Five Crises Post author By Philip Lane Post date June 30, 2011 Cormac O’Grada spoke on Ireland’s five crises in his Central Bank Whitaker Lecture last night – the speech is here. Categories In Uncategorized 10 Comments on Five Crises ← Professor Sinn Doubles Down → Central Bank Research Bulletin 10 replies on “Five Crises” Following today’s census figures, it looks like the five crises is now down to four crises, since one of the five is apparently very high net emigration. “The massive turnaround from a net immigration rate of 16.9 per thousand in 2006 to a net emigration rate of 7.7 per thousand in 2010 imply that the downturn of the 2000s was the sharpest of all, and that it still has some way to go.” Talk about bad timing. He would have been better waiting until after the publication of today’s census figures before spending so much time expounding on the ’emigration’ crisis. Nice article by Cormac O’G. I still think the emigration issue is still a crisis especially in terms of the profile of the migrants. looking forward the challenges present very bleak prospects for many young Irish workers in across the spectrum of sectors. The significant debt burden and the higher effective tax rates are discouraging many highly qualified young workers from staying. However, time working abroad provides valuable experience which can potentially be leveraged if migrants return. Whatever happened to those fabled lambs of 36 ? Did those 125 brave dumb creatures travel to exotic destinations after they were slaughtered or did they infact witness with their own eyes something continental. I guess we will never know. On industrialisation, the Henry Ford plant in Cork had peaked in 1930 with a payroll of 7,000 but in the 1930s, lack of local demand for tractors and tariffs, prompted a downscaling and the transfer of many workers to the Ford plant in Dagenham, Essex. Meanwhile, distillers had been hit by US prohibition and in Bandon, the Allman’s Distillery was closed. After 1933, the equal share of the US whiskey import market which Scotch and Irish distillers had shared up to 1919, was never reclaimed. Nothing succeeds like success and Frank Barry shows in his paper ‘Foreign Investment and the Politics of Export Profits Tax Relief 1956’ that it was Taoiseach John A. Costello and the Department of Industry and Commerce not the Department of Finance who promoted the exports profit tax relief scheme (EPTR) – – the genesis of Ireland’s success with FDI. He writes: ‘Whitaker wrote to his Minister, Gerard Sweetman, in September 1956 that EPTR would further postpone the day “when we can bring farming profits within the income tax net” and argues that “it is production which should be aided rather than exports”. Later, Whitaker in a sarcastic comment to his counterpart at Industry and Commerce says: ‘I do not know why you assume that we have invented a new time machine.’ http://www.irisheconomy.ie/index.php/2011/02/05/historical-origins-of-irelands-low-corporation-tax-regime/ Finally, on agriculture and its role, exports of food and drink account for 10% of merchandise exports and 5% of total exports but contribute over 30% of the total net earnings from manufacturing industries. Yesterday, the CSO reported that operating farm income jumped 28% in 2010 and I was surprised by the statement by John Bryan, IFA president, that farmers depend on EU payments/subsidies for 94% of their income. This is an average but this level of welfare in a sector with greater export potential, is ridiculous. Farmers get so-called ‘direct’ payments for even watching the grass grow. http://www.finfacts.ie/irishfinancenews/article_1022648.shtml I think the final quote from Dr. Whitaker sums up the challenge and the problem: “..although we can be as wrongheaded as anybody else, we do have a capacity to recognize when we are doing wrong. I mean tacitly we do so—we may not confess openly to our wrongdoing—but I think we learn from experience…”. Nobody, other than the extremely masochistic or seriously religiously deluded, will willingly and openly confess to wrongdoing, but that precisely is why accountability – and procedures to enforce accountability – is vital in the public sphere. We have the courts, on the occasions when they are called upon, and the judgement of voters at elections. But that is the extent of it. All other mature, well-governed democracies have much more extensive and effective systems enforcing accountability in the public sphere. There is a huge need for these systems, but the demand is not being articulated – and one can be absolutely sure that the government – or, indeed, any government – will not volunteer supply. ‘The Broad Sunlit Uplands’ – must be a newly discoved Jack Yeats or a Roderic O’Connor. The Impressionist influence on The Aesthetic Turn in Irish economics emerges … The Sixth Crisis? @ MH I,ve been on alot of trains in northern Germany these last few day, passing by fields being worked productivly by farmers. What we are doing here/ allowed to happen here is the height of folly. What skills or efficiencies are being lost as the grass grows? Fascinating read. One aspect of the lecture I have been thinking about in terms of crises and booms is that the mortality conditions in Ireland have an ambigous relationship with economic conditions. While Cormac notes the increase in infant mortality during the emergency, the back is broken on infant mortality in the subsequent 20 years during a period of economic stagnation. Similarly, declines in mortality at older ages start in approximately 1986 during a bad economic period. Though they seem to accelerate during the “Celtic Tiger” likely due, in part, to better healthcare resources, there is a lot of complexity in the overall pattern. There has been a lot of speculation about the suicide rate in Ireland also, but again not great evidence that it is counter-cyclical. There is certainly a cross-sectional link to unemployment but, to take one example, suicide rates increased dramatically for both men and women through the 90s and start of the last decade. There is evidence of increases during the current collapse but, taken as a pattern, not strong evidence, in my view, of a stable relationship with GDP in general. Johntheoptimist’s complaint aside, O’Grada’s basic point that migration flows are a good rough yardstick of economic conditions in Ireland is clearly a sensible one and makes a useful organising tool for his paper. With relation to the 50s wave of migration, there is a long body of literature that this group had difficulties and also a high rate of returning. So far, the group who left in the 80s look like they did very well and continue to do well. One welfare cost of a collapse in an economy like Ireland is that it may lead to sudden, unplanned migration of people with relatively low skill-levels who then find it tough to integrate and reintegrate (have just finished a paper with two colleagues on this effect to be released). From a welfare perspective, the conclusion that this is the most serious crisis is very interesting. I would probably still say the 40s was the most serious simply because it was hopefully the last time that a nontrivial group of people were actually driven into conditions where basic nutrition and core health were damaged though Cormac mentions this and it is really a subjective question as to how one weights these numbers. We are at a stage where well-being data is going to have to be used in part to work out welfare costs of economic fluctuations. Relative to the expectations we had formed, perhaps this is the most serious collapse in terms of regret, disappointment and anger. @ Liam Delaney I’ve heard that Shane McGowan of the Pogues summarised the most central/persistent Irish story as: “Bloke goes away: bloke comes back.” Very interesting and entertaining excursion into our economic history. O’ Grada remarks that the five crises were all different. I’m not so sure I can agree with that. What they all have in common is an underlying dysfunctional political culture with one generation of politicians after another showing a great reluctance to change it in any meaningful way. The next crisis may appear very different, but the seeds of it are probably already sown. Comments are closed.