Facilitated by Nuala McKeever
Dr. Peter Doran (QUB)
Caroline Whyte (Feasta)
Note: owing to a technical error, this session was not videoed. A transcript of the audio from the session, beginning with Minister Donohoe’s response to the first interview question, can be found below.
Nuala McKeever introduced the session, and Caroline Whyte began by asking the Minister whether he was familiar with some of the research and thinking on new economic paradigms, such as Doughnut Economics, and the work of Stockholm Resilience Centre and the Club of Rome.
Transcript of the session
Minister Paschal Donohoe: Thank you. I’m very familiar with some of the books and website that you’ve referred to, and I’m familiar with the long-standing critique and views of the Club of Rome on economic growth. I was in Rome on Friday, actually, meeting some academics and economists talking about the performance of the economy in Europe at the moment, and the challenges that we face.
I know those kind of critiques now have been further charged by where we are with the climate crisis and where we are also with the huge change in nature of politics across the world at the moment, and of course one of my jobs is that I have to reconcile such views regarding economic growth with the practical reality that the absence of economic growth makes it very hard for states to be able to meet practical needs that the system has, and that’s the state that I’m operating in.
So I’m in the early phases of preparing Budget 2025 – it’s the latest of a series of budgets that I [worked on] in Ireland – and there is a spreadsheet, and the bottom of that spreadsheet has how much taxes that we are going to raise, will we borrow – in Ireland’s case the answer to that has actually been ‘no’ for a few years – [so there’s] a given amount of money, that is then allocated in negotiation with every other government minister. The absence of growth makes those figures harder. That is the practical challenge that is there, that every other minister for finance has to grapple with across the world. And…as aware as I am and even as sympathetic as I am to promote the critical assessment of the nature of economic growth, I’ve been a politician when we haven’t had economic growth, and I’ve seen what happens to society […] and that is the kind of limited space that I’m in.
Caroline Whyte: Thank you, it’s very interesting that you mention practical realities, because as I’m sure you’d probably agree, we have two levels of practical reality – there’s the cultural and political reality of a system that’s very dependent on growth, and we would argue that we have to separate from that system, and there’s the practical reality, the very very pressing practical reality of ecological boundaries, planetary boundaries […] It’s very interesting that you mentioned the ministers of finance around the world, and I think in a sense – maybe you would agree – countries are in the same boat and they have to find ways to work together [on this].
Paschal Donohoe: I think that’s very fair and I entirely accept the point that the overwhelming practical reality is the climate crisis and change that is needed. Within the public argument about that change that’s needed, one of the things I’m very proud of when I see my colleague Deputy Marc O Cathasaigh here from the Green Party, one of the most thoughtful and effective TDs in Dáil Éireann, and somebody I would have a lot of respect for because this government, and it was a change I made in one of my early budgets as Minister for Finance, we have the most ambitious and progressive form of carbon taxation in Ireland of any country in Europe. [This is] the kind of change that is needed.
Where I would feel different with your critique and have a different view often is that it does appear to me that [some are arguing that we can] meet societal needs in the absence of growth, and I am entirely unconvinced that can be done, entirely unconvinced. What I am convinced by is the need to change the nature of growth and change what that means for how we structure our societies and our economies.
But to make the case – and I have seen the case but am unconvinced by it – that we can meet the needs of society in the absence of growth is certainly a proposition that doesn’t convince me, the simple reason being, I’ve been around in politics when we haven’t had growth, and I’ve seen the harm it caused, and I’ve seen what happens to people who are vulnerable, I’ve seen what happens to our ability to meet the needs of today and tomorrow, and to embed the absence of growth into our economic model […] means at least a transitionary phase of a recession. And I’ve been around in recession, I’ve even unfortunately been around in depression, and I haven’t seen anybody happier because of that.
Dr Peter Doran: I wanted to ask you about your response to President Higgins’ very interesting and provocative interventions around these matters. I think you had [commented] that he was on top of the trends and the literature and was obviously making comments that were worthy of serious attention.
