Fast-Growth Economies

Patrick Honohan’s Tokyo speech is a wide-ranging essay on different varieties of economic growth and the transition between fundamentals-based growth and unsustainable growth: you can read it here.

9 replies on “Fast-Growth Economies”

I’m lost. Can someone explain to me what exactly is the function of the “Governor of the Central Bank of Ireland.” There ain’t no currency to safeguard, there is no power to set interest rates, he has no power over employment levels, the financial regulator is in charge of systemic risk, and the Governor has no role in operating the country’s international payment system.

@ Geronimo

The governor is one of 22 on the ECB’s governing council.

The head of financial Supervision reports to him.

The current governor has the credibility to influence economic policy if he is willing to confront the forces of conservatism.

This is an interesting speech.

As regards: “When the budgetary adjustment is accomplished, a chastened polity will help ensure stability-oriented policies that will be key to a renewed engagement in the global economy: especially, but not only, for countries such as Ireland which are among the most globalised on earth. The customers for our exports: increasingly Asia for sure. The investors: likely also to be shifting more in the direction of Asia from which investment in Ireland’s traditionally highly profitable MNC sector is, to date, still underweight.”

I doubt if Asia can ever become significant for exports from Ireland.

Ireland currently exports less to India than it does to Hungary.


‘Two policy problems arise: how to prevent such policy errors, and how to recover from an error. The first is more challenging conceptually, the latter more challenging politically.’

The latter is where the Irish political class lacks balls – the expertise is (and has been) available … nationalise and national government and take on all vested interestes and we could have saved a generation. The political class simply circled the wagons in support of elite interests, transferred present and future resources to this elite, forcing a generation to flee and further institutionalising the underclass that their grabbing predecessors failed to address.

Rise up ye supine serfs and rally to the cause! 1789

This is but one of a series of speeches; it is difficult to assess who the audience is. It could be “home thoughts from abroad”. It seems to have been used in this respect when the Governor cleared up any uncertainty about his view on the manageability of throwing more and more money into the Anglo pit.

I haven’t picked up any indication of how his homilies are considered in East Asia – in particular, in China. Perhaps some others have. We should not underestimate the Governor’s international reputation. It may be that officials in the government compounds in Beijing, mindful of China’s emerging property bubble, are taking the Governor’s words to heart.

But, equally, we should not underestimate the extent to which the ‘western’ model based on the rule of law, well-defined property rights, liberal democracy and competitive markets in a mixed economy is considered almost beneath contempt in official circles in China.

The shrinking of the western idea – due to the perversion of key aspects by wealthy and powerful elites over the last two decades – is legitimising mercantilist behaviour by an authoritarian regime and increasing strategic investments by its sovereign wealth fund and majority state-owned behemoths. It would be ironic if the Governor’s far eastern jaunt were to encourage more Chinese strategic interest in Ireland – something which, of course, would be welcomed by the left/progressive fraternity (but should raise some concerns in more rational beings).

@Paul Hunt

“… something which, of course, would be welcomed by the left/progressive fraternity (but should raise some concerns in more rational beings).”

Does this mean that you view left/progressive as irrational or as somehow ‘less’ rational than the ‘perverted’ western idea? Look around at our own wee western-perversions Paul! … and at our own ‘ rule of law, [little people only] well-defined property rights [don’t get me started (-;], liberal democracy [sic ..serfs] and competitive markets [er… wha aboot the State] in a mixed [or jinxed] economy’.

I welcome interest in, and investment in, Ireland from the world’s 2nd largest economy and one of the primary, and oldest, civilizations on the planet – China.

The Governor has a deserved international reputation – in terms of growth theory – China is a facinating ongoing project and the real comparison at this time is with the Soviet empire ……… no contest thus far.

Considering that Anglo-Irish wins the gold for the most %GDP poured into black hole bank bailout [see recent Economist thread – >10%] – methinks the savvy Chinese may treat his views with more than a passing interest … which citizens in this liberal democracy were consulted on p1ssing >10% of GDP into Seanie’s Folly?

Scenario: What would the Chinese have done in a similar situation? Methinks they might have been a bit more ‘rational’ than our political class …. and we would almost certainly have cleaner cleaned out upper-echelon boards of directors ………….

Speeches are speeches. But wherein lies reality? Presumably the Governor has a set of beliefs (economic growth, sustainability, competitivness – whatever) and is articulating his views about these. Unfortunately, reality for modern, developed economies is a tad different. This reality is conspicuous by its absence from the Governor’s presentation. He may be quite unaware of this dissonance – his ‘default reference values’ are different.

B Peter

“Michael Hennigan – Finfacts Says:

August 22nd, 2010 at 11:34 am
@ Geronimo

The governor is one of 22 on the ECB’s governing council.

The head of financial Supervision reports to him.

The current governor has the credibility to influence economic policy if he is willing to confront the forces of conservatism.”

Does anyone know how much it costs the Irish taxpayer to support (salaries, support staff, offices, technology, travel expenses etc) these activities of the Governor. Activities that apparently include attending a few meetings a year, supervising someone who one expects (hopes) is competent, and making a few speeches.

Are there any more of these gigs in Ireland and how does one get one of em?

@David O’D,

Be careful what you wish for. Despite the way they’ve been abused by some, we cast aside the fundamental principles of western democracy, economy and society at our peril. Much as I admire China’s civilisation and rapid recovery from its Marxist detour, its rise will lead to three possible outcomes – (a) regional of global conflict as its expansion of economic power and demand for resources will require the expansion and deployment of military power – and the CCP is adept at mobilising nationalist sentiment to preserve its hold on power, (b) an internal implosion as a growing middle class will demand western standards and values which the CCP will not be able to contain or, least likely, (c) a managed transition to western-style democracy and a mixed economy. South Korea and Taiwan manged this transition, but I’m not sure China can achieve it as a unitary state.

@Paul Hunt

Not casting aside democratic principles around here Paul.

Unusually, I detect a touch of ethnocentrism in your comments here. For (a) one could just as easily refer to the rise of the USA in the 20th century, and more recently its deployment of military power in protecting its access to energy resources – or further back the use of naval power by the British Empire (which always had a good few Paddies on the front lines); I won’t mention Stalin but without his ruthless industrialisation and sacrifice of 20million Fascism would not have been defeated[Stalingrad remains one of the great moments in the survival of democracy in Western Europe]: I agree that China is in the global market for primary resources and perfectly entitled to be; on (b) yes, how China adapts to growing middle class remains an open question – & imho, too soon to predict if ‘western-style’ will be the outcome – culturally and historically China is not west. And as has been pointed out a good few times on this blog – not all states can continue to grow at 10%pa …….. Western style capitalism has a few limits, as well as a few well-acknowledged flaws …….. may I assume that you are not one of the naive ‘end of history’ fraternity that what we have at present is the pinnacle of human endeavour – what a bummer if it were ………

On the rise of the Asian tigers, there is a school of thought which highlights the authoritarian nature of the elites in S. Korea, Singapore, Taiwan, etc which through central control pushed through [often violently] the early stages of capitalist growth – the ~70hr working week in S. Korea for example, not to mention the severe penalties for littering the pavements with chewing gum in Singapore.

I’d put a few bob on China remaining ‘unitarist’ for quite some time – but I won’t live long enough, not will a company such as remain in business long enough to pay out (-;

The Chinese are doin more than OK; let’s just get used to it. Neat of The Governor to drop in and say Hi.

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