6 April 2006 Edition
Economy: Uncontrolled growth, increasing privatisation
BY ROBBIE SMYTH
Visions of the future?
An unstable economy today, growing uncontrollably and funded by massive rising personal debt, and a future economy with nearly 30% of its citizens over 65, one million new Irish migrant workers and a million new houses built.
The future shape and direction of the 26-County economy is being mapped out with expert reports abounding in recent weeks from the usual collection of bankers, government agencies, economic think tanks and international institutions.
There are though four vital gaps missing from the studies, they are, firstly any sort of democratic or people-focused element in the economic analysis being offered, any real concern for the environment and no real all-Ireland basis to the analysis.
Finally the lack of government control or even input into the future shape of economic policies and planning is glaring, there are though some interesting opinions about one government policy that is being actively pursued, that is a growing number of conservative, market driven economists arguing against privatisation.
The studies published in recent weeks have come from the NCB, ESRI, economists at Trinity College Dublin, the Central Statistics Office, the OECD and the Central Bank, while Friends First and the Bank of Ireland also represent views from the financial sector.
NCB stockbrokers have produced a new survey on economic and demographic trends over the next 15 years. Titled 2020 vision, Ireland's demographic dividend, it makes a series of forecasts about the future of the 26-County economy.
The population will grow from the 4.1 million of 2005 to 5.3 million. The new Irish migrants who currently account for 10% of the population will have doubled to 1 million or 19% of the population in 2020. The study also forecasts that 29% of the population will be over 65 that's 1.7 million pensioners.
The number of cars will have grown from 1.7 million in 2005 to 3 million and nearly a million new houses will be built over the next 15 years. The implications for the state infrastructure are massive, going on these figures the Ireland of 2020 will be a very different place to today.
A million SUVs
The NCB report raises a lot of questions like what type of housing are we going to build, the recent tax reviews on incentives for property development pointed to the deficiencies in the massive apartment building in cites that have the potential to create a new era of ghettoisation and with a preponderance of 1 and 2 bedroom units are unfit for long-term family living.
It also raises the issue of the emerging car culture with the number of cars on our streets set to nearly double over the next 15 years, already our major urban centres suffer daily gridlock, will the 26 Counties have the road network to carry all these cars, do we even want to have a car based culture?
A study published this week by Sustainable Energy Ireland has found that the growth of SUVs is now one of the largest contributors to the growth in greenhouse gas emissions in the 26 Counties. SUVs produce three times the amount of greenhouse gases compared to smaller cars while the number of larger cars, that's with engine sizes greater than 1,900cc has increased by 300% since 1990. There are now 200,000 such cars on our roads. By 2020 we could have a million SUVs on Irish roads. Is this really the Ireland we want to live in?
So who will build this new Ireland? According to current government policy the infrastructure of 2020 will be increasingly privately built and owned, and there is little debate about whether this is a good thing especially if our population and economy is et to grow so much over the next 15 years.
Dan McLaughlin, chief economist at the Bank of Ireland has called on the coalition government to establish an infrastructure fund with the current tax bonanza rather than let the money be frittered away.
McLaughlin has also joined with Communication Workers Union general secretary Steve Fitzpatrick in recommending that the National Pension Reserve Fund invest in Eircom rather than let it be bought again by venture capitalists who will further indebt the company. As of yet there has been no government response to either of these recommendations.
The issue of overdependence on the housing market was raised by Friends First economist Jim Power. Their economic outlook published in late March argues that consumer spending has risen to the pre 911 levels n the heyday of Celtic Tiger economic growth.
What is different now is that we have a hugely inflated housing market, with consumers borrowing more and more money to spend. According to Friends First the construction industry accounted for 19% of all economic activity in the 26 Counties last year and the economy is now too dependent on the housing market.
In the same week the Irish Financial Services Regulatory Authority warned against homeowners who were remortgaging their homes to pay short term loans and credit card bills. Future interest rates rises could make this a very expensive way of clearing your credit card now but paying off the debt over 20 years, but it shows the level of consumer spending in the economy.
This week the Regulatory Authority has, as borrowing reaches record levels, called on the banks to put more money aside to cover potential mortgage defaulters. Irish households owed €268 billion to banks and financial institutions at the end of March.
The increased rate of economic growth has also been highlighted in new Central Statistics Office figures published late last week. They reinforced the findings of other economic forecasters by showing that economic growth of 5.4% in 2005 was the highest level of growth in five years.
The CSO figures also show an economy driven on credit driven spending, and an economy where imports are rapidly outstripping exports with a gap not seen in 20 years. There is a strong argument to be made that the economy is out of control. Driven not by government policies but by consumer spending and borrowing and increasingly on imported goods.
Who is in the driving seat?
The missing link in all of these studies is the Coalition government, where are the Finance and Enterprise ministers? Brian Cowen and Michael Martin have fallen off the government radar in recent weeks. These studies collective raised some serious questions about how our economy is performing but neither has publicly responded. Its seems that the driving seat is empty when it comes to economic policy. If the government continues to leave a policy vacuum the banks and builders will fill it with their policies, but maybe that's what they wanted all along.
The 26-County economy in numbers
Number of cars on roads today
Number of cars possible in 2020
Percentage of the population predicted to be over 65 in 2020
Level of economic growth in 2005
Amount of money owed by 26-County households