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Analysis/Comment Last Updated: Aug 23, 2010 - 8:24:15 PM


Irish Economy 2009: The Bulldozer at Bay and Benchmarks for Brutal year
By Michael Hennigan, Founder and Editor of Finfacts
Dec 31, 2008 - 9:01:56 AM

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Brian Cowen receiving his seal of office as Taoiseach, from President Mary McAleese, in May 2008

Irish Economy 2009: While South Korean President Lee Myung-bak, who had been nicknamed the "bulldozer," had transmuted into a political blancmange within months of taking office, Ireland's Brian Cowen, whose bulldozing style had won the acclaim of journalists, who should have known better, has had even a worst fate. Barring a remarkable transformation, in the brutal year ahead, Cowen is destined to copper-fasten his reputation as the most inept Irish leader in modern times. In the absence of significant reform in response to the economic crisis, there will be new dawns proclaimed to soften public anger. However, we set out some benchmarks below to sift substance from spin and spoof.

In May, President Lee Myung-bak had to contend with tens of thousands of demonstrators protesting in Seoul, against the planned easing of import restrictions on US beef - -  a bigger perceived threat than the nuclear-armed family run tyranny of North Korea, with its border just 40km (25 miles) north of the South Korean capital! The new Irish Taoiseach (Prime Minister)  Brian Cowen, who in almost 11 years in government, had neither made one tough decision, promoted reform or articulated a credible vision of the Irish economy for the aftermath of a temporary huge construction boom, took for granted a victory in the referendum on the European Union's Lisbon Treaty.In June, the campaign against the referendum that was financed by a multi--millionaire who claimed to be motivated by opposition to European "elites," triumphed and it has been all downhill since, for the hapless Cowen.

David Gergen who has worked for four US presidents - - Nixon, Ford, Reagan and Clinton - - says in his book Eyewitness to Power, that the seven leadership qualities a great president must have are: personal integrity, a sense of mission, the ability to persuade, the ability to work with other politicians, a strong start after the inauguration, skilled advisers, and the ability to inspire. He calls Reagan "the best leader in the White House since Franklin Roosevelt," and says Clinton "is one of the smartest men ever elected president." Gergen also says: "Bill Clinton getting mad is like Mount Vesuvius erupting. At the White House, he would usually blow at least once in the morning and straight into the face of George Stephanopoulos (currently presenter of ABC's Sunday morning news show, This Week with George Stephanopoulos). Perhaps he felt that George was the son he never had and could trust him to take it." Stephanopoulos described Clinton in his own book All Too Human: A Political Education, as a "complicated man responding to the pressures and pleasures of public life in ways I found both awesome and appalling."

Whatever explains Brian Cowen's blundering eight months of leadership - - a second-rate politician like most of his contemporaries, who are produced by an outdated political system? the overwhelming stress of a job after years of coasting? indecision in a crisis and maybe an occupational hazard of the politician, added to the cocktail? - -  the outsourcing of a public spending review to a group under the chairmanship of University lecturer Colm McCarthy, coupled with the failure to propose any significant reforms to change the system, which resulted in the second case of monumental economic mismanagement in a generation, is a most serious indictment of failed leadership.

As Ireland and South Korea, face recession in 2009,  President Lee Myung-bak is seeking to have half the staff numbers of the independent human rights commission cut, while in Ireland, Brian Cowen's Government has effectively scuttled the work of the Equality Authority, by cutting its budget by 43%. Criticism comes at a price in both democracies and the treatment of the rights' bodies in the year the world celebrated the 60th anniversary of the Universal Declaration of Human Rights, is the equivalent of President Richard Nixon's infamous tax audits.

Finfacts Report: A second Irish referendum to ratify the Lisbon Treaty and Bismarck's carriage

THE ECONOMY AND A CREDIBLE ENTERPRISE POLICY

Prof. Frances Ruane, Director of the Economic and Social Research Institute (ESRI), said in a recent paper that the growth engine of the Irish economy today is mainly found in foreign-owned enterprises, and despite recent reports, we are still a considerable distance away from having large numbers of strong internationally-trading indigenous businesses. “We ignore our dependence on these foreign-owned enterprises at our peril,” she warned.

