Funferal

Friedman on the Irish economy

Thomas Friedman’s column in the New York Times today argues that France and Germany should follow the economic policies of Ireland, apparently basing this on a recent trip to Dublin. He makes the Irish system sound like an unmitigated success, based on our decreasing worker protections.
While there may be some truth to his cause-and-effect argument, and I can’t speak to the specifics of the regulations on firing people to which he refers, there are a number of points that should be made to bring some balance to the story.
First, coincidentally, the annual job-figures report of Forfas was published this morning. Forfas is the umbrella body for industrial development in Ireland. Jobs supported by their schemes fell by 1,000 last year – which is better than the previous three years when losses averaged 6,000.
Second, those looking at improvements in the Irish economy over the past decade – and they are substantial – look at facts like growth, which sometimes hit 12% or more in the mid to late 1990s. However, you’ve got to bear several points in mind. The Irish economy was in truly disastrous shape in the late 1980s – in 1989 more people emigrated than completed second-level education. Large growth isn’t difficult in a situation like that since there is so much untapped potential. The open model adopted in Ireland has made it very responsive to changes in the global economy – overly responsive. When the global economy does well we can do very well; when it falls back, we slump.
Third, the situation Ireland now finds itself in is being a country with high prices – one recent survey listed Dublin as being as expensive as New York – and only moderate social services. According to a recent statement by Labour Party health spokesperson Liz McManus:

Today’s EFILWC [European Foundation for the Improvement of Living and Working Conditions] report reveals that Ireland’s health and social services are well behind the average of the pre-enlargement EU 15 Member States. Moreover, whilst our social services compare favourably against those in the 10 accession states, our health services are only marginally better.
Second, despite government claims to the contrary, OECD figures show that our total health spend for 2002 was only 7.3% of GDP, which is more than 1% lower than the average across other OECD countries.

Fourth, many of the jobs we have attracted have been low-skill ones that have left employees in difficult positions if – or when – companies move on, with few high-value or transferrable skills. ofr much of the 1990s tele-sales was marketed to students as the career of the future – there seemed to be a confusion that because telecoms equipment was involved in the process the jobs themselves were highly-skilled and desirable with many opportunities for personal development. Now, compared with unemployment or forced emigration a tele-sales job is often desirable, but it’s not particularly rewarding and varied work, or the sort of sector that necessarily provides a long-term career path. The government is belatedly recognising this issue in beginning to concentrate on research and development, on encouraging more complex indigenous industries.
In short, yes Ireland has improved economically over the last decade or more. This was in large part due to the impact of the global upswing on our open economic system. This open system has its shortcomings – particularly when downturns have a negative impact on economic development – and there’s more to measuring success than just pecentage growth.