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.
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’.
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.
Yesterday, U.S. President Donald Trump made his ‘big announcement’ on tax cuts. Some Irish eyes aren’t smiling at the prospect of the headline-grabbing reduction in the corporation tax rate from 35% to 15% actually coming to pass. Essentially, though, this latest announcement amounts to little more than reheated campaign promises, washed down with Trump’s now-familiar saccharine bombast.
This was not a well-thought out exercise in policy innovation, but rather a cheap PR stunt designed to boost his flagging ratings and attract plaudits ahead of the media-constructed – but substantially meaningless – landmark of his Presidency’s first 100 days, which falls this Saturday.
*** This article was first published on thejournal.ie on 27 April, 2017 ***
OECD Corporation Tax Rates since 2000
Source: Tax Policy Reforms in the OECD 2016
First it was Brexit. Then it was Trump. Twice in recent months, we have awoken to news from across the water that shook us to our core. Something has gone ‘Br-ump’ in the night.
For Ireland, the biggest impact of Brexit and Trump’s ascendancy are likely to be economic. Even if recent decades have seen Ireland Inc. diversify its economic ties, the UK and US are still by far our most important trade and foreign direct investment partners. Directly or indirectly, hundreds of thousands of Irish jobs depend on these countries’ fortunes and policies. The temptation will be for Irish policymakers to adopt a reactive stance, but this needs to be complemented by a proactive and comprehensive approach.
As a tiny, very open economy, Ireland has surfed the wave of neoliberal globalisation more deftly than most, making the most of our geographic and cultural proximity to the US and the UK, in particular. For decades, for better or worse, we have been ‘all in’ on an economic strategy aimed at grabbing a slice of the global economic pie. As a result, there is perhaps no other country as uniquely exposed to the twin ‘Br-ump’ challenges.
Nobel Laureate Joseph Stiglitz can stake some claim to being the intellectual father of the ‘Occupy’ movement with his May 2011 Vanity Fair article ‘Of the 1%, by the 1%, for the 1%‘. He followed up with a book in 2012, ‘The Price of Inequality‘. This, in turn, builds on inter alia the 2003 and 2004 scholarly works of Thomas Piketty and Emanuel Saez on income inequality in the US since 1913.
Piketty, Saez and others – including Ireland’s Brian Nolan – have since worked to bring together data on top income shares for some two dozen countries and counting in a consolidated database (complete with helpful interactive graphics).
When Barack Obama was elected on a wave of euphoria three years ago this month, the US was in the grip of its deepest recession since the 1930’s.
Times were tough, but when the silver-tongued President-elect spoke of hope and change, of America as a place where all things were possible, he spoke to the American dream. People wanted to believe.
After three years of economic pain and political bickering, Americans are angry and frustrated. They have lost faith in their political class. For the first time in living memory the American dream itself is being called into question. People are no longer so sure that if they work hard and save hard, they will be able to provide a secure future for their children. Continue reading