Friday, May 17, 2013

17/5/2013: Welcome to Surreal Irish National Accounts

A significant, but only because it is now 'official', confirmation that Ireland's GDP and GNP figures are vastly over-exaggerated by the distorting presence of some MNCs in Ireland has finally arrived to the pages of FT:

As one of those who said this time and again, starting with my work in the Open Republic Institute in 2001 and through today, I am grateful to Jamie Smyth for pointing this out.

The ESRI, which - being tasked directly with doing research on Irish economy and being paid for doing such research - has slept through the years of boom as the Government wasted resources in chasing imaginary investment/GDP and spending/GDP targets. After years of the Social partnership bulls**t, we only now, driven into desperation by necessity of the crisis, are beginning to face the reality that we are poorer than our GDP and GNP levels actually imply.

I take heart that all those who never once before voiced their concern about the distorting nature of our MNCs-dependent economic variables are now quoted in the FT voicing that concern. Since the beginning of the crisis I put forward consistently a three-points position countering Ireland's official sustainability analysis when it comes the economy being able to sustain current levels of Government debt:

  1. Despite all the focus in Irish and international media and official circles, it is the total economic debt mountain (household, government and non-financial corporate debts) that matters in determining sustainability of our economic development;
  2. Irish economy's capacity to carry the above debt burden is determined not by GDP, but by something closer to an average of GNP and Total Domestic Demand which, in 2012, stood at 81.54 and 75.21% of our official GDP.
  3. Irish exports growth is now becoming decoupled from the real economy as it is primarily driven by services exports which are dominated by a handful of tax arbitrage plays with little real connection to value added generated in this country.
The ESRI note cited in FT - detailed and well-research as it is - only scratches the surface of tax arbitrage effects on our official statistics. 

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