After catch-up

The Economist’s bloggers have a piece on China today which is relevant to Ireland. They ask what happens to an economy’s growth rate, in the long run, once it has caught up to the technological frontier. Their answer, correctly, is that “Historically speaking, the answer is clear—growth slows to 2-3% per year.”

This is a point which Cormac Ó Gráda and I made in a textbook chapter on long run Irish growth a decade ago. Very high growth rates characterise economies catching up to the frontier — Western Europe or Japan in the 1950s and 1960s, the Asian Tigers in the 1960s and 1970s, ourselves in the 1990s. Once you have caught up, 2-3% per annum is about as good as it gets. Allowing a bubble to inflate can obscure this reality over the short to medium run, but in the long run you won’t manage to grow more rapidly than the United States has done over the past century or so: to do so is a sign of an economy that is still in some sense backward.

These are relevant considerations when thinking about what sort of growth rates Ireland can reasonably be expected to achieve over the next decade or two.

47 thoughts on “After catch-up”

  1. Kevin is writing about per-capita growth. For issues such as debt sustainability and evaluation of various infrastructural projects, total output also matters, which depends also on demographics (domestic population growth and migration). This is an important consideration for Ireland given the scope for high migration flows.

    I took a quick look at state-level data for the US (1963-1997). Over that period, the US economy grew on average at 2.8 percent per year (total growth). But some states grew much more quickly (Nevada at 5.6 percent; Arizona at 5.1 percent) and other states much more slowly (New York at 1.6 percent; Michigan at 1.5 percent; West Virginia at 1.2 percent).

    This variation matters a lot for public finance projections. During the good years, the projected total growth for Ireland included an assumption that Ireland would be a major net recipient of immigrants; in contrast, the historic view was that Ireland’s total growth would be limited by net emigration.

  2. The frontier is multi-dimensional. While parts of the economy are close to the state-of-the-art (and a few define the state-of-the-parts), other parts still have some catching up to do.

  3. I have only skimmed through it very quickly, but the bloggers seem to have omitted any reference to population growth. Very negligent. Apologies to them if I missed it. Clearly, if population growth is higher, then, all other things being equal, economic growth will be higher, regardless of whether or not they allready have roughly similar GDPs per capita. This might not be so true in an overcrowded country, bursting at the seams, where the result of population growth might be pressure on land, water and other resources. But, in an underpopulated country like Ireland, it most certainly is true.

    In Ireland, the current natural rate of population growth (excess of births over deaths) is 1.1pc and, contrary to the expectations of economic forecasters a decade or so ago, has been rising sharply in recent years. It is also about the same in the U. States. What both Ireland and the U. States have in common is that, by today’s standards, they are relatively (emphasise ‘relatively’) religious and socially conservative countries. In contrast, in most of continental Europe, where the secular/left/liberal advance has swept all before it and industrialised abortion is the norm, the current natural rate of population growth is now negative, ie. there are more jobs for undertakers than midwives, and the percentage of the population who are over 65 is growing at a ferocious rate. That ways lies economic stagnation and social ruin, which is presumably why the left in Ireland wants us to go down the same route.

    As long as these demographic trends persist, it is extremely likely that Ireland and the U. States will enjoy higher long-term growth rates than demographically moribund continental Europe. Even if we accept that economic growth in continental Europe will average 2-3% per annum, and even if we accept (which I don’t) that per capita GDP growth in Ireland will henceforth only be the same as in continental Europe (over the past 40 years, it has beeen much higher), another 1.1% should be added to Ireland’s likely growth rate to take into account Ireland’s higher natural population growth.

  4. For those new to the debate, Kevin and Philip refer to what I see as the most important debate about the Irish economy over the last two decades: the “convergence” versus the “regional economy” views of Irish economic growth. The paper Kevin references is one of the classic statements of the convergence view. Frank Barry has been the most consistent advocate of the regional economy view (link to one of his papers below).

    An implication of the regional economy view is that even a mature regional economy can sustain high growth if it attracts sustained net resource flows–people and capital. Of course, such an economy can also experience sustained decline if those net resource flows reverse, creating greater variance of (mature) performance at the regional economy level.

