March 26, 2006

A glimpse of Ireland's future

Posted in Celtic Tiger · 14 comments ·
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Do you want to live in an Ireland with another million people, with traffic gridlock like Mexico City, where 20 per cent of the population are immigrants, where house prices are double or treble what they are today and where the suburbs stretch right across the country?

This is the Ireland envisaged by a new report published last week. The economists at NCB have done the rest of us a great favour with the publication of their comprehensive and fascinating view of Ireland in 2020. The authors, Dermot O�Brien and Eunan King, are credible, experienced professionals, not given to hyperbole.

They have painted a picture of the economy and society in 2020.

Some of the projections are startling.

For example, the population might rise by one million, and as many as one in five Irish people will be foreign immigrants.

They see enormous growth in cars on the roads and continued rapid increases in house building.

You can learn more about the economy from scanning the marriage, births and death columns than poring over many academic reports, because economics is about people. It is the study of families, baptisms, weddings and funerals. When demographics are positive and money is not scarce, little can stop the march of an economy.

The problem for most countries is that they rarely get this dream combination.

Sometimes they have great population growth but no cash, like the Congo; or loads of money, but no population growth, like Germany. The NCB team assumes that we will have both for the next 20 years.

If there is a flaw in the logic of the report, it is that the authors have decided that we are unlikely to experience an economic cycle for the next decade and a half.

Still, let�s not nit-pick, because to do so would be to miss the central point of the report.

Let�s assume NCB is right. What tensions will we have to deal with? What plans should we put in place? What would an Ireland with more than five million people look like? A lot more sallow, for starters.

We would be able to take the sun better.

The report envisages huge immigration in both historical and comparative terms.

The implication is that we may face serious social and racial tensions, where Chinese landlords evict black tenants and a displaced white Irish underclass votes for a 21st-century version of a National Socialist party that promises an Ireland for the Irish with a strong state.

One potentially hot issue touched on in the report is that the productivity of the average Irish worker is falling. As we move to a more service-related economy, productivity will decrease further. This means output per worker will lessen, which implies that wages have to fall relative to where they were before. In practice, this means that Irish and foreign workers will be working side by side on lower wages, causing resentment.

Yet different immigrants are likely to have different experiences. Recent history of Chinese migration indicates that they will prosper in business more quickly than others. South-east Asia is full of Chinese emigre billionaires. They are particularly well represented in the property business.

In Britain, the most successful recent immigrants are the Indians who were expelled from Uganda by Idi Amin. Time will tell what happens in Ireland, but it�s interesting to speculate about who will be the New Ireland�s Ugandan Indians.

The great Polish community of Chicago made its presence felt economically in the blue-collar trades, and it used this power to launch first generation politicians who agitated for the community. Might we have a second-generation Polish taoiseach in the decades ahead?

In contrast, if the experience in Britain and France is replicated here, Africans and Muslims could struggle economically.

That sense of alienation appears to heighten, rather than diminish, in the second and third generation.

Obviously, we are using very broad brush strokes here, and such racial stereotyping can be dangerous, but we need a framework and a point of reference – and where better to learn from than our neighbours� experiences?

It seems fair to conclude that such levels of immigration – over one fifth of the population – will cause some racial tensions.

The probable political implications are that either a new party will emerge with an ��Irish first�� policy, or some sort of bar on free immigration will be introduced.

What about the practicalities? Where are people likely to live? While the NCB report shies away from this issue, the CSO attempted to answer the question in a fascinating publication last May when it confirmed what most of us privately suspected � that Dublin between the canals will be a largely non-Irish zone by 2021.

During the same period, the white Irish middle classes will flee to the suburbs. We saw this pattern in the US during the 1970s and 1980s.Likewise, in Britain, immigrants are over-represented in central London and thin out as you head towards the M25.

This is described as the ��doughnut theory�� in the US, whereby centres of the cities are left to immigrants, while the richer natives flee to the sanctuary of the suburbs for better schools, a perception of greater safety and, frankly, to ��be among their own��.

This is the historic middle-class reaction to immigration. They don�t riot – they trade up. The Central Statistics Office predicts that, by 2021,112,000 white Dubliners will move out (10 per cent of today�s population), to be replaced by 250,000 immigrants (25 per cent of today�s population).

Where will the natives go? The CSO forecasts that the region with the strongest growth will be the mid-east area: counties Offaly, Westmeath, Laois, Kilkenny and Carlow. The population of this region will increase by 51 per cent. Already, these are amongst the most fertile counties in the country. Their growing populations will be bolstered by unprecedented white-flight from Dublin.