Paschal Donohoe: Absolutely.
Peter Doran: An interesting comment that you made was that you agreed at least that we cannot pursue growth at all costs – I think you probably remember that – and I think that’s probably a landing place for our conversation today, you know, because I don’t think anyone is suggesting that degrowth as a movement or as on objective is the equivalent to a recession. We’re talking about a more discriminating, nuanced approach to what the purpose of our economy is, and to what extent we rely on the vagaries of markets to determine the good life.
So I’d love to hear you maybe expand on your response to President Higgins, especially around that comment that you at least agree that we cannot be in favour of growth at all costs, in other words, where do we draw the line, and where do we begin to build a conversation and find common ground.
Paschal Donohoe: Of course. President Higgins obviously has a different political framework and outlook from mine, and we are blessed to have a man of his wisdom and insight [as our Head of State]. I think what President Higgins’ contribution identified – and this is a critique that has been around for some time, and one I totally agree with – is that much of the economics that captured how we think about public policy for so long is based on presumptions that were wrong.
I adore Trinity College, where […] I studied economics, and when I studied economics, much of how we thought markets operates was based on the assumption of perfect rationality, that all actors had been totally provided all information instantaneously, and underestimated the role of institutions and trust. And those assumptions were just completely wrong. And I think President Higgins’ critique is a long-standing one. Economic theory has changed, the way economics has been taught has changed, and maybe that is something that needs to also be reflected in the public commentary on it.
And in relation to [disagreeing with going for] growth at all costs, again I’ve said that because I believe it, I believe there are three reasons for that. Number one, growth at all costs leads to a very neoliberal, totally market-focussed view of what growth looks like, and I ultimately don’t believe it’s sustainable; secondly there’s exactly the point you’ve just made about our climate and our economy; and thirdly, it’s not up to free markets to determine what the good life is. That’s determined by individuals, by society, by the people we elect, by philosophers, by our hopes. Not up to free markets to determine that. And that’s why I’ve always made the case for a strong state. Not necessarily an overwhelming state, but one that is capable of the kinds of actions that markets cannot take on their own, and we have that in some areas, we don’t have it in others.
Pater Doran: I think that’s clearly an area where a conversation can be had. We had a very interesting session on the role of universities yesterday, and there is a big appetite within the academy for more a heterodox, pluralist approach to the teaching of economics […] to democratise the debate […]. So would you support that movement towards a much more heterodox, pluralist approach to the teaching of economics?
Paschal Donohoe: I would indeed. I have a son and a daughter who are studying economics in secondary school at the moment. And I have to say, I am very encouraged and impressed by how I see the economics curriculum at second level has evolved. Making it a lot more practical, number one, and number two, it’s more open than the curriculum I certainly studied, and in all my engagements with universities of which I have a lot, I can absolutely hear how the university curriculum has evolved to fully reflect the critique that I had a few minutes ago regarding economic theory – they’re not my critiques, they’re just obvious critiques […] – and a great example of the change that’s underway is the Young Economist of the Year competition [which took place] a few weeks ago. And for any of you who are thinking about how you could improve the teaching of economic theory, honestly, if you came along to that conversation and saw the quality of the work that’s being done by second level students, you would walk away feeling very reassured about how economics is being taught, and also absorbed by young people. […]
Caroline Whyte: Can I just come back to your point about needing a strong state. I’m also going to zoom out to the European level, because of course you have an important role, a leadership role as the president of the Eurogroup. I’m wondering how European institutions can address the need for a more stable financial system. For example, there’s been a lot of criticism, as I’m sure you know about, how in the Eurozone, the European Central Bank is planning a digital euro but it’s been quite – some would say – captured by corporate commercial bank interests, and there’s an argument for having a public-based euro or a public-based central bank system that’s less influenced by commercial banks. I just wondered if you had any thoughts for that in terms of a strong state and the need for […].