    The debate about the nature of the Irish eocnomy has implications across a range of policy areas–industrial policy, migration policy, housing policy, the public finances, etc. While we have all been focused on crisis management issues, it is important not to lose sight of the forces that will swamp everything in the end.

    http://www.esri.ie/UserFiles/publications/20070724151930/QEC2002Sum_Policy_Barry.pdf

  5. @ All,

    When I read Kevin O’Rourke’s orginal post, it instantly reminded me of a blog entry I took the trouble to compile back in late April. I was thinking about the analogy of horse racing. Jockey riders are professionals who earn a fee, based on their skills in maneuvering his or her mount around the last bend, or on the back straight, in pursuit of a winner’s prize. But what if the prize never existed? What if the jockeys and their mounts were only a necessary stage prop? If sufficient numbers of economic activity can be provoked, by the simulation of a race, where competitors compete, then isn’t that as useful in growing the economy as a real race? Maybe the Irish economy suffers from a lack of provocation, a lack of external influence. The island was so un-strategic from anyones’ point of view, it simply was by-passed. Clearly that was not the case with Japan, the Asian Tigers, or indeed China. That part of the world is large enough, no matter what it does, to have its own critical mass. A criticial mass, even if there was no policy, no model or no tiger economies, the Asian region would still affect the world economy in some way. The question with Ireland, is how it managed to delay its economic development for so long, given its close proximity to Europe.

    I guess the world had become so small by the end of the 1990s, that no country could preserve its isolation-ism at that stage. China included, albeit the filtering of search engines and so forth goes on. China recently invested in an enormous state media control headquarters in Beijing. That should point us at something. The newest cathedral and most prominent structure in the capital isn’t an Olympic stadium or a theatre, or a place of worship. But a facility to do with media and broadcasting. In classic central planning fashion, the Chinese managed to build a huge central facility, in the age of radically de-centralised communications infrastructure.

    The Economist’s bloggers wrote the following: And to a certain extent, those countries could learn a thing or two; it has become so difficult to build new transportation, energy, and communications infrastructure in America that organic innovation suffers. The interesting thing here to bear in mind, is the massive upheavel in economic and legal terms, which finance for such infrastructure has had to face. Technologically, the finance is being radically dispersed. No one entity owns the whole infrastructure. It makes it incredibly difficult for the major capitalists to ring-fence their investments, like in the past. Places such as Radio city at the Rockefeller centre would have been symbols of the old communications environment. The CCTV tower in Beijing is like a 21st century version of the Rockefeller centre. It is interesting to note also, the Rockefeller centre was built at the height of the depression in north America, by a man who controlled a large monopoly over natural resources. Similar to China today, who have monopolised a lot of the world’s resources, albeit it is the state doing the monopolising rather than an individual.

    The Economist’s bloggers wrote the following, The American government has at times generated some nice bits of innovation—the internet is the classic example—but it has taken the distributed ecosystem of the market to figure out what to do with it. Again, I am reminded of what Yochai Benkler suggested in his book, The Wealth of Networks. What we are witnessing today in media, is a power struggle between the old and new media. It is to the former’s benefit, that media remains centralised, and therefore large investment can be concentrated in centralised facilities and infrastructure. The only problem is that technology is pulling in an opposite direction. Such commentators as Clay Shirky, Nicholas Carr and Larry Lessig are all required reading, once you venture into this territory. I spent a good deal of time sampling their ideas a while back – but never followed up with any indepth research or analysis. Maybe some other Irish scholar has the time or resources to do so? BOH.

    http://designcomment.blogspot.com/2010/04/third-phase.html

  6. Richard Tol says:

    While parts of the economy are close to the state-of-the-art (and a few define the state-of-the-parts), other parts still have some catching up to do.

    I suppose, the key question to ask, is at the two extremes of economics – what is the major difference between a small few figures in central government, and a small few figures in private enterprise? For that matter, when you look at Ireland’s major symbol of its economic prosperity, the Anglo headquarters at North Wall Quay, again, we find only a few key figures up to something and constantly pulling all of the strings. At least the boys at Beijing managed to get cladding on their monstrosity. Maybe central planning is good for something after all. It is also interesting to note, the cladding for North Wall Quay was being pre-fabricated in Germany when Anglo was circling the the drain in late 2008. Back in the 1930s, all of the materials for the Rockefeller centre were sourced from within the US boundaries. The project was responsible for keeping several foundries owned by US steel open through the depression. Even if we finished cladding our buildings in Ireland, it would only be a stimulus to the German economy. BOH.

    http://designcomment.blogspot.com/2010/02/north-wall-quay-time-line.html

  7. Are we talking about GDP/capita or GNP/capita? While Ireland has a significant MNC export enclave this is probably important.

    And are we being misled by the fact that the only significant in-migration in the history of the state was attracted by an unsustainable bubble economy?

    Finally, JtO may decry the decision of citizens in the prosperous core of the EU to opt for a comfortable relatively low growth future, but, for various social, cultural and economic reasons, I think there will be limited migration of the current – and likely to continue – indigenous surplus of labour to supply the services they require – and will require. Though I expect there will be significant out-migration to the usual destinations.

