Measured Macroeconomic Performance

In a series of informative comments across recent threads, Michael Hennigan has raised important questions relating to the reliability of the recorded growth in key macroeconomic aggregates, and also the employment performance of internationally traded sector in general and the foreign-sector in particular. (See here for a useful summary from his Finfacts website).  Although Michael watches these figures much more closely than I do, and so I hesitate to contradict him, I find it hard to share some of his concerns.  

First a point of agreement:  At roughly 100 percent of GDP, Irish exports are strongly influenced by the activities of multinationals operating in Ireland, and the numbers tell us little about value added and incomes in Ireland.   Where I have difficulty following Michael is in his concerns about the reliability of Irish GNP and GDP figures.   GNP excludes the profits of multinationals (and not just repatriated profits), and so should be immune from concerns over tax-driven transfer pricing.    GDP excludes imports (including intermediate imports and royalties).    Michael says the Irish exports are overstated by one third.   If he has a chance, he might explain this in more detail, and also how he sees it affecting measured GNP and GDP given the exclusions just noted. 

Michael also notes that employment in the foreign-owned sector has fallen from 166,000 in 2000 to 144,000 in 2011.   This fall is certainly very regrettable.   But it occurred during a massive bubble-driven, structural mal-adjustment of the economy.   Given the extent to which the bubble affected the allocation of resources, I am surprised the damage done to the traded sector was not much greater.  Part of the answer would appear to be the highly elastic labour supply response – notably through immigration – which allowed the construction and other non-internationally traded sectors to expand, while limiting the damage to the traded sector. 

I do share Michael’s concern over risks around the projected return to robust growth after 2013.  But my main concern is a prolonged “balance-sheet recession”—and not just in Ireland.    While Michael’s description of the nature of much multinational activity in Ireland seems accurate, I find it hard to share his concerns about its implications for measured Irish growth performance.   I am ready to be corrected. 

35 thoughts on “Measured Macroeconomic Performance”

  1. A look at the OECD STAN database is relevant to the discussion. It gives the import content of exports as a relatively stable 50%, and breaks down the import content of exports by sector.

    The data is based on I/O tables.

  2. What is with the Michael Hennigan love in these days. No doubt we will get to here about his wrong export employment in 1999 number he keeps coming out with.

  3. While waiting for MH’s reply, a question occurs to me with regard to the following;

    “Michael also notes that employment in the foreign-owned sector has fallen from 166,000 in 2000 to 144,000 in 2011. This fall is certainly very regrettable. But it occurred during a massive bubble-driven, structural mal-adjustment of the economy. Given the extent to which the bubble affected the allocation of resources, I am surprised the damage done to the traded sector was not much greater.”

    What resources? And how did this misallocation impact on decisions taken in corporate HQ, mainly in the US?

  4. @DOCM

    The most important resources in question are people. The demand for labour in construction (and other non-traded sectors, including the public sector) pushed up wages. The knock-on effects through the wage (and non-traded goods price) structure made Ireland a less competitive jurisdiction to locate foreign direct investments. While cost is not the only factor affecting location decisions, it certainly is up there as HQs judge the potential profitability of investments given the alternative locations available to them. Given what happened to the cost structure, hanging on to 144,000 of those jobs does not look to bad to me. The relative cost structure is gradually improving, and so far Ireland has retained its reputation as a stable place to do business, avoiding retrospective changes to the rules of the game. It is unlikely there will be substantial growth in jobs in this sector. The important thing is to hang to the core we have in a highly competitive environment.

  5. @ John McHale

    Thanks! While I accept the points you make, I am personally doubtful as to whether the labour element played any significant role as the qualifications of those who went to work “in construction” were not of the kind being sought by MNCs. The general upward trend in labour costs did, of course, play a role but, generally speaking, MNCs are good at setting their labout costs. As to infrastructure, notably buildings, the head of the IDA is on record as saying that there is a shortage of buildings up to the standard required by MNCs even if rents have come down.

    The reality is that FDI is a revolving door and what enables the country to hang on to it has most to do with the incentive packages which brings it here in the first place. When relative costs change, mainly elsewhere (e.g. Dell’s departure for Poland), the firms change with them and quit the country as fast as they arrive.

    They do not provide a solid basis for sustainable development (although I do agree that we should not throw the baby out with the bathwater and must hang on to the present strategy until we can come up with something better).

