The relative scale of the Irish crises

In an excellent blog Ronan Lyons takes Fintan O’Toole to task over his ultra-negative “Bailout has turned us from citizens into serfs” article in the Irish Times.

In it, O’Toole reaches new heights of frankly ridiculous hyperbole, with his equation of Irish citizens now to our ancestors who starved to death in their hundreds of thousands in the mid-nineteenth century. Such is the poor standard of opinion writing now that the imagination is limited to attempting to out-do all previous comparisons. It’s only a matter of time before Fintan announces someone as the new Cromwell and proves beyond doubt (to himself at least) that Irish people are no better off now than during the Black Death.

Lyon’s takes O’Toole to task for, rather incredibly, focusing solely on the banking bailout. Perhaps because that particular crisis could well be regarded as a crisis of free market capitalism. The other crisis has it’s roots in Bertie Ahern’s Inchidoney conversion to socialism. The graph below shows the relative scale of the banking bailout (best and worst cases based on estimates from the ESRI and bearish estimates for Nama losses from Constantin Gurdgiev) and the fiscal crisis (2008-2014).
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Ronan finished on a positive note highlighting some of the strengths of the Irish economy.

Five more facts that are somewhat inconvenient for O’Toole’s analysis:

  • Ireland is still one of the wealthiest countries in the world. When ranked by per capita output and controlling for local price levels, we are inside the world’s top 10. If that’s too economicsy for you, we also rank in the top five of the more broadly-based UN Human Development Index. The current crisis makes a little dent in that, but overall we’re still very very wealthy by international and historical comparisons.
  • O’Toole seems to think that no-one in Ireland is working. In fact, about 9 in 10 people who were working here in Ireland at the height of the boom are still at work. If you work outside agriculture, manufacturing and construction, you’re almost certainly still in a job.
    Ireland is still one of the top locations worldwide for foreign direct investment, as recent announcements from IBM, eBay, LinkedIn and Zynga show. In fact, according to the IBM GILD report on FDI, Ireland attracted more FDI jobs per capita than any other country in the world in 2008 – the same year Ireland’s domestic economy tumbled into recession. And as rents and property costs tumble, Ireland’s attractiveness increases.
  • Irish people have a famously small tax burden – all-in rates calculated by the OECD suggest that people on the average salary pay only about 10% of their income in tax (even less if you’ve children), compared to an OECD average of over 20%. Presumably we will normalise this a little bit over the coming years, but Ireland is still a great place to work, particularly if you’re on a low income.
  • Ireland is a hub for internationally traded services. Despite accounting for only 0.05% of world population, Ireland has a world market share in services of about 2.5%. Traded services are a huge growth area for the world economy and Ireland is well positioned to capitalise on this, as it is one of the first countries in the world where more than half of all exports are services.
    • Cynic2

      The famine analogy is worth remembering. They starved to death because they became totally reliant on one crop that failed. There are parallels but no-ones going hungry – yet – and the Brits aren’t about to blame any more.

    • Mack

      Cynic2 –

      There are parallels but no-ones going hungry – yet – and the Brits aren’t about to blame any more.

      WTF? I have to admit I laughed, so maybe this was joke – especially the bit about the Brits. But – if it wasn’t a joke – could you explain the parallels with the famine?

    • John East Belfast

      Mack

      Anything I have read of O’Toole reads more like a sensational journalist than an economist – when I read the opening introduction cahpter to his “Ship of Fools” – when he summarised the reasons in advance of where it all went wrong – I was amazed he never mentioned once European Monetary Union and only touched on too low interest rates.

      However I fear the next financial tsumani to hit the ROI will be a Residential Mortgage crisis.

      NAMA is about commercial property loans but as Euro Interest Rates creep up at the behest of Germany and France then mortgage defaults will be another Bank crisis – but this time will be too big to save.

      Also the International Financial Sercices Centre will account for a lot of those International Service exports but that wont be as attractive under any new tightened Regulatory Regime – which I think even the Quinn Group are now getting a taste off

    • Mack

      JEB –

      NAMA is about commercial property loans but as Euro Interest Rates creep up at the behest of Germany and France then mortgage defaults will be another Bank crisis – but this time will be too big to save.

      It could well be. The banks should be in much healthier condition now, but we I think we have around 3% of mortgages in arrears. Although some of those mortgage holders will be deep in NE (it will depend when the bought and on circumstances) – you would hope that more could be recovered on a livable house than on a field outside Athlone.

      Also the International Financial Sercices Centre will account for a lot of those International Service exports but that wont be as attractive under any new tightened Regulatory Regime – which I think even the Quinn Group are now getting a taste off

      It’s like being hunted by a lion. You don’t need to outrun it, just one of your compatriots. Quinn have a going consumer concern in Ireland, I’m not sure the regulator will crack down on international service providers, hedge funds and the like in Ireland to such an extent it would force them off-shore. I’m sure he’ll get tougher, but with the goal of encouraging them to expand here.