"Government needs to operate counter-cyclical policies and thus be ready for a downturn – it should not be taken by surprise when the inevitable happens," she added.

Finfacts has for years been warning that the obsession with property had left the indigenous sector with a Cinderella role while foreign-owned firms were responsible for over 90% of Irish exports.

Ireland today is  more dependent on US firms, than it was in the early years of the Celtic Tiger.

We warned that Irish enterprise policy was effectively about public relations as the proceeds of the bizarre land rezoning system and other windfalls from the property boom were being invested in overseas commercial property, with the crumbs left for the Irish tradable goods sector: for example €13 billion invested in commercial property in 2007, compared with less than €200 million in venture capital for Irish firms.

In the period 2000/2007, employment in the tradable goods and services sector actually fell, while overall employment in construction, the public sector, retail and distribution, expanded by more than 600,000.

Frances Ruane says recent research on indigenous manufacturing, shows a productivity performance that does not indicate potential for rapid output growth or for large increases in pay.

Enterprise Minister Mary Coughlan says: "The decisions we take in Government today will substantially affect the country's direction and prosperity for the next 10 to 15 years. For that reason it is important that such decisions are grounded in a clear understanding of where we want to be then. Our comprehensive framework for sustainable economic recovery, Building Ireland's Smart Economy, published earlier this month, sets out exactly that."

Fancy words are easily found but put in context, Coughlan is peddling absolute bullshit.

Announcing an innovation fund isn't very challenging is it? However, in the absence of significant reform proposals that would have a discernible impact on competitiveness and an answer to why the existing high tech sector is seriously struggling, what value can be put on what is essentially more PR blather? Four years to a world-class knowledge and the embattled Iona Technologies, the biggest home grown high-tech company, is sold to a younger US firm? Ah shur, what relevance has that to anything and besides, the glacial development of broadband in Ireland is nothing to worry about either!! After all, everybody loves the Irish!

Haven't we the best educational system in the world and the leading software industry? (Microsoft is Irish isn't it?)

Say it often enough and you can easily believe the propaganda.

"We already have some excellent indigenous global businesses based in Ireland," Coughlan says.

So why is Iona now an American firm? Surely, Prof. Ruane is talking down our potential?

"Given the level of taxpayers' money being invested through our Strategy for Science, Technology and Innovation, research and development must result in tangible outcomes in terms of jobs," Coughlan adds.

Yes, more than €8 billion by 2013 is a lot of bobs but where is the answer to experts on innovation, who say that there is no direct correlation between investment in university research and the real economy?

So how many jobs are you expecting apart from the thousands of researchers on the public payroll?

Israel has 65 companies on the US tech-dominant Nasdaq Stock Exchange. Ireland has 5 including the low-fares airline Ryanair.

Israel also has cross-fertilisation from the significant defence research sector.

There is no credible strategy underpinning the €8+ billion plan to become a "world-class economy" and there has been no attempt to provide one.

Grafton Street, a narrow street linking Ireland's oldest university Trinity College and St. Stephen's Green, which has a public park, is Dublin's principal shopping street and in 2008 rental terms, the fifth most expensive shopping street in the world.
Propaganda laced with superlatives dominates the public comments of the 4 ministers in the Department for Trade, Enterprise and Employment (not a misprint -  yes 4 but the country would be surely blessed if it had just one competent one who binned the spoof and produced credible policy with an input from agency chiefs who are not expected to be yes-men, peddling the same vacuous superlatives as their ministerial masters).

The primacy given to marketing spoof over policy, is perceived to work in the short-term.