    I have never understood the debate on the tax regime in Ireland. It is clear (i) that it is very advantageous relative to those of other countries (ii) there is nothing in the EU treaties which requires the harmonisation of direct taxes (a situation that is unlikely to change) and (iii) because the regime is non-discriminatory, it cannot be challenged under other aspects of the EU treaties (although there will undoubtedly be continued efforts to attack it from a company law perspective).

    However, the sole defence is the repeated statement that “we are not a tax haven”. We should be able to do better.

  6. @DOCM

    If Ireland needs a second bail-out ,which is at least a possibility, expect most of the Eurozone countries to try to obtain a fiscal treaty as a condition for any help .The only Eurozone country on your side will be Luxembourg .The commission is very unhappy with the status-quo and so are Germany, France, Italy and Spain.

  7. The main impact on GNP change will reflect the poor medium term outlook for the big economies. With property remaining in a comatose state, the big FDI stock will continue to provide significant Irish capital investment (e.g the current Intel project), reflected in the gross capital formation data with some benefit for construction while the 3,000+ commercial aircraft could be expanded without any big impact on the 1,000 direct staff in aviation leasing. Population increase will also be a factor in the actual result.

    1) There are signs of improvement in the US housing sector but private debt is back to early 2008 levels; stagnant wages for many workers will keep pressure on consumer spending as will rising food prices as a result of the drought. A win by Rom-Ry would make the situation worse. 2) China like Germany fears inflation. Export growth collapsed in July but it’s reluctant to launch a big stimulus for fear of reigniting a property boom. Consumer spending accounts for 35% of GDP — half the US level but a bank chief this week said: “consumption takes time to grow because it requires large improvement in the social-security network and greater varieties of consumption choices. Neither can be realized in a short time.” 3) Japan’s post earthquake bounce will fade in 2013. 4) India has been hit by drought, a big trade deficit, weak currency and slowing growth; Russia needs a Brent crude price of $117 a barrel to balance its budget. 5) Latin America is dependent on commodity demand from China as is Australia.

    Germany will be hit by slowing growth in emerging economies and the rest of Europe will be on respirators for years.

    FDI in Ireland has been dependent on US firms with Europe, including the UK, being the main market.

    The US itself has become a competitive location for manufacturing in recent years; there is an abundance of cheap natural gas and at a time of high oil prices, freight costs to Asia are low (many incoming containers to the West Coast return empty to Asia).

    Big manufacturing firms provide lots of jobs and generally good local linkages.

    In the last decade, the majority of new FDI jobs in Ireland were in financial services.

    Software and web services do not employ large numbers and crucially, many of the jobs are for foreign nationals, likely more than 50% in some cases — not types drawing dole in Ireland but young mobile folk (so the impact on unemployment would be negligible).

    The Taoiseach announced last Feb that PayPal would hire 1,000 for its call centre in Dundalk. In June, it was reported that PayPal has been forced to ‘import’ employees from abroad — 500, or half of those required — at a far higher cost. Global operations vice-president Louise Phelan warned that we need to focus on language skills here to protect our status as a European gateway.

    She said Ireland suffered from a “deficiency” in workers with second languages. “We are a gateway to Europe but we need to ensure we are supporting the languages. Absolutely there is a deficiency in languages in Ireland. I am bringing in 50% of our language cover I require from 19 other countries.”

    There is a lot of hype about R&D but there is little significant research done by FDI firms in Ireland and few collaborations with universities. There is a tax credit which can cover a multitude of expenses. In my first job, I had responsibility for submitting R&D grant claims to the IDA!

    In 2011, the US accounted for 26% of FDI projects in Europe, followed by Germany, UK, France and Switzerland. The top target locations were the UK, Germany, France, Spain an the Netherlands. Ireland had a 9th rank according to an Ernst & Young Survey.

    Competitiveness has improved as it has done elsewhere. Ireland does retain several key advantages but in July, UNCTAD, the UN agency, published a survey where 174 multinationals responded and in contrast with a decade ago, Ireland is not among the top 20 location choices for new investments.

    http://www.finfacts.ie/irishfinancenews/article_1024589.shtml

    So with financial services and pharmaceuticals under strain; past success in hooking most of the big US fish in key sectors and little prospect of winning big emerging market projects, the Irish FDI sector will just tick over, in the medium term.

  8. @ Michael Hennigan

    ‘So with financial services and pharmaceuticals under strain…. and little prospect of winning big emerging market projects, the Irish FDI sector will just tick over, in the medium term.’

