Why We Need an Economic Plan B

Economies across Europe are entering recession once again. Following a sharp fall in output and employment in 2008-2010 and a continuing contraction in the 'domestic economy' - only temporarily counteracted by a surge in exports in the first half of 2011 - there are mounting concerns about future growth prospects here.

Unemployment is at crisis level especially as young people remain without work over a long period. This is proving very damaging to communities and individuals and is a major cost to the Exchequer. 'Plan A' has focused on domestic deflation through decreases in labour costs, cutting public spending, raising taxes and charges across the board as well as growing exports as the preferred way to recovery over stopping the decline in domestic demand.

It is argued, in this paper, that a 'Plan B' is urgently needed to stop the fall in domestic demand and generate growth through job creation, investment in priority infrastructure and measures to raise skills. It is possible to do this through a combination of measures allied to a gradual increase in the tax take arising from growth in the economy as well as taxes aimed specifically at high-wealth and high-income individuals and households.

The choice of spending or taxing is a domestic (Irish) one and not one that has been imposed externally. This has been confirmed on numerous occasions by the Troika. In the long-term a strategy to develop a much stronger and export-orientated indigenous sector offers a more sustainable approach to developing a social and economic model that fits the needs of a 21st century society.

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