Ireland Calling by John Spain
The boom to bust decade
Posted on Wednesday, January 13, 2010 at 02:22 PM
- Abortion reform Irish style - Women still have no rights over their own bodies, continue to travel to the UK for procedure
- We’re total abortion hypocrites - proposals for new legislation were laughable
- Catch 22 for Irish abortion law - navigating Ireland’s rigid, Catholic influence legal framework and Savita Halappanavar’s case
- The late Baroness Margaret Thatcher had her good points
- Letters from the tax man - the mounting cost of Ireland's property tax and running the country
Greetings from the North Pole. Well, not exactly, but that's what it feels like.
For the past two weeks Ireland has been in the grip of a weather system from Siberia that has seen temperatures sink as low as minus-14 Celsius. For the past few nights, for example, it's been minus 9 or 10 across most of the country, with sleet and snow adding to the misery. And it's forecast to continue for another week at least.
We're not used to this so we don't know how to cope with it. In fact we've not really had much snow -- there's only an inch or two on the ground in most places. Yet the country has ground to a halt.
We're running out of salt and grit to make the roads passable, schools have closed for the first three days of this week, and the airports have been forced to shut several times over the past week for a few hours. And all this because of a few snow showers that would hardly be noticed in New York or Chicago.
As I said, we're not used to it (the last time we had a cold spell this bad was decades ago). So local councils here are never prepared. And the furious public have been blaming the government.
If Taoiseach (Prime Minister) Brian Cowen is feeling paranoid who could blame him? Even the weather is against him!
There was further bad news over Christmas -- on a much more serious note -- with the shocking news that the Minister for Finance Brian Lenihan has been diagnosed with cancer of the pancreas, one of the worst cancers you can get. He began chemotherapy a few days ago and has the good wishes and prayers of the whole country behind him.
Obviously this is a terrible blow for his family, but it is also a serious blow for the country since he is seen as the only politician with the requisite ability and courage to get us through the catastrophic economic mess we are in. He says he intends to continue working while undergoing treatment, but it's not going to be easy for him.
Added to all that has been the relentless recession, deeper here than in any other European country, with retail sales way down over the holiday period and unemployment numbers again rising. The very latest figures here show that one in every three males under 25 is now on welfare.
So it's been a miserable Christmas. But this being the first issue of the Irish Voice of 2010, it's time to look back beyond Christmas to review the past year and add up the national scorecard for 2009.
And yes, it's a big F -- F for Fail or Flunk or whatever you guys call it over there. It's been a year when not only the Irish economy but the Irish state came very close to total failure, to complete collapse.
This is also the start of a new decade, so it's appropriate to look back over the last decade in Ireland. In fact it's necessary to do so to see how we got ourselves into the mess that reached crisis point over the past year.
By any measure, 2009 was an extraordinary year here, and the 2000s (the noughties) were an extraordinary decade. The decade saw monumental changes, more than in any other recent decade.
I don't say that lightly. I've been working as a journalist since 1970, which is four decades ago now, and the changes we have seen in the past decade are on a different scale.
The noughties saw Ireland emerge as a place where everyone seemed to have a second home, or an apartment in Bulgaria, an SUV, a massive flat screen TV, kids in fee paying schools and a few hundred euro to spend on an average night out.
The Irish economy, once the poor man of Europe, heated up so much we were growing at 9% or 10% a year when even Germany and the U.S. could only manage 2% or 3%.
It was mad, of course, but it was a divine madness. Two or three foreign holidays a year, so what was not to like?
And as we lay in the sun we calculated how much our houses were increasing in value every year. Perfectly ordinary family homes in mature areas around Dublin were suddenly worth a million. We were all millionaires!
Everyone was swept along, from the CEOs on their million-plus salaries to the blocklayers and plumbers who would not take a job for less than a thousand a week. After tax.
It was crazy, but we did not call it that. We called it the Celtic Tiger.
I do remember writing here a couple of years back that it seemed strange that the economy was still booming even though we were losing all our manufacturing jobs to cheaper countries. I particularly remember commenting in this page about the absurdity of a property boom in which we were building thousands of new homes to sell to immigrants who were coming in here to work in construction. It was a bubble and most people knew it, yet we clung to the hope that we could keep blowing it up without it bursting.
It was a decade of greed and stupidity, and looking back now it's extremely embarrassing. We can blame the U.S. for letting Lehmans go under, we can blame the global financial collapse, we can blame the Man Above, or right now we can blame even the weather.
But there's only one place the blame needs to go, and that's right here. The reason the collapse is worse here -- much worse -- is because Ireland was more stupid and more greedy than anywhere else. And over the past year we have started to pay the price.
We will go on paying the price in 2010 and for at least another two or three years into the future because that's how far things have got out of line here and how long it will take us to readjust. There are big two problems, our lack of competitiveness and our budget deficit.
Government spending here soared during the Celtic Tiger as the boom brought in massive tax revenue. Now that our property bubble has burst and our economy has tanked, tax revenue has collapsed so that it covers just over half of government spending.
Getting that back under control meant huge cutbacks in state spending in the recent budget, and there will be similar cutbacks in the next two budgets. That impacts on state services and will be felt by everyone here as a noticeable reduction in our standard of living.
One of the problems in getting state spending back under control is the huge jump in unemployment (now up to 14% and still rising) which is putting so many people on welfare. And that is related to something else that happened here during the Celtic Tiger years -- our serious loss of competitiveness.
Pay rates and salaries soared during the boom and that fed into the cost of everything else here, from the coffee you bought on the way to work to the electricity used to power your computer or your cement mixer. We went from being a hugely attractive country for multinational companies to set up in, to one where everything was ridiculously expensive. Manufacturing, transport, the general costs of doing business here all went haywire and multinational -- and Irish -- companies reacted by shifting their plants abroad. Many of the high profile cases -- like the loss of the huge Dell plant in Limerick or the decision to manufacture "Waterford" glass in Eastern Europe -- were covered in this page.
But it wasn't just the high profile cases -- it was the ordinary manufacturing plants which closed down week after week, month after month as Ireland's manufacturing industries died. In the end we were left with a huge property bubble, which eventually burst.
Getting that competitiveness back is the biggest challenge that now faces us, both in 2010 and in the years ahead. If we can get that right, we have a chance.
If we don't, or won't, then expect to see many more young Irish where you are in the days to come. Happy New Year ... we hope.