Welcome to the Finfacts Blog

Monday, May 28, 2007

The people have spoken and made Jackie Healy-Rae kingmaker again?

The people have spoken as the old cliché goes and Ireland may have Jackie Healy-Rae as kingmaker again - a grassroots politician of tremendous charisma and brilliance - from his humble beginnings to his business and political success - his is a story full of craic, humour and colour, according to his own website.

Irish Times columnist Fintan O'Toole said on RTE Radio on the day of the General Election count that the Alternative Fine Gael/Labour Party coalition deserved to loose the election because of the strategy of focusing on the standard of public services rather than the economy.

We're all good hurlers on the ditch but I doubt if it would have mattered.

The simple fact about arguments on how unbalanced the economy is with an over-reliance on construction and the impact of falling competitiveness on exports, is that they have a minority audience.

At a time when many people have yet to be convinced that the free lunch has not been invented, with a housing market correction in its early stage and SSIAs having matured, it's more comfortable to believe that we have found the philosopher's stone that would transmute our current good times, built on foreign direct investment, European Union transfers (we are still net beneficiaries from the EU budget) and a property boom, into a permanent prosperity.

With no fundamental reform having been put in place to better position our economy against some negative trends, there is little chance of that now happening in the coming five years.

With tax revenues falling, the Minister for Finance will struggle to reduce public expectations but putting that genie back in the bottle will take backbone rather than political skill.

There are no plans to tackle ramshackle planning, governance issues including accountability, public service and falling competitiveness.

Paring public spending with the European Central Bank rate at 4.25% and the SSIA spending stimulus gone, and the housing correction underway, will impact many sectors of the economy.

The Paris-based OECD will put forward proposals on reform of the Irish public service by the end of this year but there will be no appetite to take on the trade unions. An addition of 77,000 staff since 1997 and sham benchmarking have widened the gulf in benefits available to the majority of workers in the private sector who don't even have a basic occupational pension.

We may well have a world class knowledge economy by 2013 by investing €3.8 billion in Research & Development, but I doubt it. It is of course worthwhile to deepen our research competence but any return will be long-term.

Fianna Fáil presented a plan to add 250,000 jobs to the economy over the next five years, and as previously detailed, it contains a number of worthwhile measures but none that will have more than a marginal impact over the next five years.

In the vital exportable/tradable goods and services sector of our economy, we will continue to delude ourselves by failing to separate the performance statistics of Irish-owned firms from the dominant foreign-owned sector. We can of course believe our own propaganda about a knowledge economy but when only €4.2 million in venture capital was invested in young innovative firms in Ireland in Q1 2007, there is a warning on our own capacity. Besides, isn't their a pertinent message from the glacial speed of the rollout of broadband?

At least former Progressive Democrat voters reacted to the big gulf between rhetoric and performance.

The PDs obsession with income tax cuts (the overall tax burden hadn't changed in a decade), while having no reform agenda, cost it dearly.

They became deluded by their own propaganda.

The notion that some people have that the PDs were responsible for the emergence of the Celtic Tiger era is absurd.

Promoting trends that were underway in other countries was positive but not the key catalyst.

A zero tax rate on corporate profits on exports was introduced as far back as 1956 by the Gov. of John A. Costello.

A key event in the attraction of foreign direct investment was US chipmaker Intel's decision in 1989 to locate a big plant here. That only happenned because of the existing multinational base an in turn encouraged other leaders of the US tech boom in the US to establish facilities here in the 1990's.

Income taxes were cut in response to the take-off in the export sector.

However, we are even more dependent on foreign direct investment now than we were in 1997 but as the native owned export sector struggles, there is pressure on many of the multinationals to move from Ireland because of the cost structure. Political propaganda does not always make credible history.

Comment: Does the glacial adoption of Broadband in Ireland tell us more about ourselves than we would care to know?

Feargal Quinn says Ireland now a “party society” – not a society of political parties – without a thought for what will happen when the tide goes out on our prosperity


  • As long as we have a government without adequate representation of ICT, Science and Tech among the TDs, we are basically sunk. I'm not sure what that percentage should be, but the massive overrepresentation by lawyers, auctioneers and accountants speaks volumes not just about our style of government but how we think as an electorate. As well as the blindsiding we are witnessing with regard to our so-called building boom, I think it also more than explains the poor progress in broadband (which by the way is still way behind the average - and we should now be looking at next gen broadband at this stage - 10Mbps plus).

    Ask any IT manager/ CIO working in Ireland today what he/she would have their children work at tomorrow. I would wager that not one have them choose a career in Hi-Tech. They've seen it all first hand. The ramp in the late 80s, the boom to burst during the 90s and the realisation that MNCs see no benefit in centralising anything in Ireland in the noughties. All Horizontal functions are centralised (in US, UK, big fancy cities where the VPs would only have their children educated and their spouses avail of the latest in haute whatever). Vertical functions are positioned based on cost - hence the huge redirection of FDI to China, India etc. Make no mistake, Ireland is and always was regarded as a backwater - which now has become too dear to operate in.

    The reality is that we paddies do not have the Street Cred in Science and Technology. We simply do not have the generational pedigree in Engineering and Industrialisation which even the former Eastern Bloc have in shedloads. Our R&D will by necessity be of a low CAPEX variety - with origins in Software and BioTech - where cost of entry can be lower. It has to be export focused and whoever is involved will be dying to flip their investment to help pay off that big mortgage.

    I cannot see us getting out of this situation soon. IT, Engineering admissions are falling - because our kids can read newspapers and are not stupid. There is no caché in any of these deciplines. Law, Finance and Medicine are the ones to go for. It basically means the status quo will remain as will our continued ignorance of the nature of the changing world around us.

    Lets hope it becomes more understanding out there. We can specialise in being harmless and being generally good company.

    By Anonymous Anonymous, at May 28, 2007 11:24 PM  

Post a Comment

<< Home