While the CSO spoke of 250,000 new immigrants in Dublin, the NCB forecast suggested as many as three quarters of a million new immigrants. Are they to live outside the capital? And if so where? If we do not build new cities like Almeer in Holland or Milton Keynes in England, the implication is that provincial towns will absorb huge population increases in the years ahead. This has already happened.

Quite apart from the Dublin commuter belt, the 2002 census reveals a similar arc spanning a 40-mile radius around Galway, Cork and Limerick, where young families, both indigenous and immigrant, are nesting.

NCB implies in the report – by the car ownership figures that it predicts – that the government will not get its act together on public transport. NCB envisages an explosion in car ownership and suggests 200,000 new cars on our roads per year for the next ten years. Obviously, Mexico City is the model, as traffic and the commute times will reach intolerable levels.

The big question is whether this is the country you want to live in. What is the alternative?

Maybe it�s time we reassessed the basis of our economic model. Is economic growth the objective in all cases, at all levels of income and for all people?

There is a discipline of economics called ��steady state economics�� which questions the addiction to ��growthism��. It contends that gearing the economy – and, by extension, our lives, families and society – exclusively for growth is somewhat silly, given our present levels of wealth.

The NCB report offers a vision of the future. It is not the only vision, but it is the most likely outcome of our present policies and philosophies. Is this what you want?

Or have you even taken a break from the rat race to consider the future?


  1. ian

    i feel this report which was published last week will
    create for the first time in irelands history what can be
    called a professional underclass.
    Ireland is very unigue in that a large percnetage of the
    population go to college. If the report is to be believed
    and i somewhat dubious about the aspects of it ,
    particularly the immigration aspect, then society will
    disentrgrate, house prices will be beyond belief, the jobs
    for professionals jsut wont be there and mass emigration
    will start again to australia, The Uk and canada.
    Continue with the good work david
    ,many thanks

  2. Tom Farrell

    David,

    At the moment, this topic is discussed constantly in
    various guises and forms. Media analysis and debate today
    in Ireland usually frame it in ‘pyramid-like’ terms, i.e.
    we, the ‘super-successful Irish’, need foreigners to come
    here and take the jobs that are beneath us. I believe we
    should frame our thinking in more ‘hourglass-like’ terms,
    i.e. we have partly climbed up the ‘food chain’ (and
    spectacularly so which does merit celebration), we do need
    foreign workers for certain unskilled jobs, BUT EQUALLY, we
    also need highly skilled foreign ‘knowledge workers’ to
    come here and complement our own efforts in putting Irish
    companies on the top global stage in the 21st century, i.e.
    bring new perspective, top-tier global experience and new
    innovative ways of doing things.

    Why do we need the highly skilled foreign workers? Recent
    reports on global companies are revealing. Fortune’s Global
    Most Admired Companies in 2006 contained 303 companies.
    There were no indigenous Irish companies present. Indeed,
    other countries of comparable size left us in our tracks:
    Belgium (x2), Finland (x3), Luxembourg (x1), Norway (x2),
    Singapore (x2), Switzerland (x8). In parallel, the
    Financial Times World’s Most Respected Companies report had
    one Irish company, viz, Ryanair. Michael O’Leary was also
    the only Irish person in the Most Respected Leaders
    category. Finally, there were no Irish companies in the
    Most Respected for Innovation category. Finally, in the FT
    Global 500 report, only AIB (# 325), BoI (# 402) and CRH (#
    446) featured. While this is positive, the reality is that
    the banks derive the bulk of their revenues from the Irish
    domestic market and not from the international market.

    Based on current political leadership policies and general
    consumer behaviour, frankly, I don’t believe our presence
    in these reports will be substantially different 10yrs from
    now. Instead of focusing on domestic-based R&D, leading-
    edge technology infrastructure and education excellence at
    all levels, we are instead pumping insane levels of capital
    into non-productive assets, i.e. €m properties, €100k SUVs
    and €k designer handbags.

    So we believe we have climbed to the top of the food chain,
    and yet, apart from Ryanair, there isn’t one Irish company
    renowned the world over for a leading edge, innovative and
    best in class product or service. If we are one of the most
    successful and richest countries in the world, why aren’t
    some of the best and the brightest choosing Dublin over
    London or New York? To attract the best talent from abroad,
    Ireland (most likely Dublin) must be more attractive than
    say London or New York to convince an experienced 40yr-old
    British or American finance executive to come here with his
    wife and 3 kids. Or Dublin must be more attractive than say
    the Silicon Valley to convince a top 29yr-old Indian
    software engineer to camp out here for a few years or so.
    And let’s not forget the well-heeled Irish abroad who also
    hold senior positions around the commercial capitals of the
    world. Will ‘going home’ to Ireland finally be more
    attractive than working and living in London, New York,
    Singapore or Sydney? Of course, all of this raises quality
    of life issues over and above the professional life issues.

