A tale of two economies?

[Xray]

We appear to have an exporting sector that is doing well and increasingly competitive, but we have destroyed the domestic economy. Why are we still focusing on the strong bit and ignoring the weak bit. Further deflation is going to be a disaster at this stage for the economy.

http://www.irishtimes.com/newspaper/...reaking35.html

[BrendanGalway]

This would owe a lot to the sacred cow of Multinationals setting up shop here and declaring their profits here to avail of low tax. As well as Low Corpo tax, they get subsidies for wages via the IDA and grants to setup shop in the first place. These things are obviously not made available to most of our own domestic sector which has not been deemed worthy of any support at all.

Im no Economist but aren't the Multinational operations included in our GDP figures ? I seem to remember Michael Martin getting grilled about this before, he was attempting to show how strong our Economy was as we faced into the downturn even though only a handful of foreign companies, that we bribed to come here, accounted for the majority of it. Our domestic sector seems to have been taking a kicking for years.

[C. Flower]

This would owe a lot to the sacred cow of Multinationals setting up shop here and declaring their profits here to avail of low tax. As well as Low Corpo tax, they get subsidies for wages via the IDA and grants to setup shop in the first place. These things are obviously not made available to most of our own domestic sector which has not been deemed worthy of any support at all.

Im no Economist but aren't the Multinational operations included in our GDP figures ? I seem to remember Michael Martin getting grilled about this before, he was attempting to show how strong our Economy was as we faced into the downturn even though only a handful of foreign companies, that we bribed to come here, accounted for the majority of it. Our domestic sector seems to have been taking a kicking for years.

Multinationals are included in GDP (Gross Domestic Produc) and not in GNP (Gross National Product).

We've been steadily losing domestic manufacture for the last ten years.

There has been a trickle of tech job announcements over the last three or four weeks. I am so sceptical at this stage that I'd like to hear from someone in the know about how real they are.
http://feeds.breakingnews.ie/~r/bnto...ed-453000.html

We are also getting these reports from Stockbrokers saying that growth is about to set in. These outfits are so heaviliy entwined with the banking sector that its hard to know whether they have any credibility or not.

I used to rely to some extent on Michael Hennigan's Finfacts for a neutral/critical look at the economy, but there was no sign of him last time I looked over at that site.

Irisheconomy might be of help, but I get the feeling that everyone is namerised at the moment.

http://www.breakingnews.ie/ireland/a...ed-453000.html

[Slim Buddha]

This would owe a lot to the sacred cow of Multinationals setting up shop here and declaring their profits here to avail of low tax. As well as Low Corpo tax, they get subsidies for wages via the IDA and grants to setup shop in the first place. These things are obviously not made available to most of our own domestic sector which has not been deemed worthy of any support at all.

Im no Economist but aren't the Multinational operations included in our GDP figures ? I seem to remember Michael Martin getting grilled about this before, he was attempting to show how strong our Economy was as we faced into the downturn even though only a handful of foreign companies, that we bribed to come here, accounted for the majority of it. Our domestic sector seems to have been taking a kicking for years.

They are included in GDP figures but not in GNP figures. The policy has, since 1997, been in the hands of 2 women who never worked in the real world and 2 education/public sector men from Cork. And it shows.

[ZANU-FF]

you guys worry too much

http://www.rte.ie/business/2010/0303/mcdonalds.html

good times ahead...

[BrendanGalway]

Multinationals are included in GDP (Gross Domestic Produc) and not in GNP (Gross National Product).

We've been steadily losing domestic manufacture for the last ten years.

They are included in GDP figures but not in GNP figures. The policy has, since 1997, been in the hands of 2 women who never worked in the real world and 2 education/public sector men from Cork. And it shows.

Which no doubt is why Martin was keen to emphasise GDP even though, naturally, most Economic commentators were expressing concerns that GNP was falling behind. The picture of Irelands economy didnt look so good once Foreign owned companies were taken out of the picture. FF assured us these people were just talking down the economy.

Bless us, we were so innocent back then.

[charley]

i don't know about the IDA but if you check udaras na gaeltachta's yearly reports you will see some companies getting grants that would be equal to their yearly wage bill, i'm only guessing here but are some companies being wholly subsidised to prevent embarrassment to certain development bodies

[sparkey321]

We appear to have an exporting sector that is doing well and increasingly competitive, but we have destroyed the domestic economy. Why are we still focusing on the strong bit and ignoring the weak bit. Further deflation is going to be a disaster at this stage for the economy.

http://www.irishtimes.com/newspaper/...reaking35.html

Because we cannot create wealth selling stuff to ourselves. The economy is too small and too reliant on imports.

The only way to create wealth and bring money into the Irish company is through exports.

[C. Flower]

Because we cannot create wealth selling stuff to ourselves. The economy is too small and too reliant on imports.

The only way to create wealth and bring money into the Irish company is through exports.

I see you didn't use the term "open economy". To be an entirely open economy in a free market world is a very, very, bleak place to be in a downturn.

