We need to cut costs and increase productivity to pay the mounting debt. It is disconcerting that Ireland dropped from being the 22nd most competitive economy in 2009 to the 29th in 2010, according to the World Economic Forum.
People pay attention to the overall indicator and rank, but the subindicators tell the real story. There are no surprises, really, but it is a sobering read.
Here are some the negative trends:
*Public trust of politicians: 37 to 65
— higher numbers are worse, as countries are ranked from 1 to 139
*Wastefulness of government spending: 45 to 93
*Burden of government regulation: 61 to 87
*Efficiency of legal framework: 22 to 27
*Government deficit: 55 to 130
*Savings rate: 75 to 119
*Government debt: 51 to 112
*Intensity of local competition: 39 to 51
*Time required to start a business: 24 to 45
*Brain drain: 10 to 19
*Financing through local equity market: 51 to 105
*Ease of access to loans: 19 to 117
*Soundness of banks: 9 to 139 (bottom of the pile)
*Regulation of security exchanges: 16 to 90
*Capacity for innovation: 26 to 31
*Government procurement of advanced tech: 43 to 75
There are positive trends too:
*Quality of infrastructure (6 indices, all up)
*Inflation: 48 to 3
*Interest rate: 63 to 11 (I guess the data are older than a few weeks)
*Pay and productivity: 76 to 56
Ireland is still the best place in the world if you worry about malaria. The judiciary is still strong. And foreign investors are still treated well.
28 replies on “What a difference a year makes”
“Judiciary is still strong” I guess that translates as “Ruling class immune from the law”
@Tim – absolutely LOL.
‘Will the circle be unbroken?
Not a chance lads,
Not a chance’.
I’m pretty sure it means the exact opposite of that. The judiciary can only work with the legislation they’re given.
Public trust in politicians at 65 is astonishing. I would have guessed it to be around 110 instead. I guess brain drain would look different today as well.
Cutting the cost base and productivity is one thing, another thing is to identify fields of core competence, which we do not have in abundance either. The relentless focus on a financial services driven economy worried me from day one.
What is left in Ireland’s economy?
“What is left in Ireland’s economy?”
The arts and sport, according to Joseph O’Connor on 2RN yesterday. Is there an export market for hurling?
The Paddy Games were a big hit in Holland: http://www.irishexaminer.com/ireland/dutch-tv-toasts-paddy-games-128132.html
Does the original report have no entries for the following: (a) corporation tax (b) employers’ payroll taxes (c) employees’ income tax wedge (d) taxation as a percentage of GDP? Or, have you omitted them from your list?
These things are far more important than some of the obscure items in your list. ‘Public trust of politicians’? Give me a break. If that were an important consideration, California would rank below North Korea in economic performance. In addition, while there is plenty of hard and reliable data available on items like productivity, inflation, taxation, infrastructure, unit wage costs, which are by far the most important factors in relation to competitiveness, there is no such data available on many of the other items and, on investigation, it will turn out that the data source is simply economists’ subjective opinions. Where is the databank (so that we can check the figures) for public trust of politicians, wastefulness of government spending, time required to start a business, brain drain, capacity for innovation etc etc. My guess is that it doesn’t exist.
@John The Optimist – no doubt our relative position with regard to all these is also erroding as other countries compete on taxes and we will have to raise ours.
Competitiveness is a pretty slippery concept at the best of time. This index just looks to me like a random combination of various economic indicators. Why call it a competitiveness index? An Index of Economic Goodness seems more appropriate.
What does it really mean to say our competitiveness has slipped because our budget deficit went up?
Beyond that a lot of people read the report, is there any reason to pay any attention to it. For instance, is there any evidence that this report has any predictive power for how an economy peforms?
Scopus says that no one has ever put this data into a growth regression (and published the result). There are 150+ indicators, 139 countries, and 9 years of data so that would keep someone occupied.
I do not like the superindicator, but it does suggest that the economy is heading the wrong way outside of banking and public finance too.
The subindicators are more instructive. We have lots of people out of work, and many of them will try their luck as a small company. Instead of encouraging them, the government is apparently making it harder to start a new company.
