I am on Shaftesbury Avenue in London, quite shocked. I have just put my card into an ATM to get £200 and realise that it has cost me nearly €300. I was aware that the British currency was rocketing, but this exchange rate difference is extraordinary and is brilliant news for Irish exporters.
We should do a deal with the British, fix the exchange rate here and simply transport Britain’s industrial base to Ireland and hit the restart button.
Of course, I am joking, but there is a startling divergence between the British economy, our biggest trading partner, and the eurozone economy that Official Ireland pretends is our biggest trading partner.
Employment in Britain is growing for a start. As George Osborne claimed in his recent budget, Yorkshire has created more jobs than France.
Thankfully, the Irish economy is not a European economy in any meaningful sense. We are an Anglo-American economy with a Franco-German currency grafted onto us.
Despite politicians and senior civil servants going over and back to Brussels all the time, we are actually part of the Anglosphere which maps a giant global arch from Dublin to London, across the Atlantic through North America and down to Australia and New Zealand.
This is our world. This is where we trade, where our investments come from, where our people live. It is an interlinked web of culture, language and family.
Granted, there are some significant differences, but if we are honest, these differences are dwarfed by commonalities.
Economically, when the Anglosphere does well, we do well. Period.
In the past five years, Ireland’s economy has been dragged upwards by Britain and the US. Ireland’s youth have sought opportunities in booming Australia, Britain, Canada and the US. We head to Boston or Birmingham, not Brussels to look for work. These are the facts.
We are the only eurozone country that actually does more trade outside the eurozone than within it.
But this type of anomaly describes much of Irish economic policy – it’s an economic policy made up without much reference to the actual economy.
However, thankfully for us, our major trading partner – Britain and the US – are motoring and they have dragged Ireland out of the mire and put us on the road to recovery.
Ahead of the election, the government’s line is that EU-imposed austerity sorted things out and led to some ‘magic’ recovery.
This is not only untrue, but economically impossible. In reality we do €1 billion a week worth of trade with Britain and its growth drives our growth.
As we head into 1916 anniversaries, we should be down on bended knee thanking the Brits for picking us up and dusting us down in the past few years.
I know this is unfashionable and not pro-EU; even after all these years, there is still an anti-London narrative of Official Ireland.
So what happens next in the British economy is crucial for Ireland and is more important than what happens in Germany, France or any other eurozone country.
On the surface, Britain is flying. Retail sales are booming, unemployment is half our rate, the budget deficit is falling and the housing market is strong. London continues to suck in enormous amounts of capital from the rest of the world.
But there are some problems that we in Ireland should like the British to address, not least because their prosperity is our prosperity.
What gives economies their underlying strength is if they are productive and this means if the people and the capital used in the economy are being used to their best and most productive.
Here Britain has a problem. Productivity has been falling for a long time there. Declining productivity has been a problem across the western world in the post-financial crisis period, but it seems to be a particularly severe problem for Britain.
In the league of the world’s seven most advanced nations, Britain is behind every one except Japan.
This means that Britain is not getting the most out of its workers and its capital and you can see this in the fact that British wages are not rising and the fact that it continues to run large current account deficits.
Some people argue that the reason British workers haven’t been as productive as their continental or American counterparts over the past few years is that British business never regarded the slowdown in the economy post the 2008 crash as permanent.
Rather than fire people straight away at the first sign of a wobble in demand, British employers kept their workers. This explains why unemployment in Britain didn’t increase nearly as much as expected after the financial crash.
This implied that companies seem to have preferred to retain workers but have worked them less hard, hence the decline in productivity.
In the years ahead, there needs to be massive investment in Britain – public and private – to push productivity upwards. The British government knows this and so too do British companies.
In fact, British companies have among the lowest ratio of debts to profits in the world, so there is no capital constraint on British corporations.
In a world of mobile capital there can be few more attractive destinations for innovative and high-tech investment.
Britain has four of the top ten universities worldwide, generating world-class academic research. This is evidenced in the disproportionate number of British-based Nobel prize winners in science.