Paschal Donohoe: Thanks, that’s such a topical question. Firstly, regarding a strong state, I’m a centrist politician, a politician of the centre, that’s what I’ve made a case for and what I continue to make a case for. I will not make a case for an over-mighty or excessive state but I’m absolutely convinced that we need a strong, resilient state, that in conjunction with markets will achieve more for society than either could ever achieve on their own. And that in turn underpins my view about the European Union, which isn’t a state, but is a very unique, really critical entity and in turn, one of the greatest limitations that states have is even if you are France, Germany or Italy, the challenges and opportunities that democracies face in this century are now too big for even the biggest European states to be able to [address]. And artificial intelligence, climate and cooperation regarding security are only three examples of that.
And that’s why the EU does matter so much. […] On the Euro, I would have a different perspective in relation to it. The euro for me is a project that is backed by citizens through the legitimacy that we offer to our central banks, who in turn provide the backstop to a currency. And actually the banking system, which I have a lot of engagement with, would argue, would not recognise the view that the central banks are captured anymore by the commercial banking system, and in fact one of the concerns they would have about a digital euro, which I disagree with but it is a view that they have, is that it would actually disintermediate the private banking system in Europe and would pose a challenge to how it would operate.
And one of the reasons that I believe the digital euro is so important is in a few decades’ time, maybe even sooner, unless central banks develop a digital dimension to their existing currency, the means of payment and the storage of value will be increasingly led by the private sector, and I think that would have the most serious consequences for how governments and central banks can work, really serious, and that is why the digital euro and the so-called CBDC, Central Bank Digital Currency, are a really, really important project […]It has really big political consequences.
Pete Doran: Minister, you have been engaged in the development of the new Wellbeing Framework….
Paschal Donohoe: Yes.
Peter Doran: …and I was delighted as well to hear you refer to the role of the poets and the cultural activists, and I believe you ultimately think about the economy within the context of a social imaginary, the way we actually imagine a good life and our lives together, life with the land. Could you tell me a little bit about the how the framework has begun to impact on decision-making and could you comment on whether or not you feel it would be worth considering addressing the role of culture and language as part of the Wellbeing Framework […] at the moment it isn’t really part of that, I believe.
Paschal Donohoe: Yeah, I mean, so much, if not all of my economic outlook is defined by my experience of the Global Financial Crisis, and what I went through, and what I saw the community that I represent go through, and it has been most [central] to how I do economic policy. And something that I’ve said again and again, and am happy to emphasise, is that economies fit within societies, not the other way around, and I’m really clear on what depends on what. Economies are within society, and they depend on society because the social licence determines how they work.
And in relation to the point on wellbeing indicators, in my own department, the Department of Public Expenditure, and the other department I’ve spent a lot of my political life in, the Department of Finance, has civil servants in both departments whose job it is to look at the Wellbeing Framework that we have, agree budgets together, and for evaluating the impact of economic policies on wellbeing indicators, and whether that is, how we evaluate […] in terms of the interaction between taxation policy and social welfare policies, when we are doing budgets, there’s a 6-week period for looking at a budget, that is something officials would be looking at structurally, and records are being made of the decisions to see what would the impact be of a budget at different levels[…].
And I think you do make a fair point then, that those wellbeing indicators, they tend to be quite tangible wellbeing indicators. How then to incorporate into them a recognition of culture and so on, is a really good point. I would welcome your expertise regarding how we do it and what that would look like – again that is something that I’m very interested in – but beyond culture, beyond wellbeing and budget integration, I think a lot about loneliness in society and how the policies that we [introduce], what role they would play to regard to it, which is why I’m so proud of the fact that we are a country that spends a lot of time opening up libraries as opposed to closing them down, because I think they are a really really deeply important thing to allow a lot of the things you’re talking about to flourish.
Peter Doran: Thank you. Over to Caroline.
Caroline Whyte: On another subject – you’ve acknowledged, I think a fair number of times, that the current Irish economic model that we have, which is very dependent on foreign direct investment, is a source of vulnerability. Obviously it brings in revenue but we can’t count on it in the long term. So, if you look at the medium and long term, could you maybe comment on the global pressures that you see – the sources of vulnerability that there are – and what steps that the government can take – and other governments too – to have greater resilience in this time of planetary crises, such as the climate emergency and breaching of the planetary boundaries?
