Fortune Magazine's analysis of Ireland's 'new troubles'

Paul Sweeney21/05/2009

Paul Sweeney: Fortune magazine takes a look at Ireland’s “New Troubles” in the current issue, 1st June 2009. It is a particularly shallow and a very ideological analysis. But it is one which will sit well in the boardrooms and with the business “wanna be’s”. Carefully selected interviewees who are all right wing business people and commentators deliver a very superficial analysis of what went wrong and what the prescription is. Fortune’s Shawn Tully ensures that the ill-informed will be no wiser internationally by his crafted ideological piece.

Starting and ending the article with the profound thoughts of leading intellectual, Michael O Leary, “the blarney filled promoter” begins by saying his bikini-clad calendar girls “really do work here.” He ends with a cry to save Ireland’s key weapon of competitive advantage, the low tax on corporations, such as Ryanair. With the penny dropping on how vulnerable this advantage is, Tully and O’Leary are worried that the price of bail-out of Ireland by Europe will be the termination of the race to the bottom in corporate tax competition in a European Single Market. This point was made recently made by James Wickham on Progressive Economy.

Fortune asserts that if the low Corporation Tax rate goes then it will “undermine Ireland’s crucial campaign for lower wages. ‘If taxes rise, employees will demand higher pay,” says Alan Barrett” of the ESRI. “That would go in the opposite direction from our attempts to restore competitiveness,“ he asserts.

Barrett’s is an incrediblely narrow understanding of the issue of competitiveness. In fairness, we hope he was selectively quoted by Tully in order to build his view of Ireland. What about the impact of the 25% drop in Stirling and the fall in the dollar on overall costs on cost competiveness? And the barely functioning banking system? And the poor infrastructure and public transport?

Another quote is from a businessman whose name is always linked to the word “entrepreneur.” Is an entrepreneur a person who make his fortune when the state hands him a very valuable public asset in the form of a telephone licence - which should have been auctioned to the highest bidder? Denis O’Brien warns against union and labour regulation in the piece. “I’d be extremely reluctant to invest in France or Germany because of the labour laws. You have too many rules and negotiations. In Ireland we can cut labour costs very quickly,” he boasts.

In one section, Tully asserts that unions are weak in Ireland (yet the density is 37%here compared to 8% in France) but moans that the government often bends to the will of public sector unions. He asserts that “multinationals are rarely constrained by union contracts”, but yet they are in several of the firms he mentions by name - eg J&J and Schering Plough! And in many others too, especially in pharma. He seems unaware of the Social Partnership process, which largely influences pay and conditions in every sector, unionised or not.

Instructively, he quotes Willie Slattery of State Street who complains that he could not compete with well paid public sector workers for staff. Willie, who wants a pay freeze for no less than three to four years, is a member of An Bord Snip Nua.

The article focuses on “years of reckless spending”, but neglects to point out the crisis was largely created by tax cutting and tax shifting from incomes and profits to spending taxes, which were unstable, especially around property. It was the pro-cyclical policies in the boom, enhanced with tax subsidies for property investors which led to the Irish crisis, combined with reckless lending by the banks, unsupervised by a state “captured” by efficient market theory. The issue is not to deflate the economy further as this piece asserts.

On a positive note, Fortune does point out the there are many excellent sectors and firms in Ireland – “its fundamental economy still packs vast potential for exports and could rebound strongly.” However, if we were to follow the prescriptions of the eminent people quoted by this business magazine, we would be in even deeper trouble.

Posted in: PoliticsEconomics

Tagged with: commentaryPolitical Economy

Paul Sweeney     @paulsweeneyman


Paul Sweeney is former Chief Economist of the Irish Congress of Trade Unions. He was a President of the Statistical and Social Enquiry Society of Ireland, former member of the Economic Committee of the ETUC, a member of the National Competitiveness Council of Ireland, the National Statistics Board, the ESB, TUAC, (advisor to OECD) and several other bodies. He has written three books on the Irish economy and two on public enterprise, including The Celtic Tiger; Ireland’s Economic Miracle Explained and Selling Out: Privatisation in Ireland, chapters in other books and many articles on economics.



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