Every time Ireland has progressed over the past few decades, something has gone wrong. I’m not talking about the heartbreak of the national football team, I’m talking about the economy.
The obvious example was the self-inflicted wounds of the collapse of the Celtic Tiger era. On other occasions it has been blown up on us by external events beyond our control, from Covid to the current energy and cost of living issues.
Looking around other countries, current risks and uncertainties are unprecedented in today’s world. It’s like everything is on the table, from a massive global recession to a nuclear conflict.
Yet somehow, whether through clever boxing, blind luck, or a bit of both, public finances and the economy are in a surprisingly good position at such an uncertain time.
When you look at the huge deficits being run by the US and UK, these numbers seem almost too good to be true
It is hard to believe that within months of the end of Covid restrictions there were 200,000 more people working in Ireland than before the pandemic began.
Ireland has remained one of the few countries in Europe to have continued to grow its economy during the pandemic period. After a budget of 11 billion euros for 2023, the government still expects a surplus of over 6 billion euros next year.
When you look at the huge deficits being run by companies like the US and UK, these numbers seem almost too good to be true.
The UK faced a €60 billion hole in its accounts ahead of the chargeback of the late Kwasi Kwarteng’s mini-budget. Even Germany, which is the steadiest of the steadiest in terms of its economy, is forecasting a recession next year with the economy contracting 0.4 percent.
Of course, just because the government here says they expect things to get much better doesn’t mean they will be right.
It also doesn’t mean people aren’t facing a very difficult time this winter and probably into next year.
The value of a budget surplus isn’t worth much to those who can’t get a home, pay their utility bills, or access decent health services when they need them.
Having an economy that can show some resilience in these uncertain times at least offers the chance to solve some of the problems people are facing.
It takes more than money to tackle housing and health, but sound public finances at least make change possible.
Exports have been central to the strength the economy has shown in recent years. Much of the growth has come from a number of mostly US multinationals employing 190,000 people here. Every year they invest 6.5 billion euros, pay 12.4 billion euros in salaries and spend another 8.8 billion euros on buying goods and services.
For a small country on the edge of Europe with few natural competitive advantages, it’s a game that successive governments have generally played well.
Selling overseas has also helped create a large number of homegrown Irish multinationals that have managed to continue to expand at a time when it feels like the wheels of the world economy are turning off.
A survey of CEOs of Irish export companies released last week showed that 91 per cent of them expect to increase their exports over the next year.
Similarly, in 2022, 91 percent of them had either grown their business or maintained sales levels. Less than one in ten of them had seen exports fall.
Part of this economic strength is due to the complicated tax game successive Irish governments have played to attract foreign investment.
It has at times put the country in the eye of the international media storm, not least when the government persevered to the end before agreeing to an OECD initiative for a future minimum effective corporate tax rate of 15 percent.
This may not go down well with politicians in Europe, but big companies will have been watching very closely and privately supporting the government’s approach at every step.
Maintaining and continuing to attract this type of foreign investment requires a difficult balancing act between commercial success and the constraint of not giving too much power and influence to a small group of qualified executives in boardrooms thousands of miles away.
It’s a balance that we probably didn’t get right at times, but we didn’t totally screw it up either.
For a small country on the edge of Europe with few natural competitive advantages, it’s a game that successive governments have played well
However, just as there are real positives to the situation Ireland Inc is now in, there are also real risks.
Over-reliance on these multinationals’ taxes is one of them. Energy security or a major global downturn are others.
Successive UK governments since the 2016 Brexit referendum have shown how quickly things can take a turn for the worse. Fiscal credibility is central to any government’s ability to steer the ship through difficult times.
Kwasi Kwarteng now understands the dangers of reaching for popular, unfounded simple solutions to complex business challenges.
No one should know this better than the main Irish political parties after the humiliation and financial pain of our 2008 economic, fiscal, banking and property crash.
The question is whether the lessons have been learned. One lesson that really had to be taught the hard way is the value of consistency. It’s essential when it comes to dealing with the corporate world and the ruthless international markets that fund the money carousel.
This government, or any new Sinn Fein-led government that might come along, cannot afford to risk jeopardizing the economic gains that have been made.
Simple and popular solutions to complex problems are figured out.
Just ask Liz Truss.
https://www.independent.ie/opinion/comment/as-liz-truss-has-found-out-things-can-unravel-quickly-but-a-resilient-economy-like-ours-gives-us-hope-42068003.html As Liz Truss has discovered, things can unravel quickly, but a resilient economy like ours gives us hope