The Toronto Star slams Irish Miracle

This stuff is just amazing.    The Toronto Star really did a hatchet job on the Irish Miracle.  But it’s an absolute joke.  It is about the same as saying the ‘Ontario miracle’ of the past 15 years was a mistake because of the troubles the economy is currently facing.

A cursory look at the underpinnings of Ireland’s boom economy demonstrates its lack of sustainability. It was vulnerable to collapse in America’s boom economy, the source of two-thirds of foreign investment.

Look at that statement closely.  The boom economy isn’t sustainable.  That the Toronto Star makes such a conclusion is a waste of ink.  Of course a boom economy isn’t sustainable.  By definition a boom must come to an end.  But to invalidate the 20 years of growth because of a strong pull back now makes no economic sense.   The Toronto Star is saying that an economic development model that is predicated on foreign direct investment is invalid because Ireland’s 20 years of growth has now been offset by a couple of years of decline. 

That’s crazy.  I’ll take 18 years of rapid growth for two of decline any day of the week.  That is exactly what has happened in Ontario and very few people are suggesting that Ontario has been a failure.

There are lessons to be learned from Ireland.  The rapid increase in housing costs and wage costs did become problematic in the past couple of years.  There may have been public policy moves that could have mitigated this somewhat.  It is true that the rapid growth led to significant government spending to try and keep up with infrastructure needs (and now a high debt to GDP ratio).  Ireland was spending like the boom would go on forever.

But the Toronto Star completely misses the point and will just add fuel to the fire of folks that want to cut places like New Brunswick out of the global business investment flow.

New Brunswick missed out on the growth of the past 15 years. As I have shown in this blog- with the notable exception of the call centre sector – the province’s manufacturing sector, life sciences, film & new media, aerospace sectors – most of Canada’s growth engines hardly grew at all here.   And that is why we are not losing as many jobs.  You can’t lose what you didnt’ get in the first place.

I’m disappointed by this narrow and biased interpretation of the Irish miracle and its current challenges.

Maybe those great journalists at the Star should pick up the telephone and ask any Irish person if they would rather be back in the 1970s with the massive out-migration and the dead economy.  A 20 year boom was bound to come to an end and because of the close ties to the US market, the downturn has been particularly challenging.  But, like Ontario, to wipe out the gains of the past 20 years it would take 15 straight years of a 6% GDP decline.

And that will never happen (has never happened in history).

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8 Responses to The Toronto Star slams Irish Miracle

  1. My journalist friends that tilt to the left of the spectrum will be wondering why I am so annoyed with the Toronto Star article. What the Star did here is take a 5% problem to invalidate a 95% solution. A few years ago some journalists on the right end of the spectrum (citing a report) did a similar article on the Alberta oil & gas industry warning that excessive royalty and regulatory regimes were stifling new capital investment in the oil patch. This as record levels of investment had been made.

    When journalists head into the story with a pre-determined outcome and then cherry pick statistics, data and quotes to wrap around the story that’s the worst kind of journalism. A case study in what not to do.

    A good journalist would have certainly highlighted all of the challenges that Ireland is facing as the result of coming down off 15-20 years of boom. Then the journalist would have put this decline in perspective. That it would be almost impossible to wipe out the gains of the last 15-20 years.

  2. mikel says:

    I think your criticism is off the mark, what it sounds like you are objecting to is the hypocrisy. The Toronto Star certainly is more moderate than the G&B and the NP, and the real complaint is that this criticism never came about as Ontario was mirroring Ireland’s economic policies.

    Virtually everything the article says is ‘true’, there is no denying that. While people were touting the celtic tiger crap three years ago, I was pointing to OECD studies that were showing the childhood poverty in Ireland was higher than any other country. What is unfortunate in media is the tendency to talk as if a country’s wealth is distributed equally.

    What is being said about Ireland is no different than what is being said about almost every country. In fact, as the largest ‘foreign owned’ economy in the world, we can add that Canada’s financial system was spared simply because WE didn’t generate nearly the wealth of the US or Ireland.

    But there’s no point in crying foul when the media is finally telling the truth-its better late than never. Again, the problem is not ‘massive growth’ or ‘no growth’, it is SUSTAINABLE growth. The Scandinavian countries aren’t hurting nearly as much as many of these other economies, and there are at least a few success stories out there.