    In short, we need to stop talking in one-dimensional terms
    about bringing in ‘non national migrant workers’ to do our
    dirty work (which, by the way, are smug and demeaning terms…
    ironically coming from a people who were in the same
    situation not so long ago). Maybe it’s time to take a long
    hard look in the mirror and assess how good we really are,
    and subsequently, have a more informed debate on who else
    needs to be encouraged to come here.

    Rgds,
    Tom

  3. Eoghan

    Hi David,

    As a 32 year old taking a year out in Asia at present, I
    note with interest your rhetorical question: “have you even
    taken a break from the rat race to consider the future?”

    A few articles back your opinion was “When the year-outers
    get bored of the ashram and finally come home, they will
    find it much harder to get a job”

    Mixed signals, Davy.
    Eoghan

  4. mark

    Hi David,
    I have to say, I found the NCB report more amusing than
    anything else, somewhat of a Simon Doonan does economics!.
    Firstly, if I am not mistaken (and do correct me if I am
    wrong), but surely it is in the financial interest of NCB
    to provide such a prediction of growth in the Irish
    economy, bearing in mind they are in fact a private
    investment firm.
    Secondly the absence of an understanding of the world stage
    and indeed Irish factors in the future of the economy is
    quite baffling.
    (and I shan’t even mention the exaggerated time frame)

    Overlooked International Factors;
    Oil, (self explanatory)
    Japan’s recovery, it is already affecting the stock markets
    in the Middle East. (as you have pointed out)
    Germany’s recovery, the great interest rate debate in the
    EU!!
    Middle East instability, possibility of an Iraqi civil war,
    Iran’s development of Nuclear weapons. The government’s
    interference in the stock markets of their respective
    country as happened last week.
    Aids, at what point does a social crisis in Africa become
    an economic one?
    How the American economy fairs, bearing in mind their
    astronomical debt!
    The jobs that moved here from America, eventually moving to
    India.
    Global environmental factors, from natural disasters to the
    green house effect/ controls to co2 output
    European civil unrest, as in France.
    And as you mention growth of the neo-European-rightwing, as
    happened in Austria.

    Overlooked Irish Factors
    Oil, the cost of and where we will get it? Home heating;
    the over priced houses need to be heated with over priced
    oil, the balance will surely tip and of course petrol for
    all these cars.
    Pollution/ waste problems, sewage, garbage, co2
    Roads, lack there of; where are all these cars going to
    go???
    Collapse of tourism, green Ireland???
    Housing; where are all these houses going to be built, the
    local councils are obscenely unproductive; and developers
    control the market.
    The growth of the underclass/ civil unrest
    The lack of police on the streets and the rise of street
    crime both petty thievery and more serious attacks.
    Lack of investment in anything other than property
    Dependence on foreign companies
    The introduction of energy ratings on homes
    Inflation after ssia’s flood the economy
    Unlike Japan (as you have pointed out in the past) we have
    No manufacturing industry.
    Electricity, we can’t cope with this massive projected
    demand, and indeed we rely on foreign imports in this arena
    too.
    And finally broadband, despite eircom’s great PR drive a
    vast amount of Irish homes still don’t have broadband and
    the entire network is completely outdated and unable to
    deal with future extra million plus capacity.

    thanks

  5. Pete

    I find it easy enough to accept that the population of
    Ireland will grow to 5 million, and perhaps beyond. That
    would still leave it probably the least densely populated
    country in Europe. Of course, more people means more cars,
    more demand for houses, roads, electricity, water,
    broadband, milk, dry-cleaning services, everything. That’s
    standard growing pains, and all these things will
    eventually get provided.

    But I do not accept that house prices will rise to 2 or 3
    times what they are now, for a number of reasons:

    1. Interest rates are probably going to rise over the next
    few years, making houses totally unaffordable for most
    people even at current prices, let alone double.

    2. Wages growth would be restrained by the competition
    from another million immigrants, which should limit house
    price growth. If wage growth is not restrained, Ireland
    will lose competitiveness and jobs, leading to recession,
    emmigration and lower house prices.

    3. Rental houses are not worth buying for the rental
    return at current prices, with many new landlords putting
    their hand in their own pocket every month to make the
    mortgage payments (and reap the capital gain). Unless
    rents increase dramatically, very few investors will be
    able to bear the monthly negative cashflow of investing in
    rental property at twice current prices, particularly if
    interest rates rise. If rents DO increase dramatically,
    see (4.) below

    4. If house prices (and rents) double, and wages do not,
    there will be mass emmigration. It will simply not make
    sense to many people to spend 2 generations paying off a
    mortgage of 20 times their salary for a semi-detached
    shoebox in the middle of nowhere, when a 40-minute flight
    away they can get similar job prospects and income, and
    houses at less than half the price. If wages DO double,
    see (2.) above.

