December 30, 2009
Earlier this year I was working in Australia and spent some time at the famous Bondi Beach where it became obvious to me that there were two types of people there.
The first species is the sculpted Aussie surfers. All sun-bleached hair, bright white teeth and toned limbs. Just the right proportions, strong features, physical perfection . . . and that’s just the straight blokes!
Gay men built like Bette Midler’s backing dancers in outrageously skimpy budgie smugglers ignore the Elle MacPherson clones doing early morning tai chi as they wait patiently for the right waves.
The second species is us, the Irish, in our GAA jerseys, huddled together so as not to frighten the natives at the far side of Bondi, not knowing how to surf, swim or strut: the O’Neill’s football, step one haircut and socks give it away. The faded teenage tattoos on freckly backs are another tell-tale sign, particularly as what was once a shark just above the shoulder-blade now resembles a beached whale, deformed on skin stretched by too many Hula Hoops, pints and Pot Noodles.
Two separate sets of figures just published — the first by the Australian Embassy and the second by our CSO — indicate that there will be plenty more of the second species on Bondi in the years ahead.
The Australian Embassy revealed that there has been a 25pc increase in Irish people looking to emigrate permanently to Australia. Quite apart from those who have decided to leave for good, other young Irish people are on the move to the ‘lucky country’ as never before. The number of 12-month working holiday visas for Australia issued to people under 30 has surged by 33pc to 22,786 in the year to the end of June. This figure is likely to have risen since then as recent graduates realise there are no jobs for them here.
This is the new Irish experience. In my book ‘Follow the Money’, I refer to the people I saw on Bondi Beach, working in cafes on the promenade or in the Irish bars in Bondi Junction, as ‘Generation Exodus’. Generation Exodus is the end result of the pathetic governance of Ireland over the past 10 years.
When the ‘insiders’ in Ireland waltz us up an economic cul de sac — as they did in the 1950s and the 1980s — society splits into ‘insiders’ and ‘outsiders’. The insiders — those with a stake in the society, those with the contacts and the networks to muddle through — get stronger. In contrast, the ‘outsiders’ get out. It happened in the 1950s and again in the 1980s and now it is happening again.
Generation Exodus should have inherited the fruits of 10 years of growth. Instead they are given the door. Meanwhile, the people who caused the crisis and dismissed persistent economic warnings as “doom mongering” are still in power.
For those who remember the 1980s, or even the 1950s, there is a perfect symmetry in all this. Today’s Generation Exodus is the ‘Ryanair Generation’ of the 1980s or the ‘Mail Boat Generation’ of the 1950s. In the late 1980s and early 1990s, thousands of young Irish people — myself included — headed on Ryanair flights to London. In the 1950s, 500,000 of our parents’ generation emigrated to the UK. Today, the opportunities are no longer in Britain, so Ireland’s latest exiles, Generation Exodus, must go further afield.
But the pattern is exactly the same. Today’s insiders, as in previous decades, couldn’t care less. One prominent politician, a consummate insider, summed up the establishment’s attitude to 1980s emigration with: “Sure how can we all expect to live on this little island?”
The same smug nonchalance is on display now. And worse, the full extent of the property madness of the past 10 years was confirmed by the figures published earlier this week by the CSO. The CSO data confirms that Generation Exodus will get bigger and bigger over the coming years.
For those of us with the economics weakness, dry numbers published by statisticians can paint vivid pictures about how our society works and if you join the dots you can see the big picture which links the numbers to the experience of Irish migrants in Bondi.
The CSO has published data on Ireland’s “capital stock”. The capital stock is the engine of the economy. The more capital of the ‘right’ sort that has been accumulated in a boom the better prepared the economy is to ride out the recession. The ‘right’ capital makes an economy productive. With the right capital we can get more people working, producing more and therefore getting paid more, which allows us to buy stuff without getting into debt. By raising the productiveness of everyone, investment in the right capital benefits all.
Unfortunately, there is also the ‘wrong’ capital. This is investment in stuff that produces nothing, that creates no jobs or opportunities and that demands no new skills to be used because it is the capital that, far from producing wages, is actually a cost that needs to be constantly maintained.
Too many houses are one such ‘bad’ investment. And in the boom we invested enormously in the ‘wrong’ sort of capital which will not contribute one job to Generation Exodus.
Looking at the CSO figures, we see that Ireland’s capital stock in 1999 was â‚¬189bn, of which â‚¬100bn was houses and other property. In 2009 Ireland’s capital stock is â‚¬476bn, of which â‚¬302bn is dwellings. So, discounting housing, Ireland’s capital stock has risen from â‚¬89bn to â‚¬174bn over 10 years. That’s a rise of 95pc in 10 years, which isn’t bad, but it’s not quite the huge rise of 150pc when you include housing. But the problem is that all this investment in housing is useless and has to be paid off.
To put things another way, in 1999, housing accounted for 53pc of Ireland’s capital stock. But in 2009, housing accounted for 64pc of Ireland’s capital stock. So while Ireland’s net capital stock is â‚¬476bn, if we leave out both dwellings and other buildings but include roads, machinery and transport equipment (ie the ‘right’ capital) our figure falls to a surprisingly low â‚¬80bn. This means that only 17pc of our capital stock is not a building of some sort.
Now contrast this with an economy like Switzerland. The total amount of their capital stock made up of buildings of some sort is 56pc, but the other 44pc is civil infrastructure, machines, transport and equipment. This is why Switzerland can be both expensive and productive: it has the ‘right’ capital.
Ireland in contrast, after 10 years of a boom, has the ‘wrong’ capital, which means we have the worst combination possible: we are expensive and unproductive. The high costs make us weak because they don’t reflect high productivity. So we have the brains of Generation Exodus, but not enough machinery to let these brains work to their potential. So we educate them to emigrate as we have done for generations and yet again some other country benefits.
And all the while, the ‘insiders’ knuckle down for the battle of survival in a shrinking Ireland and the ‘outsiders’ are told where to go.