The Enterprise Strategy Report, which was published in 2004 noted that:

Over the previous decade, the overall value of exports from Ireland had grown very substantially. The figures, however, tend to mask two important facts:

  • Export growth in most indigenous sectors has been negligible

  • Exports from foreign-owned companies have been largely directed and managed from outside Ireland.

The ESR said that "the majority of these companies do not conduct their sales and marketing activities from Ireland. These activities are usually managed and executed elsewhere within the corporate family. The resulting lack of direct customer interaction limits their ability to innovate and to influence their future development in Ireland."

Nevertheless, ministers regularly brag about export gains while deliberately ignoring a reality that for example exports to emerging markets in Asia, reflect the success of US-owned firms in Ireland and not domestic firms.

Trade missions need to have a litany of announcements on new order "signings" and again, much of it is spoof, even though journalists usually fall for it, never mind the public.

As for blather on promotion of start-ups and entrepreneurship, when it comes to public procurement, the established firms with their connections with ministers and senior civil servants, have the inside track.

<<Developing export potential, sustainable new enterprises, improving competitiveness and emulating successful overseas models, is easy to talk about. Developing a credible enterprise policy must begin with honesty about the challenges and junking the current public relations dominant mindset among policymakers. It has to also be evolved as part of a broader reform programme. As discussed below, if for example, housing remains the most expensive in the world and only baby-steps are made in reforming the vested interest status quo, Ireland will remain in the doldrums, overwhelmingly dependent on US firms - - who are themselves facing many challenges.>>

Coughlan says she plans to establish an advisory council of business leaders that will report regularly to her and to a Cabinet committee on economic renewal. This council will report on the measures it believes the Government can take to return the economy to sustainable growth. Last month, she announced the creation of an Enterprise Feedback Group of business executives to report on innovation policy.

Ireland is never short of talking shops and the selected members of both groups shouldn't bother with what will be more window dressing, unless they are prepared to call a spade a spade and say it publicly.

Prof. Frances Ruane presented her paper Resonances from Economic Development for Current Economic Policy Making, to a conference in September 2008, in honour of Dr.T.K. Whitaker, on the 50th anniversary of the publication of the seminal report Economic Development. The paper was published in December 2008:

Growth Engine: Whereas in 1958 the economy did not have a growth engine, we potentially have one today, centred on high-tech internationally-traded manufacturing and services.

However, the growth engine is mainly found in foreign-owned enterprises, and, despite recent reports, we are still a considerable distance away from having large numbers of strong internationally-trading indigenous businesses. We ignore at our peril our dependence on these foreign-owned enterprises, and the need to provide a competitive environment in which they can prosper. Of particular concern here, and similar to 1958, is the poor productivity performance in many parts of indigenous manufacturing, even in those enterprises that are exporting.

Competitiveness Matters: Ireland’s success in turning the economy around in the past came from growth through international trade and internationally mobile investment. The lesson, which Economic Development recognised in 1958 but that is periodically forgotten, is clear – Ireland cannot succeed if it is not globally competitive. No one, neither government, nor employers, nor trade-unions, nor consumers can simply ‘wish away’ that economic reality – if they try to do this, history shows that the country loses. For example, Economic Development suggests that if the competitiveness level is lower than Europe, then living standards must be lower. It goes on to recognise that lower living standards are only acceptable as part of a programme of national regeneration. This conclusion is as relevant in 2008 as it was in 1958 and in 1987. Anticipating the type of situation we currently face, Chapter 3 Para 14 notes that: The success of any policy of economic development will depend on the effective and continuous cooperation of the trade unions in promoting increased productivity and in avoiding increases in wages and salaries which would injure export prospects. So the message for today is clear – Ireland must win back its competitiveness and that means starting with a pay policy that does not raise public sector costs or does not reduce private sector employment. In today’s climate, this may mean a review of the current levels of public sector pay and whether they impede economic recovery and longer term prosperity.