Paschal Donohoe: There’s a lot there….
Caroline Whyte: It’s a big one, yes. (Audience laughter)
Paschal Donohoe: I think I’ll do my best to pick a few elements out of it and just give a quick answer. So firstly, in terms of our current model, the economic model, on many dimensions I’d see it as being a source of strength, in terms of employment, in terms of investment, in terms of how we’ve been enabled positive economic transformation […].
On the other hand, I’ll go back to my experience of the financial crisis; the most powerful lesson I had during that period is you should never assume a tax revenue that you have now will always be available in its entirety tomorrow, and I…that left me seriously seared. And that is why I’ve been making the very difficult political case that’s saying that if you have tax revenue coming in you shouldn’t always spend all of it. Which is why I have been at the heart of [ensuring] all our public finances aren’t being spent, and it’s why over the last few years we’ve had between 7 and 8 billion euros in surplus, because I’m convinced that we will get to a point in the future when that money won’t be there, and I saw the harm that happens to an economy in the long term, and that won’t happen to us […].
In terms of the deeper and more powerful challenge regarding the medium-term future of our economy, I would tie your point about the planetary boundaries to what I would think is the next phase of change that can happen to Ireland, to [further] our ambition that we are a net energy exporter in a few years’ time, and the energy that we export would be powered with wind.
And I believe the economic opportunity that Ireland has to get to that point is comparable to the foreign direct investment opportunity that we identified in the 1980s. I think it’s that big, and that is what I want Ireland to look like early in the next decade, which is, I hope, our contribution to the energy transition we have to make for so many reasons, but of course then also the ability of another [pillar] to our economy to then lessen the dependency that you’ve outlined, and that is a huge project that this government is trying to make progress on, and I believe we will, and I should acknowledge the signature contribution of Minister Eamon Ryan to that.
Peter Doran: I’ve been told I have one more question. We imagined this conference more as a departure point than a conclusive event and we want to keep the conversation going, not least with you and your colleagues, and we’ve been thinking about possibilities for ways to institutionalise or engage with you and your colleagues and senior civil servants. There are a couple of possibilities, and I’m not asking you to say yes or no. For example, the Wellbeing Economy Alliance, which is a global alliance in which we’re an all-island hub, and we’re part of an intergovernmental network, and a number of governments are part of the network – New Zealand, Finland, Iceland and Wales, for example, so we would like to extend an invitation to you to consider the possibility of being part of that peer group, to learn from one another about what this might look like in terms of policy. And the other possibility is a bit like the Westminster model, where they have an ad-hoc group of MPs, so civil society, academia and members of the Dail would come together occasionally in an ad hoc group, study group, to examine the latest thinking around the wellbeing economy and engage with political actors to identify landing points in terms of policy implementation. Are those possibilities that you might be willing to talk about in the future?
Paschal Donohoe: Of course, absolutely, and, you know, we are at a moment… I believe we’re in the early stage of a moment of the most profound change. Climate, artificial intelligence, war, after a pandemic – any one of those factors connects with systems in the world changing, and all four are happening at the same time and so we need new forms of dialogue to examine how the stakes can be raised and how to navigate our way through.
I think they’re all really good ideas and I’d love to explore them and see how we can do it, and there is another one, which is that every year we have an event called the National Economic and Social Dialogue in Dublin Castle, where we bring together all of the different stakeholders to talk about economic and social priorities for the year ahead, and I think the next time it’s done, which will be the second quarter of next year, I think you should come along, and you should present at it, in terms of your views of these issues, because I think it would be a very helpful contribution to a debate in which we try to look at the long term, and we need to think about…is that long term different from how we’ve been thinking, and I think it would make for a really interesting debate if you were to come along to the event. […]
(Applause)
Peter Doran: Thank you very much, Minister.
Nuala McKeever: We have a break planned, but if you’d like to take one last question.