    QED, Michael.

    You’re not, you couldn’t be, suggesting that it’s high time for a new industrial/enterprise strategy?

    From what you say one might conclude that Ireland needs a major 2012 equivalent of the 1970/80s Telesis report to examine the current and future structure of the entire Irish economy ( including agri-food export marketing which, ludicously, is the preserve of the Department of Agriculture) and also including what state agencies are responsible for facilitating investment, ‘production’, human capital development ( ’emigration’!), and exporting.

    Indeed, from continental European isolation here rumours reached us that such a proposal was approved at the Fine Garl Ardfheis back in April and therefore should be part of the policy of the majority partner in coalition in Ireland right now.

    It may also be high time to conclude that that a country as small as Ireland can afford just one sustainable ‘Enterprise’ agency.

    If we want to maintain our anachronistic ‘split’ approach to the apparently distinct ‘export’ and ‘domestic’ economies, we might adopt the simple expedient of an agency with one CEO and two Assistant CEOs.

    And close down ALL the rest!

  9. Are the GDP and GNP figures a reliable indicator of macro-economic performance ?

    Simon Johnson has a view (see page 12).

    http://www.iie.com/publications/testimony/johnson20120801.pdf

    Some further disentanglement of the issues by those technically qualified to do so seems called for. Empirical observation would suggest, however, that the answer is no. The inter-linkages between “domestic” (Enterprise Ireland) and “FDI” (IDA) – and their statistical impact on one another – need to be teased out.

    The article by Johnson, first linked to by MH, makes for sobering reading although I find it a bit too doom-laden.

  10. On other points raised by John:

    1) employment figures are in respect of full time permanent staff.
    2) The GDP effect of profitshifting is mainly in manufacturing exports.
    Earlier in the week, I suggested here that the production output data is suspect:

    http://www.irisheconomy.ie/index.php/2012/08/06/14118/#comments

    The services giants report big revenues in Ireland but small profits as they offset the booking in Ireland of end-user revenues generated elsewhere, with big charges including royalty claims. So there is no big contribution of net exports to GDP.

    The implications of the exaggeration of services exports are however not a benign issue and the nonsense analyses it triggers both in public institutions and among commercial economists, is reminiscent of bubble times.

    The penny has dropped since the crash about a ‘disconnect’ between the exporting and domestic economies. The main answer is here.

    Remember the mantra about increasing services exports and ‘rising up the value chain’?

    It’s important because the annual changes can account for most if not all of reported the rise in exports in a year.

    Services exports amounted to €79bn in 2011.

    Sales revenues booked in Ireland in 2011 by Microsoft were €13.4bn and Dell €9bn. My estimate of sales by Google are €12bn; Apple €12bn; Oracle €4bn and Facebook €1.6bn.

    This total of €52bn compares with a total of €62bn for computer services, business services and misc. services exports.

    Microsoft had a global revenue per employee of $777,140 in fiscal 2011 and $27m in Ireland; Google had a global revenue per employee in 2010 of $1.33m and $8.52m in Ireland.

    If Microsoft booked revenue in Ireland at its global revenue per employee, it would have sales of €500m. Google would have sales of €2bn.

    Total services exports grew by $5bn in 2011 and computer services by $4bn.

    So real services exports could fall while the headline total would show the opposite.

    Google chooses a tax strategy and is declared Ireland’s biggest exporter!

  11. @John,
    I don’t believe there is a problem with Irish GDP, GNP and exporting figures being constructed in compliance with statistical definitions. There is, however, a serious problem that properly constructed GDP, GNP and export figures for Ireland are of limited use as indicators of Irish economic activity.

    Total exports is such a poor indicator of value added or wealth creation for Ireland that it discredits anyone who uses it without qualification. In most other countries, an increase in exports is likely to mean that more value is being created, and that this will feed though into the real economy experienced by the country’s (non-corporate) residents. Change and volatility in compositional effects, decisions on transfer pricing, changes in the share of inputs sourced locally, trading activity and other factors mean that it is not possible to honestly and competently draw this inference for Ireland, or talk about export stats to a non-expert audience without providing a big health warning.

    GDP isn’t quite as bad because at least it focuses on value that is properly attributable to someone somewhere in the world. However, it is still well into in “How to Lie with Statistics” territory because the share that will end up in the pockets of Irish (non-corporate) residents is much lower than for most other countries. It is also more subject to change and volatility, rendering trends near-useless without deeper analysis.