  8. Is there a post growth stage ?

    Interesting statistic in the FT 2 weekends ago

    “In real terms, annualised (US) quarterly output has now been hovering at about the $13,000bn mark since the beginning of 2006. That is almost five years of absolutely no growth – halfway to equalling Japan’s infamous lost decade, a feat thought to be unrepeatable in the dynamic USA.”

    http://www.ft.com/cms/s/3/6ac666a8-9be3-11df-9ebd-00144feab49a.html

  9. @JohnTheOptimist
    You may be right about the potential for population growth in Ireland to save us from economic stagnation but you are entirely wrong about the reasons for this growth. There is lots of research evidence on the drivers of population growth in developed countries, which clearly demonstrates that it has nothing to do with social conservatism. If this was the key driver countries such as Italy and Portugal wouldn’t have the lowest birth rates in the developed work. In fact the evidence is that young women’s access to the labour market is the key factor. In countries such as Ireland and the US birth rates are high because flexible labour markets mean that women are confident of re-entering the labour market after taking a break for child bearing/rearing. Contrary to your claims most Scandinavian countries also have high birth rates as in these highly regulated labour markets women (and men indeed) have access to generous parental leave and subsidized childcare. From the perspective of birth rates, the worst of every world is a highly regulated labour market and anti-working mother society such as Germany, which has a very low birth rate because many women have no children because the trade off in terms of career is too high.

  10. Prof. Michael Spence’s Commission on Growth & Development has said that since 1950, 13 economies have grown at an average rate of 7% a year or more for 25 years or longer. At that pace of expansion, an economy almost doubles in size every decade.

    Growth of 7% a year, sustained over 25 years, was unheard of before the latter half of the 20th century. It is possible only because the world economy is now more open and integrated. Each and every one of these growth miracles had an export sector as a driver of growth and an increasing share of trade in GDP. There are no exceptions.

    These countries are: Botswana, Brazil, China, Hong Kong (China), Indonesia, Japan, Korea, Malaysia, Malta, Oman, Singapore, Taiwan, and Thailand

    Ireland’s growth did not last 25 years as FDI and exports stalled just as the property bubble had enough self-sustaining propulsion, with the aid of the euro and foreign bank lending to keep the property bubble going until the rocket headed for earth.

    The Commission said some 55% of China’s population is rural and 73% of India’s is rural. So there is still much room for development.

    According to Deutsche Bank, the working-age population in India will increase by a stunning 240m (equivalent to four times the total population of the UK) over the next 20 years, compared with 10m in China.

    http://www.finfacts.ie/irishfinancenews/article_1019143.shtml

    The issue of demographics can of course be exaggerated give the advances in technology; I wouldn’t expect an ageing Germany to become moribund given its tremendous engineering reputation across the globe.

    Frank Barry’s paper: These different perspectives also have different implications for the future. If the convergence view is correct, it suggests that we can now rest on our laurels: as long as we do not introduce inappropriate policies we are unlikely to fall behind average EU living standards. If the regional view is correct however, it suggests that external shocks to our ability to attract FDI might have serious long-term consequences for the economy. Foremost among these possible shocks would be a diminution of US FDI.

    A country dependent on foreign firms for 90% of its tradable exports is of course very exposed.

    Foreign firms are responsible for about 90% of China’s electronic exports and over 50% of exports overall. However, the difference with Ireland is that the Chinese domestic market is important to multinationals and they have little choice but to accept China’s policy of linking FDI with development of its own indigenous sectors.

  11. @ JtO

    Population growth on its own is not enough to either generate or sustain economic growth. If it were then you should be looking to buy into the Liberian, Burundian and Afghani economies because they, according to the UN World Population Prospects Report, have the highest population growth rates.

  12. @JohnTheOptimist
    “in most of continental Europe, where the secular/left/liberal advance has swept all before it and industrialised abortion is the norm”

    One of the ironies of the bitter US conflict over abortion is that the country has one of the least regulated systems of abortion in the developed world. European countries generally place restrictions that are unknown in the US. Also the US abortion ratio (# of abortions per 1000 live births) of 236 (CDC, 2006) is one of the higher ones in the developed world and is higher than in many European countries in particular northern and western ones. It’s true that most European countries have lower birth rates than the US but “industrialised abortion” isn’t a cause.

  13. As the CSO gathers data on agricultural land sales, it seems odd or maybe not given the vested interest in secrecy, that no data is available on the bonanza income for farmers from rezoning.

    They have collected at least €4bn from roadbuilding sales alone.

    The national average price for Irish farmland was €21,145 per acre in 2008 – – the highest in Europe — representing the drop of 16.8% from 2007. The average in Great Britain during 2008 was £4,200 per acre (€4,726) – – up 21% on 2007.

    According to Savills in 2007, in France, each field changes hands at least once every 70 years, but in Ireland on average a field changes hands every 555 years! Total annual turnover in Ireland was less than 0.2% of the total acreage. Countries with sales restrictions, such as France, are cheapest. Land is about €6,000 a hectare, compared with almost €60,000 in Ireland in 2007, as French land must be offered first to young local farmers.

