Shane Ross


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New Measures Needed For A New Economy

Posted on: May 14th, 2008

There is a predictable pattern to government debates on financial markets. The Government blames international global players and markets, and the Opposition blames the Government. The Government claims the credit when things are going right and the Opposition claims it is because of international markets. New measures are needed for a new economic reality.

It is fair to say it is not just international markets that have gone wrong. There are certain things the Government could and should have done, but did not do.

I have been a long-time supporter of the Government’s economic policy on the whole. While I have not supported everything I have supported the broad thrust of the kind of market-led actions it has tended to take, which have encouraged the prosperity that has blown internationally and globally in our direction. Particularly under Mr. McCreevy, the Government managed that extraordinarily well and derived benefit to the extent that it fuelled the Celtic tiger and made us considerably more prosperous than we would have been otherwise.

I also take the point I am sure will be made by the new Minister of State, Deputy Mansergh, that there are many things about which we cannot do much. We cannot do anything about the fact that the dollar is at an all-time low, which is bad news for us. We cannot do anything about the fact that sterling is plunging almost daily and has fallen further today. We can offer these as legitimate excuses that create real difficulties for the Government, particularly in the realm of exports. It is only fair to say that is something it must accept and take on board. It needs to ride it out and hope it turns. We are at the mercy of international global markets.

I am not a great believer of following where investment goes around the world, which is a moveable feast. However, international markets are indicating one thing about Ireland at the moment. They are giving it the thumbs-down in a forensic manner. The people who must decide the countries in which to invest around the world have decided to pull their money out of Ireland. The Irish Stock Market which in recent years has been the guardian of billions of dollars, euro, yen and other currencies, and the beneficiary of that money, has plunged this year because international investors have said there is something much more wrong here than there is anywhere else.

The Irish market is indicating we are doing worse than was anticipated and worse than anybody else. That is coming from cold people with no emotional or personal involvement in what is happening here. They are simply people who analyse whether it is a good place to put investors’ money and they have given the thumbs-down. Why was Ireland one of the worst stock market performers in the world — if not the worst — last year and still a bad performer this year? It is because those with a clinical interest are saying they do not like what is happening here that much now. They may be exactly the same people who got excessively euphoric about what was happening here during the Celtic tiger years. They got very excited about property and activity here, including stocks and shares. They got themselves overexposed to property also.

However, we must respect their opinions and ask them why they are taking this point of view. Much of it relates to the property slump. However, some of it is to do with the fact that they are not confident the Government at the moment has the political will to manage the economy in those areas in which it has some clout.

I date the decline in the Government’s management of the economy at approximately three or four years ago. I date it to an electoral timetable, which meant that the then new Minister for Finance was reluctant to anticipate a downturn at any stage. That was because he wanted to do the right thing — first to win the next general election and second to safeguard his position as the heir apparent of Fianna Fáil. Hard decisions are not made by ambitious politicians at a certain time. That does not mean that he will not do them now. Now that he is in the top job he may decide these things need to be done because they are necessary even if unpalatable. The Government is now in a unique position to take unpopular measures that are necessary in a downturn, which will have been forgotten or overtaken by events by the time of the next general election.

I was interested in what Senator MacSharry when pointed to a very credible report indicating that growth would return to 3.75% by 2010, and upwards and onwards after that. He is right that John Fitzgerald is an almost unique economist in that he anticipated the boom, which was extraordinary. He also called the end of the property market, which is even more extraordinary. He is paid by the Government, which also makes him unique. In other words he was not singing the Government’s song all the time. We must respect what he says. On the other hand it is an extraordinary hostage to fortune to tell us what will happen in 2025 — I do not believe anybody can do that. It makes assumptions that the Government will take the right measures.

It is vital for us to recognise that the Irish economy is nothing like what is described in either the motion or the amendment. The engine of the Irish economy is in multinationals, financial services and other areas. That is pointed out in the ESRI report. It is not in the old-fashioned indigenous industries that we are so keen to portray as the Irish economy. It is now a non-unionised, vibrant sector which is going to lead us forward, and that is the sector that must be encouraged. I applaud the Government’s recognition of the fact that we must attract those multinationals and that they are the most important part of the economy. We have to give them those incentives because the old economy, which is dominated by a declining trade union membership, is dead. The new economy is the one that must be encouraged. We have to shed all those old shibboleths and recognise the fact that we are in a new situation and that those areas to which I referred are the ones we must encourage in the future.