Irish Economic Prospects for 2019

Writing this time last year, I expected our economic fortunes to get better before they got worse. I saw clouds gathering on the distant horizon, but no major storms forecast for 2018.

*** This article was first published on thejournal.ie on 28 December 2018 ***

Ireland isn’t quite partying like it’s 2006, but the stats don’t lie – 2018 has been a bumper year by most measures.

  • The economy generated nearly 1,300 extra jobs per week in the 12 monthsto end-September, up from less than 950 per week the previous year. Even if the pace of job growth slowed after the middle of 2018, this is still impressive progress by any measure, and enough to see the unemployment rate fall to 5.3% in November, down from 6.4% the previous year.

  • Although this is close to what economists call ‘full employment’, it should be remembered that the share of the working age population making themselves available for work is still (62.6%) significantly lower than its 2007 peak (67.4%). This flatters the unemployment rate and suggests there are still some 300,000 people that could be enticed back to the workforce.

  • Growth in average hourly earningshas picked up, from 2.1% a year ago to 3.2% now, more than double the growth rate from two years ago. The minimum wage will increase by 2.6% from New Year’s Day, from €9.55 an hour to €9.80.

  • Only part of the increase in people’s pay packets is being eaten up by higher prices. Consumer prices are basically flat, edging up only slightly from 0.5% in November 2017, to 0.6% in the same month this year. This average hides important differences: the cost of housing, water, gas and electricity increased more than 5% on the year while the price of furniture and household equipment fell by more than -4%.

  • This means real hourly wages are increasing in every sector with the exception of public administration, which clocked up only a 0.8% gain in the year to end-September.

  • With more people at work earning higher wages, it is hardly surprising that we are spending more. Ireland’s GDP figures are heavily distorted by multinational activity, but the most unpolluted – and least volatile – component is private consumption which grew by 2.9% in the third quarter of the year compared to a year earlier.

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Book review: ‘Identity’, by Francis Fukuyama

Regarded as prescient in heralding the collapse of communism in 1989 as the ‘end of history’, Francis Fukuyama has since become something of an intellectual piñata.

His thesis then was that the triumph of liberal democracy, buttressed by a market economy, represented the ‘end of history’ in the Hegelian sense that other modes of organizing society had been tried, and failed, leaving the strongest standing. Eventually, he expected that it would become ubiquitous. The European Union was hailed as an aspirational model, having put an end to the continent’s centuries of internecine conflict.

So convinced was Fukuyama of the superiority of liberal democracy that, though a Democrat, he aligned himself with the neoconservative movement that provided the intellectual underpinning for George W. Bush’s disastrous invasion of Iraq.

*** A version of this book review was first published in The Irish Times on 24 October 2018 ***

His two most recent books, The Origins of Political Order and Political Order and Political Decay, were an attempt to clarify and rebut criticism of his ‘end of history’ thesis. Most notably, he dropped the pretense of the finality and inevitability, if not the desirability, of universal liberal democracy. He adapted his thesis to fit the facts on the ground.

Identity, his latest offering, was written for the age of Trump. Addressing the zeitgeist at both ends of the political spectrum for ‘identity politics’, particularly in the U.S. but also across Europe, he does a deep dive into what he sees as one possible mortal threat to liberal democratic institutions – ‘political decay’.

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Cooperative Advantage

Economists are well versed in the concepts of competitive advantage and comparative advantage, but could we be missing a trick by not putting more emphasis on what has been called ‘cooperative advantage’?

What if the economy was organized around cooperation instead of competition? What if the principles of shared ownership and community solidarity replaced the pursuit of profit and maximizing shareholder value?

It’s so far from our everyday reality that, for most of us, it is little more than a thought experiment. Continue reading

Budget 2019 Housing Redux: welcome to the Republic of missed opportunity

THIS WAS SUPPOSED to be the ‘Housing Budget’.

A series of government plans, strategies and false starts have so far failed to stem the surge in rents, reverse the relentless rise in homelessness or put homeownership back within the means of low-to-middle income families.

A decade since the property bubble burst and homeless figures began their long march to 10,000, this was flagged as the moment when the Minister for Finance would do what Ministers of Finance do to tackle a social crisis when there’s an election on the horizon – throw money at the problem.

So, let’s take a deep dive into the good, the bad and the ugly of the housing measures in Budget 2019.

*** This article was first published on thejournal.ie on 10 October 2018 ***

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‘That’s insane… did they guarantee everything?’: Remembering the bank guarantee

NOBODY LIKES TO get a call from the boss when they’re still in bed.

Exactly ten years ago, in the early hours of 30th September 2008, I got such a call: one I’ll never forget.

From January 2008 to the general election of February 2011, I was, among other things, economic advisor to Joan Burton TD, then opposition Finance Spokesperson for the Labour Party.

As such, I had a front-row seat to the political theatre and economic tragedy of Ireland’s unfolding banking crisis.

*** This article was first published on thejournal.ie on 30 September 2018 ***

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Winter is coming

Sure as night follows day, and winter follows autumn, the economic cycle will ebb and flow.

Right now, the Irish economy is enjoying something of an Indian summer: strong growth, record employment, rising wages, low inflation and low interest rates. And the good times have a while to run yet.

That’s far from saying that everyone is living on the pig’s back, as anyone facing the sharp end of the health or housing crises can attest.

But, the economy is at cruising speed and unlikely to soar higher. At least not safely.

Maybe not today. Maybe not tomorrow. But winter is coming.

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Is the economy overheating, and does it matter?

Writing in the midst of our summer heatwave, I can’t help but see the parallels with Ireland’s recent economic trajectory. After a seemingly endless winter, we are finally getting to enjoy some sunny spells. Likewise, our economy has been through the wringer over the past decade, but growth and unemployment numbers suggest mercury rising.

As with the weather, there’s always someone complaining: if it’s not too cold, it’s too hot. The conservative class of economic pundits have been sounding the siren of an overheating economy, as if we were back in the Celtic Tiger’s obnoxious heyday.

Is overheating a thing? Continue reading