Davy Stockbrokers nailed it: we’re not wealthy now, we never were. Though we had years of high income, private investment in the productive economy was ‘pitiful’, opting instead for property and construction. While productive public sector investment was higher, it was squeezed by fiscal policies which cut taxation – especially for those on high incomes who didn’t invest properly. With public investment being slashed in the years ahead, we’re not going to be wealthy anytime soon.
But for a while the economy was rolling in it. While Davy was referring to wealth (capital stock), let’s look at incomes as measured by GDP per capita using the PPS measurement and chart our money roller-coaster (Ireland in GNP). Whatever about the larger debate over which measurement to use – GDP or GNP – it is clear that the latter measures how much money we are left with after capital flows.
In 1995 as the Celtic Tiger boom, fueled by multi-national investment and job creation was just taking hold, Ireland was the third poorest country in the EU-15. We even ranked behind Spain in terms of GDP per capita (PPS).
However, we were starting on our roll. Exports were growing exponentially, employment was rising rapidly, emigration was ending and incomes were rising. It was only a matter of time before we started heading up the charts.
By 2000, Ireland had nearly closed the gap with the EU-15. We had gained on the table leaders and significantly widened the gap with the poorer countries – Greece and Portugal.
By now, though, the speculative economy was taking hold. Attempts to create a strong indigenous enterprise base and organic linkages with the multi-nationals (i.e. Irish companies supplying multi-nationals with goods and services) were floundering.
The economy continued to grow – in excess of EU averages – but not at the same rate as the first phase of the Celtic Tiger boom and certainly not in a sustainably way.
But the few who pointed this out were laughed out of the court of public opinion.
And why not? According to the numbers, on the eve of the recession, we were rolling in it. We surpassed the EU-15 and now ranked 2nd behind the Netherlands. The days when we were skimming the bottom was a long time ago in an economic galaxy far away.
But as we have learned, the numbers were badly misleading. Ireland was more damaged by this recession than any other EU-15 country: collapsing output and employment, exploding deficits, burned out banking. And let’s not forget, a Government that didn’t know what it was doing – either in 2000 or in 2008 (or, rather, a Government that couldn’t think beyond a low-tax).
So where are we going to be by this time rollercoaster hits bottom? Not in a very good place.
The EU Commission projects that Irish income per capita will fall back below the EU-15 average.
In addition, the gap between Ireland and the poorest country – Portugal – will be close to where it was in 2000. In just a few short years we have fallen from the heady heights of second place. It can be argued that all the comparative gains we made since the beginning of the decade were wiped out.
So it’s been quite a roller-coaster in the league tables. In 1995 we started off in 12th place in the EU-15:
- 1995: 12th
- 2000: 11th
- 2007: 2nd
- 2011: 10th (estimated)
Not only were we never a wealthy country, when we had the money we blew it. But who blew it? To whom did this money to flow to? How many of us shared in the high-income times? Relatively few – as we will see in a subsequent post.