The best is yet to come*
Newstalk’s Marc Coleman has a nice perch on the Financial Times comment page today to outline his fairly optimistic long-term view of the Irish economy despite the current property downturn. His essential argument, to be outlined in more detail in his book, is that Ireland has two key assets for its long-term growth prospects: people and land. But the article (perhaps constrained by length) doesn’t really go into why these assets have not been better exploited already. Because that would be a can of political worms.
First, here’s part of Coleman’s thesis –
The country is vastly underpopulated. Like a vacuum in a high-pressure globalised economy, it has huge potential to continue drawing in labour and capital for decades to come. While that fact will not save it from a temporary correction of its overheated property market, it promises fantastic potential once that correction has run its course … This demographic dividend needs to be complemented by something else; a density dividend. Poor transport, high utility costs and weak competition in many markets are raising the costs of doing business. More seriously, the failure to adequately urbanise, resulting in population sprawl, is holding back productivity in indigenous industry and significantly raising the cost of delivering public services.
The problem is that a raft of vested interests has built up precisely around that model of development and it’s going to be very difficult to change. Hence the asterisk in the title. While Marc refers to high utility costs, there are utility costs that are too low. What use is “free” water in Ennis and Athy (and previously Galway, and next?) if you can’t drink it? The water problems in turn are linked to bungalow bliss with all those stand-alone septic tanks running into the water table. Lack of water charges results in underinvestment in water facilities. Then there are the build-and-run developers and most of all the speculation linked to land rezoning. The rubbish that everyone agrees should go somewhere else but not into dumps or incinerators — so in practice into ditches in Fermanagh. And on and on.
Unless this Gordian knot is cut, we’ll continue to have what we have now: a property market driven more by speculation and boom-bust cycles and delivering a lot of low quality housing. And that demographic dividend won’t be exploited.