Economic Cycles Happen: Economic cycles are a fact of life – they happen again and again and we must continuously plan with this in mind. Our experience, from time to time, of long periods of sustained growth in our major markets, such as in the 1990s, should not cause us to forget this. Government needs to operate counter-cyclical policies and thus be ready for a downturn – it should not be taken by surprise when the inevitable happens. Strong global competitiveness means that the impact of a downturn can be moderated, but this is not the situation Irish business faces in 2008, where the economy has lost international competitiveness in recent years, and recent policies have been pro-cyclical.

Finfacts Reports
Irish Economy: ESRI presents grim outlook; Job losses of up to 117,000 in 2009 - more than 4 times worst year of 1980's
Irish public sector pay excluding pensions exceeds private sector pay by 10% for top jobs to up to 30% for other grades
Innovation, The Venturesome Economy and Ireland
Foreign firms, mainly American, account for 90% of Ireland's Exports
Ireland is more dependent on US firms than any other developed country
Cowen banks on US firms which already provide 90% of Ireland's exports with €500m for new venture capital funds
Irish Economy: State bank guarantee tolls the death knell of the Celtic Tiger; Fairytale ends debunking the myths and exposing the reality of foundations built on quicksand
Irish full-time employment in manufacturing and internationally traded services fell 10,297 in the period 2000-2007 while the total workforce expanded by 605,000

CRONY CAPITALISM, VESTED INTERESTS AND NO COMMITMENT TO REFORM

The Irish economy is in the current mess because of the system of limited accountability where the buck stops nowhere and the nexus between politics and the construction industry.

Barring rioting in the streets and a near economic collapse, Brian Cowen has signalled so far, that the status quo and existing vested interests are secure.

Without a commitment to reform in the governance procedures dating from the era of the donkey and cart, an end to the links between the construction sector and the dominant political party Fianna Fáil and a change in the land rezoning and planning systems, which make land artificallly scare, in a country that is 4% urbanised, then any aspirations about change and reform should be viewed as bullshit.

Poster for the movie The Field based on John B. Keane's celebrated play. Character Maimie Flanagan says on complicity in a conspiracy of silence, to her son: "God we're a pity, Leamy ... the whole bunch of us."

Land for roadbuilding in Ireland as a percentage of total project cost is double the European Union average and a land rezoning decision brings huge bonanzas to farmers, who already depend on the public purse for more than 50% of their income. The system is a huge tax on property purchasers.

A public tribunal has been investigating planning corruption for more than 11 years and ZERO has been done to change the land rezoning system - - Ireland's crack-cocaine - - which has spawned the bribery of politicians and public officials.

Finfacts Report: Irish Farmers and Sacred Cows - more on the land rezoning bonanza

In simple terms, public spending cuts without fundamental change will not have any public credibility.

The expected cost of operation of the Oireachtas (Irish Parliament) in 2008 is €122m and is forecast to rise to €137m in 2009  -- an increase of 12.3% while spending in other areas is for the chop.

The costs have increased by 61% in 5 years for what is effectively a part-time parliament of 216 members. Inclusive of tax-free expenses, Irish parliamentarians, are believed to be amongst the highest paid in the world.

New Zealand has a comparable population to Ireland's and a single chamber parliament of 121 members. It has budgeted €56 million in its recent budget for running its parliament in 2008/2009.

Besides the costs of the Oireachtas, Ireland has 35 ministers - most of the ministers of state have titles and made-up work. Ministers have hundreds of support staff providing personal services. Taoiseach Brian Cowen, has a staff of about 9 in his constituency office.

The 1920's era "messenger-boy" system of making representations for constituents predominates and despite resources for research and staff in recent times and huge pay increases, the typical TD is a teacher, auctioneer, publican or small-town solicitor, whose level of public speaking is to read verbatim from a sheet of paper. The official language is Irish but most members cannot speak it and virtually all proceedings are in English.

The Oireachtas is currently shuttered for a 40 day break and sits for only about 90 days annually. It usually shuts down from mid-July to early October.

