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| Assistant Secretary, U.S. Treasury, Harry Dexter White (left) and John Maynard Keynes, honorary advisor to the U.K. Treasury at the inaugural meeting of the International Monetary Fund's Board of Governors in Savannah, Georgia, US, March 8, 1946. Keynes died of a heart attack at his holiday home in Tilton, East Sussex on April 21, 1946. Photo credit: IMF |
Irish Economy: The renowned Depression era British economist John Maynard Keynes would likely have some useful advice for Taoiseach Brian Cowen, as the latter struggles for a response to the aftermath of a situation when the capital development of a country becomes the by-product of the activities of a casino.
Stephen Collins, Irish Times Political Editor reports today that the Taoiseach Brian Cowen is finalising an economic recovery plan which will be unveiled in the next few weeks. It will contain a range of tax incentives and grants designed to make Ireland the most attractive place for companies engaged in research and innovation.
Cowen is reported by his advisers to be hoping the plan will have the same positive impact in helping the State out of the economic downturn as the Financial Services Centre had in the late 1980s.
The plan will offer additional incentives to the 12.5% corporate tax rate to lure new companies here, encourage existing multinationals to locate their research divisions in the State and encourage the development of small Irish companies in the area.
Collins reports that Cowen has been working on the plan with Cabinet colleagues and officials from the IDA and Enterprise Ireland as well as officials from Government departments.
Government sources say Cowen wants to reorient Government policy so that Ireland will be well-placed to get on the path to recovery when the downturn ends.
Individual initiatives could be positive but as as an overall strategy, it appears to be more a public relations effort as two decades after the last serious effort to address the dangerous challenges facing the country, Ireland and the world has changed -- more specifically America has changed and Ireland is banking again on the US.
Intel arrived in 1989, Dell in 1990 and in the interval, many other world class American companies set-up in Ireland. Dublin's IFSC took off as the US financial sector rapidly expanded along with the high-tech sector. Today, the scenario is different, and following another double-digit plunge in Citigroup's shares in New York on Thursday, there is for example speculation that the financial giant may be broken up.
Under the current National Development Plan, more than €8 billion will be spend on developing a "world class knowledge economy" by 2013, but it has been argued that depending on eureka moments from university research, is not the best approach to underpinning an enterprise strategy.
John Maynard Keynes wrote in his seminal work, The General Theory of Employment, Interest and Money: “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”
Keynes's biographer, Robert Skidelsky, makes clear that at every stage of Keynes's career, he tried to think broadly about the social and political consequences of economic policy. In The Economic Consequences of the Peace (1919). Keynes had been a member of the British delegation at Versailles and saw that the vengeful peace, would have baleful economic consequences for both victors and vanquished. America was a creditor of both sides and in 1933, Keynes in his open letter to President Roosevelt said: "You have made yourself the Trustee for those in every country who seek to mend the evils of our condition by reasoned experiment within the framework of the existing social system. If you fail, rational change will be gravely prejudiced throughout the world, leaving orthodoxy and revolution to fight it out."
In the development of the post-World War II international financial system, which he helped create at Bretton Woods, New Hampshire in 1944, Keynes was very much in tune with the political, economic and social impact.
So in the Ireland of today, confronting the aftermath of the end of a casino economy and very serious global economic headwinds, Keynes would likely say that band-aid measures by the Irish Government do not address long-term challenges.
The political leaking of the "launch plan... to kick-start economy," deserves scepticism
Last weekend, a plan to announce the setting up of a public spending review group next week, was leaked.
There has been no leaking of a plan that would bring fundamental reform to a bloated governance system, land rezoning that makes land scare and a huge bonanza for some, in a country that is 4% urbanised and measures that would bring Ireland down from the fourth ranking in the World Bank league of most expensive countries in the world.
Does the Government know, post the property tax windfalls, how a credible public service delivering services comparable with the best run European countries, will be financed?
It will not be easy to adjust from a system where most excess private investment went into commercial property overseas rather than Irish business. Trade missions give the illusion that developing export markets is easy but with 90% of exports made by mainly American firms, we need to credibly address how this dependence can be reduced.
