Celtic Tiger 2005: Built to last or on a foundation of quicksand?

finfacts

While Taoiseach Bertie Ahern has made some valid comments on the Irish Ferries dispute, he is riding a dangerous tiger in keeping silent on the pressure to bring in French style employment protection laws.

He can play King Canute to the real threat of a reverse of the offshoring that has brought us great prosperity but where are the positive and credible plans to counter it?

Besides, the two factories that announced plans on Tuesday to close because of overseas competition, the Government has spoken about knowledge-based jobs but in India and China, they are developing as significant R&D centres. They are also producing high calibre graduates by the thousands.

The wealthy Irish have ploughed billions into property compared with the chicken feed that has been available for new Irish businesses.

On Monday Intel chairman Craig Barrett said that the company may build a plant in China. American banks ar looking at offshoring significant operations to India. With some 90% of Irish exports being made by foreign-owned firms, the risks are huge.

As Julius Caesar reputedly said: The General who rests on his laurels, is usually, wearing them in the wrong place!

It is surely time to wake up.

http://www.finfacts.com/irelandbusinessnews/publish/article_10004162.shtml

BrianD

Quicksand without a doubt. It's a temporary thing that will fizzle out. Why? It's built entirely on speculation. Furthermore we are using the wealth to enrich ourselves personally and not the community/country we live in. HAve you seen the type of services and living environmnent in Ireland that you get in Germany, Australia ... ? Nope. You'll be hard pressed to go for a swim in most parts of Dublin.

But it's incredible how the times have changed. Remember when the ministers for agriculture and education used to be the prominent ministers because they were a huge power block in the economy? The farmers and the teachers! I am not even sure the minister for agriculture is!

It seems that the property industry is the economy. The building of houses and the buying of same at home and abroad. The Government has made no attempt to develop a high tech sustainable industry to use all those well educated people that we used to export. The Intels of this world will move on as soon as the incentives run out and just like your local pub/shop will use immigrant labour they will just move their plants to the next source of cheap labour.

Garrett Fitzgerald made a very wise observation recently. He asked why to we need people to service the economy when the economy should be there to service the people. We treat the economy as the end that justifys the means - that must be kept going at all costs.

Bluehair

BrianD wrote:

We treat the economy as the end that justifys the means - that must be kept going at all costs.

Hey it's the American way (closer to Boston than to Berlin and all that).

Unfortunately it's all being built on a generation that know nothing else; cheap credit, abundant jobs, rampant property speculation, appauling services...

I've no doubt that when things start to go bad we'll all look back on this as the 'wasted decade'.

mike65

Hmmmmmmm, the celtic tiger was supposed to have been slain once already. If we are still talking about it then the phenomenon may be hardier than the sceptics like to think.

The deep roots of long term economic success take a long time to develope, comparing us to mature economies like Germany is frankly idiotic. The old West Germany spend 30 years on a growth run of about 5% pa, which for the size of the country was fantastic (bigger the country the smaller the average growth rate as a rule). The fact the country still appears rich, even after 10-12 years of stagnation is down to the money spend in the past. Once you have solid foundations, maintainence of the country is still possible on low growth rates. Though they'll get found out sooner or later if reform is'nt forthcomming.

Here the money is still "new" and the Irish like all 'nouveau riche' spend the cash in a feckless fashion, on cars, holidays, hot tubs etc! The state meanwhile has to play catch up as growth spurts stretch everything to breaking point, the feeling is that alot of money is being spent and we're seeing little for it.

Often this true but thats a managment failing, and we vote them in and out of office. (though senior civil servants are part of this problem too and they have jobs for life).

The growth rate of the population is put at a staggering 25% over the next 20 years ie from 4 to 5 million, I think this is unlikely and yet if those who have arrived here since the boom began put down roots and have children then may the projection is'nt so wild. A fast growing population creates growth in itself.

BrianD made a point about devloping indiginous industry, its a valid point. The industrial profile of the economy is skewed toward inwards investment which, as said is mobile. Trouble is large scale locally owned employers will always be few and far between in a small economy, it does'nt matter how fast we grow this state will always be a tiddler. Those that are ambitious will expand operations elsewhere so they can take advantage of economies of scale and a large local consumer base.

Mike.

BrianD

Could we be the first nation who's primary economic activity is Real Estate?

ronbyrne2005

mike65 wrote:

Hmmmmmmm, the celtic tiger was supposed to have been slain once already. If we are still talking about it then the phenomenon may be hardier than the sceptics like to think.

The deep roots of long term economic success take a long time to develope, comparing us to mature economies like Germany is frankly idiotic. The old West Germany spend 30 years on a growth run of about 5% pa, which for the size of the country was fantastic (bigger the country the smaller the average growth rate as a rule). The fact the country still appears rich, even after 10-12 years of stagnation is down to the money spend in the past. Once you have solid foundations, maintainence of the country is still possible on low growth rates. Though they'll get found out sooner or later if reform is'nt forthcomming.

Here the money is still "new" and the Irish like all 'nouveau riche' spend the cash in a feckless fashion, on cars, holidays, hot tubs etc! The state meanwhile has to play catch up as growth spurts stretch everything to breaking point, the feeling is that alot of money is being spent and we're seeing little for it.

Often this true but thats a managment failing, and we vote them in and out of office. (though senior civil servants are part of this problem too and they have jobs for life).

The growth rate of the population is put at a staggering 25% over the next 20 years ie from 4 to 5 million, I think this is unlikely and yet if those who have arrived here since the boom began put down roots and have children then may the projection is'nt so wild. A fast growing population creates growth in itself.

