This is my first post. I'm a 'more part-time than I'd like' writer right now, but one of the regular gigs that I have is as a columnist for that august publication, Totally Dublin. That'd be Dublin, Ireland, geography fans.
It's fun, but occasionally I find myself wanting to write more than my word count, so one of the things that I'll be doing here is posting my columns from time to time, with some added bits if I think I haven't rambled enough. Hopefully it'll stay fairly interesting and avoid self-indulgence, but we'll see...
October's column is inspired largely by another recent job, working as a researcher for David McWilliams, an Irish economist who has just published a book called The Generation Game, which is catching a teeny bit of heat right now, mainly for suggesting that Ireland's boom might just possibly have a best before date.
Anyway, here's the column:
'The queues of frantic soon to be ex-customers are trailing out of branches of Northern Rock as I write this, with the British parliament desperately trying to calm everything down amid fears of an imminent recession. By the time you read this, the situation may be much worse, or if we are to remain with our governments interpretation of the affair, just grand, no bother at all, barely a storm in a teacup. Bertie says that all those people who are suggesting that the economy might be in less than the full flush of health ‘are not economists’ and that he wouldn’t trust them ‘with a dime going down the shop’. Rightly so. Do these comedians not realise that our currency is the Euro? Clearly, against the fearful intellectual might of Our Glorious Leader, charlatans like David McWilliams, Alan Greenspan and The Economist are naughty schoolboys secretly reading the Beano inside their economic textbooks, quaking in their shorts. Surely everyone is going to come to their senses now and go back to buying duplexes in Meath?
What’s that? Sub-Prime mortgages? Consolidated loans? Popular in America, you say? Sounds good. Nothing could possibly go wrong there. Oh. It did? Really? Collapse in financial markets, eh? Ah. Well. That could never happen here. We’d never dream of selling sub-prime mortgages to people who have no business with Monopoly money, let alone the real stuff. No, we’d never have people like Start, Springboard, Stepstone, Nua Homeloans or GE Money peddling that sort of financial product. I’m certain that these companies also would be in no way connected to some of the large US financial outfits that are on the sharp end of the subprime disaster on that continent right now, or some of the ones that have been getting a bad press in the UK at the moment. Names like Citicorp or GE Capital would never pop up, surely.
Whew. I’m glad that we don’t need to worry. Even if we did, Our Glorious Government have taken fabulous care of Ireland’s infrastructure in these prosperous years. We really have made hay while the sun shone. What with all the new hospitals and schools in the rapidly expanding commuter belts, the massive improvements to the public transport system and the roads all over the country. Not to mention broadband. I think we should all ignore that World Economic Forum report on how Ireland has a poorly developed and inefficient infrastructure, or all those tedious reports about healthcare and education shortcomings. They’re all just jealous.
Oh well. I’m sure nothing else could go wrong. We have all those lovely US multinationals like Intel, Apple and Google. Excuse me, I didn’t catch that. China?
Yes, I would be in no way worried about the fact that our biggest indigenous industry – the building and property market – is predicated on selling things to each other at ludicrous prices. Nor do I have any worries that all these other countries like China, India or even places like Poland or Romania would ever do something as ridiculous as undercut our invitingly low corporate tax. What’s in it for them? Anyway, it’s not as though they have substantially more people willing and able to do the same jobs for the multinationals that Irish people do now.
Yes, we’re very lucky to in such a rock-solid economy, run by such a clever government. We’ve got no worries at all. '
So, it's a little flippant, but that's the problem with columns generally. They're not really designed for detailed discussion of complex ideas, which is fine unless you're as pretentious as me. Then again, if you wanted a profound discussion of economic ideas, you probably wouldn't be reading Roisin Ingle, Julie Burchill, or god forbid, me.
Still, it's interesting to think about the issues that I'm trying to raise here. Ireland is in a different situation than it ever has been before. We do seem to have lots of money, and everyone is doing really well. However, it doesn't necessarily follow that everything's going to stay that way, let alone keep getting better.
There are several potential problems with the economy, it seems to me:
1. Our reliance on foreign multinationals. Before anybody confuses this for Indymedia, I'm not about to start ranting about globalisation. Or at least, not right now. What I am saying is that a large part of the reason that Ireland's boom has happened is attributable to our success in attracting large foreign corporations to our shores - Dell, Apple, Intel, Pfizer, Google, etc, etc. We succeeded in bringing these outfits here because we had a great sales pitch: an educated, English-speaking workforce, (relatively) cheap costs and most of all a very agreeable corporate tax rate.
In 1999, Ireland's corporate tax rate was 8%. To put that in context, the rate in the UK was 30% at that time. We could set our bar that low because we had nothing to lose - this was 8% more tax than we would have had otherwise, so it was in effect, free money. There was no way that the UK could compete with the underdog across the water, and by October 2004, Ireland was the most profitable country in the world for US investment. US companies, being clear-minded about the whole 'making money hand over fist' thing, came over and created lots of jobs, pouring lots of money into the economy.
So this is all great. We're all working in HR and driving our BMW's, thinking about Saturday's barbecues. Everything's just fantastic.
Along comes every other country that was in our position 15-20 years ago. Last year, a Swiss canton, Zug, set it's corporate tax rate to 6.6% (Ireland's at the time was 12.5%). Every country that watched our ascent from Europe's pauper to prince is going to copy this model, just as we are beginning to be unable to compete. Bulgaria's corporate tax rate is
10%. Expect this to continue, and as it does, watch one very compelling anchor to our economy get pulled.
After writing all that, I think that it might be an idea to split this post, given that it's now over a thousand words.
So, whomever has read down this far: cheers, I hope it's been interesting. Do come back.
- thanks to FinFacts for all the hard data that I don't actually carry around in my head...