With the City, Britain has the deepest capital market in the world, dwarfing New York. This implies there is lots of capital in Britain looking for a home.
All told, Britain is well placed for the years ahead. For this we should be grateful because – despite the rhetoric of 1916 and all that stuff – our two economies are still profoundly linked. We forget that at our peril.
Over to you Pat Flannery.
Britain means business. Britain is being honest about the weaknesses in it’s economy. And it is addressing them. Mainly through hard work. Brussels means face saving, because the business model of Brussels is “expand and pretend”. Brussels is refusing to admit to Brussels being the source of the PIGIS mess. In fact Brussels even has the arrogance to ass u me that the solution to problems created by Brussels, is “more” Brussels. And Ireland’s establishment are full committing to this idiotic face saving exercise. The ECB is also playing pretend with respect to the entire debt model of economic expansion… Read more »
We have the best of both worlds. We have all the benefits of a single currency. And they are huge don’t doubt it so don’t be so quick to throw it away. I quick like to hop on a plane to Belgium and not be gouged by a bank for exchange costs which are quite real and quite expensive. We have extremely beneficial links with the US economy AND as David is pointing out – We have Britain. We have a common language – The most important language in the world. To copperfasten our links with Britain and hedge our… Read more »
I look across the (narrow, confined) spectrum of the Irish media. All I see are opinions masquerading as facts. I see many commentators who are certain of the opinions being the reality. And there is so much consensus. And very little study of the underlying conditions. And no understanding of the assumptions. And practically no serious analysis. I do not know how many times I have heard the absurd phrase “Debt to GDP ratio”. The debt is real. GDP is made up from accounting tricks. In the Irish media, I see intellectual insolvency everywhere. And an utter determination to avoid… Read more »
David is guilty of the worst sin an economist can commit, a flawed analysis. He clings to a British myth that London is still the center of the world and America is a mere British colony. He says “We are an Anglo-American economy with a Franco-German currency grafted onto us.” There is no such thing as an “Anglo-American economy”. He totally misunderstands the role of America in today’s world by reducing it to a mythical relationship with its colonizing power called the British Isles of 250 years ago. He seems unaware that American businesses see Ireland as an American satellite… Read more »
This old chestnut again David??? Seriously, you need to get a new economic mantra. The perils of having an over-dependence on one trading partner is well known, I am sure you studied it in school. The percentage of our exports to Britain has been declining for decades and will continue to do so – this is both natural and healthy for the Irish economy. We actually export more to the euro-zone than to Britain. Around 16% of our exports go to the UK but around 34% of our imports come from there – the imports percentage figure is much higher… Read more »
aidanxc: “Around 16% of our exports go to the UK but around 34% of our imports come from there – the imports percentage figure is much higher as a lot of international companies will serve Ireland out of their UK branches.” I don’t know where you got your figures from but they sound about right from my personal research. As an economist David should be pointing out how Irish entrepreneurs can build lucrative new import businesses that would avoid being served out of UK distributorships. We should learn to view the British market as any other international market not something… Read more »
Antaine: No it is not the way manufacturers want things. They respect and understand individual countries’ sensitivities. We just don’t assert ours. Can you imagine a French company demanding and being granted the sole distributorship for Belgium or Holland? Can you imagine Israel being granted a sole distributorship for Egypt or Lebanon? Yet that is what we Irish accept as normal every day. I have been to many U.S. trade shows especially the big electronic ones in Las Vegas and was constantly appalled at how the Brits lie to manufacturers that Ireland is part of the UK in order to… Read more »
From the CIA World Factbook page on Ireland
Economy,
Exports – partners:
US 19.6%, UK 16.9%, Belgium 13.7%, Germany 7.7%, Switzerland 6.3%, France 4.9%, Netherlands 4.5% (2013)
So the Eurozone accounts for 30.8% of Irish exports minimum. The tally above only mentions the highest 6 individual countries on the list. It exudes 33% worth of Irish exports, of which a considerable chunk has to be going other Eurozone countries…so somewhere between 40% and 50% is likely heading for the Eurozone.
This has been pointed out before on here.