Irish companies are like hens teeth these days.

[just_society]

In the late '80's/'90's the idea was to attract multinationals who would create jobs, give a few Paddies a job and a bit of experience, and in time we would attract more of these jobs, and hopefully set up a few of our own companes. This was going splendidly until about 2000 or so. Then the dotcom crash happened.

These jobs in electronic engineering/IT suddenly looked unstable. Then benchmarking changed the game, meaning engineering/science/IT courses/jobs were seen as hard work, underpaid, and unstable compared to a well-paid and secure job in the public sector. Multi-national companies couldn't match these salaries, so in many cases there was a shortage of skilled workers for these jobs (filled by immigrants in most cases). Graduates all buggered off from Science/Engineering and towards Law/Medicine/Finance. Couple this with low interest rates and a housing bubble, and the scene was set.

The point is, the domestic economy, from the way houses were bought and sold to one another, from the bloated public sector bill, to overcharging of most businesses, and the retail bubble meant our domestic economy was very overheated by 2007. (5% inflation at one point I recall). Our overheated domestic sector pretty much devoured a lot of our export industry.

So it's clear as day to me, that the domestic economy needs to be rebalanced to support exporting industries. This means reducing the price of professional fees, transport costs, rents, etc. Massive deflation is the only way to achieve this. So I think our domestic economy shouldn't be the focus of the economic rebuilding.

[sparkey321]

I see you didn't use the term "open economy". To be an entirely open economy in a free market world is a very, very, bleak place to be in a downturn.

Irish companies are like hens teeth these days.

It works both ways.. We are not self sufficent as a country we need imports.

Selling stuff to ourselves does not create money it only passes it round in the same pool and every time we import something that's money taken out of the pool. Pretty soon you have nothing left. You have to export to create money.

Be that indigenous Irish firms or multinationals it does not matter. Every penny Pfizer pay in wages is created wealth, it brings money into the country from outside same for the money it pays for services and contractors etc.

Supermacs sells stuff in Ireland. While a good company it does not create wealth, it does not bring in new money in actual fact it send out money for the stuff it imports.

Ireland is too small to be anything but an open economy.

[eoinmn]

+1 just_society

What bugs me is that we have a media that constantly holds up non-exporting businessmen (no women, just men) as paragons of virtue (Quinn, Kerr, Pat McDonagh) and ignore the useful work done by exporting indigenous companies.

We also have a situation where the IT industry is massively important, but those that work in the IT industry are not represented in the Dáil, and are sneered at in the media and online as nerds.

[Xray]

Because we cannot create wealth selling stuff to ourselves. The economy is too small and too reliant on imports.

The only way to create wealth and bring money into the Irish company is through exports.

That is a dangerous simpliestic way of looking at it. You can create wealth by passing it about and selling things to each other. It is called the multiplier effect, and ours is getting dangerous low because of the fear in consumers.
People buying and selling things and services in the domestic market is the most important part of the hit we have taken, there is no way to recover until we fix that.

Sure we need the big companies employing people and we must ensure we keep them happy. But in the long run if we have a very poor domestic economy that is unstable and makes educated people leave by the plane load, the those companies will also leave.

Economics is not a zero sum game of gathering wealth, it is also about the flow of wealth, not wealth is flowing here and the country will die on the vine as a result.


http://en.wikipedia.org/wiki/Multiplier_(economics)


Put simply if I earn 1000 euro in Microsoft and stick it in a saving account that is pretty useless to the economy, if I buy a BBQ in woodies we have an economy. At the momeny we are not buying anything, we will have a wasteland here withing 2 years and the state will collapse.

[Xray]

That is a dangerous simpliestic way of looking at it. You can create wealth by passing it about and selling things to each other. It is called the multiplier effect, and ours is getting dangerous low because of the fear in consumers.
People buying and selling things and services in the domestic market is the most important part of the hit we have taken, there is no way to recover until we fix that.

Sure we need the big companies employing people and we must ensure we keep them happy. But in the long run if we have a very poor domestic economy that is unstable and makes educated people leave by the plane load, the those companies will also leave.

Economics is not a zero sum game of gathering wealth, it is also about the flow of wealth, not wealth is flowing here and the country will die on the vine as a result.


http://en.wikipedia.org/wiki/Multiplier_(economics)


Put simply if I earn 1000 euro in Microsoft and stick it in a saving account that is pretty useless to the economy, if I buy a BBQ in woodies we have an economy. At the momeny we are not buying anything, we will have a wasteland here withing 2 years and the state will collapse.

It was bad when we borrowed abroad to spend on property but it is not bad when we earn abroad and spend here. Stopping spending is the worst thing you can do in a recession.

[eoinmn]

Put simply if I earn 1000 euro in Microsoft and stick it in a saving account that is pretty useless to the economy, if I buy a BBQ in woodies we have an economy.

Is that not a rather old-fashioned or simplistic view of how a Savings Account works?

The money doesn't just sit in the account.. it gets invested in the economy.