One fifth of the members of the parliament hire relatives on the public payroll and earlier this year, it was reported that the chairman of the Upper House had his wife, son and daughter on the public payroll.

Fine Gael Dun Laoghaire TD Sean Barrett, who employs his daughter as a parliamentary assistant, said it would not be possible to advertise the job openly.

“You need someone you can trust,” he told the Irish Independent. Barrett said he resented the fact that his daughter, whose salary is paid by the taxpayer, was being singled out. It's well he might and is surely an illustration of the gulf between the well cosseted parliamentarians and the public.

Teachers who are elected to the Oireachtas can keep their teacher jobs and pocket the difference between their grade and a hired substitute. Ministers who have been teachers, such as Foreign Minister Micheál Martin, are currently building up entitlements to 3 very generous public pensions, as a Minister, TD (member of the Dáil -  - Lower House) and teacher,while the majority  of private sector workers - -  over 1 million - do not even have a basic occupational pensions while many in the minority who do, are exposed to the vagaries of the market.

TDs and Senators get daily pocket money of €62 if they live within 15 miles of the parliament building Leinster House. Beyond the pale, a Dublin area TD can collect an overnight allowance of €144 and Dublin area TDs can get over €30,000 annually in tax-free expenses - - as much as the average industrial wage. TDs from the "country" who have long-term service can end up with Dublin apartments paid off via their expenses.

An audit by the Comptroller and Auditor General's office in 2007, found that a pint of Guinness cost as little as €3.70 in the Dáil visitors' bar, more than 35% cheaper than elsewhere in Dublin.

TDs earn a base average salary of €122,000 - over 3-times average industrial wage - 77% above pay of New Zealand MP and Green Party TDs are set to to gain an extra €1.5m in income from its 5-year Coalition with the Fianna Fáil Party.

 A United States Senator earns $169,000 (€121,000).

The base pay of a New Zealand MP in 2008 is €69,000 and last year, the base pay of a member of the Australian House of Representatives was €72,000 per annum.

So there is both featherbedding and limited accountability while in the multi-seat constituencies, it's teachers, auctioneers and publicans who have the time to build up a local profile with party members and the public.

In a paper at a Central Bank of Ireland conference in 2006, Dr. Frank Barry who was then at University College Dublin, highlighted some of the issues that require attention, including the "structural flaws that give zoned land an artificial scarcity value and that continue to offer strong incentives for corruption. The failure to tackle these issues seems ascribable, in part at least, to the failure to introduce international best-practice measures with respect to the financing of the political process. The failure to address cost and time overruns in infrastructural provision over the boom period represents a further weakness in Irish governance."

Barry highlighted the detrimental effects of the localist and clientalist nature of the Irish political system. The shelving of the Buchanan Report of the 1960s on regional policy, for example – in response to localist pressures – is now widely recognised to have had highly adverse consequences for the country as a whole.

Barry said that the imminent end to EU supervision of national investment policy will strengthen the scope for localist pressures. A move from the present national electoral system towards the kind of list system frequently encountered elsewhere in the developed world would help insulate against such pressures and would also serve to raise the quality of Irish political representation.

A limited list system, which allocates parliamentary representation proportionately to parties but lets parties choose the members of parliament, was recommended in 1996 by the Constitution Review Group, which was chaired by Dr T.K. Whitaker.

A number of countries, and not just those new to parliamentary democracy, have changed their electoral systems in recent times. Most – including Italy, Japan and New Zealand for example – have switched to "mixed systems" of the German type, which combine national lists (where political parties offer lists of the most capable people willing to serve) alongside constituency representation. This would dilute the stranglehold of localism on the system and allow governments to devote more attention to difficult longer-term issues.

Since 1987, non-party members of parliament, who are called "independents" and small single issue parties, currently the Green Party, have traded their votes for patronage and have enabled Fianna Fáil, to govern as it would have had with its own overall majority. The Green Party for example has zero impact on economic policy and has nothing to say on reform.