Afternoon Gents
Thanks for all the comments. Digesting them now. Hope all is well.
D
I’m as pissed of as anyone with the Germans and the Euro Zone issues; but having said that, I just don’t see an “Anglosphere” and the numbers don’t support it. Irish exports to Canada amount to less than 1%, and just over 1% to Australia. New Zealand isn’t even in the top 20 nations; whereas Mexico comes in at 19 with 0.63%! The US at 19% and the UK at 14% are definitely the biggest players, but they are two completely separate nations. While no single continental European nations meets those figures, the total for Euro Zone members are higher… Read more »
Here is a contribution I made to a similar discussion on this forum, what seems like such a long time ago now. 1. jim says Irish economic policy pushed through by the PD/FF administrations of the last couple of years has been one of 1. Low tax, 2. Low wage to productivity, 3. “Competitive” in the sense that a larger proportion of profit per unit cost could be repatriated i.e. The Anglo/American model. We found ourselves at the mercy of the dollar’s fluctuations and their (Anglo/American) economic cycles more so than the rest of Europe because of our exposure to… Read more »
While we are at the I told you so I put together a 2 pager just prior to our entry into the EZ. The main drive was to ensure we joined the Euro with the Punt rate as high as possible. My fears expressed at the time that the lower the rate we used the more likely we would we see asset inflation and consequent wage inflation. Needless to say I didn’t predict 2008 or anything like it. BUT even then to somebody who is neither an economist or any other financial persuasion the risks were there to be seen,… Read more »
“I was aware that the British currency was rocketing, but this exchange rate difference is extraordinary and is brilliant news for Irish exporters.” I am not aware that the British currency is rocketing but I AM aware that the EURO has fallen a lot recently compared to the US dollar and the UK pound. When the value of the pound is compared to the US dollar there is little change since 2008 at approximately US1.55 to the pound. Current gyrations have seen the US dollar strengthen compared to most other currencies. OR is it that most other currencies have declined… Read more »
The US has used Ireland Inc as a Euro-Hedge Strategy,working in concert with the UK. For the USuk/UKus incubus-succubus it’s a win-win situation and always was. If the Euro had worked, Canary Dwarf on the Liffey would be Euro Satellite of City Of London / Wall St. The Euro has catastrophically failed, the UK is leaving the EUro address the productivity gap which David discusses. Ireland, like Greece, has a choice of restoring Sovereignty by leaving the Euro or jjoining either the NeuDeutschmark or the LatinEuro2, depending on whether Dragi or Schauble win. The USUK -Franco -Prussian Empires have used… Read more »
Kids are dying on the streets of cholera, the army is about to launch a coup and we are choking on pollution and poisoned rivers… Well, we’re not really are we? So, I’d love to see a little less whinging and a bit more calm, measured reflection. Ireland has come from being one of the poorest countries in Europe to being in the top 10 or 20 in the world or almost every positive metric you’d care to mention. No 13 on the World Peace Index, no 18 for quality of life, no 11 for education etc. So everybody get… Read more »
If David is saying that Britain is more likely to get it’s act together, and that Brussels is not, then David is 100% correct.
However, the path that I see in front of Ireland, as a consequence of 15 years of continually living loosely, and squandering with liberal abandon, is a path already passed by Greek.
Ireland is another Greece in the making.
And Sweden is another Ireland in the making.
And Roisin Shortall and her merry socialists want us to copy Sweden. One of you is right. Are we into a damn close run thing here. ie We’re not as bad as you think and Sweden is worse that is recognised. One thing I would be interested in would be an article from David on the differences between Public Debt, Corporate Debt and Private Debt. For example Public Debt can be increased in a sustainable way but what are the limits. And in reality should borrowing only be undertaken for capital investment? Private debt has to be paid down eventually.… Read more »
It’s 1960 and quite a few years earlier and quite a few years later.
Irish citizen sits leaving cert.
Irish citizen passes all exams except Irish.
Irish citizen does not get Leaving Certificate.
Irish citizen has to emigrate cos there are no jobs in Ireland.
Irish citizen has no certificated formal education.