    With so little land coming on the market and then at economically unproductive levels paid by rich aspiring “lifestyle” farmers, it could hardly be a positive for the national economy.

  14. @ All,

    Apologises btw, for the ambiguous stream of consciousness I posted above earlier. However, these issues such as the ‘China model’ and such, are so large, that it is highly unlikely any one brain is capable of grasping the proportions and scale involved. Hence, why I took the approach of combining a lot of elements, timescales and ideas into one/two posts, which really don’t make a lot of sense. In the interests of not making much sense, I read The Economist piece again, and some of the statements in their debate. When we talk about ‘infrastructure’ in China, maybe it is useful to talk about infrastructure and how it worked out for the United States. The MIT World website has an interesting lecture about the loss of downtown in the US cities. It is a lecture by an author Robert M. Fogelson. They thought in the mid 20th century in the US, that if they only had interstate highway infrastructure and so forth, that it would draw people back into the centres of the great American cities. However, what they found was, when the highways got built, the people still didn’t return to the metropolis. People were satisfied to stay out there in the suburbs and potter around as normal. Despite the investment in all of the ‘infrastructure’. The evolution of communications makes that even more acute, and we can think of supply chain management in terms of companies like Walmart. Now there is another useless contribution to this debate – Walmart were making shapes at China not so long ago. I must have read it somewhere. But is the infrastructure of a country such as China going to have to ‘catch up’ more in order to accomodate big box traders? Again, thanks for tolerating this rambling post of mine, but I am concerned the issues we are trying to grasp here, are ultimately too enormous for mere human beings. BOH.

    http://mitworld.mit.edu/video/15

  15. @ Michael Hennigan

    “According to Deutsche Bank, the working-age population in India will increase by a stunning 240m (equivalent to four times the total population of the UK) over the next 20 years, compared with 10m in China.”

    Most of them will be illiterate and dream of a job as a taxi driver in Delhi or Bombay. Neither city needs 240m taxi drivers.
    Never mind that 65% of the people in the “city of dreams” have no private access to sanitation. It’s still better than in the countryside.

    Almost all of India’s cheap plastic crap is imported from China. Outsourcing telemarketing can only absorb so many people. 70% of Indian workers work in agriculture.

    Uttar Pradesh had 166m people in 1991 and will have 300m by 2030. It’s more like Ireland in 1830 than anything else.

    Financial analysts are notoriously bullish about India. They go to Bombay, stay at the Taj and take in all of the good news. You get a good sense of India Shining on a spin from the airport if you don’t look out of the window until you get to Marine Drive.

    India has huge problems in the area of tax collection. And then there is the Naxal Maoist issue

    As for China there is a massive dependency ratio problem coming up on the outside. One child marries one child and the unit has 4 parents to look after in the absence of a social welfare net.

  16. To try and unpack some of the issues with regard to ‘infrastructure’, population movements and so forth, this podcast debates some issues faced in north America. BOH.

    The Water Crisis:
    The Construction Industry’s Role
    Bruce D’Agostino With Robert Glennon

    Robert Glennon is the author of Unquenchable: America’s Water Crisis and What To Do About It (Island Press, 2009) His previous books include the highly-acclaimed Water Follies: Groundwater Pumping and the Fate of America’s Fresh Waters (2002). Glennon is the Morris K. Udall Professor of Law and Public Policy in the Rogers College of Law at the University of Arizona.

    http://www.jackstreet.com/JackStreet/WCMAA.Glennon.cfm

  17. @ seafoid

    There is nothing in what you say should dent optimism about India or China.

    Best of luck to you if you believe what’s happening in Asia is spoof dreamed up by Western analysts.

    India has huge problems in the area of tax collection. And then there is the Naxal Maoist issue

    Welcome to ‘pigs in the parlour’ Ireland in the 1970s.

    Problems with tax collection?

    That may be a good thing in an emerging economy!

  18. @Michael Hennigan

    I am just back from 3 years in Bombay. Pigs in the parlour Ireland had a population of 3.5 million. Easy enough to fix in an EU context. Uttar Pradesh is hopeless. India’s population adds over 50m per decade. How many of those people will ultimately qualified to even work in a call centre ? Most of them will still be playing the caste system.

    India has a fabulous education system for the 2000 people who get into the IITs every year. Great.

    China is different. Maybe the party can engineer it. I don’t see it happening in India. There comes a point with population growth where the increase in population drowns out everything else and that is where India is now.

    The India of analysts is like Lenin’s view of the Soviet Union. The kulaks and white russians were the unwanted residue of the sick dysfunctional past that had no place in the glorious Union of the future. India’s blast from the past on the glorious journey to tomorrow is the vast majority of its people who are poor and ignorant .