As always, political announcements dressed up in superlatives and delusions, take primacy over transparency on the challenges, and the difficulties in confronting them.
| Finfacts Reports |
| Irish Public Spending: Pre- IT/Web official policy prevails - hide as much information as possible from taxpayers |
| Irish Economy: Lenihan says mini-Budget may be necessary - Euro was major cause of Irish housing bubble |
| Global Economy: US savings rate rises from close to zero in 2007 as housing wealth falls - bad news for Emerging Economies |
| Irish Economy: Ulster Bank says GNP to fall 4% in 2009; Modest recovery in 2010; Deflation for first time since 1946; 85,000 more job losses |
| Irish Public Sector Pensions' bill jumped €743m to €1.8bn in 5 years to 2008 - up 66.5% compared with pay rise of 45.4% |
| Greatest Bubble in History: Warnings ignored in US and Ireland; Vacant Irish housing units rise 150% to 350,000 in period 2002/08 |
| Irish Economy: Cowen says economic circumstances toughest facing country in 100 years; "Now is the time for us to pull together” |
| Irish Economy: Proposals on developing coherent policy action to deal with the economic emergency |
| Mahon Tribunal ends public hearings after 11 years; Irish land rezoning system remains protected sacred cow |
| Irish Economy: Goodbody says GDP will plunge 4% in 2009; Budget forecasts too optimistic; Number of years before trend growth is achieved again |
| Citibank Europe's head says Dublin's International Financial Services Centre faces big potential job losses |
| Irish Economy: State bank guarantee tolls the death knell of the Celtic Tiger; Fairytale ends debunking the myths and exposing the reality of foundations built on quicksand |
| Irish Budget 2009 Analysis: Lenihan's "call to patriotic action" |
| Irish Economy: Political disarray, panic, incompetence, a credibility gap and five-star "cradle to grave" socialism |
| ESRI Medium-Term Review 2008-2015: Irish economy to grow at 3.75% annual rate; Business services exports very sensitive to Ireland’s competitiveness |
| Irish Economy: Central bank forecasts recessions in 2008 and 2009; Hurley says bad debts and loan losses were not the key issues in discussions on State guarantee for Irish bank system |
| Irish Government guaranteeing liabilities of about €400 billion of 6 financial institutions; CSO says Irish credit institutions and moneymarket funds owed €818 billion overseas in June; National debt was €43 billion |
| Irish Economy: Irish media and holding ministers to account |
| Irish Economy: Ireland is faced with new challenges as the US financial sector faces retrenchment and transformation |
| Analysis: Irish Economy - Cowen and the 100 days' milestone - a Political Pygmy amongst the Oireachtas Lilliputians |
| Irish Services Strategy Group Report: Political whitewash ignores overwhelming dominance of foreign-owned firms in Irish service exports thereby neutering strategy for Irish firms |
| Irish full-time employment in manufacturing and internationally traded services fell 10,297 in the period 2000-2007 while the total workforce expanded by 605,000 |
| IBEC and understanding the world East of Suez |
| International House Price Comparisons 1970-2006: Irish price growth in 36-year period third highest among 18 Developed Countries |
| International house price comparison index for 2007 ranks Dublin, Ireland and Beverly Hills, California for world's most expensive comparable management level family homes |
| World Bank study says 12 economies account for more than two-thirds of world’s output; Chinese economy size cut by 40%; Ireland is fourth most expensive world economy |
| The CSO reported from the Census 2006, in August 2007, that there were 266,000 vacant dwellings in 2006 representing 15% of the total housing stock. Of these, 175,000 were houses, 42,000 were flats and 50,000 were classified as holiday homes. County Leitrim had the highest percentage of vacant dwellings (29.3%) while 11.7 per cent of dwellings in Dublin City were vacant at the time of the census. |
| The Irish Mind and the Knowledge Economy: Should we bank everything on fuzzy leprechaunic political dreams? |
| Irish investors were the second biggest net investors in commercial property across Europe in 2007 |
| Foreign-owned firms were responsible for 90.2% of Irish exports in 2006 - including both merchandise goods and internationally traded services |
| Analysis: Doha Trade Round - Irish Farmers and Sacred Cows |
| NCB Stockbrokers: Housing market not the engine of growth; Exports contribute minimal impact to growth because of high import level - Demographics are the key |
| Philosopher-economist Adam Smith : A patron for 21st century trade unionism? |
| Ireland's Celtic Tiger 2005: Built to last or on a foundation of quicksand? |
