of the battle ground towards social policy. 

This is not a satisfactory situation for a number of reasons.  It means making an artificial distinction between economy and society that doesn't exist in the real world.  If economic well-being is exclusively measured by national income accounting, then other important social, environmental and cultural indicators crucial to measuring the quality of life will be excluded from consideration.  The New Economics Foundation has been working to create new ways of measuring what is missed by traditional methods; "we have challenged the economic orthodoxy that GDP is a good indicator of well-being with an alternative indicator - the index of sustainable economic welfare (ISEW) - which shows a very different picture."

Conventional economic indicators can only give us a snapshot of one particular point in time about income levels and is a crude measurement of poverty or inequality.  What we need are a set of indicators that will yield a more rounded picture of the opportunities and situations of people at very different stages during the course of their lives.  People can move into and out of relative poverty at different times and it is factors like the structure of the labour market or the level of public provision of services that can make an enormous difference to an individual's sense of security. 

Another reason to reject the rigid dichotomy of the social and economic spheres is that there are many occasions when policy that is seen as strictly economic or financial can have a profound impact on social policy.  The individualisation of the tax system, masterminded by Charlie McCreevy as Minister for Finance, is now seen as having a repercussion on childcare policy as the tax laws were explicitly changed to benefit working couples rather than those with one partner in the home.  It can be argued that the policy discriminates against those who made the choice to stay at home with children and who bore the loss of potential income to do so. 

In today's Examiner Rónán Mullen illustrated how economic policy is driving social policy:

The Government may be tempted to subsidise childcare provision either by giving tax relief on income spent on childcare or by funding childcare facilities directly. It certainly looks like the ducks are being lined up in a neat row. In August, we had the small businesses’ lobby group, ISME, calling for employers to be allowed to provide tax-deductible subsidies to employees for the specific provision of childcare. The lack of women returning to work was “having a serious impact on the economy’s labour supply,” ISME said.

A policy that is purely based on tax breaks would benefit only those in work and, proportionately, high income earners.  So childcare policy cannot be discussed without looking at the possible consequences of changes in the tax regime and economic policy issues should not be separated from the fundamental question of what kind of society we want to become.

Comments

[Colman]

I've only found your site recently, directed here by Slugger O'Toole, and it's wonderful: thank you for your writing.

Something I don't understand about the childcare debate: surely anything that subsidises the cost of childcare is simply going to end up raising the market price of childcare by the same amount. DIrect provision seems to be the only way of doing the job to me, but I'm probably missing something along the way.

[Gerry]

Thanks for the compliment.

I agree that tax breaks probably would drive up the price of childcare. Regulation and price controls may seem to be the answer but how would this work in practice? The more that I look into this topic, the more I'm convinced that there has to be a mix of policies including direct provision as you suggest. If employers regard female participation in the workforce as being so important, then they'll presumably see the wisdom of such a policy!Most crucially, extended paid parental leave has got to be central to childcare policy. There's got to be choice for parents and opportunities to go into and out of the labour market at various stages throughout life.