    Investing in India is nothing more than a levered bet on world growth. September 2008 showed it. Nobody on Wall Street really believes in India either if push comes to shove.

  19. @BOH

    “But is the infrastructure of a country such as China going to have to ‘catch up’ more in order to accomodate big box traders? ”

    Walmart have a goal of serving one billion customers per week within 20 years. I presume that will mean selling a lot of stuff in China. I think the goal is deluded and the environmental consequences don’t bear thinking about.

    “Think about giving everyone with a mobile device the platform and the information they want to buy, the exact product they want at the absolute best price anywhere in the world,” Mr Duke said, in his most wide-ranging speech since becoming chief executive in February last year

    http://www.ft.com/cms/s/0/0c92f88c-703a-11df-8698-00144feabdc0.html

    Re the US and people not returning to the cities, didn’t cheap oil have a lot to do with it? If oil goes to $200 or $400 a barrel what happens the US model ?

  20. @ seafoid

    I defer to your greater familiarity with India than I have myself.

    I have however some familiarity with the area of the world that Rudyard Kipling called East of Suez, having lived in Jeddah, currently in Kuala Lumpur and having a long-term interest with the Philippines.

    The return of China as an economic power has had a huge impact in reducing poverty in the region. As with other parts of Asia, there are advances and challenges.

    The advanced countries no longer have a monopoly on knowledge jobs and in the US, the world’s biggest economy, middle class earnings have stagnated over the past two decades. In Japan, currently the second-biggest economy, about 35 per cent of the workforce are temporary workers earning less than the Irish minimum wage, while the number of the working poor, earning less than ¥2m (€17,600) annually, continues to rise.

    Globalization and Asia’s return to economic supremacy

  21. @ michael hennigan

    The FT had a graph a few days ago showing projections of global GDP by country and there was a sign of a clear shift from the G7 towards Asia. The Japan figures you cite are very noteworthy. And now China seems to be the world #2. It is going to be interesting. But dependent on continued open borders and trade so things could change.

  22. @ Seafoid,

    I am delighted that someone else is interested in this huge planning and environmental issues. But to be quite frank, the sheer scale of these issues scares me off. The issues are so large, as to almost make discussion pointless. But then again, the problems appear to be so large, that we have very little choice except to try and gain some grasp.

    In the above podcast I linked about the water crisis in north America at the moment, I was interested to listen at how interconnected these large scale problems are. The fact, the farmers who grow biofuel crops are competing for water in certain parts of the continent. And to process the biofuels, having grown the crop it requires additional water supplies. It is hard to get one’s mind around the sheer scale of things involved. I mentioned Walmart, I think, because it is the kind of organisation that might sell biofuels in the future, and possibly interface with supplier(s) and supply chains. But wrapped up in all of these environmental issues, are also the social issues.

    A question to all. To what degree have companies such as Walmart simply lived off the existence of infrastructural investment by the federal government in the United States down through the years? I.e. The creation of the inter-state highway system, and the internet communications infrastructure. The point is, much of the infrastructural investment in the United States has not worked in the way it was predicted to. I read commentators such as Danah Boyd at her blog site describe the conditions for teenagers in the US today. Where they cannot even visit the local mall or the cinema, because parents keep them locked up safely in the suburban home. In other words, the acceleration in development of the internet, has much to do with realities in the physical world. If there is anything such as a Chinese model or an American model, and so forth – clearly, we need to look at them in social dimensions as well as economic and political.

    Another CMAA podcast which might enable us to grasp some of the numbers is this one. Michael Hennigan and others are much better with the numbers and statistics than I am. But clearly, when we get to this scale of policy creation, we are dealing with a different language almost. BOH.

    Effective Solutions for Transportation Infrastructure Needs
    Bruce D’Agostino With John Horsley

    John Horsley is Executive Director of the American Association of State Highway and Transportation Officials (AASHTO). He has spent more than two decades analyzing solutions to many of the nation’s toughest transportation challenges.

    http://www.jackstreet.com/JackStreet/WCMAA.Horsley.cfm

  23. @John Mul.

    Population growth on its own is not enough to either generate or sustain economic growth. If it were then you should be looking to buy into the Liberian, Burundian and Afghani economies because they, according to the UN World Population Prospects Report, have the highest population growth rates.

    That’s why I said ‘all other things being equal’.

    If two counties have roughly equal education and skills levels, roughly equal infrastructure, and roughly equal levels of government competence, but one has much faster population growth than the other, then the chances are that the economy of that one will also grow faster.

    Compare U. States and Germany:

    between 2000 and 2010, U. States GDP grew by 25pc

    between 2000 and 2010, Germany GDP grew by 6pc.

    I’d say that the much faster population growth in the U. States was a factor.

