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: http://www.ft.com/intl/cms/s/0/eb114bda-be3f-11e2-9b27-00144feab7de.html#axzz2TYJudjwo
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:
- 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;
- 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.
- 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.
The note is available here: http://www.esri.ie/UserFiles/publications/RN20130102.pdf
I am constantly bemused by the incessant drive to the bottom of all analysis since we went into decline in 2007. The self same doom sayers were trumpetting the wonderful celtic tiger. Paper doesnt refuse ink and biy do we get some dross in all of the contributions. Ireland has been a stage coach halting site for over 40 years and we do it well. long may the MNC's come here and water their stallions and feed our national economy in the process. Why do we "need" to convince oursleves that we are anything else . Agriculture and tourism are our core inustries.Hey whats new. Oliver Lupton
ReplyDeleteOliver, you can take this view. But it does not mean we should continuously delude ourselves into believing that our GDP is the real benchmark for measuring our income.
ReplyDeleteWith all due respect this is a superficial take on events.
ReplyDeleteGlobal rent flows themselves are extracting from European domestic demand.
The UK (London) is sucking in over £100 billion of real goods deficit.
Even under gold standard systems a real country not on the Imperial standard could produce domestic fiat to monetize domestic goods for comsumption.
This merely highlights another aspect of the dramatic final settlement crisis in Europe and beyond.
Even a couple of billion £ sterling extra consumption in Ireland would do much for the domestic economy.
Imagine what 100 billion + would do.
We would make the place glow in the dark.
Again refer to British balance of trade data.
Income from the rest of the world peaked in Q1 2008 at over £18 billion Sterling - I imagine much of this was Scottish free banking operations in Ireland.
Now its normally only a couple of billion a quarter.
So they have chosen real goods over income.
fair enough but........
That means the system of settlement must change don't you think ?
These current account metrics are not fit for purpose because of a much broader defect.