What will be said of the Irish crisis when finally it can be spoken of with hindsight? On that happy day, we may be speaking of the deregulation of the financial sector that allowed the riskiest of debts to be bundled together as if there were safety in the herd. Perhaps people will note the dramatic redistribution of income towards the richest 1%, which now has over 10% of Irish wealth. No doubt folk will be full amazed that even when bad bets were made, the financial whizz-kids kept their bonuses and passed their losses to the state.

It will perhaps be a matter of remark that the state decided that those best able to bear these costs should be cosseted from tax demands, so that the painful adjustment was instead demanded from those most deserving of state assistance. The Central Statistical Office estimates that in 2012 some 12.9% of households have had to without necessary heating of their home at some time in the year, up from 6.3% in 2008, and that 23.3% of households reported not being able to afford a morning, afternoon, or evening out in the previous fortnight, up from 11.1% in 2008.

It may be noted that all this contradicts the clear instruction of the 1937 Constitution, which directs that ‘in what pertains to the to the control of credit the constant and predominant aim shall be the welfare of the people as a whole,’ and which imposes upon the state a duty ‘to safeguard with especial care the economic interests of the weaker sections of the community.’

Unemployment map

From David Meredith and Jon Paul Faulkner, ‘The nature of uneven development in Ireland, 1991-2011,’ in Kearns, Meredith, Morrissey eds. Spatial justice and the Irish crisis (RIA, 2014) 107-127. Used with kind permission.

Now, all of this injustice takes place somewhere and when we speak of the Irish crisis we should remember its landscapes of despair. Future archaeologists may one day walk through the rubble of our crisis and bemoan the planning deficit that allowed houses without services, and new shopping centres to compete with half-empty ones. The people who camp inside houses marooned within landscapes pockmarked by the shells of abandoned constructions, the people whose local A & E services have been closed and who find that under-provision in the Ambulance Service mean that should they need timely care there is an odds-on chance they won’t get it, and the folk decanted from their community while their houses were to be repaired and who now find those repairs repeatedly deferred, all know that national averages hide the multiplying and accumulating deprivation inflicted upon themselves and their neighbours. We know that even the children of these sinks of poverty register the appalling reputation of their home area and feel less trusting of other children on their streets. We also know that stress and lack of opportunity translate into sickness, drug dependency, crime and violence.

A new geography of exclusion has been produced by the crisis. It works at multiple scales and it targets particular housing estates, particular small towns, particular parts of cities, and everywhere it corrals the poor and the disadvantaged to protect the property values and refined sensibilities of the rich. When asylum seekers are warehoused in remote places and when they self-harm or go on hunger strike to protest years spent in isolation and limbo, we get glimpses of a new geography of marginality, but we also know that the vicious asylum system is a consequence of under-funding and of a wish that Ireland not be, as so many foreign places once were for the Irish, a haven for the dispossessed and needy. Instead Ireland is once again open for investment and the property porn begins again in the weekend supplements. The government has shown foreign investors that they can bet on foolish speculation and still recover not only their bet, but also the promised winnings.

Will things be any different this time around? Well, the state sector will be carrying cuts already inflicted, and yet more already placed into the pipeline. Instead of addressing financial regulation and implementing directive planning, the predominant ideology of successive governments has been that it was the Irish state sector that over-spent the country into recession. So, we must expect further rounds of spatial injustice, further concentrations of poverty, and further marginalization of those who deserve assistance. Perhaps water charges will fund metering so that the privatization of water can be made attractive to investors. Perhaps the property tax will continue as a most regressive taxation. Perhaps the 1% will continue to milk the state for the subsidies that coax the speculation on which they thrive. Or, we just might hazard a wealth tax. We might build social housing. We might even direct government to ‘safeguard with especial care the economic interests of the weaker sections of the community.’

 

Gerry Kearns is Professor of Human Geography at Maynooth University and with David Meredith and John Morrissey has edited Spatial Justice and the Irish Crisis, published by the Royal Irish Academy, ISBN 978-1-908996-36-7, €20.00.