Paschal Donohoe: I could take a couple of questions, and then I’m sorry but we have votes in the Dail.
Philip McDonagh: My name is Philip McDonagh, Minister and I have very warm memories of when I met you when I was in Kiev. We went down to the Maidan Square […].
Paschal Donohoe: We had what is now historic meeting that took place in Kiev, and Philip then took me down to the Maidan where people were standing around bonfires waving the flag of European Union because they wanted to be closer to Europe and the then-elected government wanted to move away from Europe, and we all know what happened after that.
Philip McDonagh: Well, that’s a topic that I’d love to discuss sometime. I’m working now in DCU , we have a centre that cooperates with all the churches on the island of Ireland, and engages in research and strengthens their voice, we hope, in different areas, and we have a very good relationship with the same kinds of people in Brussels, under this Article 17 in the EU Treaty which mandates a structured dialogue with faith communities and philosophical organisations, and this is a framework for the long term dialogue that’s needed, without prejudice to all the interests that have to be upheld in the meantime.
So I wonder if, could I add another suggestion to these different suggestions for forms of dialogue: a space for the long term, and as you said, it’s the poets and the philosophers who help us to understand the good life, maybe also churches and faith communities. This would be a multi-stakeholder, long term framework, perhaps mainly at the European level, but also connected to what has to happen when we need to think what follows the Sustainable Development Goals, there’s going to be an next stage there also. So it’s just adding the long term to the other frameworks that we’ve been discussing.
Paschal Donohoe: Well that sounds magnificent, it reminds me of a book that I read earlier on in the year, it’s the best book on politics that I’ve read in a long time, it’s the book I was planning to write [audience laughter] but the author did a far, far better job than I could have done, it’s a book called ‘In the Long Run’ by Jonathan Pyke, which is about the relationship between time and politics […] and it’s a really, really challenging question, deeply challenging. That’s why your work sounds amazing […] it’s important to try and get a way of bringing that into the public sphere.
I’m not a theologian, I’m certainly not a poet, I’m in the business of trying to do the best job I can as a member of the government of Ireland, and also serving my constituents and trying to win an election. That’s who I am. But I am seared by what I went through a decade and a half ago, and deeply aware of some of the things that I see building up at the moment and what it means for us, and civilisation actually, and trying to bring that into the space that I operate in. [….]
I might take one more question, if you don’t mind. If I’m not back in time, I’ll be in trouble.
Aideen O’Doherty: Thank you Minister, I’m Aideen O’Doherty from DCU. In the session with students this morning there was talk of increasing corporation taxes. Would you consider that it seems a very obvious way to increase the funding required to take on the climate action that we face. [Audience applause]
Paschal Donohoe: We’ve already made this hard decision to increase the corporate tax. I did it. It went up from twelve and a half percent to fifteen percent. […] For those of you who say it should go up more, I’ll bring you back to the world in which I operate.
I’m not denying for a second the reality that you have painted of our planetary boundaries and what is happening, but we have many jobs and investments within our country and if you [raise] the corporate tax up beyond a certain level, it would [jeopardise] them. Then there’s also the more medium-term factor that if you believe the corporate tax revenue, that a large amount of it is transitory, and could go, but the funding needs you have are permanent, if you try to get more out of corporate tax but that corporate tax revenue is going to decline, it doesn’t meet the funding needs that you have in the medium term. It doesn’t.
And I expect corporate tax revenues to go down, but the funding needs you’re talking about are going to go up. So actually I’d really push it back and say […] that we’re going to need to find other ways to meet our [funding needs,] which is why I made the decision to automatically increase carbon tax, which next year will be bringing in a billion euro more than it was before we started with this […] and I would push it back to you and say that those kind of taxing decisions, which are a lot more difficult to make, are ultimately the way that we are going to find the money that we’re going to need.
And on that note…
Nuala McKeever: And on that note… vote Fianna Fáil! Thank you very much, Minister. (Audience laughter and applause, session ends.)
#RethinkGrowth2024 #WellbeingEconomy #BeyondGrowth #PostGrowthEurope