    In general, GNP is inferior to GDP as an indicator of economic activity for many purposes because of the amount of activity in other countries that it includes, which I guess is why it is almost invariably used as the basis for comparisons by supranational organisations. Karl Whelan has been quite vocal on the subject of why GDP is better. GNP is as poor an indicator for Ireland as for any other country. We tend to favour it in Ireland, but this is only because for us GDP is so much worse. As with GDP, it is capable of moving in the opposite direction to real activity in the Irish economy.

    We should shift our attention away from exports, GDP and GNP to other macro indicators for purposes of public discourse.

  12. Bottom line is that MNCs and FDI are good for Ireland but we need to grow the other parts of our economy.
    In 5 years Ireland has drifted from an outward looking place I was proud to call home to an insular little backwater. Our talent is being exported through emigration. All we’re left with are junkie, pensioners and an increasingly squeezed and disenfranchised middle class.
    The country is in social decline. Soon no self respecting MNC executive with a family will move to the miserable kip Ireland has become. The numbers that really matter are 18.6 billion and 34% youth unemployment.

  13. @BeeCeeTee

    ‘We should shift our attention away from exports, GDP and GNP to other macro indicators…. for public discourse’. Such as?

    It sounds like a great idea if it would lead to serious discussion of a strategy
    to substantively transform Eureka’s ‘miserable kip’. ( Must admit, didn’t realise things were that bad!).

  14. shorter : many MNCs are here for financial reasons, and done employ many irish and we dont seem to be doing much about it.
    Well, lets start with some changes in education: make a foreign language compulsory (not Ar Teanga Naisuanta) from midway through primary; lets incentives the teachng and learning of math (warning : this might involve spending money on public sector employees….) ; lets get all schools on broadband and put in programming and logic courses; lets spend more and better on improving soft skills in second and third level.
    all of these would take a decade or more but would be useful. The problem is that they span more than one electoral cycle and therefore are not going to be taken on board.

  15. The construction boom didn’t impact much on MNCs because nowadays, there is little overlap in staff. A few decades ago when foreign companies were building small factories in Irish cities and towns, it might have been different. Most employees of MNCs in recent years have been for call-center type jobs which mostly employ young Europeans and in IT, where in smaller numbers, East Europeans and Indians filled the gaps.

    However I would still worry that the long-term harm the Celtic Tiger boom did to the export-oriented economy, whether indigenous or MNC, is more insidious.

    In the 80’s and 90’s lots of bright school-leavers entered the new 3rd level degrees for engineering and computing. The entrance requirements were very high. Some of these people are now in high-ranking positions in corporate America or Ireland and would push projects here if there were a case for it.

    However after the Internet bubble burst, people discovered that these companies were not just leading-edge in technologies and work practices, but were also leading-edge in out-sourcing and getting rid of perks like pensions. Unpaid overtime when required is the norm, (you can take time off when business is slack) and you can get sent to the far ends of the earth with little notice on totally receipted travel (i.e. you will lose money, not gain. ) The word “entitlement” doesn’t exist in this world. That’s life.

    For the last decade and half, the relentless message being communicated to clever Irish youngsters is that if you want wealth and priviledge, you enter professions like medical consultant, doctor, barrister, solicitor, accountancy and business. For the less academically gifted, any government job esp. teaching. All of the above are part of the “sheltered”, “domestic”, “insider” world that commentators here talk about endlessly.

    Whether genuine export success and non-service employment is going to be obtained via MNCs or via indigenous industry, the above situation is bad.

    The “huge pensions” for the civil service ex-employees and the ‘wow’ factor associated with it reminds me of the previous 2 bubbles, the Internet and the construction which had many of their ‘wow’ moments too. So the government bubble is the last bubble to burst here and across the developed world.

    Hopefully, when the dust settles we will have a more balanced economy with wealth going to those who are genuinely the best at what they do internationally. But with the government bubble the biggest and worse, there are a lot of more hazardous possible outcomes.

  16. @ Anewdawn

    Fibre to the home could be achieved too. It doesn’t have to cost a fortune, if we bring all the state fibre together (See SBP for article on CIE sale to ESB Telecoms, may be good sign) and involve the private sector.

    I agree a major European language should be taught from National school onwards. Doesn’t have to cost a fortune.

