James Wickham: Ryanair is an Irish success story. Ryanair’s high profile CEO, Michael O’Leary, is one of the country’s home grown billionaires. And Ryanair’s success can be taken as a metaphor for one unnoticed feature of the Celtic Tiger: the extent to which it succeeded by ‘externalising’ problems.
After all, part of the Ryanair experience is not only that you reach more places more cheaply than you ever thought possible, you are also asked to pay for things for which you never thought airlines could charge. Ryanair externalises costs onto its passengers, but also has expertise in externalising its other costs. The environmental costs of air travel are now well known, and Ryanair specialises in short-haul travel, which has the highest environmental impact. While campaigning against subsidies for state airlines, Ryanair has benefited massively from regional subsidies to local airports. Ryanair even ensures that its staff contribute to their own training costs.
The most obvious example of this externalisation process is the environment. What is remarkable about the Irish boom is how old fashioned it was. Whereas for years it has been clear that economic growth can come in more or less energy intensive forms, we accepted the old equation that economic growth equals environmental damage. In particular the boom led to massive urban sprawl - which in turn ensured high levels of private car usage with all the consequent environmental impacts. Dublin’s sprawl was highlighted as an example of bad planning by the EU’s Environmental Protection Agency. Importantly, this was a political choice. Instead of an effective land use planning policy, we had a Ryanair policy – leave the mess for someone else to clear up.
Although it’s probably politically incorrect to say so, immigration policy is another example of externalisation. Despite the massive increase in employment during the boom, Ireland never achieved the levels of employment normal in countries such as Denmark. For example, in 2006 the overall employment rate in Ireland was 68.6%; in Germany it was not much lower at 67.5%, but in Denmark it was 77.4%. Ensuring that the unemployed, the very unskilled and many women could take up jobs would have required a proper ‘activation’ policy with counselling and training, it would have required a proper childcare policy. How much easier just to import labour!
And for all the propaganda about ‘our wonderful education system’, much of the need for skilled labour also came from a failure to motivate, train and educate people in Ireland. Thus whereas domestic technical education was originally expanded in order to facilitate high technology industry and services, Ian Bruff and I have shown how the Irish software sector rapidly became dependent on the import of qualified labour from around the world (‘Skill Shortages are not what they seem’, New Technology Work & Employment vol 23, pp. 30-43).
Clearly a small labour market such as Ireland’s will always need to import some specialist labour, just as those with specialist qualifications will always be more likely to emigrate. However, to some extent immigration policy was a substitute for an effective educational policy, including the weakness of any formal vocational education system. In this sense the educational costs of Irish growth were also externalised.
And I won’t even mention the idea of economic development by competing in terms of ‘light touch regulation’...