  24. @JohntheO
    “I’d say that the much faster population growth in the U. States was a factor.”
    Perhaps, but wouldn’t we all be better off looking at GDP per working age population member then? We might see, though, that japanese GDP on that metric increased at about the same rate as everywhere else…

  25. Guys.

    What is now the accepted theory of the causes of the Celtic Tiger. I thought that Honohan and Walsh’s – Convergence theory was the accpeted theory (I’ve read a lot on the decline of the Economy and most people start by starting that the intial growth of the Tiger economy represented Ireland catching up with its European peers); but I have to admit after reading Frank Barry’s piece and taken into account our current situation (i.e. being close to Uk, France etc doesn’t like like it’s going to be enough to kick start our economy) I’m more inclinced to go with the Reginal Boom theory.

    However, I’d be very interested in hearing what the view of Irish Economic Community is.

  26. @ Niall,

    Is there any sense in the idea, that in Ireland we tried to resist the process of convergence for too long – and our political and social structure is geared almost exclusively to hope and press for regional booms?

    The say when a new born is first conceived, that all of the ‘instructions’ for the creation of the entire organism are present at cell level. The region boom impulse seems to be something which is written in at the cell level in Irish society and our particular blend of politics. No matter how far we try to pursue the path of convergence on the island of Ireland, there is always a magnetic pull away from it, and back towards the boom mentality.

    Maybe that is what has economists in Ireland so perplexed. It is highly possible, depending on where you look and when you look there – to see both aspects at work. My guess is, that as young people go through school they are exposed to the influence of convergence. As they grow older and mature, they are more likely to fall back into the pattern their parents before them followed, which is towards regional-ism.

    How does one affect that? Does one want or need to affect that? BOH.

  27. @ Niall,

    I wrote a blog the other day, in which I attempted to un-pack some issues with regard to semi-state organisations – and their need to communicate and coordinate with one another. Which is actually relevant to much larger countries such as China and the US, where policy in one department can have all kinds of un-intended impacts on others. BOH.

    To distance themselves from the ‘local’, Irish governments talks about ‘international best practice’. They talk about introduction of proceedures which are deemed to be ‘state of the art’. They talk about receiving advice from ‘international experts’.

    http://designcomment.blogspot.com/2010/08/all-things-local.html

  28. @ BOH

    Is it not very important to understand the reasons for our growth in th 1990s, to face the challenges ahead.

    On one hand we should look to EU partners and aim to convergence on their best practice and wait for the economic benifits to arrive. Whereas, on the other hand, we should aim to outsmart our competitors with policies such as low corporation tax.

    For instance, a big concern that I have at present is that the banking guarntee while been aimed at secureing the banking sector was also designed with a view to out-smarting and getting-one-over our neighbours (Foreign Cash apparantly flowed in after its initail annoucement). If this was part of the aim then that has that portion of the guarantee has blow up in our faces.

    On the night of the guarantee the policymakers might have had a choice between aiming for convergence based on what they expected standard EU-wide policy to be, or they could introduce a ‘smartarse’ guarantee with the aim of gaining a competive advantage.

    In this sense is it not very important to know whether our stength is in our convergence or our innovation?

  29. @ Niall

    I think Frank Barry makes a compelling case for the Regional Boom Theory.

    Like every other nation, we don’t like to consider our shortcomings.

    I would say an important factor in our economic history is that we haven’t had a strong trading tradition and it’s evident today.

    People picking up ideas from other countries and developing new businesses/ selling new types of produce.

    Why wasn’t fishing an important industry?; it wasn’t because a diet of spuds, buttermilk and bacon every day was so great or the fish on Friday rule.

    It’s striking that in 1933 when De Valera/Lemass were implementing measures to support native enterprise, the surviving Irish whiskey companies were not ready for the end of Prohibition. So the 50/50 split in imports to the US between Scotch and Irish distillers before 1919 became a lopsided Scotch one from 1934.

    In the first half of the 20th century, the most significant new industrial enterprise was an FDI one — Henry Ford’s family plant (it was separate to the Ford Motor Co.) in Cork. It motivated Dunlop to open a tyre plant, also on the Marina in Cork.

  30. @ Niall,

    What is that they say about two men running away from the bear? You don’t have to run faster than the bear. You only need to run faster than the other guy.

    It neatly describes the Irish notion of competition in the banking sector. There was an interesting comment by David Murphy when interviewed on morning Ireland radio program. If you look at BOI in the context of other Irish banks it appears stable. But if you look at BOI in the context of other European banks, it does not look healthy.

    It reminds me of the period in late 2008, when all of the Irish banks professed to be healthy, sound, well capitalised. They would not accept any assistance etc. Obviously, the Irish banks knew there would be a consolation prize (more optical than anything else), for being the best of a bad lot. The race to decide who was the best of a bad lot seems to be won now by BOI. But AIB nor Anglo were not willing to give in so easily in late 2008.

