Transcript General

Globalisation and the Irish Economy:
Responding successfully to change
Frances Ruane
The Economic and Social Research Institute, Ireland
www.esri.ie
Format of Presentation
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Snapshot of the Irish economy
Understanding globalisation
Thriving in a globalised world
The importance of domestic policy
making
Average Growth in GNP
Recent Performance has been spectacular in
terms of 1980s experience
10
8
4
2
0
05
-1
20
5
00
-0
20
0
95
-0
19
5
90
-9
19
0
85
-9
19
5
80
-8
19
0
75
-8
19
70
-7
5
0
19
%
6
Ireland’s openess: Trade/GDP
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
1970
1980
1990
1998
2000
France
Germany
Italy
Netherlands
Bel-Lux
United Kingdom
Ireland
Denmark
Sw eden
Austria
Norw ay
Australia
United States
Japan
Ireland’s Debt/GDP ratio
150
%
100
50
0
1970
1975
1980
1985
1990
1995
2000
2005
Understanding Globalisation
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Process increased worker/capital ratio
globally (E.Europe, China, India) =>
Increased return to capital globally =>
Increased global growth rates with
increased share of capital (reinforced
by financial integration) =>
Share of labour income is not a good
metric – look at employment and real
wages
Globalisation and SOEs
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Major sources of economic growth /
non-growth are outside their control
Price takers in ‘global’ markets =>
Growth is not demand constrained as
long as economy is globally competitive
Vital that the ‘local’ part of economy
operates efficiently => efficient public
sector and local business sector
Globalisation and Ireland: 1
Labour
Migration
TRADE
Production
in Ireland
Foreign
Direct
Investment
Financial
Integration
Globalisation and Ireland: 2
Labour
Migration
TRADE
Production
in Ireland
Foreign
Direct
Investment
Financial
Integration
Globalisation and Ireland: 3
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Phase I
Opened up new export markets =>
Additional FDI and new/growing
indigenous export companies =>
Increased productivity (linked to
technology; skills) =>
Increased employment and incomes =>
Increased markets for domestic
businesses => virtuous cycle
Employment growth
7
6
5
4
% 3
2
1
0
-1
1987
1990
1993
1996
1999
2002
2005
2008
Recent Performance - Wages
5
4
3
2
1
0
-1
1970-75
1975-80
1980-85
Real Wage
1985-90
1990-95
1995-00
Real After Tax Wage
2000-05
Globalisation and Ireland: 4
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Phase 2
More competition in export markets
More FDI (?); more ODI (?)
Increasing importance of service exports
Increased productivity in competitor
countries (linked to technology; skills)
Enhanced productivity required to
maintain employment and incomes =>
We need to take long-term perspectives
Exports of Services
80
70
% of Total
60
50
40
30
20
10
0
1990
1995
2000
2005
2010
2015
2020
2025
To thrive with Globalisation
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We must be competitive =>
To increase productivity, we need
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More capital
Better technology
Additional skills
Reward for risk-taking
Efficient public sector
Efficient domestic supply sector
Labour flexibility and mobility
Importance of Productivity
GDP/Head, 1980-2000 (Ireland GNP)
5
4
3
2
1
0
-1
EU
Greece
Ireland
GDP per person employed
Participation rate
Spain
Portugal
Employment Rate
Age Dependency
US
Educational Attainment, 2008
100%
75%
50%
25%
0%
20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
Primary
Junior
Leaving
Third
But how good is Irish education?
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Primary and second levels
Third and fourth levels
Without quality at each level, we are
likely to become a ‘global decliner’
over the next 20 years
Need to face up to the quality issue
How can we improve our education
system?
Productivity challenges
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Manufacturing – FDI and increased R&D /
marketing / etc. in indigenous companies
Agriculture – limited potential – quality food?
Private Sector Services – employee flexibility,
strong competition, good regulations
Public Sector Services – a cost drag on
competitivenss if not efficient – and
undermines living standards at the same
time
Being very open means …
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Limited independence of global trends
Potentially magnified effects of small shocks
Limited range of effective policy options
High cost of non-rational policies
Competitiveness cannot be ignored
Greater need for joined-up policy making
Need for evolving benchmarks and policies
Effective policy instruments
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Consistent development strategy
Sensible spatial strategy
Strategic incomes policies
Flexible labour-market policies
Counter-cyclical fiscal policies
Appropriate taxation policies
Efficient recurrent expenditure policies
Efficient capital expenditure policies
Challenges for Ireland in 2008
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To remember how bad things were …
To recognise how lucky we have been …
To appreciate that the longterm outlook is
good if we are sensible (MTR – 2008)
To be pro-active in the face of global
change
To be pro-active in EU policy making
Challenges for Ireland in 2008
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To reform regulatory processes to meet
needs
To reform institutional structures to match
needs
To take calculated policy risks (RTI; energy)
To develop a capacity for good policy
making and delivery
• People / Institutions
Ireland according to the Economist..
MAY 1997
An important reminder
Ireland according to the Economist..
MAY 1997
Poverty in a European
context, reflecting the
absence of
competitiveness
1988
Ireland according to the Economist..
MAY 1997
The Celtic
Tiger
Europe’s
shining light
The Economist
1997
Exceptional Growth
in a European
context driven by
growth in trade
made possible
by competitiveness
Ireland according to the Economist..
2004
Exceptional Growth
in a European
context driven by
by domestic stimuli,
especially
construction,
masking a loss in
competiveness
Ireland according to the Economist?
?
2008
Growth still high in a
European context
but with evidence of
unsustainable
domestic stimuli,
and growing
competitiveness
risks.
Ireland according to the Economist?
We do not want to
become a country
that has forgotten
the hard lessons of
the recent past….
2010