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The luck of the Irish

Written By: - Date published: 12:30 pm, November 24th, 2010 - 11 comments
Categories: Economy - Tags: ,

In Question Time yesterday, Bill English said Ireland is an example of how bad the recession might have gone in New Zealand. That triggered a memory of John Key three years ago saying we should follow the Irish economic model. I guess we can just be thankful Key wasn’t in power at the time to put that crazy ‘aspiration’ in effect.

Here’s the ‘Key Notes’ from October 2007, where Key says we should adopt Ireland’s economic reforms:

Looking at Ireland

I’m always struck by the similarities between New Zealand and Ireland. We are the same size in terms of population, and we are both green, hilly, and have strong agricultural economies.

There are differences too. Ireland is also more prosperous than New Zealand. That hasn’t always been the case. Just fifteen years ago, the Irish and New Zealand economies were on a par. We were both poor performers compared to other developed countries.

Nothing much has changed in New Zealand. But Ireland has gone from being one of the poorest countries in Europe to being one of the wealthiest. It’s done this by adopting policies that encourage business growth, improve the skills of its young people, and entice Irish people all over the world to return home to live and work.

The lesson from Ireland is that countries can turn themselves around if they are determined enough. It’s a lesson New Zealand would do well to learn.

In case you’re wondering, the Irish model that Key is crediting with its apparent economic success is a strain of neoliberalism just as virulent as ours, if not more so, with an additional element of corruption.

Of course, the real reason for Ireland’s growing prosperity was, initially membership of the EU and the huge net payments it got from the EU infrastructure and agricultural budgets. After decades of poverty, the EU was helping Ireland to catch up.

Then, things went nuts. Among its neoliberal reforms, Ireland set up an ‘International Financial Services Centre’, basically a Wild West for financiers were Irish tax rules didn’t apply. The jobs and cash flowing in caused a huge property bubble. Everyone had jobs, everyone felt rich and could get even richer selling houses to each other. (sound familiar? Ireland was worse)

And then it all went to shit. The global financial system nearly collapsed, the finance jobs disappeared, the housing bubble burst, the economy went into steep decline. The recklessly over-extended Irish banks, which were riddled with corruption, went to the government for bail-outs. To pay for the bail-outs and constrain its own deficits, the government slashed spending sending many more on to the dole queue and gutting public services. Even that wasn’t enough to make investors confident enough to buy its debt and, now, it has had to go to the EU for its own bailout.

As Bill English said in the House yesterday “We have only to see the experience of Ireland, which has essentially gone broke, to see just how bad things could have been.”

Remember, that’s how bad things could have been if English, Key, and Brash had had time to put their extreme rightwing plans into effect before the crisis.

11 comments on “The luck of the Irish ”

  1. Colonial Viper 1

    China and Singapore have shown willing to limit and deflate property asset bubbles early on to prevent (or minimise) adverse effects on the real economy. But then those countries have politicians who think more than a year in advance.

    And in fact its not an asset bubble per se which is particularly toxic, it is when that asset bubble is being fueled by interest bearing debt.

    • Herodotus 1.1

      CV, yet a property bubble keeps the middle class ingorantly happy as there perceived wealth increases, and displays to the less well off that entering onto the conveyor belt to success is attainable.
      To the incumbent govt there is a no cost, no promise scenario to keep the middle class swinger on their side. Unfortunatelt the longer the bubble exists (held artificially) the bigger the BANG.
      But boy was it interesting of all the self congratulations at BBQ’s of how wise people were on entering the group of multi home ownership. Also how doumbfounded they were when in discussions to justify the price of a bach/crib or their new rental. It was all based on the house next doors value.

      • M 1.1.1

        ‘yet a property bubble keeps the middle class ingorantly happy as there perceived wealth increases, and displays to the less well off that entering onto the conveyor belt to success is attainable.’

        Herodotus, I still have friends boarding this supposed gravy train, doing it on a shoestring but it will only take a job loss for it to be a total train wreck. I’ve tried to caution them but they’re so wrapped up in the ‘wealth generation’ they think it can’t lose, all part of the something for nothing mantra – I think Lotto tickets would be better odds and you wouldn’t lose your shirt.

  2. tc 2

    We’ll always have an unaturally high property market when there’s no CGT to discourage those that can from making tax free gains…….Oz introduced one in the 80’s alongside compulsory super, FBT to level that one out.

    Let’s all hold our breath for the MSM to bring our money market PM to account over such statements…..that’s if you can pry them out of the corner they’re cowering in.

    • Colonial Viper 2.1

      And make it tougher to get credit. People who are not buying a property as a primary residence need to stump up a 50% deposit for instance.

  3. ghostwhowalksnz 3

    Part of the Irish miracle was illusory , even without the real estate boom.
    The reason the large difference between GNP and GDP.

    their low tax rate meant that many companies were based in Ireland and didnt have any jobs in Ireland

    For example, Google does all its worldwide advertising through Ireland , worth billions but doesnt give jobs or services to the Irish, but Google gets 15% tax rate.

    The big Wall St banks , most of their deals are done in London, but the ‘back office’ is in Dublin. It only covers the paperwork but the high income traders are all in London and paying British taxes?

    As they say sup with the devil, and you have to pay his dues

  4. When it was originally coined, wasn’t the phrase “luck of the Irish” spoken ironically? If so, the title for this post is particularly apt.

  5. millsy 5

    What does it matter.

    The regular folks, along with those at the bottom of the heap, are the ones who are going to wear it the most. As they have all done during this whole recession.

    Maybe its time for the bankers to lose thier jobs, houses, etc.

    • Vicky32 5.1

      “Maybe its time for the bankers to lose thier jobs, houses, etc.”
      And then start leaping from windows… I remember a school teacher of ours back in the 60s telling a story about how he gave a boy a ‘saxpence’ because the boy had a Scots accent (back in the Depression – wow that teacher must have older than I realised at the time!)
      I remember feeling distant sympathy, never realising I’d be living through times that are almost as bad…
      Deb

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