    This should tell us something about our definition of stable and healthy enterprise in Ireland. At the end of the day, it is not about being the best in international terms. Despite what the government tells us about centres of excellence etc. BOH.

  31. @BOH

    Could you plase point me in the direction of the entry by Paul Hunt. I’d be very interested in reading any commentary on lobbying.

    I have tried to look over a few days before the 5 Aug but I didn’t manage to find it.

    Thanks in advance

  32. @Michael H,

    “So the 50/50 split in imports to the US between Scotch and Irish distillers before 1919 became a lopsided Scotch one from 1934.”

    And I used to think that was all old Joe Kennedy’s fault.

    However, I agree with your take on the regional economy perspective. For me the clincher takes us away from the pure economic perspective when one examines the political economy of Ireland in a historic context. Ireland moved from being a regional economy (as a colony of an empire) through a phase of autarky that led to a slow opening of the economy (e.g., the UK-Ireland FTA) and then to accelerating integration in the EU project from 1973. I suspect those who favour the convergence theory are motivated, unwittingly or not, by pleasure in Ireland ‘taking its place among the nations of the earth’.

    As EU economic integration progressively increased during Ireland’s membership – culminating perhaps in the Single European Act – Ireland needed to establish a Unique Selling Point (or a set of USPs). There is scope for much debate about the contents of this set of USPs – and the relative importance of each, but they were established for a regional economy within a larger economic entity.

    Of course, some of these USPs proved to be entirely bogus and ultimatley disatrous (e.g., world-class, but light-touch, regulation of financial and other sectors) and some have proved to be only temporarily unique, since they have proved to easily replicable, but some remain.

  33. @ Paul Hunt

    Light touch “regulation” wasn’t a USP as much as a virus imported via the medium of English from the US and the UK. If Ireland had a different language other than English would the virus have been so prolific ?

  34. @seafoid,

    It is important to distinguish the virus from the transmission mechanism. I would argue that the statutory powers and duties of regulation were in place. The virus was the unwillingness to use/policy decision not to use? these powers appropriately. Wrt to financial regulation in Ireland some relatively minor changes in organisation coupled with key changes in personnel at the top demonstrate that the powers and duties existed; they simply needed to be applied.

    However, your point about the origin of the virus is valid, even if it mutated into a peculiarly Irish strain. Having argued that Ireland should be viewed as a regional economy within the EU (and is perhaps even more so now that monetary sovereignty has been pooled and fiscal and economic sovereignty almost completely compromised), I also recognise that in some respects it exhibits features of being a regional economy within the anglo-saxon sphere of economic influence.

  35. @ BOH,

    As a former member of the Liam Carroll empire myself I’d be interested to know how high up the ladder you were? I have followed your posts over the past year and have found your ramblings to be at best hardtofollow.

    My guess is you were one of the slouchs working in the QS department. Never did see eye to eye with those guys!

    @ R Tol,

    The frontier is indeed multi-dimensional. But state-of-the-art represents where Ireland sees itself. Will these other parts catching up keep growth higher than 2-3%?

  36. constant1ne says;

    My guess is you were one of the slouchs working in the QS department. Never did see eye to eye with those guys!

    Anyone who would pay any attention to my online contributions and work since late 2008, would jump to the same conclusion. I had only started at the bottom of the ladder working for Liam Carroll in 2006, and my research since then, has indicated the game was up for Zoe developments as of that date. Except many of the directors higher up the ladder needed at least until late 2009, to finally realise that fact. When I work for an outfit such as Zoe, I am a very different bloke, from what my online persona would suggest. I am actually good at taking orders, and hopefully never tried to push my opinions on anyone. Apologises also, for taking up so much space on the Irish Economy blog over the past year or so. The funny thing is, while hardened professionals who understand the construction industry find my writing impossible to decypher – when it comes to people who understand nothing about construction – they can actually find my writing quite enlightening. That was the sort of balance I had aimed for. To write something that a non-construction professional might be able to read and like, as opposed to writing something directed for consumption by the CIF, RIAI, IEI, SCS etc. I am satisfied, I succeeded in that sense during the course of a year – and provided some level of information for the many thousands out there, who find themselves unwittingly paying for mistakes, of an industry they weren’t part of.

