JOIN USCeltic Tiger has ceased to roar
Business is slow for the flower vendors in pedestrianised Grafton Street in central Dublin. Buskers play their instruments energetically to extract coins from cash-strapped shoppers. Air Lingus, the national carrier, reports that passenger traffic is down by 16 per cent. Advertising in The Irish Times, now celebrating its 150th birthday, has dropped drastically.
The US computer giant Dell announced it is to close down its Limerick plant, with the loss of 1,900 jobs, and shift its operation to Poland where the average salary is one-fifth ($11,000) of pay in Ireland ($50,000). Eight hundred jobs are at risk at the world famous Waterford Crystal plant after its parent company, Waterford Wedgwood filed for bankruptcy.
Waterford crystal goblets, plates and bowls have been a symbol of the skills of Irish workers for 225 years. At least one firm servicing foreign civilian aircraft is moving its facilities to the Arab Gulf.
Businessmen are dumping thoroughbred race horses in farmers’ fields because they can no longer afford to keep them. Racing, the sport of kings, was fashionable among the newly wealthy. The caged and ailing Celtic Tiger, once Europe’s miracle economy, is a skin-and-bones shadow of its fat, sleek self.
Negative growth
Ireland is one year into at least three years of negative economic growth. The Economic and Social Research Institute (ESRI) says Ireland’s economy will shrink by 9.2 per cent this year. This will be the largest fall in growth suffered by any developed country since the Great Depression. The total contraction between 2008-2010 is likely to be 14 per cent.
The unemployment rate for this year is predicted to be 13.2 per cent and 16.8 per cent during next year. Emigration could rise to 30,000 through next April, reversing the homecoming trend of overseas youth during the boom years.
Although the government’s recent budgets have had a positive effect and restored a measure of fiscal sustainability, the ESRI argues that it would be preferable for the banks to be nationalised than for the government to buy at a discount toxic assets which have a book value of $90 billion.
This would increase Ireland’s national debt and mean high interest payments for many years to come. Irish citizens are paying higher taxes to underwrite banks and provide income redistribution for those with the lowest incomes.
The collapse of the Irish economy is largely due to globalisation. “We have the most globalised economy in the OECD,” an Irish observer told The Deccan Herald.
Ireland’s economy is closely linked, in particular, with the deeply troubled US and British economies. Unlike India, Ireland does not have a large domestic market to cushion the economy from global trends.
Cronyism is another key factor. The source said, “Too many bad deals were made by cronies” of ministers and officials who have not been called to account. Declining property values in Ireland and the UK — where many Irish citizens had invested large sums — have left banks with heavy indebitedness.
Limited funding
The collapse of Ireland’s banks, once the envy of Europe, has compelled bankers to compete for limited funding and guarantees. Public confidence is low.
The construction sector, accounting for 25 per cent of Gross Domestic Product, has contracted sharply. Consumer spending is falling and demand for Irish exports — with the exception of Guinness stout — is falling. The down-turn is exacerbated by the strong Euro, which, as a bloc currency, cannot be devalued to suit fringe members of the Eurozone.
However, Dr Robert Kennedy, chairman of business administration at the University of Michigan, argues that Ireland’s economy will rebound because it has a skilled and well educated populace and a flexible system. He holds that developments in Ireland mirror the shift from manufacturing to services that took place in the US some years ago.
At present the US private sector service industry comprises 72 per cent of economic activity while only 16 per cent involves manufacturing. Once Ireland makes this transition, he believes that the economy will grow at a rate of three per cent, a figure higher than the European average. The Celtic tiger could recover to roar again.