In yesterday's article, attention was drawn to the wider quality of societal infrastructure resulting from public expenditure in other European societies. However, our deficit in societal infrastructure is not eliminated by achieving average EU income.
It has been caused by 50 years of low income in relation to our European partners. We know that the justification for structural funds to date stems from our traditional weak economic position and the European belief in the necessity to achieve social and economic cohesion.
However, we are all aware that with our increased levels of income, we no longer qualify in the same way for such funds .
It is regrettable that per-capita income is the main measure for qualification. Structural funds were designed in particular to improve infrastructure and we do have a huge infrastructural deficit as partially identified by IBEC last April.
IBEC's list had a largely economic focus, others might argue for a wider societal based list. Recent increases on the capital side have made a small beginning in addressing the capital deficit of our societal infrastructure. Appeals to Europe on the basis of such an accumulated investment deficit will now cut little ice.
Our European partners are now scrutinising our behaviour. What do they observe?
They see a State which is rapidly approaching EU levels of income. However, we are unwilling to invest in our own society through taxation, and we expect other EU countries, which carry an average burden of tax of almost 50 per cent of GDP as against our 34 per cent, to fund key activities and infrastructure.
We will build the Kinnegad bypass only if the Germans or Swedes pay. The self-help group in Tallaght will continue beyond 1999 if we can squeeze the money out of Europe in the next round of funding, but it is not a valid activity for Irish society to fund.
Our European partners clearly see that we will not fund the essentials of a developed, fair and just society. As they see it, we create a tax climate which attracts industry from other EU countries, adding to their unemployment, attacking their social market model by attacking its taxation base, from which we ironically expect to draw benefit by way of structural funds.
The reduction in corporate tax from 38 per cent to 12 per cent was unnecessarily severe, the halving of capital gains tax was completely unnecessary. These and other measures have added to a perception that we want it both ways - low tax in Ireland but the benefits of European taxation levels provided by structural funds.
Some will interpret this as a call to a punitive tax regime. It is nothing of the kind. Let us look at the figures. One per cent of GDP is about £500 million. It is a lot of money for public provision, but even the strongest proponents of tax reduction concede that when £500 million is spread around as tax reductions, most people comment on the miserable nature of the individual benefit.
Preventing expenditure falling from 34 per cent of GDP to 30 per cent would provide an annual re source of about £2,000 million, twice our net take this year from cohesion and structural funds. Given the impact to date of the public re source application of structural funds expenditure, it is difficult to estimate the extraordinary magnitude of positive change these levels of public resource could bring to the nature of Irish society.
A substantial beginning could be made by stopping the reduction in public expenditure as a percentage of GDP. This would still allow for some tax reductions for lower- and middle-income earners.
It goes without saying that any increased expenditure should not be frittered on wage drift for existing public sector employees. Additionality is the key. This is not generally an issue on the capital side, but it is crucial that additional improved services actually transpire from extra current spending.
It will be argued by those opposed to government expenditure that increased expenditure would be inflationary or against Maastricht. Such arguments are bogus. Government expenditure is only inflationary if funded by deficits. Maastricht says absolutely nothing about levels of Government expenditure. It is neutral on the issue and simply bars funding expenditure by excessive deficits. Thus Denmark can have a level of expenditure at 57 per cent of GDP while Ireland has a level of 34 per cent, with both conforming to Maastricht.
These expenditure, inequality and structural funds issues have bobbed independently on the media surface over the last two months. Our levels of government expenditure, the inequalities in our society, the lip service to reducing social exclusion and the structural funds issue are closely interconnected and cannot be dealt with compartmentally. We need to confront the contradictions and the connections.
It is time that we did. We have the resources to decide what kind of society we want. We are heading rapidly for a society whose driving force is the US variant of capitalism.
This model is characterised by the assumed superiority of "the private" in every domain and its consequent gross inequality. We are right there behind the US in the queue, in second place.
We could seriously consider the European social market model given our stated commitment to Europe, a model which, it is fair to say, is under scrutiny and will undergo change. Its essential elements, however, will remain in place, particularly with socialists involved in government in 13 of the 15 EU countries. A positive public expenditure attitude is one of its core elements.
It is a model which rightly acknowledges the important role dynamic markets play, but it gives effect to the broader societal requirements of fairness, reduced inequality and genuine opportunity for all through well-funded public provision of infrastructure in its broadest sense.
It is a model which derives all the benefits of a market economy but it is also a model which rejects the inequity and philistinism of a market society. That is a philosophical reason for embracing the European model.
On a practical level, we would look less hypocritical to European taxpayers; then our requests for further funds might gain a much more sympathetic ear than that generated by the current exercise in map-making, as part of our regionalisation.
It has been said that Irish politics lacks debate and fundamental difference on issues. Perhaps the above issues could create some debate.
Series concluded
James Wrynn is senior lecturer in business policy in the faculty of business, Dublin Institute of Technology