    The TS article focuses its theme on the idea of ‘massive tax cuts’ and deregulation, and that is all very true. You don’t NEED a ‘boom’ economy, you just need a DECENT economy, and unfortunately by the frequent posts about Ireland, the blogger is stepping into the same shoes as the various Premier’s who talk about going ‘from worst to first’ and ‘being the best’. If NB simply had a decent economy where it wasn’t heavily reliant on the feds, and people didn’t have to move for opportunities-in other words, if people are HAPPY, then surely that’s good enough. People sometimes forget that economic development is designed for people, not vice versa.

  3. richard says:

    I would say that perhaps it is more important to understand the factors that lead to Ireland’s boom. In addition to tax changes, there was also a massive infusion of funding from the EU. Ireland has had a tremendous poverty problem for decades. My father, coming from a Carleton County farm, was appalled at the poverty he saw in Ireland during WWII; things were not much different in the 1970s. So Ireland had a long ways to go; it is not surprising that gains would be very rapid in that situation. You had a westernized nation ready to make massive jumps economically, once education spending and social assistance was ramped up.

  4. Rob says:

    The article does make a good point that the neoliberal policies followed by the Irish government were not the only cause of the massive boom. EU subsidies underpinned the Irish Miracle.

    Besides that, I think David hits the nail on the head. We cannot ignore what the Irish did if we intend to pull our own region out of our Sargasso Sea of economic development. The housing boom was unsustainable, but so was Calgary’s in the 1980s.

    I think that it is WAY to early to judge on the success of Irish reforms. Let’s see how they pull out of this recession, and how their market recovers. We can then better decide how successful they were.

    As an aside, Jack Mintz is getting a lot of play in the news today. We get an old quote from him in the Star, and the CBC features his opinion on the NB tax reforms that he recommended. Surprisingly, he’s in favour of them.

  5. Jeff J says:

    So, it’s safe for us to assume that the recession is over for Ireland.

    If the recession *isn’t* over for Ireland, that would mean that there would be *more* than two years of economic decline. And that’s simply can’t be, because citing merely the two years of decline observed thus far would be an awful lot like cherry picking statistics to make a point. 😉

  6. Bill says:

    If there is something to be learned from the Irish situation it’s “hedge your bets.” From what I read in the article, it appears the boom was bought into much the way it was in the U.S. and elsewhere, and no one took precautions to anticipate an inevitable downswing. I don’t think this invalidates what they did in Ireland, it just reinforces the idea that caution, dull as it is, is an important safeguard. I found this quote interesting:

    “‘The mistake was to interpret what was rare as something permanent,’ Philip Lane, an economics professor at Trinity College, told the U.K.’s Financial Times.”

    It works both ways. The current global economic mess is equally rare. As Rob said, it’s far too soon to draw conclusions on the success or failure of the ‘Irish miracle.’

  7. mikel says:

    I think there needs to be more study as to whether ANY ‘neoliberal policies’ have an effect on economic ‘booms’. Unfortunately, there is a real problem is equating foreign investment with long term sustainable growth. Again, there is LOTS of money in New Brunswick, and lots of ‘opportunities’. While there is value in bringing in outside investment, its pretty hard to miss the examples of scandinavian countries, which largely have limited private investment power, and examples like Venezuela, which have surpassed many parts of canada in poverty elimination and education-AND economic development.

    Neoliberal policies are largely negative in most countries, and we see little evidence that low taxes actually make an economy better. But again, there’s nothing wrong with trying to get RIM or some decent company to set up shop in the province.

  8. Anonymous says:

    I don’t see anywhere in the article a statement saying that the Irish would have been better off if the economy stayed as in the 1970s. What I see is a call for caution with regard to some kinds of policies (a little overdone, I should agree)

    On the other hand, David’s statement that “The rapid increase in housing costs and wage costs did become problematic in the past couple of years.” suggests that what is happening with the Irish economy today is the result of what happened in the last 2 years. That’s a very short time span to mess up an entire thriving economy, isn’t it?

    I just think that a little bit of caution from both sides is necessary to help understand what happened.

    An update via “the Irish Economy” blog (http://www.irisheconomy.ie):

    “The EC has published its spring economic forecast. They are predicting a 16% unemployment rate for Ireland in 2010″

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