Irish economy 'will lead Europe within a decade'

zod

• Henry McDonald
• The Observer, Sunday 11 January 2009
• Article history

Ireland's economy will bounce back from the credit crunch and start to outperform its major European rivals over the next 10 years, one of the United States' leading economists has predicted.
After a week of job losses and warnings yesterday of major cuts in the Republic's public sector, a former adviser to the US government has given a surprisingly upbeat assessment of Ireland's economic prospects for the rest of the decade.
Within the next 10 years Ireland's growth rates will be higher than the economies of main competitors such as Germany and France according to Dr Robert E Kennedy, head of business administration at the University of Michigan.
In a new book on outsourcing in the global economy, Kennedy urges Ireland to accept that "assembly-line manufacturing" would leave the country for eastern Europe and beyond.
Last week US computer giant Dell announced it would axe 1,900 jobs at its Limerick plant and shift its manufacturing to Poland. The job losses at Dell came just 48 hours after 800 jobs at Waterford Crystal were put in jeopardy after the glass maker's parent company, Waterford Wedgwood, went into administration.
Kennedy predicted more jobs would be lost from Ireland's manufacturing base. "Ireland has very high labour costs compared to central and eastern Europe. The average wage, if you divide GDP by population in Ireland, is around $50,000 (€37,000) whereas in Poland, it is $11,000. So in terms of low-skilled jobs involving physically assembling computer parts, in the end Ireland can't compete.
"However, where Ireland has an edge is in its highly skilled, educated workforce. What was interesting about the Dell decision was that it was its manufacturing arm being shifted to Poland. Dell is keeping most of its service and administrative base in Ireland."
The central thesis of Kennedy's book is that advanced economies must shift their activities from manufacturing to services and specialist fields such as financial expertise, biotechnology, innovation and design.
"What is happening to the Irish economy at present, if we leave out the credit crunch, also happened to the United States quite a while ago," he said. "Today in the private sector service and specialist industry makes up about 72 per cent of economic activity, whereas only 16 per cent is manufacturing.
"Ireland is going through the same process. Your success from the mid-1990s was based on attracting big names in manufacturing from the United States. Now they are leaving as your wage levels rise and these companies look eastwards. The next phase the Irish economy will go through is an evolution towards services where you will grow in niche areas of expertise. You have the edge over others in the EU because you have an Anglophone, highly educated workforce as well as a free and open economy. Leaving aside the current global crisis, Ireland still has an excellent business environment."
Dr Kennedy said that within a decade Ireland would be enjoying annual growth rates of 3 per cent, far higher than the EU average. "Economies like Germany and France are not as flexible as the Irish economy. There are far more restrictions and regulations in these larger economies than there are in Ireland. If you asked me what will the picture be like in 10 years' time I would put big money on a bet that Ireland will outperform these larger countries."

John_Mc

zod wrote: »

• Henry McDonald
• The Observer, Sunday 11 January 2009
• Article history

Interesting stuff, let's hope he's right!

thebman

Cool so I just have to unemployed for a decade and then I'll be sorted.

I was worried about the recession there for a sec :P

kippy

brim4brim wrote: »

Cool so I just have to unemployed for a decade and then I'll be sorted.

I was worried about the recession there for a sec :P

Thats not actually what was said.

Nice to see something positive, whether its BS or not.

inforfun

"a former adviser to the US government"

Looking at the state the US are in, he obviously knows what he is talking about....

donaghs

Nothing new in terms of favouring higher skilled jobs over manufacturing. The IDA have been doing that years. And with economic cycles the economy is bound to improve eventually.

Interesting that there was a world-wide recession in the early 80s and the early 90s. Perhaps we'll be starting another recession in 10 years time!

thebman

Well the general idea is we have to upskill all our manufacturing people who have been unemployed and don't have the money to pay for the education (and if the government had their way, they'd have to pay full fees) so FF seem hell bent on ensuring we don't have a knowledge economy while continuing to talk about it everytime the bad economy is brought up in an interview/debate.

daveirl

This post has been deleted.

10000maniacs

For the past 10 years we have been pricing ourselves out of manufacturing, and the previous 10 years, the US had being doing the same.
Unless we start coming up with innovative ideas ourselves, like what Michael Dell, Bill Gates, Robert Noyce and Gordon Moore have done, we in Ireland are doomed.
Its analogous to pop stars spending their lives doing cover versions while the songwriters make all the money.
Get your thinking caps on and invent something that the global market wants. Only then the Irish economy 'will lead Europe within a decade'

1huge1

Sounds like a load of optimistic crap to me to be honest, something like the IDA and the irish government have been saying for years, an excuse for losing our manufacturing jobs but in turn we benefit for what he calls ''high skilled jobs'', fair enough but this is nothing new and he mentions nothing about us becoming more competitive which is what needs to be done even with trying to attract these high skilled jobs we can't let our wages get out of hand.

One thing that did interest me however was that we are at a advantage over our continental european counterparts in that we are more flesxible, that is true and could well work in our faovur in the near future.