What if the Bad Times Come

In response to a post written by Treasa, I got thinking about other things I think our parties need to be on top of. Bearing in mind this post from P and also the recent gloomy predictions from the ESRI, I think that over the next year we need to face up to something, our current tiger cant last in its present form.

“Low productivity growth, an increasing balance of payments deficit, an over-reliance on construction and the end to the maturing of the SSIAs all point to poorer prospects in 2008 and beyond. So although the headline numbers look good for 2006 and 2007, the authors believe that more challenging times lie ahead.”

Bertie is always quick to rubbish such remarks, things are fine, more money is on its way thanks to that fecker McCreevy and shut up the lot of ye. Im all for positive thinking, but when it begins to cloud the judgement of our highest level politicians, I begin to worry.

You see, I dont know if this sense of willful denial of possiblity is for our benefit or actually what he is thinking. We have built a very successful economy on the basis of low corporate tax and foreign FDI. Dell and Intel stand as great monuments to the Irish success story we are told. Yet the flip side of our extensively globalised economy is the quickness with which it can disappear.

The ESRI report highlights a reliance on construction and low productivity growth as worrying signs for the future. Another element we are not taking consideration of is the relationship of oil prices to our economic fortunes. We dont tend to produce many of the components that go into chips, computers etc on these shores, we are dependent on transport to get stuff out and it stands to logic that the price rises in oil and knock on rises of transport costs is potentially not very good for the economy.

The effect of this rise in oil prices is not just hitting us, over at TPMCafe a very interesting post by Sterling Newberry. In the US there are concerns over yield curve heading into “top to bottom inversion”.

Even though technologies such as HDTV and wireless have only nibbled around the edges of the economy. The problem is that we are now on the backside of the large economic cycle, as risk has bottomed and begins climbing. Either investment must take larger risks for more reward, or it must flee risk, and thus lower long term economic growth.

That is the sort of talk in the US Financial Community that will make our politicians run for cover. Bertie Aherns track record on facing up to the possibility of economic downturn isn’t very reassuring and the forthcoming election seems unlikely to provoke a bout of honest discussion any time soon. Especially from out incumbents.

Of course, its very easy to dismiss some of my writing as the begrudgery of a left-wing whingebag. However there has been solid rumours around the place that Dell are shaping up to ship out in the coming years-if they do you can bet it wont be before the next election. Even if Dell do not leave, a developing trend among US investors to back away from investment in favour of accumulting cash reserves and sitting out another downturn could spell bad news here.

An approach which favours cost-cutting and increasing margins would have to seriously consider the value of remaining in Ireland.

All this is, of course, conjecture; it may not happen. The ESRI seem pretty serious about growing imbalances in our economy, I would like our politicans to be worried too. Over the next year Fianna Fail and the PDs will be looking for our votes on the basis of strong economic performance over the past years, and to give them credit where it is due we have been booming.

Yet politics is a thankless task and as a famous Cork-man reminded us, ‘fail to prepare and prepare to fail’. If our elected leader is unwilling to engage with the stream of reports and data suggesting a consumer bubble, debt bubble and property bubble, overreliance on construction for growth and worrying times ahead globally, then Im not sure I want to vote for him. Nor will I be voting for others who insist on peddling a ‘not to worry more of hte same for the next while’ approach. I want to know before hand-as it will be my last chance to really influence the decisions-what parties intend to do in the event of things going a bit pearshaped.

I also would like it to be less token-ism (oh just lower more taxes) and a bit more leadership. If the issues likely to confront us in the coming years can be singularly addressed by lower taxes then I really shouldnt worry at all. Only they cant. Over the past years we have opened our society to increased globalisation. We have benefitted hugely from this yet now the tide seems to be turning. Globalisation is at a cross-roads with increasing regionalism, increasing priorities being national and not global and (importantly) increasing willingness by domestic politicians to attend to domestic problems in a fashion considered unorthodox in the globalisation manual.

Doubtless as a small state we will be first affected by changing currency and investment climates. We have no right to expect the current situation to continue for ever. If then we arrive at a problem then it is a time of change, a time where those who we elected to lead us can be expected to exercise the remaining powers that they have and the ones they have but dont use to offer pathways to progress. We are not likely to be presented with a problem which can be solved by the same old doctrine. This does go beyond managerial guff and procedural tinkering. And because it does I want them to discuss it openly and honestly with us before the election. I dont pretend to know what answers they should give, I only want to see the options in front of me-before I vote.

Maintaining a dignified silence and holding the line of ’twill all be fine’ is a bit like not wanting to scare the masses. Weve been wealthy enough for long enough to take it standing up, I think.