What would it take for Cowen to be so brave to push through significant reform?

Apart from the cronyism evident in the politics-construction nexus, the State buys about €16 billion in goods and services annually. Besides the rationale for business to rub shoulders with ministers and senior public servants, Ireland has about 800 State agencies or quangos. Each agency has at least 10 board members and apart from the handy earner for 3-4 meetings each year without any effective responsibility, membership can be seen as an official stamp of approval leading to further patronage and business.

RTÉ, the State broadcaster, is also part of the crony system and its leading presenters, were as good as the politicians in taking advantage of the construction boom, when it came to pay demands and long holidays.

As part of the small establishment, the broadcasters and the comfortable senior management, facilitate ministers who generally dictate their terms of agreement for giving interviews. In over ten years in office, former Taoiseach Bertie Ahern never had to participate in a forensic interview.

We said last September: Why expect the comfortable RTÉ Director General Cathal Goan, who was paid €441,000 last year, an increase of 22% on his previous year’s remuneration (his performance-related pay of €108,000 in 2007, was up from €44,000 the previous year - thank you Celtic Tiger), to start rattling cages at this stage in his career?

The broadcasters are as divorced from the day-today travails of most of the population, as ministers.

RTÉ, which operates as a virtual monopoly and with advertising soaring during the boom, the broadcasters naturally saw themselves as public service rainmakers. The State broadcaster is funded by a tax/licence and advertising. For decades, as most people with money evaded paying taxes, RTÉ threatened "spongers"  who didn't pay the licence, which was likely to be people with little money, with shame and embarrassment in the courts.

Pat Kenny is Ireland's highest paid broadcaster, presenting The Late Late Show on RTÉ television and a daytime two-hour news magazine on radio, earns more than €2,000 per hour on-air time.

RTÉ's second-highest paid broadcaster Gerry Ryan had his autobiography of the good life published as the Celtic Tiger crashed.

He was reported to have got an advance of €100,000 for little gems like this:

"I go first class with Aer Lingus to JFK.

"There's a big seat, everyone's attentive and nice...I have a few drinks, and when I'm with my family, I see them enjoying the fruits of my labour .... Then we get to New York and there's a limousine waiting to take us to Manhattan.

"We check into Fitzpatrick's and go upstairs to one of the suites, or as we did last year, to the penthouse ... And the path is always greased. Maybe U2 are playing in Giants Stadium, and the backstage passes will be waiting for us in the Rockefeller ....

"I defy anyone to say that's not a good way to travel."

Maybe? But isn't the path always greased  - - for the Insiders!

In these troubled times, RTÉ's radio phone-in programme Liveline, provides a platform for complaints about hardships and the coldness of officialdom. The presenter Joe Duffy, who works for a public body, earns more than everyone in officialdom, including the Taoiseach.

Empathy is easy and 2008 was marked by a public spat involving broadcaster Pat Kenny, about a strip of land in the wealthy coastal enclave of Dalkey in South Dublin, that evoked John B. Keane's celebrated play The Field.

The Field may well provide a broader message about a conspiracy of silence and when young Leamy Flanagan complains to his mother Maimie about their own complicity, she says: "God we're a pity, Leamy ... the whole bunch of us."

HOUSING AND PROPERTY - - STILL LEADING THE WORLD

Dec 2008: 30 Marine Drive , Sandymount, Dublin 4 - - 4 bed semi-detached: An opportunity to create your own ideas and put your own stamp on this attractive pre-war bay windowed house situated in this most popular and convenient location. The property is in original condition and in need of total modernisation, with obvious potential... possibly €200,000 to €300,000 in renovation costs. €1,100,000 (USD$1,550,714)
During the boom, as Ireland slipped down international rankings for competitiveness and information technology readiness, we rose in key property league tables and remain there, despite the bubble bust.

