AP front 1 - 2022

25 January 2001 Edition

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Could this really be the end?


Dell, Compaq and Microsoft were added to the list this week of technology giants who have somewhat lost their shine. Add in growing fears that the US economy is slowing down and you have the crisis mongers in our media foretelling that the Celtic Tiger is heading for the endangered species list. No one seems to be answering the simple question of why are we so easy prey to a boom and bust cycle anyway?

First though, the news from the Silicon island. Dell, which employs a mere 5,700 people across its operations in Limerick, Bray and Dublin, has warned of reduced profits. The good news for now is that Dell has played down any suggestion of job cuts like the 132 workers who will be leaving Gateway in the coming weeks.

Compaq, which employs 2,200 people in Belfast, Dublin and Galway, recorded fourth quarter earnings for 2000 that were a 55% increase on the previous year. However this is below ``market expectations'' and the company also had to write off $1.8 billion dollars. This left Compaq with a net loss of $672 million.

Microsoft, which employs 2,000 people in Dublin, recorded last quarter profits for 2000 that were unchanged from 1999.

All three companies have huge markets in North America and Europe and all three have reported slowing sales growth in these regions. Note that it is only slowing sales growth. Sales have not fallen. They are just not growing fast enough.

This is the nub of the problem that the US economy and by extension the Irish one is facing. The US companies here have built their corporate strategies and investments around the premise of an ever growing market. It was the same premise that caused the Asian Flu crisis of 1998.

The Asian Tiger economies had borrowed trillions of dollars and invested in huge building programmes on the premise that their economies would continue to register rapid economic growth. It was the slowing of growth that caused the crisis, leading to huge instability in international financial markets. European and US banks lent the money to fund this expansion and found themselves with a huge growth in bad debts.

Now in Europe and North America we are on the cusp of the same problem, because of the short-sighted nature of international companies and the policy makers who assist them.

The signs are that the US economy, after a nine-year period of steady expansion and increasing employment, is not collapsing but slowing down its growth. Why should this precipitate such a crisis?

If there is work for all the technology workers here on the basis of the same profits as last year, why should there be job cuts? The simple reason is the Dells, Compaqs and Microsofts of this world have built themselves into an environment where there has to be an ever increasing spiral of profit.

If profit falls you slash workers and close plants. This is self-defeating, because with less people working there is less income and less people buying. We need to view these companies and their strategies as part of a unit, as an international problem that needs an international solution.

The first step to this is to begin to take the international economy off this profit-driven treadmill. It makes sense to make profits. It doesn't make sense to wreck an economy because you can't make that extra dollar more than last year. However, there seems to be nobody ready to face up to this simple reality.

An Phoblacht
44 Parnell Sq.
Dublin 1