Irish citizen starts at bottom of rung.
Our government hamstrings it’s own citizens.
The above applies to said citizens even if they remain in Ireland.
So Irish citizens screwed by own government – sound familiar.
Thus endith today’s history lesson.
Like a few above have mentioned this subject has been done to f**king death. We’re obsessed with the Macro which we can’t control at the expense of the micro which we can influence. Let me explain briefly if I can. I’m an accidental landlord on a micro scale. My mother lived in an old decent sized house near Dublin City centre. It was so badly insulated winter or summer you could hang sides of beef in it. My brothers and I put our resources together some years ago and turned the place into two warm town houses. The Ma lives… Read more »
” I have just put my card into an ATM to get £200 and realise that it has cost me nearly €300. ” Welcome to the flip side of a depreciated currency. Exports may be easier to sell but imports have just got 15% more expensive. You have noted the inflationary effect of a depreciated currency. The depreciated currency caused by a lack of productivity attempted to being boosted by a surge in the production of new money. Inflation is always a monetary event–Milton Friedman. Any perceived growth in the UK or US is a nominal recording in an inflated… Read more »
A tunnel between Ireland and the eurozone would be more useful though excessively expensive. Who knows what type of taxes the British will be applying once they pull out of Europe so spending 23 bn on that project would be a complete waste. The idea of joining the Commonwealth is risible – why should we join of club of dictators, despots and dysfunctionals. Seriously… any other bright ideas?
[…] • Madrid’s Podemos-Backed Mayor Saves 70 Families From Eviction (TeleSur) • British Prosperity Will Drive Ireland’s Recovery (David McWilliams) • Imposing Losses On Hypo Bond Holders Illegal, Says Austrian Court (FT) • The Costly, […]
“Indeed, Ireland’s economic recovery, such as it is, is almost wholly based on Britain’s – like some kind of parasite, feeding on the pig’s belly… For countries such as Ireland and Spain, Britain’s refusal to play the same game has proved a God-send, providing a growing source of external demand to offset the absence of it at home.” “Those new flats down the road from where I live are one manifestation of such inflows. Another was last week’s purchase by Nikkei of the Financial Times. The £844m paid will count as inward investment, helping to offset Britain’s import bill. But… Read more »
Former Government Minister John Gormley has just thrown David McWilliams under the bus at the Banking Enquiry. He attributes authorship of the banking guarantee decision to David and called it the “David McWilliams option”. He pointedly contradicted McWilliams’ account of their email communications at the time of the guarantee and introduced those contradictory emails into the Banking Enquiry record. This revelation may explain some of David’s contradictory positions on this site.
https://atlas.media.mit.edu/en/profile/country/irl/
Ireland’s top exports appear to be highly technical in chemistry and medicine.
top imports are petroleum and aero industry and mendicaments.
http://www.gata.org/node/15601 Here is info on central bank manipulation of the monetary system. On their own behalf of course. That is why you owe them money and not the other way around. Now is the time for Ireland to be rid of the central bank system and revert to currency, debt free from Treasury. Revoke the majority of the debt as odious debt (a legal concept) and pay off the rest with a national currency. The resulting positive government balance would enable the revocation of income tax. That would attract all kinds of business and a produce a joyous prosperous country… Read more »
I’ll be honest.
I never thought the Dail Bank Enquiry would ever amount to much.
But they’ve proven me wrong.
Admittedly it’s taken a while but they have finally identified the person most responsible for the crash.
It’s our own David McWilliams, take about sir.
McCawber, I may as well add a little now I’ve started. There is more width down here. Douglas Hyde, who grew up in my mother’s part of Roscommon, and the Irish Texts Society has one of his books in their series. From the preface: ‘Almost all the men from whom I used to hear stories in the County Roscommon are dead. Ten or fifteen years ago I used to hear a great many stories but I did not understand their value. Now when I go back for them I cannot find them. They have died out, and will never again… Read more »
I don’t think the title of your article matches the content lol. Just kidding, mainly because I had some doubts after reading the article. https://accounts.binance.com/zh-CN/register-person?ref=JHQQKNKN