Ireland must break from boom and bust

Photo: Leah Farrell (RollingNews.ie)

After the financial devastation suffered by so many here – including those forced to emigrate – following the collapse of the Celtic Tiger a decade ago, PJ Cunningham looks at the Celtic Phoenix and asks if we can avoid repeating past excesses and mistakes.

Ten years after Ireland hurtled towards economic and political oblivion it has somehow managed to turn its fortunes around in double-quick time.

Ireland’s economy has had a phenomenal turnaround. It was a financial basket case in 2011 and 2012 but now most, if not all, of the economic indicators from investment to the public finances show that we have recovered at a rapid rate.

We’re even close to ‘full employment’ again, and the banks –which caused all our problems a decade ago – may still be a bit wobbly but are nonetheless back in profit.

US and other foreign money has percolated back into our economy as every sector from technology, commercial property, house building to hotels has been earmarked as a boom area.

This amazing ‘riches to rags to riches’ story comes with a big warning light flashing in the background this time. As Einstein emphasised, long before the term ‘Celtic Tiger’ was ever coined: “Insanity is doing the same thing over and over again and expecting different results.”

ghost estate boom and bust
A ghost estate of Shannon Quays in Roosky, Co. Leitrim.
Remnants of the lavish spending of the Celtic Tiger.

“Bad habits”

While there is less of a widespread ‘feel-good factor’ this time, soaring houses and spending in luxury or high-end businesses and restaurants suggests some bad habits have returned.

The one good thing about the current state of affairs is that recent governments have refused to fan the flame like the Fianna Fail led government of the early part of this century did.

It means that every second person you meet is no longer telling you how they are adding to their property portfolio with a penthouse in Spain, Portugal or, God between us and all harm, Bulgaria.

Airbnb, which has a huge base in Ireland, has taught us that these days we can visit a place overseas without feeling the need to buy a bolthole, just because we think we can.

If the fallout of the Celtic Tiger taught us anything, it was that we Irish should not believe what we are told, that we should ensure we have savings, not debt, and that we should keep ourselves well informed financially.

Ireland being Ireland, we should always be cognisant of the fact that the economic winds from other places can very easily blow our house down if we are not careful. Brexit is a clear and present danger – everything from tourism to trade is on the table there – and the likelihood is that we will feel the pinch, deal or no deal.

can flexible border barnier varadkar
All-Island Civic Dialogue on Brexit: Fourth Plenary Session at Dundalk Institute of Technology.

Warning

In such instances, money can become scarcer. The head of Ireland’s Industrial Development Authority (IDA) recently warned that his organisation is finding the marketplace a tougher place in which to operate.

We should heed his warning. Ireland is largely at the mercy of multi-nationals and should never forget that. Just four of those huge corporations pulling out of Ireland would tear a €1 billion hole in the economy.

And we run the risk of being collateral damage to international financial shocks caused by Donald Trump’s cat and mouse games with China, the EU and other countries.

The $50 billion worth of tariffs he imposed on goods from China and his recent threats of a trade war with Europe are likely only to leave victims underneath the economic rubble.

A recent German study ranked Ireland as “the most globalised” of the 42 countries it surveyed.

This is good when the economic tradewinds are favourable but means we will be the first to feel the economic storms when the elements change direction.

This all helps explain why Ireland, more than most, has had a “boom and bust” economic history. There is seldom an in-between.

Boom and bust

Statistics suggest we may be at the zenith of the present boom as the Irish economy grew by 7.8 per cent last year. The projected GDPs growth for the current fiscal year is earmarked at just under five per cent.

Most of Tuesday’s budget was a set-piece and choreographed, but Finance Minister Pascal Donohoe did, it seems, have an opportunity to do what his predecessors, notably Fianna Fail’s Celtic Tiger-era Finance Minister Charlie McCreevy and others did not do; and that is put aside a billion or two for a rainy day.

budget pascal donohue
Fine Gael Minister for Public Expenditure Pascal O Donohue with Minister for Finance Michael Noonan pictured presenting the Budget outside Government Buildings

Spending was increased overall for the second year running after some years of austerity. And it remains unclear whether what resulted from the budget will act as a safety protocol for when the time comes where the economy looks like it may overheat and the country, again, about to lose the run of itself.


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