    We need better teacher training too, the Finns (PISA league toppers) educate all teachers in a teaching specfic Masters level course and actually pay them less than we do (except pre-schoolers who teach ages of 6-7 who ONLY require a degree).

    How about doing something (Anything!) about the cost of child here. I know of some valuable heavily invested in employees (all female) that find it economically unviable to return to work.

  17. @Richard,
    I have seen good suggestions on here in the past about better indicators from at least one of the academic contributors. Unfortunately, I can’t track down the post right now. Personally, I’d go for some sort of income indicator, possibly one based on personal income with an adjustment to take off the part funded by net transfers and net borrowing from outside the State.

    On your wider point, I believe the Government has appointed a group to advise on reviving manufacturing in Ireland, which I think is one of your main concerns. Perhaps you should make a submission.

  18. According to Eurostat, the highest shares of pupils in primary education studying a foreign language in 2008 were found in Luxembourg and Sweden (both 100%), Italy (99%) and Spain (98%), and the lowest in Ireland (3%), the Netherlands (32%) and Hungary (33%). The proportion of pupils in primary education studying a second foreign language was highest in Luxembourg (83%) and Greece (24%).

    http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-24092010-AP/EN/3-24092010-AP-EN.PDF

    In Ireland, there was a lot of talk during the 1980s recession about the teaching of languages such as German in primary schools but political cowardice and intransigent unions put paid to that.

    The tragedy of the Irish language is that while a Civil War could be fought about symbols, there was never a serious commitment to endure the hassle of developing a bilingual society.

    In Malaysia, an ethnic Chinese learns Malay, Cantonese, Mandarin and English.

    @ Richard Fedigan/ BeeCeeTee

    On GNP, CRH and Glanbia provide an illustration on how statisticians have to pay attention to the specific detail of significant companies.
    As about 90% of CRH’s shares are held overseas, most dividend income remains overseas.

    Glanbia gets 42% of its revenues from the US, 6% in the UK and 10% from the rest of Europe.

    About 1,800 of its 3,600 staff are located in the US and there is likely very little valued added for Ireland. However, more than 60% of its shares are held in Ireland.

  19. @ Michael Hennigan – Finfacts

    Excellent analysis as usual.

    One point though…I wouldnt blame the education system in ireland for our low levels of foreign language takeup. As our state education provision moves more to a “lowest common denominator” system such as exists in the UK, I believe parents will have to take a much more active role in the education of their children than in the past.

    For me, the importance is a foreign language is obvious, I just wouldnt be depending on the state to provide it to any proper standard. Maybe that is the message we should be promoting in ireland.

  20. As a non economist, I would be interested in finding out how bank profits and bank losses are dealt with in GDP/GNP. Are the annual profits added as part of GDP and are the losses deducted?
    How for instance is the latest ‘clanger’ of another billion lost on Quinn Insurance dealt with. Will this have an almost 1% negative effect on GDP?
    And if not how is it accounted for in GDP?

    In relation to the measurement of GDP/GNP, I remain very sceptical as to the quality of the information. For the bubble years, we are led to believe that we had huge additions to GDP based on the inclusion of housing ‘capital formation’ at bubble prices. Surely there is an argument that those capital formation figures are now historical nonsense.

    @John McHale / Others

    RE: Your comments on Balance Sheet recession.
    Whatever about other countries this is clearly a major issue in Ireland.
    SME debt levels are simply disastrous. In former times it was possible collect debts in 60/90 days. Now many SME’s have simply parked the debt and no longer pay it, surviving on paying for current supplies with cash.
    As with banks/private households/ mortgages there is a mountain of small business debt in the economy that will never be paid.
    All this debt deleveraging is dragging the economy down. There will be no recovery until it is dealt with.
    Public policy seems to have been abrogated by the financial sector with the mantra ‘ we must fix the banks’ at all costs.
    Such a policy is based on a complete misunderstanding of the most basic workings of an economy.

    AIB or BOI or PTSB paying down their debt or bonds or squeezing businesses or private individuals to pay debts is the exact opposite of what the economy needs for survival and growth.
    In military terms it is the equivalent of the bank officer corps deciding to shoot the wounded front line soldiers in a vain attempt to extricate themselves from the fray.