An annual global survey of 236 prime shopping streets in 48 countries, which was published in November 2008, shows that Dublin's Grafton Street, is among the top 5 most expensive in the world -- ahead of London's New Bond Street and Tokyo's Ginza.

Prime office rents in Dublin are 14th highest in the world and double the level in Brussels - the capital of the European Union.

Residential housing is still among the most expensive in the world.

Dec 2008: 30 The Golf Links, Malahide, Co Dublin - - 5 bed detached: This imposing and superbly presented luxurious family residence offers outstanding accommodation with landscaped gardens, enjoying a wonderful location in this prestigious Golf Links development sitting on the coasts edge, within five minutes walk of Malahide Village and all its very many amenities. €1,750.000 (USD$2,467,045).
A 2007 survey of management standard 2,200 square foot single-family dwellings with four bedrooms, two and one-half baths, a family room (or equivalent) and a two-car garage in 394 markets across the United States, Puerto Rico, Canada and a sampling of countries/territories outside of North America, showed that
the cumulative average sales price of the homes surveyed in the 317 US markets (including one in Puerto Rico) covered was $422,343.
For example in the Rocky Mountain state of Colorado, the most expensive house was in Boulder, at $615,000. the cheapest was in Colorado Springs at €197,500.

The most expensive studied international markets included (prices converted to US dollars as of Sept. 7, 2007): Dublin, Ireland ($2.13 million); Milan, Italy ($1.91 million); Rome, Italy ($1.79 million) and Paris, France ($1.67 million).  The most affordable international market tracked is Bogotá, Colombia, at $140,100.

The Dublin price ranked with Beverly Hills, California, as the most expensive in the world.

As was suggested above, land rezoning remains the untouchable huge tax for the benefit of a small number, coupled with a ramshackle planning system and widespread nimbysim (Not-in-My-Backyard Syndrome) and its related shakedowns, is a huge drag on competitiveness and will remain so.

No alone were ridiculous prices paid for property during the boom, the Government allowed its developer supporters to build apartments of poor quality with joke levels of storage space. Occupants of apartments at the former gas works site in South Dublin, near the Google offices, have to store bicycles on their apartment balconies.

An article in the Irish Times on Dec 27, 2008 provided reason for the bullshit antennae to hit high alert. Even as 150,000 people may lose their jobs in 2009, the two bank economist cheerleaders of the boom, Dan McLaughlin and Austin Hughes, may well emerge from the rubble to proclaim new golden ages.

Dec 2008: 33 Dunville Avenue, Ranelagh, Dublin 6 - - 5 bed semi-detached: street parking if lucky; "This semi-detached family home is situated in the very heart of Ranelagh on historic Dunville Avenue. The property has a wealth of period details, and been restored and extended throughout, combining the grace and elegance of a period property with the last word in modern comfort and convenience. €2,250,000 (USD$3,171,915)
Property Editor Orna Mulcahy and a colleague Frances O'Rourke wrote:
Maybe, just maybe, people will look back on 2008 as the year in which they should have bought property. A few years from now, when the economic gloom has lifted, today's prices - down as much as 40 per cent from the peak of 2006 - might seem like so many missed opportunities for first-time buyers and trader-uppers.

Using Construction Industry Federation (CIF) statistics to bolster their case and quotes from the Oracle of Omaha Warren Buffett, who is the antithesis of a property speculator, there is no hint that Irish house prices are among the most expensive in the world.

Billionaire Buffett has lived in the same house in Omaha since 1958 and a casino economy, based on trading property, is not his cup of tea!

Mulcahy/O'Rourke say that property website myhome.ie currently has a record number of homes posted on its site, and the average posting - the time a property takes to sell, or be withdrawn - has jumped from 100 days in 2006 to 220 days. They do not comment on the level of asking prices but as our illustrations show, the levels remain ridiculous.

They say that as many as 35,000 new homes lie empty across the country. However, including holiday homes, the total is estimated to be ten times the CIF level.

What is an empty new house?