    I did spend several year of my life at Dublin Institute of Technology studying in the architectural department. The largest portion of the time was spent slouching. I spent most of my time after studying architecture on the coal face with various engineer and construction employers. Some of whom had emigrated years ago to the United States and become accustomed to that kind of approach. I fitted well into that scene. As you probably know Liam Carroll worked for the US multi-national consultant Jacobs engineering, prior to doing his own thing. He would have imported a lot of the US notions of how to go about building. I.e. Where the designers and contractors have a closer relationship. It is getting new life at the moment, and they have invented a cool new term called Integrated Project Delivery. Below is a link to a recent magazine article by Construction Management Association of America. From my basic understanding of how construction procurement works, Liam Carroll was aiming for a type of construction management system. And that in itself was very forward thinking, and he deserves credit in that regard. I would understand this a lot better, if I had not slept my way through the construction economics lectures in the 1990s. Even though I hated those lectures back then, I would say construction management is one of my talents and I could give those guys in the QS department a good run for their money. BOH.

    http://www.nxtbook.com/ygsreprints/ygs/p14053_tgd_cma/#/20

  37. Thanks for the career update!

    I’ve an economics background myself and still find your writing hard to decipher-but thats neither here nor there…

  38. constant1ne says:

    I’ve an economics background myself

    Delighted to hear that. One thing the sudden death of all the developers has shown to me, is the gaps there exists between various disciplines involved in construction. It is impossible to devise a solution for the construction industry, when one half of it doesn’t even know what the other half is talking about. We have IEI running some parts of the contracts. SCS doing something else, RIAI doing something else, Dept. Finance doing it’s thing, and CIF going off in some other direction. And yet we expect it all to fall into place, when the rubber hits the road, with millions and billions at stake. It is like expecting an international soccer team to come together and compete, even though they all play different sports.

    If you asked ten architects what is the ‘Agreed Rules of Measurement’ are, how many out of the ten would give an intelligent answer? I think you would have to make your sample as large as 50, before you found one or two architects who know. Yet, it is so basic. It is like an architect asking a surveyor what Le Corbusier’s five points of architecture are. About one in five hundred surveyors might have some idea. It seems to me, that basic knowledge in the various branches of construction is completely unknown outside of that discipline. And yet we talk about new contracts to enable/force design team members to collaborate to offer integrated project delivery? It seems like we have a very up hill battle to fight – and I don’t see many getting that pushed about fighting the battle either. BOH.

  39. Ok Brian I hear what you are saying. But is an economics blog the place for it to be said? Does an international soccer team all play different sports? Do they not all play the same sport? Contrasting the defense/attack tactics of a soccer team to the construction sector is far fetched to say the least.

    ‘Agreed rules of measurement’ have nothing to do with economics in the architechtural world that you are talking about. Maybe instead of rabling on LD’c work on an economics blog you should consider looking for an architechural/construction blog where you can vent your feelings about where he went wrong.

  40. constant1ne says:

    Maybe instead of rabling on LC’c work on an economics blog you should consider looking for an architechural/construction blog where you can vent your feelings about where he went wrong.

    It is not relevant to an economics blog at all – except for the fact that we are here in Ireland (at least I am at the moment), and every man, woman and child on the island has been lumped with the debt burden from a construction industry they had nothing to do with. I other words, 99 out of 100 people on the island at the moment, have become un-willing participants in a property casino against their better wishes. If that is relevant to the ‘economics’ on an island, I don’t know what is. Because if we decide to go down the regional boom route, in our policy approach, it might leads us to come to the same conclusions as major property developers in Ireland did in the past. I.e. That we need to provide residential, and hotel space, and retail space, and office space for the influx of all of that foreign capital and people onto the island. Any of that sound vaguely familiar from the last decade of Ireland’s economic development?

    On the other hand, if we pursue the policy approach of the convergence theorists, which talks about Ireland catching up to the rest of the world – we are more likely to saddle ourselves with the risk of constructing large renewable energy infrastructure, and other forward thinking stuff. My own believe is that both strategies (based on their associated theories of convergence or regional boom, will lead to increased employment and GNP upturn in the short term. But will either approach lead to something sustainable? What was really worrying about the the regional boom phenomenon in Ireland of the 1990s and 2000s, was not the fact that it didn’t lead to sustainable economic well-being for the inhabitants of the island. But rather it lead, to something a lot worse. To a situation, where we will spend the next 10 years trying to do damage limiation on stuff that happened for the last 20 years.

    The net result would be to assume, that if Ireland had done nothing at all for the last 20 years, we would probably be in a better position today. We now face the incredibly bleak prospect, of having to run, just to stand still. If any of this doesn’t seem relevant to economics, please pull me up. As for venting of feelings – I’ll leave that to the real movie actors or politicians.

    As for this: ‘Agreed rules of measurement’ have nothing to do with economics in the architechtural world that you are talking about. Go have a proper look at the public procurement contract and come back to me. Whatever responsibility you hope to assume in the economy, or in construction in Ireland, over the next decade, don’t neglect doing your homework. That is all I am trying to get across. Just a friendly word of suggestion. All the best. BOH.

  41. Thanks for the friendly word of suggestion.

    I will give them the merit they deserve given your relationship with colleages and sudden departure from the LC group.

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