  21. Well done to the UK on a great Olympics. The legacy of New Labour not the Tories.
    Fiscally responsible conservatism is the way to go really. But that aside – well done UK

  22. @ John McHale

    Its a good thing, IMHO, that you are taking Michael’s analysis on board. His truths are not very palatable but they are probably necessary. You say:

    ‘Given what happened to the cost structure, hanging on to 144,000 of those jobs does not look to bad to me. The relative cost structure is gradually improving, and so far Ireland has retained its reputation as a stable place to do business, avoiding retrospective changes to the rules of the game. It is unlikely there will be substantial growth in jobs in this sector. The important thing is to hang to the core we have in a highly competitive environment’

    Eureka says:

    ‘All we’re left with are junkie(s), pensioners and an increasingly squeezed and disenfranchised middle class. The country is in social decline. Soon no self respecting MNC executive with a family will move to the miserable kip Ireland has become. ‘

    One of Michael’ fundamental points, as I read him, is the lack of competiveness which characterises the irish economy. As long as y

  23. @ John McHale

    Its a good thing, IMHO, that you are taking Michael’s analysis on board. His truths are not very palatable but they are probably necessary. You say:

    ‘Given what happened to the cost structure, hanging on to 144,000 of those jobs does not look to bad to me. The relative cost structure is gradually improving, and so far Ireland has retained its reputation as a stable place to do business, avoiding retrospective changes to the rules of the game. It is unlikely there will be substantial growth in jobs in this sector. The important thing is to hang to the core we have in a highly competitive environment’

    Eureka says:

    ‘All we’re left with are junkie(s), pensioners and an increasingly squeezed and disenfranchised middle class. The country is in social decline. Soon no self respecting MNC executive with a family will move to the miserable kip Ireland has become. ‘

    One of Michael’ fundamental points, as I read him, is the lack of competiveness which characterises the irish economy. As long as y

  24. @ John McHale
    Apologies. Need to upgrade the specs.

    Its a great thing, IMHO, that you are open to engaging with Michael’s analysis on board. Its tough medicine but he works at it. You say:

    ‘Given what happened to the cost structure, hanging on to 144,000 of those jobs does not look to bad to me. The relative cost structure is gradually improving, and so far Ireland has retained its reputation as a stable place to do business, avoiding retrospective changes to the rules of the game. It is unlikely there will be substantial growth in jobs in this sector. The important thing is to hang to the core we have in a highly competitive environment’

    Eureka says:

    ‘All we’re left with are junkie(s), pensioners and an increasingly squeezed and disenfranchised middle class. The country is in social decline. Soon no self respecting MNC executive with a family will move to the miserable kip Ireland has become. ‘

    One of Michael’s themes, as I read it, is the lack of competiveness which characterises the domestic economy. As long as you are ‘protected’, and PS protection is just one variety, you can screw up without fear of any interloper taking your place. If you are outside the tent, as so many able young folk find themsleves, then its back to the 80s/50s/30s etc.

  25. Couple of comments:

    1: If G*P is such an invalid metric, why contnue to employ it? Makes no sense.

    2. Domestic competiveness? Like against what? What’s the base-line?

    3. Stick it where it deserves to be stuck: our decrepit politicians and their fianancial backers. Now why would anyone want to give those useless critters money? Oh! they do have SOME use. I thought so!

    I have mentioned this several times. This country is in economic (and possibly social) Regression. We are literally, going forward into our past. Joe Lee is somewhat dated, but he did explain why we failed to benefit in the early days and after a brief catastrophic flurry our politicians are taking us backwards. William Kingston (Interrogating Irish Policies) tells it how it is.

    I suppose we can look forward to the restructurings that will never come!

  26. @BeeCeeTee et al.
    @Brian Woods Snr

    ‘The country is in economic( and possibly social) Regression.

    Have not lived in Ireland for over 30 years, although I try to keep a close ‘case study ‘ eye on developments so I don’t know what ‘group to advise on reviving manufacturing in Ireland’ ( BeeCeeTee) the Guvmint has appointed.

    It’s not clear to me that any clearly-defined group, with responsibility to one, mandated and empowered individual is responsible for studying what form the post-US FDI Irish economy will take.

    Ireland would be less of the ‘miserable kip’ Eureka describes if there was recognition that our existing model, while we fight to maintain its viable bits, is unsustainable and if such a clearly-defined group was publicly tasked with coming up with a model to replace it.

    Telesis, a ‘non-Irish’ consultancy, back in the 70/80s had such a mandate and, although the recommendations were woefully implemented, produced results coherent with where the global economy was going at the time.

    What group is doing this critical work today?