Another example, it appears that the bankrupcies and withdrawals are affecting competition. Can’t be good for costs of business and costs of living.
quality of overall infrastructure 69th.
internet access in schools 58th
tertiary eucation enrollment rate 33rd
goverment procurement of advanced tech products 75th
and, in danger of crossing theads, soundness of banks 139th, of 139.
@Karl – spot on. I commented on the university rankings the other day:
“This seems like a growth industry akin to the competitiveness ranking industry and seems to suffer from the same problem i.e. difficulty in properly measuring inputs and outputs. How represeantative are their surveys?…..”
All sorts of variables are thrown in the pot making up a hodgepodge.
While I would pretty much disregard specific indicators in this report, it does highlight the areas of competitiveness outside of financial gymnastics.
This should be priority no. 1 for policy. Our banking strategy is pretty much set in stone for the next few years (whether you think it’s a good strategy or not). We are finally beginning to get a grasp of how much the crisis will cost us (within a range), but now we need to focus on identifying and implementing reforms which will boost our productivity. That will be the crucial step -to increase our productivity to allow us to pay the tab for a botched banking policy.
The sell-off of some semi-states as Prof. McCarthy is studying can contribute to this, but we also need reform in a host of areas identified by the competition authority over several years.
Burden of government regulation: 61 to 87
Do you think Anglo found the government regulation “burdensome”?
Having read it (or as much of it as is free on the internet, as I’m certainly not going to fork out a brass farthing to read the full thing), my conclusion is that the report is a joke.
As I suspected, hardly any of the data used is hard data (ie proper figures that can be checked out). It is nearly all based on surveys of subjective opinions. In Ireland’s case (as I correctly guessed in my first post, without knowing it at the time), the opinions surveyed are those of economists at University College, Cork. Quelle surprise!
Let’s take the infrastructure scores, which one of the posters mentioned.
Ireland is ranked 38th for infrastructure. But, it is not based on any hard data relating to roads, railways, airports, seaports, telecommunications, electricity grid, shopping centres, schools, hospitals etc, all the things we normally think of as infrastructure. It is based on surveys of people in each country asking them to rate the infrastructure in that country. As I said, in Ireland’s case, the survey was among economists at University College, Cork. This produces absurd results. Take the following rankings for infrastructure:
Does anybody think that Portugal has a better infrastructure than Ireland?
OK, given the nature of this site, some will say ‘yes’.
So, let’s throw Norway into the mix. The survey ranks Norway 29th for infrastructure. So, now we have the following rankings:
I’ll ask the same question as above.
Does anybody think that Portugal has a better infrastructure than Norway?
For those answering ‘yes’, if you google, you’ll find the address of your nearest mental hospital, and I suggest that you go there urgently.
We’re being watched:
Thanks for checking some of the details. I won’t answer your question, because it’s been 15 years since I last was in Portugal.
I know that there is a lot of perception. Surely the banks are bad, but the worst in the world?
Whether solid or not, reports like this help to shape the reputation of a country.
I wonder what your opinion is of the following item in the survey:
Q: How would you assess roads in your country?
So, according to the World Economic Forum:
Gambia has better roads than Ireland – which will doubtless be reported as fact in tomorrow’s Irish Times. However, apparently, also:
Namibia has better roads than Netherlands
Ethiopia has better roads than Norway
I suggest a new game for people to play over Christmas – pick the silliest pair of cross-country comparisons in the WEF report – here’s another one:
Q: To what extent are scientists and engineers available in your country?
So, according to the World Economic Forum:
Scientists and engineers are more available in Greece than in Germany.
When was the survey was carried out? – in 700BC perhaps.
I think you read it a little too quickly!
They say that they use a “Partner Institute” to administer the survey – in Ireland’s case, these are (p .vii) a group in UCC’s Economics Department and The National Competiveness Council, an Irish Government body (http://www.competitiveness.ie/aboutus/).
The actual respondents to the survey are a stratified sample of business executives. These aren’t listed, but by computation from Table 1 (p60) it seems that in Ireland they took a sample of size 48, which included 6 or more firms employing 1000 to 5000 employees. (That would cover most all such firms here, I’d think?).
