Ireland in recovery
By Pat de Brún | Feb 4 2014
With Ireland exiting the bailout, Pat de Brún considers what the long terms effects of austerity will beAfter years of tax hikes, job losses, cuts to public services and mass emigration, could things finally be looking up?The trajectory of Ireland’s recovery looks as though it will increasingly satisfy the usual barometers employed by economists and ratings agencies. However, being told that we are in recovery and actually feeling that change in our daily lives are two very different prospects.“Your sacrifices are making a real difference. Ireland is now moving in the right direction,” we were told by An Taoiseach on the evening of Ireland’s bailout exit. The partial reclamation of our economic sovereignty, our move out of recession and the long-awaited commencement of the banking inquiry may give some cause for optimism regarding Ireland’s new direction.With bond yields less than a third of what they once were, and our credit score officially out of junk status, the international finance community certainly seems to think so.However, much of Ireland remains less than enthused with the result. The austerity directed by the IMF has left many public services defunded or privatised. While our government spending remains high, more and more is going to short-term fixes such as welfare payments, rather than structural investment in the economy.Education has been perhaps the hardest hit, falling to less than 10% of government spending after having been at a comfortable 14% for decades. This has been combined with an ever-increasing focus on attracting international investment.We’re told that we have to be competitive in order to attract multinational companies and jobs. It’s a safe bet that this means more tax breaks for foreign businesses, rather than trying to support domestic businesses, such as government-funded industrial research like Germany and the US.Ireland has already been successful in attracting this international investment, with our technology and pharmaceutical industries both showing promising growth. Google, Facebook, Twitter and Linkedin have located their headquarters in Dublin in recent years. This appears to bode well for the future, with the provision of plenty of high-skilled jobs and the continued expansion of the knowledge economy.Lack of investment in education, however, raises questions about how many of those jobs are going to Irish citizens. Moreover, even when these jobs do go to Irish citizens, it is exclusively to the well-educated; never to the poorest members of our society.There are few people trying to turn back the tide of foreign billions, no matter what they think about the corporate tax rate, but we are not going to see Ireland transform into a country of software engineers. Companies who create a product that can be replicated infinitely without needing extra workers will not provide many jobs.Those who call this a band-aid solution are not wrong. For the moment at least, the high-tech sector may be the only thing holding the Irish economy afloat. There is a clear danger in hoping that the world’s most mobile industry doesn’t pack up and leave for a better offer.Unemployment seems to have peaked, having dropped back to 12.9% in recent months, but the total number of employed people continues to drop. Instead, the drop in unemployment can be at least in part attributed to some people no longer qualifying for benefits, or emigrating in hopes of jobs overseas. With the youth unemployment rate still over 25%, there is a good chance that many of those reading this publication will be departing the country after graduating.Emigration has once again become a fact of life in Ireland. At this stage, we’re well used to hearing the media line on this issue, featuring heart-breaking stories of middle-class families being wrenched apart through economic necessity. Yet those of us with friends who have departed these shores can testify that this is not always an accurate portrayal.Long gone are the days of the coffin ship and the once-in-a-blue-moon handwritten letter. In their place we have many young people who are eager to travel and experience the world, never more than a Skype call from home. These are people who will hopefully return to Ireland someday, full of life experience and skills. Assuming, that is, we are able to build an economy for them to return back to.Nobel Laureate, and former Chief Economist at the World Bank, Joseph Stiglitz, recently stated, “The wave of economic austerity that has swept Europe in the wake of the Great Recession is at risk of doing serious and permanent damage to the continent’s long-cherished social model… and needlessly contributes to suffering of the jobless and the poor.”Ireland may be on the way up in many respects, but much of this progress is in the form of quick fixes that leave our most vulnerable still at risk. One in four Irish people are in immediate danger of falling into poverty, and one in ten of us already live in food poverty.The big question in years to come is how we will create sustainable jobs in this country. Cuts to education reduce our capacity to start our own technology sector instead of relying on money from Silicon Valley. We can’t provide manufactured goods cheaply because of the euro.Exiting the bailout has given the government back the power to spend where they need to, now we just have to hope they can figure out where that is.