    In summary, either rising interest rates will kill house
    prices, or uncompetitiveness will kill the economy, which
    will kill house prices. Or both. Obviously the former
    option is better, because that way we still have a
    competitive economy.

    A slightly off-topic rant, but relevant, is the subject of
    inflation. In the financial press (including the SBP)I
    regularly see articles or tables comparing the rate
    of “inflation” in Ireland to that in other Eurozone
    countries, like Germany or France. Now, every economics
    textbook I’ve read defines inflation as “the fall in the
    value of money”, and since Ireland and Germany use the
    same money (the euro), their inflation rates must
    therefore be the same. If prices in Ireland increase
    faster than in Germany, it doesn’t mean that our inflation
    rate is higher than theirs, it just means that Ireland is
    getting more expensive and less competitive.

  6. Garry

    Great comments, Tom.

    Most reporting on our current happy position is just self-
    congratulatory waffle, sometimes with just a hint of the
    authors worry about how long can it last for. Its good to
    give ourselves a pat on the back now and again but some of
    the oul guff about foreign workers — let them here to do
    the drudge work and screw them on rent to keep construction
    going — rubbish, not just morally wrong but its not good
    for more than a few years at best. No society or economy is
    successful with just services or construction, it needs
    wealth creation.
    Time to get back to basics. We dont have raw materials like
    oil etc to create wealth from, we have people…
    Unfortunately, the wealth created from “innovation/people
    based industries” needs constant effort.

    On growthism, I thought growth was the whole essence of
    global capitalism, without growth in one region, capital
    will move to get a better return, the earth will stop
    turning for that forgotten backwater….

    If we could have a wealthy society where we could swan
    around buying organic museli and mochas from each other,
    I’d be all for it but do you think its realistic?

  7. John Doe

    I must say I enjoyed the NCB ‘report’ which has attracted
    so much flack in the media and on various economics
    blogs. I am truly amazed, that the supposedly erudite,
    failed to notice the profound ironic subtext of this
    cleverly crafted and witty prose piece. The authors, of
    course, intended that the ‘report’ be read as a satirical
    sideswipe at the pomposity and self serving nature of the
    endless publications emanating from our financial
    institutions.

    The ‘report’ engages the reader in ludicrous flights of
    socio-economic fantasy; the authors pile the absurd upon
    the ridiculous, in a positive cornucopia of cutting
    satire. The comic effect is breathtaking and I must say,
    my ribs still ache following my first reading.

    So I say well done chaps on a masterful and highly
    original effort. I look forward to more of the same in
    the future.

  8. Willie C

    Howye.. a quick question, as a regular reader of David’s
    articles – and I think he is an excellent writer with some
    brilliant insights – I assumed that these articles David
    puts up were the same as the ones he publishes for the rag
    that is the Irish Indo every wednesday – but looking at
    today’s rag (sorry, indo), I see the articles are
    different..

    Is this to mean David McEgo graces us by publishing two
    articles a week? one in the indo and one here?

  9. David Mc Williams

    Thanks for all the comments. And Willie C, I put up on the
    site the two articles that are published each week, one in
    the Business Post the other in the Indo.

    Best Regards,

    David

  10. Willie C

    Thanks for the clarification David, I hope you dont mind
    the jibes..! I’m sure u’ve a brass neck on ye anyway!

  11. David Mc Williams

    No worries Willie C..the wife calls me much worse on an
    daily basis! David

  12. Joe

    Hi David,

    Very interesting article. The question of whether Ireland
    should continue it’s addiction to growthism is one of the
    most urgent facing Ireland today, however it is not one
    that many dare to even dream of. It’s highly likely that
    such an addiction will lead to a segregation of society
    and a disintegration of community. As long as governments
    believe that what Irish people want are policies that
    facilitate continued growth and the enablement of a
    consumer culture than they will continue to structure
    their agendas to match. Perhaps that is what Ireland
    wants, (it looks like it) despite any consequences,
    however it’s high time we started some serious debate on
    this topic in this county. The reaction to this report in
    the public was either “it’s too good to be true” or ”
    isn’t that great, there will be no housing crash”. I have
    not heard one politician or commentator ask whether this
    is really the future we disire for our country besides
    yourself, so I commend you for doing so.

  13. christopher

    Hmm this is all interesting but i think people are forgeting that before the famine we had a population of 8 million!

  14. Gef Dickson

    David,
    It would be helpful to have the information to make some assessment on Steady State economics. Can you elaborate or point us in the right direction – but nothing too heavy or theoritical ?!

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