The results of the survey are combined with “hard” data on quantitatively-determinable measures such as “General government gross debt as a percentage of GDP (2009)” (That one can’t have helped our case, but lucky they didn’t use 2010 !)
This is NOT to say that I’d put much trust in any of the indexing exercises – neither this one nor the University rankings in either the QS variant (this week’s model) or the THE one (next week’s).
However, the GCR does seem to have some influence in the world.
These are the people who bring you the Davos meeting, beloved of the elite (e.g. http://commons.wikimedia.org/wiki/File:Bertie_Ahern,_Davos.jpg or http://www.ksta.de/html/artikel/1233584171654.shtml#) and berated by the left (e.g. http://www.nadir.org/nadir/initiativ/agp/free/wef/images/0127riotpolice.jpeg). Their board includes two distinguished Irish (by birth, at least) business people – Niall Fitzgerald (B.Comm. UCD 1987) and Peter Sutherland (B.C.L. TCD 1984).
Perhaps they weren’t sent their “green jerseys” …
I forgot to add that the ranking of our banking system at #139 out of 139 puts us below “Zimbabwe, Burundi, Angola and Chad”.
I hope that’s harsh 🙂
inflation : 48 to 3
pay and productivity: 76 to 56
i’m not an economist but if there is to be any future for the irish economy , it will be based on these 2 simple variables.
I would not hold my breath on the relevance of the National Competitiveness Council. Where were they when Bertie was doling out Benchmarking from the ATM (Taxpayer) ???
I feel like a Zimbabwean when I read this gibberish.
@ Alan Sloane
Suds was at UCD not TCD !!!! He played as a Hooker for UCD so that probably qualified him as a WEF Board member.
The point is that nearly all the figures given in the report are based on subjective opinions and not on hard data. And, as a consequence, they are ludicrous. This is the sort of nonsense that gives economists a bad name.
Let’s leave Ireland out of it and look at some of the information in the report.
Among the many tables of figures in the report, you’ll find the following gems:
Property rights are better protected in China than in the U. States.
Ethiopia has better roads than Norway.
Greece has more scientists and engineers available than Germany.
Luxembourg (100s of miles inland) has better seaports than Australia.
Malta is more technologically innovative than Israel.
Rwanda is less corrupt than Canada.
South Africa has the highest financial auditing standards in the world.
Rwanda ranks third best in the world for governance by corporate boards.
Maths and science education is better in Malawi than in Israel.
The Kyrgyz Republic ranks 33 places above Finland for investor protection.
Honduras has better waste disposal facilities than Austria.
Portugal’s infrastructure is better than that of the U. States.
Botswana’s railway network is better than Norway’s.
Zimbabwe’s education system is better than Israel’s.
Company staff training is better in Zimbabwe than in Italy.
Local competition is more intense in El Salvador than in Finland.
Zambia makes more use of professional management than Spain.
Germany’s brain drain is worse than Costa Rica’s.
Zambia’s banks are sounder than the Netherlands’ banks.
Lenders/borrowers’ legal protection is higher in Zimbabwe than in Sweden.
The latest technology is more available in Senegal than in Italy.
Cluster development of firms is more advanced in Vietnam than in Denmark.
The quality of scientific research is higher in Burkina Faso than in Italy.
Spending on R&D is higher in Kenya than in New Zealand.
University-industry collaboration is greater in Barbados than in France.
In case anyone is wondering, I haven’t gone mad. All of these comparisons are in the World Economic Forum Global Competitiveness Report 2010. There is a word to describe them, but I’ll be banned from the site if I use it. Why is taxpayers’ monet being used to fund such nonsense.
Actually, I tell a lie.
One (only one) of the above 25 ludicrous comparisons was made up by me.
I bet most people will not be able to spot which one.
