Growth should be used to build an equitable society

There is today a marked reluctance among a disturbingly large proportion of our population to accept the persistence of poverty…

There is today a marked reluctance among a disturbingly large proportion of our population to accept the persistence of poverty in Irish society. Those who expound this "poverty is dead" proposition often support their case by ignoring data on consistent poverty and concentrating their attack on the concept of relative poverty.

Pointing out that perfect equality is impossible, they jump from that unassailable proposition to an assertion that there is nothing wrong with inequality. Some, indeed, proclaim that we actually need inequality as a spur to effort - without identifying just how much inequality is required for this benign purpose.

All this is often accompanied by a notable unwillingness to face the fact that over the last 15 years or so inequality of incomes has greatly increased in our State, to the point where EU data shows that the proportion of our population living on incomes below 60 per cent of the average - the internationally accepted measure of being "at risk of poverty" - is now higher than anywhere in the enlarged European Union, except, perhaps, Portugal and Slovakia.

Our almost unique level of financial inequality is related to the fact that during the Celtic Tiger period the incomes of many better-off people rose quite disproportionately vis-a-vis those of the less-well-off, which tends to be a feature of a period of rapid growth.

READ MORE

But that tendency can, of course, be limited by alert public authorities, concerned with the good of society and not merely with the growth rate of the economy.

But during and since the Celtic Tiger period, no such effort was made in our State to moderate this growth of inequality. Instead, precisely the opposite happened. The admittedly very high top tax rate was rightly reduced during this period - but reduced to a level that seems to be lower than would be necessary to enable us to compete reasonably successfully with other European personal tax regimes.

But on top of this, wealthy people were enabled to avoid paying this reduced top tax rate by being offered tax avoidance schemes if they invested in a huge variety of projects, which were thought, sometimes wrongly, to have some economic merit.

The lavish scale of these extraordinary tax reliefs has enabled many of our wealthiest people to avoid paying any tax at all on their huge incomes, and in other cases has permitted them to pay out derisory amounts.

There is no evidence that in devising these multifarious tax avoidance schemes benefiting the wealthy our governments have ever sought to weigh their economic merits against their negative social effects. Voices on the Right have concentrated their attacks on the concept of "relative poverty" - the validity and relevance of which appears to be widely accepted in the rest of the EU. By this tactic they have sought to distract attention from the fact that about 300,000 people still live in consistent poverty, and that last year an even higher number - 800,000 - experienced some element of "enforced deprivation". (Internationally, consistent poverty is deemed to exist when, because of income inadequacy, people in a household live in circumstances where one or more of eight key elements are missing.)

These are not small figures, and attempts to dismiss them discredit those who are seeking to ignore the problem of poverty.

One cannot but wonder how many of those who scoff at these poverty data would themselves be happy to be unable occasionally to afford a substantial meal; to have to wear second-hand clothes; to be unable to afford a warm waterproof coat; or to live without adequate heating at some stage during the winter - to name but four of these eight poverty criteria.

Moreover, the figure given above for the number of people living in consistent poverty hides the fact that this phenomenon is very unevenly spread across different groups. Thus, more than 40 per cent of the unemployed and a similar proportion of the ill and disabled live in consistent poverty, thus defined. And so, horrifyingly, do 100,000 children under 16 . Indeed, children constitute one-third of all those living in consistent poverty.

Whilst there is some truth in the view that an excessively high burden of social welfare could depress economic growth, there is ample room here for more generous welfare provisions without significantly affecting our growth rate. Moreover there is reason to believe that restrictive labour laws are a more important factor in the slower growth of many Continental European countries than social welfare costs.

Furthermore, as I have more than once argued in this column, in Ireland there is a strong case for aiming henceforward at optimum, rather than maximum, growth.

The choice between maximising and optimising growth is probably the most important national issue that we should be addressing - yet it never features in political debate. Why not?

Because we remain still focused on an out-of-date twentieth century issue of growth maximisation.

As a result we seem unable to focus on what should be the issue for Ireland in the early 21st century: optimising growth so as to achieve a healthy, happy and equitable, society.

Over to you Brian Cowen!