The global economy needs a new Marshall Plan to fight the fallout from Covid-19 and place green technology at the centre of energy, transport and food production systems, according to economist John Van Reenen.
In an address to the annual conference of the Dublin Economics Workshop (DEW), the London School of Economics professor said the pandemic had most likely accelerated a long-term productivity slowdown, which was impacting industrial nations prior to 2020.
While productivity growth is projected to rebound in 2021, these gains are likely to be transitory without further acceleration in digital transformation, he said.
This can be done not just through more innovation but by spreading existing technology, he said. “The challenge is to strike a balance between protecting people and economies while reallocating resources away from some of the older industries,” he said.
Frances Ruane, chairwoman of the National Competitiveness and Productivity Council, said Ireland’s highly concentrated level of foreign direct investment (FDI) needed to be examined with a view “to addressing the low productivity tail in the SME sector”.
The presence of multinational enterprises in Ireland – in particular, those operating in pharmaceuticals and information/communication technology sectors – has provided a significant advantage to the domestic economy, but the spillover in terms of innovation has been limited.
Mr Coates said the pandemic had changed the State’s interaction with the economy, noting that in May 2020 more than 1.2 million households were in receipt of State supports.
The Government has signalled that the Pandemic Unemployment Payment will be wound down over the next few months and phased out entirely by February next year. The employment wage subsidy scheme (EWSS) is likely to follow a similar path.