Can we call time on this? I’d no desire to spend much time reading the work of the WEF, and certainly no inclination to be seen as its defender. I’m closer to the anarchists most likely …
Truth told, I had come across the GCR before, and was none too impressed – despite its prestigious backers and extensive data collection. I agree that the methodology of collecting opinion on each country by asking the “locals” is strange – you could probably make a better case for asking outsiders their opinions. That said, I don’t share JtO’s disdain for anything other than “hard facts” – after all “Mixed Methods” is the fashion in most all fields of the social sciences today 🙂
I guess I was surprised by the assertion that the data was based on the opinions of the UCC Economics department, and went searching to find out that indeed it was not.
I confess I did return to the document one final time to try to see what weightings were given to the various measures, but to no avail.
Whatever the merits or faults of the exercise, I thought that the summary was worth repeating here – because it seems to me to have arrived at a position that most people (especially readers/commenters/contributors to this blog) would find unarguable: namely that Ireland’s economic position vis-a-vis other countries has weakened in the past year, and that the primary cause is “concerns related to financial markets”.
“Ireland … continues
to benefit from a number of strengths, including
excellent health and primary education (ranked 10th)
and strong higher education and training (23rd), as well
as well-functioning goods and labor markets, ranked 14th
and 20th, respectively. These attributes have fostered a
sophisticated and innovative business culture (ranked 20th
for business sophistication and 22nd for innovation).
On the other hand, the decline in rank is attributable to a
weakening macroeconomic environment as well as continuing
concerns related to financial markets (with a
precipitous fall from 7th two years ago to 45th last year
and 98th position this year in this pillar).” (p24)
Oops, sorry. I’m not surprised to hear he played at hooker – probably a good preparation for a career in FG, EU, WTO, BP and Goldman. He is indeed very well connected! http://bit.ly/dyv5HO
The truth might be just as bad, in its own way.
Trouble is no one has anyway of measuring it as there are no details. So there can be no quibbling with it. Sad that the ability to so incisively dismiss claptrap deserted so many commentators after 1999 and before 2006.
I expect that Nama will release fewer details as they tend to be ripped apart by so many. A darkness before the Darkness, perhaps?
By all means we should call time on our little debate, as basically you are not disagreeing with me regarding the central fact that lots of the results in the report are patently absurd.
Your main disagreement with me is in whether the Dept of Economics, UCC was responsible for the Irish entries, or whether other organisations were involved as well. I bow to your much greater knowlege on this one. But, the report gives the Dept of Economics, UCC as its main partner in Ireland. It is not particularily important as to whether they researched all the Irish entries themselves, or whether they coordinated research done by some others as well.
However, I don’t think that the matter should be allowed to rest. Some of the results in the report are extremely damaging to Ireland’s economic reputation, in particular the bank one. Allready, the most damaging ones are being reported widely in the media and on the internet, without any mention of the fact that they are not based on hard data, but are merely the subjective opinions of the people mentioned above.
Professor Eleanor Doyle, Professor of Economics, University College Cork, is listed in the report as the main partner for the WEF in Ireland. She should be invited on to this blog to defend some of Ireland’s entries in the report, given that they appear to have come from her or her department.
In particular, I’d be intereested to know:
(a) What data did they enter for Ireland that allowed the WEF to rank Ireland’s road network 37 places below that of Namibia?
(b) What data did they enter for Ireland that allowed the WEF to rank Ireland’s seaport facities 16 places below those of Luxembourg, which is hundreds of miles inland.
(c) What data did they enter for Ireland that allowed the WEF to rank Ireland’s banks as the most unsound in the world and less sound than those of Zimbabwe. Will the UUC Department of Economics be willing to have their taxpayer-funded salaries paid into the National Bank of Zimbabwe from now on, rather than to BoI and AIB?
*Inflation: 48 to 3
I guess it depends on ones perspective. Deflation ain’t so friendly to those burdened by large amounts of fixed interest debt.
on this issue of Irish roads – What if the comparative ranking with Namibia, and other places, are accurate. There is a lot of very poor rural roads in this country.
Namibia is a massive country, but is also sparsely populated country with the population concentrated in a handful of major towns. Ireland has a massive road network (96,602km) for a country of 4 million. A country doesnt need a huge amount of capital to have a good roads if the network is comparatively small.