[lbo-talk] Irish economy

[Yann Morvan]

Doug Henwood wrote:
> Anyone know anything about the Irish economy? I'm just looking at some 
> stats and am surprised by the huge trade surplus (corporate tax 
> shelter services?) and strong productivity growth (way ahead of 
> Germany's, which is way ahead of most of the rest of Europe). But 
> bubble, then bust. Wuzzup?
I think there were too components to the strong productivity growth.
One was the influx of foreign investment (particularly pharmaceuticals) 
and the fact that it went into brand new production facilities, so state 
of the art equipment and processes.
The other was that the valuation of the output in the construction 
sector, which has been a huge part of the economy (e.g. 12.6% of 
workforce q2 2005) in the last while, was bubbling.

As Wendy said, the country doesn't capture much of the proceeds of the 
trade surplus (a lot of it foreign controlled, with 12.5% corporation tax).
On the other hand, the country has recently waken up to the fact that 
there are now 345,000 empty housing units (popuplation: 4.5m).
So a lot of the wealth that was supposed to be there just isn't, and its 
hitting state finance hard
because it was relying a lot on house taxes (30% of housing unit costs 
according to finfacts.ie).

I think it went:
rise in employment in export industries ->
rise in employment in services ->
full employment + very Irish dream of becoming a landlord ->
gross mis-allocation of resources into construction + failure to capture 
any wealth from elsewhere ->
bust

Yann