BrianD made a point about devloping indiginous industry, its a valid point. The industrial profile of the economy is skewed toward inwards investment which, as said is mobile. Trouble is large scale locally owned employers will always be few and far between in a small economy, it does'nt matter how fast we grow this state will always be a tiddler. Those that are ambitious will expand operations elsewhere so they can take advantage of economies of scale and a large local consumer base.

Mike.

look at finland,its roughly same population as ireland and has the likes of nokia and many other massive international industrial and hi tech companies,nokia used to be a wood processor and chemical company but they knew thay had to move into high tech and they prospered, we should be doing this but we arent , innovation and research is required to maintain growth in the long term,at the moment the things driving the irish economy are property speculation fuelled by artifical interest rates and foreign multinationals due to our tax haven status ,if you took these two things out our economy has very little substance in terms of real research and innovation and few succesful high tech irish companies and not many large irish companies and brands powering the economy and competing on the international stage.our most popular supermarket chain is english,our biggest employers are foreign multinationals our biggeest industry is property

people think we're a rich country now but think of it like this, we are a person who has got his first good job and is earning a good wage and spending it on a frivilous lifestyle,we're earning a lot each year but we havent got much underlying wealth like our german friend who inherited a large amount but who is in and out of work from time to time and is on a lower wage. ireland has a large gdp now but little underlying wealth in terms of infrastructure, savings in financial assests and public services.

Boredinwork

I think there is alot of sense being talked in the above posts. Ireland is certainly a economy built on quicksand and should eventually collapse. If you look at our economic growth for the last 3-4 years it has been completely fueled by the indigenous construction industry. Previously economic growth had been fueled by American multinationals exports. Both of these are a very unstable foundations to be building a economy on. At the moment the economy could go two ways, Further growth in multinational manufacturing….you got to remember we still offer excellent tax breaks, free IDA manufacturing sites (Well almost) and cheap hardworking graduates (Me not included). The government is already looking a new green field sites for pharma plats in Galway and Dublin. Also we are very sparsely populated country, so while there are still jobs, there will still be demand for over-priced houses in the country. In terms of land mass we could easily fit 8-10 million people in the country. Don’t ask about the facilities!! That’s about 100,000 house required for the next 10 years. That should fuel economic growth of 3-4% for the next 10 years. Not bad. On the other had the jobs could dry up and move to India, Eastern Europe which will have an adverse affect on the fickle construction industry. I think the biggest affect on the construction industry will be the removal of tax relief’s. Now there will be little incentive to take on risky construction project’s of apartments/hotels in less well of areas of the city. Thus construction/economic output will reduce. However the Irish economy has been flattering to deceive for the last 4-5 years so don’t be surprised if it continues to do so!!!!!

Our man in Havana

Boredinwork wrote:

I think there is alot of sense being talked in the above posts. Ireland is certainly a economy built on quicksand and should eventually collapse. If you look at our economic growth for the last 3-4 years it has been completely fueled by the indigenous construction industry. Previously economic growth had been fueled by American multinationals exports. Both of these are a very unstable foundations to be building a economy on. At the moment the economy could go two ways, Further growth in multinational manufacturing….you got to remember we still offer excellent tax breaks, free IDA manufacturing sites (Well almost) and cheap hardworking graduates (Me not included). The government is already looking a new green field sites for pharma plats in Galway and Dublin. Also we are very sparsely populated country, so while there are still jobs, there will still be demand for over-priced houses in the country. In terms of land mass we could easily fit 8-10 million people in the country. Don’t ask about the facilities!! That’s about 100,000 house required for the next 10 years. That should fuel economic growth of 3-4% for the next 10 years. Not bad. On the other had the jobs could dry up and move to India, Eastern Europe which will have an adverse affect on the fickle construction industry. I think the biggest affect on the construction industry will be the removal of tax relief’s. Now there will be little incentive to take on risky construction project’s of apartments/hotels in less well of areas of the city. Thus construction/economic output will reduce. However the Irish economy has been flattering to deceive for the last 4-5 years so don’t be surprised if it continues to do so!!!!!

What will wreck the economy is when (and not if) interest rates increase and there will no one around to buy all these houses.

irishguy

If we keep our low corporate tax rate, interest rates stay relivatively low and we keep producing high quality graduates. We will be able to maintain our current growth rate for a number of years but if any of these are affected it will have hugh consequences for the economy.

Also we have one of the highest personal debt rates in the world, but on the plus side a hugh proportion of this in invested in property abroad. So if the international economy keeps growing Ireland could become a very wealth country.

On the flip side if the recent interest rate rise is a hint of things to come and the EU push through tax harmonisation. We could be out of work with with alot of loans to pay back.
thats just my 2c

jrey1981

Regarding Nokia, they are no strangers to offshoring/outsourcing - they welcomed the likes of Hungary coming into the EU and have moved a significant proportion of their production there, as well as having opened up factories in India and China.

The quicksand, as others have said is the low corporate tax rate, which can only carry on for so long in my opinion, and cheap credit that are fuelling the boom here.

The other much larger precipice the global economy stands on, as we all know, is still relatively cheap oil. Once the slowdowns in production feed through into the economic figures and we ride the slippery slope down the other side of peak oil, then it will become clear that all the outsourcing, offshoring, just-in-time deliveries and globalisation is just one big short sighted illusion.

supersaint2005

It will be interesting to see what the next few years bring for our economy. We are certainly not investing enough in infrastructure which will help drive our economy in the future. Our governments failure to look further than the upcoming general elections is a real danger. why they didn't built the M50 3/4 lanes each side is a classic example. They're too busy lining their own pockets e.g. Callelly - 18 houses, 30 taxi plates (no, that hasn't made it to the papers yet!!) Bertie is best buddies with all the property developers who are building in dribs and drabs to keep prices artificially high. We need to cut this greed out to ensure our future prosperity. It's us the people who have achieved great things in the last 10 years not Bertie & his cronies