  27. @BW,
    1) GDP is a pretty good metric for most other countries. It’s hard for public institutions to go it alone, for a whole bunch of reasons. Most international comparisons by institutions like the OECD and European Commission are referenced to GDP. Most credible macroeconomic models are built on the assumption that GDP should be a key output, and not that many models used by key public policy players are built from scratch.

    Also, there are groups that have an interest in using GDP as a metric.

    People who want more health spending in Ireland like international comparisons that show the Irish spend is low as a percentage of GDP, when referencing it to a better metric would show that we spend plenty, but just do it badly.

    The Government and European Commission seem to like it as a metric for debt sustainability that suggests Irish debt is more sustainable than it actually is.

    People who want to see higher taxes like to use it as a metric for the amount of taxes the economy can support. Ireland is not as undertaxed as they claim.

    2) There’s no generally agreed baseline for domestic competitiveness, but I would argue that it should be whatever is required to converge fairly rapidly on full employment, consistent with consumer prices being around the eurozone average.

    3) No comment.

  28. @Richard,
    A little digging shows that the group is called the Management Development Forum.

    I didn’t realise you had been out of the country 30 years. I’d suggest that investing some time in looking at the large volume of research and policy documents on Irish enterprise policy would be worthwhile if you want to do more than snipe.

  29. @BeeCeeTee

    Thanks. I’ll look up Manufacturing Development Forum with pleasure. Although my ‘Enterprise policy’ comments here and over the last year or so, while encompassing manufacturing, go well beyond it.

    ‘Out of the country for 30 years’ does not mean I’ve been off the planet.

    Indeed, an international business career at senior (strategic) management level, including early Irish semi-government agency overseas office management, and in ‘export’ entreprenurial ventures connected with Ireland spanning almost 40 years arguably gives me an insight into Ireland’s global market positioning at least as valid as that of some actors involved in and commenting on the ‘Irish’ enterprise policy process today.

    What part of suggesting a Telesis-style audit and action-orientated process do you consider ‘sniping?

  30. @Richard,
    When you write critically about Irish enterprise development, it usually reads to me as if you have been out of touch with the work of the industrial development agencies since at least the point where Enterprise Ireland split from IDA Ireland. That you left around the time the Telesis report was published seems to me to explain that.

    Very frequently, when you make a proposal or a critique it is in well trodden ground. If it is to be persuasive, you need to say something about why your proposal is better than what is already being done in the area, or better than what is already being proposed.

    Despite the fact that plenty of documents are published on this stuff, it does not get reported well in the papers, and it does not get much coherent attention on Irish Economy, so it is necessary to put in some effort to be well informed.

    Specifically on your proposal for a Telesis-style initiative, it’s not at all obvious why that would be better than what the Government is already doing or sponsoring in terms of “audit and action-oriented process”es.

  31. Thanks.

    Firstly, I did not ‘leave Ireland’ at the time the Telesis report was published but was working in an Irish ( government) ‘development agency’ in Dublin and later in one of its (continental European) overseas offices, including at the time of the ‘split’ (Enterprise Ireland/IDA Ireland). Chances are i know more about it than many!

    Like many international executives I work in a global environment, sometimes with ‘Irish’ companies and, more often, not but whether out of the country’ or not I am, to the same extent as most international executives, aware of Ireland’s economic behaviour, if not the details of the myriad ‘document’s’ you say I should ‘dig for’. ‘Documents’, you acknowledge, that ‘do not get reported well in the papers’. Or indeed ‘get much coherent attention on Irish Economy.’

    Who’s fault is that? And should international executives and investors ‘dig for’ these reports also?

    The Manufacturing Development Forum you referred me to, I now note, dates from July of this year ( last month) and appears to be following almost exactly the line I’ve been promoting for some time on this site – albeit confined to ‘manufacturing’. So, sorry I missed it. Maybe it’s the answer?

    In broad agreement with Michael Hennigan’s oft-repeated contentions that Ireland is unsustainably dependent on US FDI to provide the export-fuelled growth Ireland needs to survive and pay its debts, and that even precarious retention of this FDI is not creating significant net employment, my thesis is that all these ‘documents’ ( and indeed the slogans from ‘The Young Europeans’, through ‘The Food Island’, The Smart/Knowledge Economy’ and ‘The Irish Mind’) are not producing the action required to reposition Ireland strategically for the future and particularly to deal with our dreadful unemployment situation, particularly for young people.

    That’s my thesis. What’s yours?

Comments are closed.