A unit bought in 2005 as an investment to sell in a few years - pay 20% capital gains and make 50 grand without the hassle and initial cost of renting, from the transaction but the intervention of economics has stymied this game?

According to the Census 2006, the number of empty houses had jumped by 126,000 in the four years since 2002.

Any implications for the property market in having about 17% of the stock empty? Any risk of distress sales?

Mulcahy/O'Rourke conclude:  No one knows if we are at or near the bottom of the market. The bottom will only be obvious in hindsight. Or, as Warren Buffet puts it, "The market will move higher. . . well before either sentiment or the economy turns up. So, if you wait for the robins, spring will be over."

It's worth repeating, that Buffett wasn't referring to houses and the last thing the Irish economy needs is a reprise of the recent fools' game.

However, it's easy to see that it may well happen.

Dec 2008: 20 Durham Road, Sandymount , Dublin 4 - - 4 bed semi-detached: The one you've been waiting for! An ideal opportunity to acquire a fine family home superbly located on this quiet residential road linking Sandymount Green with Gilford Road. €1,200,000 (USD$1,691,688)
Remember the campaigns about stamp duty while the Government's collection of 28% of the cost of each new housing unit in taxes and charges, was ignored? Besides, who would even think that the country was so short of land, that it was the most expensive in the world?

Green Party leader and Minister for the Environment John Gormley joined Planet Bertie to save the planet and his department gathers limited data on the housing market.

There is no data collected on development land sales as such information might provide too much sunlight for the vested interests involved. Neither is pricing data collected, despite the importance of the construction sector and its tendency to doom the economy.

The Scottish philosopher-economist Adam Smith wrote in his Wealth of Nations, which was published in 1776: "A dwellinghouse, as such, contributes nothing to the revenue of its inhabitant; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, makes a part of his expense, and not of his revenue. If it is to be let to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue which he derives either from labour, or stock, or land. Though a house, therefore, may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of the people can never be in the smallest degree increased by it."

It may take even a bigger bust than the current one, for the penny to truly drop for the Irish people.

A boost to housing of course can have a short-run economic impact and it's akin to what the renowned British economist John Maynard Keynes had in mind in its seminal 1936 book, The General Theory of Employment, Interest and Money, when he wrote, in tongue-in-cheek mode:

"If the Treasury were to fill old bottles with bank notes, bury them at suitable depths in disused coal mines which are then filled up with town rubbish, and leave them to private enterprise on the well-tried principles of laissez faire to dig them up again - there need be no more unemployment and, with the help of the repercussions, the real income of the community and its capital wealth also would probably become a great deal greater than it actually is!"

Finfacts Property Reports
Greatest Bubble in History: Warnings ignored in US and Ireland; Vacant Irish housing units rise 150% to 350,000 in period 2002/08
London’s West End and Moscow remain world’s two most expensive office markets; Dublin rents at 14th rank are almost double Brussels'
Dublin's Grafton Street overtakes London and Tokyo to take a top 5 position in the ranking of the world's most expensive shopping streets
International house price comparison index for 2007 ranks Dublin, Ireland and Beverly Hills, California for world's most expensive comparable management level family homes
International House Price Comparisons 1970-2006: Irish price growth in 36-year period third highest among 18 Developed Countries
Meath farm sells for €13.5 million; Irish farm land most expensive in Europe
Irish Property Obsession, British Landlordism and Myths

2009 will be a brutal year for the Irish economy. The seeds of recovery can take hold despite the downturn but the political leadership that monumentally mismanaged the economy and left it so exposed to a global recession, thus far have produced blather rather than far reaching reforms for a system of crony capitalism, that is a huge impediment to dealing with current and expected challenges.

There should be a general election to focus on the actions that need to be taken and to provide a mandate for a government to prepare the economy for recovery. Can Ireland afford another housing boom? These are very serious times as tens of thousands of people face misery. As we said recently, the current circumstances demand a response that is a serious as the moral equivalent of war.

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