Monday, 6 December 2010

Constant repetition does not make an argument correct

Proinnsias Breathnach: Garret Fitzgerald’s Saturday articles in the Irish Times have become so repetitive as to be hardly worth reading anymore. Last Saturday he was at it again, pushing two of his favourite hobby horses whose correctness he seems to take for granted but which, in one case, is quite questionable and, in the other case, is plain wrong.

The latter refers to Dr. Fitzgerald’s repeated assertion that Ireland’s export competitiveness was undermined in the early 2000s (due mainly to government-induced inflation) and that, that as a result, Ireland’s share of global exports fell by one fifth.

In fact, the available data directly contradicts these assertions. OECD data show that unit labour costs in Irish manufacturing (most of whose output is exported) fell by nine per cent between 2000-2007. Very few of our main trading partners bettered this, and overall Ireland’s position improved vis-à-vis the Eurozone, the EU and OECD.

The OECD does not publish similar data for export services, but we can compute from Forfás data that unit labour costs in Irish export services fell by a quarter in the same period. This presumably was better than most of our competitors, as Ireland’s share of global services exports more than doubled in this period (from 1.23% in 2000 to 2.75% in 2007.

Overall, according to World Trade Organisation data, Ireland’s share of global exports of goods and services rose from 1.21% in 2000 to 1.235% in 2007. I presume that Dr. Fitzgerald’s assertion of a fall in global export share refers to merchandise exports, but these only accounted for just over one half of Ireland’s total exports by 2007. Even then, most of the fall in merchandise exports was confined to a single sector (office and data processing equipment) where special circumstances applied viz. the crash of 2000-1 and the emergence of China as a major low-cost competitor in this sector which has impacted negatively on the export share of most western economies.

Garret Fitzgerald’s second hobby horse is his argument that Ireland’s system of multi-seat constituencies is responsible for the preoccupation with local affairs of Irish TDs, due to the competition it engenders between TDs from the same party. It would seem more obvious to me that the local focus of our TDs arises from the highly-centralised nature of Ireland’s administrative system which means that local residents are forced to go to their TDs to seek intercourse with this system. In most other European countries most everyday public services (health, education, social welfare, community care and facilities) are the responsibility of local government, leaving parliamentarians free to devote their attentions to matters of national interest.

Any attempt at political reform which fails to address this basic structural problem in Ireland’s political/administrative system is, in my view, doomed to failure. Garret Fitzgerald favours a system whereby Dáil Éireann would be elected by a combination of local representatives and a national list system. I would argue that we should eliminate local representation entirely from our lower house of parliament. Instead – if it is to be retained at all – the Seanad should be made up of local representatives whose main function would be to review legislation arising the the Dáil for its possible local impacts. This would give it a more focused and clear-cut function than it has at present.


Anonymous said...

... fell by nine per cent between 2000-2000


Proinnsias Breathnach said...

Should have been 2000-2007. Well spotted. Error now corrected (I think). PB

Michael Burke said...


this is an argument taken up by commentators in Britain (seeking to find a unifying domestic 'theme' for the crisis-hit countries of Greece, Ireland, Portugal and Spain).

Some of them, including Channel 4's Paul Mason and the Guardian's Larry Elliott, refer to these countries growing current account deficits, which completely ignores the other component of the C/a balance of payments; investment income. It is this which has turned hugely negative in Ireland, as the role of the banks and speculators saw Ireland switch to a net €20bn in foreign assets in 1998 to net liabilites of €157bn in 2009 (and no doubt worse again this year). It is the interest and dividend outflows and these foreign debts which have caused the C/a to move into deficit, not trade flows. If there is anything everyone is agreed on in relation to this economy, it is that Ireland has massive trade surpluses.

Except Garrett Fitzgerald.

According to the EU, Irish relative unit labour costs rose by a cumulative 0.5% between 2001 and 2010, whereas Euro Area costs rose by 3.5% (European Economic Forecast- Spring 2010, Table 31). Over the same period exports rose by 34%, compared to 24% for the Euro Area as a whole Table 46).

The dynamic growth in world services' exports over decades seems to have passed Garrett Fitzgerald by, as if Ireland too should be stuck in the 1980s.