For over 20 years, Ireland was among the leading companies in the OECD for economic and population growth. In the late 1980s, I remember hearing about airplanes full of insurance forms leaving New York to be processed in Ireland and then sent back digitally to the USA (sound familiar?). The country then went on to build substantial financial, back office, ICT and life sciences sectors through some very innovative policies and action.
The country overheated – just like Ontario in Canada – because of the sustained above average growth. In addition, Ireland had more exposure to the financial meltdown than Ontario. Housing prices have dropped and unemployment is around 13%.
It’s important to point out, just like Ontario, that the recent economic retrenchment is only a fraction of the economic build up over the past two decades. It is clear that countries and jurisdictions that overheat end up with a correction at some point.
But I am bullish on Ireland. Their economic development infrastructure (people, programs and policy tools) is still robust and – I would argue – among the best in the world. They will need to do some recalibration now – because eastern Europe has been eroding some of the country’s value proposition. The G&M has an article talking about a construction worker who was making 150k Euros per year because of the massively overheated construction market during the overheated phase of the economy.
Rapid growth does change things. You move from reducing local unemployment to attracting expatriates to attracting immigrants. That does change the dynamic. You end up with very significant growth in housing and other costs of living. That forces up wages but also makes urban centres less attractive for workers starting into the workforce. And, maybe a bit counterintuitively, it forces a rapid escalation of government spending because there is a lag between the spending on public infrastructure and the time it takes to get that investment back through tax revenue.
But Ireland will be back. Just like Ontario and, yes, just like California. California has been – with a few fits and starts – an above average economic growth engine in the U.S. 200 years. There are those who say this is the end of the road. I disagree.
There is an enormous store of capital, goodwill, entrepreneurial spirit and just plain scale in these places that is brought to bear when times get really tough.
By that thinking of course it can be argued that northern New Brunswick ‘will be back’ just because at one time it was booming. Thats baaaad logic, as any rural place in Canada will tell you. Because you were booming once, does not guarantee that you will be booming again. Try telling that to the roman empire. Here in ontario, there is a whole segment of jobs gone, I have many friends who have packed it up for the US, and when you are doing that you know its GOT to be bad.
The CBC had a good report (finally) on what most critics suspected (it was the same under Clinton in the US), in that while ontario has some ‘new’ jobs, they are not GOOD jobs. Bailing out the auto sector has of course helped get SOME of those jobs back.
Just some perspective, Waterloo is considered the ‘technology’ powerhouse of the east, maybe the country. Apart from RIM and those small companies at the new ‘accelerator centre’ there has been little new growth. The colleges, which used to advertise tool and die and machining training, now advertise carpetry and construction training. Of three new buildings going up, two were ‘self storage’ businesses. The lazy boy factory that closed years ago is finally being torn down, the ‘for lease’ sign doesn’t seem to have done much, as half of the building space will be a new police station-and this is prime commercial land.
Rural areas typically have low tax rates, particularly today. They also have low housing, and often even special government subsidies. In other words, like an Ireland or California, or ontario, the ‘policies’ are there, but having good policies is no guarantee of success. Again, if there were a magic guarantee, there would be no slowdowns, and so ‘having faith’ is about as precarious in ED as living your life with the ‘faith’ that avoiding vice in this life will have you partying it up in heaven for eternity later.
And to also remind, we had this debate at mid peak when Ireland was the ‘tiger’. I thought it was strange because there was a whole new ex pat irish community here in ontario and I wondered why people would LEAVE a place with a booming economy. A lot of people look at the boom numbers and think that’s all there is to an economy, but by that thinking Saudi Arabia has a culture that we all should emulate. Ireland had the highest poverty rate in the OECD and the highest rate of child poverty in the EU. In economic development, if all that is happening is that you bring in new people who get rich, and the local rich people get richer, then what is point if the current inhabitants are no better off? Particularly when housing and other costs are about to skyrocket.
In a new age when labour and investment in europe is completely mobile, I don’t think I’d bet the farm on ANY ‘country’. Particularly since labour and investment agreements are making the whole notion of ED within ‘countries’ increasingly irrelevant. It’s a pretty bleak future when places like Greece will only be ‘booming’ once the people there become poorer. ED shouldn’t be about making SOME numbers look better-if it is, well, I’d hazard a guess as to why ED policies don’t get the emphasis some people want. The construction jobs are now gone, so the LNG terminal provides only a dozen jobs, but LOTS of cash for Irving. Is that REALLY ED?