A positive view of Ireland's economic future

[Emerald Green]

This is from today's Observer:-

___________________________________

Irish economy 'will lead Europe within a decade'
US economist thinks growth rates will eventually outstrip main rivals

* Henry McDonald
* The Observer, Sunday 11 January 2009

Ireland's economy will bounce back from the credit crunch and start to outperform its major European rivals over the next 10 years, one of the United States' leading economists has predicted.

After a week of job losses and warnings yesterday of major cuts in the Republic's public sector, a former adviser to the US government has given a surprisingly upbeat assessment of Ireland's economic prospects for the rest of the decade.

Within the next 10 years Ireland's growth rates will be higher than the economies of main competitors such as Germany and France according to Dr Robert E Kennedy, head of business administration at the University of Michigan.

In a new book on outsourcing in the global economy, Kennedy urges Ireland to accept that "assembly-line manufacturing" would leave the country for eastern Europe and beyond.

Last week US computer giant Dell announced it would axe 1,900 jobs at its Limerick plant and shift its manufacturing to Poland. The job losses at Dell came just 48 hours after 800 jobs at Waterford Crystal were put in jeopardy after the glass maker's parent company, Waterford Wedgwood, went into administration.

Kennedy predicted more jobs would be lost from Ireland's manufacturing base. "Ireland has very high labour costs compared to central and eastern Europe. The average wage, if you divide GDP by population in Ireland, is around $50,000 (€37,000) whereas in Poland, it is $11,000. So in terms of low-skilled jobs involving physically assembling computer parts, in the end Ireland can't compete.

"However, where Ireland has an edge is in its highly skilled, educated workforce. What was interesting about the Dell decision was that it was its manufacturing arm being shifted to Poland. Dell is keeping most of its service and administrative base in Ireland."

The central thesis of Kennedy's book is that advanced economies must shift their activities from manufacturing to services and specialist fields such as financial expertise, biotechnology, innovation and design.

"What is happening to the Irish economy at present, if we leave out the credit crunch, also happened to the United States quite a while ago," he said. "Today in the private sector service and specialist industry makes up about 72 per cent of economic activity, whereas only 16 per cent is manufacturing.

"Ireland is going through the same process. Your success from the mid-1990s was based on attracting big names in manufacturing from the United States. Now they are leaving as your wage levels rise and these companies look eastwards. The next phase the Irish economy will go through is an evolution towards services where you will grow in niche areas of expertise. You have the edge over others in the EU because you have an Anglophone, highly educated workforce as well as a free and open economy. Leaving aside the current global crisis, Ireland still has an excellent business environment."

Dr Kennedy said that within a decade Ireland would be enjoying annual growth rates of 3 per cent, far higher than the EU average. "Economies like Germany and France are not as flexible as the Irish economy. There are far more restrictions and regulations in these larger economies than there are in Ireland. If you asked me what will the picture be like in 10 years' time I would put big money on a bet that Ireland will outperform these larger countries."

___________________________________

Thoughts?

[riven]

Groth rates are irrelevant. Ireland is a tiny tiny economy. Its economy will never lead europe (unless we develop fusion)

[fergalr]

This, I hasten to add, was also the upbeat assessment of Ireland's educational and economic future put to me by SIPTU V.P Brendan Hayes in November when I was interviewing him about the Social Partnership.

R&D has got to be where it's at. And not to introduce another unexpected opinion on this but Mary Harney said last year or the year before that we need to push more and more young people to attain post-graduate qualifications to stay competitive.

[dandyspencer]

And the next joke is?


What does Ireland manufacture?

Parts for Dell?

Oh dear.

Parts for Intel?

Opps!

we are good with the guiness!

[junketman]

With the right leadership it's possible. The Rainbow Coalition of 94-97 was the best government in the history of the state in my opinion, gave us surpluses, instituted a lot of good public works schemes, gave us free 3rd level education, the low corporation tax and started the economy on the Celtic Tiger path, which was a path of growth in high tech sectors and attracting investment in our well educated labour force.

If we had a government like that again then we might lead Europe. Unfortunately the FF/Green/PD/Independents government just don't have the capacity to do anything other than to lead us into an economic quagmire. If the people can get those out of office then we might have a chance, leave them in and we have no chance.

[TradCat]

He means lead Europe in terms of GNP growth rates. It is possible but we have to deal with the fallout from the bubble first.

[SJL4277]

Groth rates are irrelevant. Ireland is a tiny tiny economy. Its economy will never lead europe (unless we develop fusion)

Right. Thanks for pointing that out.

[TradCat]

With the right leadership it's possible. The Rainbow Coalition of 94-97 was the best government in the history of the state in my opinion, gave us surpluses, instituted a lot of good public works schemes, gave us free 3rd level education, the low corporation tax and started the economy on the Celtic Tiger path, which was a path of growth in high tech sectors and attracting investment in our well educated labour force.

Why do people talk like that? They didn't give us surpluses. We gave them surpluses. And free third level education was a bad policy. The first of the stupid decisions that brought the Celtic Tiger to an end.

In fairness Fianna Fail are far more culpable for that.

[SJL4277]

The thing I'd worry about is not can we return to decent economic growth in terms of positive GDP/GNP figures, as there have been several promising investments this year, but whether the economy can ever return to full employment again? The construction sector will take ages to recover, and if the Irish people have learnt anything, construction wont take place at the same scale again anyway. Also, people laid off from manufacturing aren't likely to have a huge amount of transferable skills. My guess is that we're facing into a period of relatively high unemployment, even after we return to growth

[fergalr]

Good point about layoffs from manufacturing facing a dearth of jobs to which their skills can be transferred. These people may form a significant bulk of the first Irish emigrants of this downturn. Into this group must go a large number of members of the construction industry. It'll be Auf Wiedersehen Pet, I fear. Although where in the West they can go for work right now is a questions almost too depressing to linger on.

The collapse of the construction industry was partly a case of supply vs. demand. A lot of people moved onto the property ladder for the first time as they had money for, essentially, the first time. That glut is unlikely to be repeated again. As to whether developers have learn their lesson? Government needs to take a much greater role in determining what houses are to be built. Messes like Belmayne opposite the Darndale Hilton, which is currently half-built buy an - I believe - bankrupt outfit are the follies of the last decade and hopefully not to be repeated.

We were poor before but we were never stupid. That's been the one solid cornerstone of our economy; our education as a nation. If we keep fuelling that and invest in up-and-coming economies such as environmentally sound energy production, we could be in a very good place when the recession ends.

We're losing our manufacturing sector, it seems. Britain lost its mining sector in the 1980s. These things do sometimes occur in the economic progression of a nation.