16 August 2001 Edition
Tiger economy not the envy of Europe
BY ROBBIE MacGABHANN
July inflation figures of 4.8% showed a fall in 26-County prices to their lowest level in over a year. The figures released last Friday, 10 August, also registered the fourth consecutive month of decline and had government spokesperson, Seamus Brennan, out plugging the ``good news''.
We are not the envy of Europe. This is an establishment-generated illusion. The hard efforts of workers generated enormous wealth and yes, many people benefited, but thousands more were and are being left behind
Coming just two days after the announcement of the Gateway closure, the coalition government seemed desperate for some data that could show the economy in a good light. Rising inflation over the 18 months up to last March had become a hugely important political and economic issues, principally as workers participating in the partnership agreements were seeing the real value of the wage rises won through negotiations with employers eroded by increases in prices.
In the simple logic of the coalition government it follows that falling inflation merits a lot of flag waving. `Welcome back low inflation' - maybe we should have organised a cavalcade from the airport.
So, prices are rising more slowly and falling in some important areas such as clothing, footwear and fuel. The fear of overheating in the economy is passing, according to the economic pundits. Overheating is when an economy is growing so fast that prices rise as businesses know that with so many people wanting to buy things they can raises prices without losing customers.
A good example of overheating at work in the Irish economy over recent years is the effect that rising incomes and low cost loans have when there aren't enough nice new redbrick semidetached houses to be bought. The result was that prices spiraled and thousands of people who didn't want to buy a house in the first place were the forgotten victims.
Homelessness increased, evictions increased, private rents soared, local authority housing waiting lists increased and many people rushed into buying homes that might not hold their value.
Now we clearly don't have an overheating economy. We have one that might be on the edge of at best a gentle slowdown, where total employment stays relatively static, or grows much more slowly, or worst case where the economy spins into a longer and more deeper recession.
Coalition Government chief whip Seamus Brennan offered an interesting analysis. He said ``the underlying performance of the Irish economy still remains very strong and we continue to enjoy growth levels that are the envy of our European partners''.
Funny that no one registers that inflation began to fall in the same month that Foot and Mouth began to exact a heavy toll on the island economy and that this might be a contributory factor to the fall in inflation, as retailers cut prices to attract people back into town centres.
However, if we return to the envy issue for a moment, does the coalition government really think that the rest of the EU envies our growth rates? I wonder then what they think about the same high growth economy that has the largest and still growing gap between rich and poor in the EU, that has one of the worst health services and most underfunded public transport services?
We are not the envy of Europe. This is an establishment-generated illusion. The positive side of what has happened to the economy is that the hard efforts of workers generated enormous wealth and yes, many people benefited, but thousands more were and are being left behind. This is what is so wrong with the Tiger economy.
Seamus Brennan wants us to be vigilant to international economic developments. Maybe he should stop and think about the real international comparison between Ireland and the rest of Europe and how little we measure up.
July inflation figures of 4.8% showed a fall in 26-County prices to their lowest level in over a year. The figures released last Friday, 10 August, also registered the fourth consecutive month of decline and had government spokesperson, Seamus Brennan, out plugging the ``good news''.
We are not the envy of Europe. This is an establishment-generated illusion. The hard efforts of workers generated enormous wealth and yes, many people benefited, but thousands more were and are being left behind
Coming just two days after the announcement of the Gateway closure, the coalition government seemed desperate for some data that could show the economy in a good light. Rising inflation over the 18 months up to last March had become a hugely important political and economic issues, principally as workers participating in the partnership agreements were seeing the real value of the wage rises won through negotiations with employers eroded by increases in prices.
In the simple logic of the coalition government it follows that falling inflation merits a lot of flag waving. `Welcome back low inflation' - maybe we should have organised a cavalcade from the airport.
So, prices are rising more slowly and falling in some important areas such as clothing, footwear and fuel. The fear of overheating in the economy is passing, according to the economic pundits. Overheating is when an economy is growing so fast that prices rise as businesses know that with so many people wanting to buy things they can raises prices without losing customers.
A good example of overheating at work in the Irish economy over recent years is the effect that rising incomes and low cost loans have when there aren't enough nice new redbrick semidetached houses to be bought. The result was that prices spiraled and thousands of people who didn't want to buy a house in the first place were the forgotten victims.
Homelessness increased, evictions increased, private rents soared, local authority housing waiting lists increased and many people rushed into buying homes that might not hold their value.
Now we clearly don't have an overheating economy. We have one that might be on the edge of at best a gentle slowdown, where total employment stays relatively static, or grows much more slowly, or worst case where the economy spins into a longer and more deeper recession.
Coalition Government chief whip Seamus Brennan offered an interesting analysis. He said ``the underlying performance of the Irish economy still remains very strong and we continue to enjoy growth levels that are the envy of our European partners''.
Funny that no one registers that inflation began to fall in the same month that Foot and Mouth began to exact a heavy toll on the island economy and that this might be a contributory factor to the fall in inflation, as retailers cut prices to attract people back into town centres.
However, if we return to the envy issue for a moment, does the coalition government really think that the rest of the EU envies our growth rates? I wonder then what they think about the same high growth economy that has the largest and still growing gap between rich and poor in the EU, that has one of the worst health services and most underfunded public transport services?
We are not the envy of Europe. This is an establishment-generated illusion. The positive side of what has happened to the economy is that the hard efforts of workers generated enormous wealth and yes, many people benefited, but thousands more were and are being left behind. This is what is so wrong with the Tiger economy.
Seamus Brennan wants us to be vigilant to international economic developments. Maybe he should stop and think about the real international comparison between Ireland and the rest of Europe and how little we measure up.