August 17, 2011
Every time I walk past a tiny house on Railway Road in Dalkey, it amazes me that my immigrant grandmother gave birth to six children there in the 1920s and 1930s. As is typical for many Irish people, our family history is one of upward social mobility in a generation or two.
My dad left school to go to work before doing the Leaving Cert; yet I got the opportunity to go to fourth-level education. This is social progress and a similar experience is shared by hundreds of thousands of us as free education, rising incomes and greater opportunities have allowed recent generations of Irish people to become more prosperous than their fathers or grandfathers ever expected.
When I look at my own children, I wonder if such upward social mobility is coming to a halt. Is the Irish middle-class about to disappear? This is a very real question. Will my children and their contemporaries be the first generation of Irish children in over 80 years to be poorer than their parents? And if so, should we do something about it?
This week there were massive protests in Israel which, to my mind, were of much more significance for middle-Ireland than the riots in London or the demonstrations in Syria. The Israeli middle-classes have had enough and are taking to the streets because they feel betrayed. Their grievances are easily recognised by the average Irish voter.
Most Western societies are based on trust; a trust which is anchored on the premise of social advancement. Politicians betray that trust at their peril. The idea that tomorrow will be better than today is extremely powerful and is the stuff that keeps societies reasonably peaceful. If there is a sense that we all have some stake and some chance, it allows us to go on.
This belief in tomorrow keeps parents pushing their children as best they can, looking out for them, making sure that they stay on the straight and narrow as much as possible. The notion of being reasonably well-behaved today because this “good” behaviour will be “rewarded” by even better economic opportunities tomorrow is the very fundament of social progress.
The rules are obeyed because there is a pay-off at the far side. This is the unwritten rule of our social contract with each other and with the State to which we are allied. We are citizens and in return for being good citizens, those we love will be protected by the State and our children will be given a chance.
One of the great unwritten stories of the boom, which is being forgotten now, is that it was a jobs boom. According to the EU, Ireland did not become more unequal in the boom, but more equal. The gini-coefficient — which measures the income of the poor as a ratio of the income of the rich — pointed to the fact that Ireland was actually more equal than the EU average.
But this has stopped, and worse, it has gone into reverse because the middle-class’s balance sheet is broken. On one side they have houses, which are falling in value, and on the other side they have debts, which are rising in cost.
As this “wealth” evaporates and turns into debt there is no way out. The only prospect for economic improvement is that income increases. But incomes are being squeezed by taxes and — in the areas where Ireland trades internationally — by intense competition, in particular from Asia. So tomorrow doesn’t look better than today, in fact, yesterday begins to look better than tomorrow and when that happens, politics buckles.
What happens when that social conveyor belt to prosperity and a better life stops? The middle-class begins to shrink. The gap between rich and poor increases so the middle-class gets squeezed to pay taxes for the poor, but at the same time they see their chance of social advancement scuppered by falling incomes, unemployment, negative equity and rising childcare and education costs.
The psychological costs of this are everywhere. How many Irish mothers today will be looking across the kitchen table at a despairing unemployed 22-year-old son or daughter, wondering how this happened?
And this is where an economic response is necessary. It’s not good enough to sit tight, hope that everything will pass and declare business as usual. The State has to react and change economic tack.
After all, when you boil economics down, it should be about making sure that demand in the economy is sufficiently strong to keep incomes reasonably secure and to keep unemployment as low as possible. It should be an instrument to give people hope and belief.
It should be about creating a system of trade where people can have a chance to fulfil their lives. If that system breaks it should be fixed. If a society divides whereby those at the top have too much and those at the bottom expect those in the middle to pay for them indefinitely, the middle will revolt.
Ultimately, if the middle decides that after all their good behaviour they have been led up nothing more than a social cul de sac, they will question the point of this system.
One million are expected to protest in Tel Aviv and other cities on behalf of the squeezed middle-class in Israel. These protests are fascinating because they are totally different from the mass protests in the other countries of the region. Israelis, unlike Syrians or Egyptians, live in a prosperous democracy with a well-functioning welfare state, like most Europeans. Their problems and their protests are much closer to Cork than Cairo.
In Israel, ordinary people with jobs are protesting that they simply can’t live on their wages. They are complaining about a country where the top is extremely rich and the middle, traditionally well-educated and secure, simply can’t live on their after-tax wages. Does this sound familiar?
Think about the prospects for the average family in Ireland for the next few years. We know that taxes will rise and rise to pay for a national debt. We know that demand has collapsed and that the banks are ceasing to function as providers of credit. We also know that the exchange rate is vastly overvalued — if you doubt this go shopping with sterling in Newry. We also know that interest rates are rising not falling and we know we have a Government that is intent on doing nothing radical to reverse what is a truly unprecedented challenge.
This combination of economic difficulties and political inaction means that the middle-classes will shrink in Ireland and that the conveyor belt which carried many thousands on this journey towards a better future comes to a grinding halt.
That’s when the problems really start.