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Ireland’s recently adopted four-year recovery plan promotes an export-led strategy. The idea is to introduce measures to assist the export sector. These measures will assist export recovery through enhanced competitiveness and sector specific initiatives. Export growth will in turn deliver high value employment and act to stimulate the domestically trading sectors of the economy. These developments will in turn boost consumption, reduce unemployment and increase tax revenue. Confidence in this strategy is supported by the recent performance of the internationally traded sector. The government estimates exports have grown by over six percent in 2010.

Given the importance of the pharmaceutical industry to Ireland’s economy and its large share in Ireland’s exports, it is useful to take a closer look at the developments of this sector and their implications for the recovery plan.

The Irish pharmaceutical industry is performing strongly throughout the economic crisis. CSO external trade data show that exports in the combined chemicals and pharmaceuticals sector (which is dominated by the pharmaceutical sub-sectors) grew from €44.2bn in 2008 to €49.4bn in 2009 (+12%). The most recent CSO release shows further export growth by 4% in the first eight months of 2010 (compared to the first eight month in 2009). This compares with falling exports in other important manufacturing sub-sectors, notably the office machines sector (computer hardware), which experienced a drop of 32% in exports. As a result the combined chemicals and pharmaceuticals sector now accounts for 60% of Ireland’s manufacturing exports.

Now let’s take a look at the employment figures of the CSO. Between Q4 2007 and Q4 2009 employment in basic pharmaceutical products and pharmaceutical preparations (NACE 21) dropped by 9%, from 30,800 to 27,900.  How can we explain this apparent paradox?

Part of the job losses are related to corporate merger activity and the concomitant reorganisation of global manufacturing capacity. Other job losses are related to pharmaceutical companies losing markets when some of their products reach the end of their patent life. I discussed the implications of this “patent cliff” issue for Ireland in a previous IAN post. These processes were responsible for the recent high profile job-losses and plant closures at Pfizer and GSK in Cork. But one would expect these processes to translate in a drop in pharmaceutical exports, not an increase.

After talking to some pharmaceutical company managers, I believe the answer to the puzzle lies in a parallel development which may be termed “fat pharma going lean”. Traditionally, because of obscenely high pharmaceutical prices, pharma companies’ main concern was to have a sufficient supply of product. Pharma companies paid little attention to production efficiencies. However, product prices have come under serious pressure due to increasingly stringent price controls in many markets, as well as increased competition. In addition, changes in the regulatory environment have significantly increased the cost of bringing a drug to the market. In response, following the example of the electronics industry, most pharmaceutical companies are now introducing more efficient processes. As a result, Irish plants are starting to produce significantly more output, while at the same time reducing their head count. In some Irish plants, staff numbers have been reduced by over 10 per cent, completely under the radar of the media.

One might argue that this development will make the plants more efficient and put them in a better position to attract future investments by the parent company. However, efficiencies are implemented globally, not only in Ireland.

The recent growth in Irish pharmaceutical exports has not been job-less, it has been job-shedding. At least in the context of the pharmaceutical industry, the Government’s export-led recovery strategy may be problematic. In this sector, in the short term, increased exports are unlikely to lead to significant number of new jobs. Without new jobs, there will be no boost to consumption, no boost to the domestic sector, and no boost to income tax. Pharma is, of course, a specific case. The increasingly important internationally traded services sector may lend itself better to the export-led recovery plan.

Chris van Egeraat

One of the major ‘known unknowns’ about Ireland after Nama is whether there will be any economic growth in the country during Nama’s lifespan. And such growth is needed if property prices are to rise 10% in ten years. There are many reasons for pessimism here. The U.S. capitalist economy isn’t exactly surging back to life. And even if it does, the U.S. is so riddled with debt that any recovery won’t necessarily mean demand for services or good produced in Ireland. China, to which many commentators look for signs of a global recovery, is too export-dependent and too dominated by its coastal elites to lay the conditions for a much-needed boost in demand from its rural sector – a source of demand that was critical to the success of other Asian NICs (that is, ‘success’ as measured by surging economic growth rates, if not in equality).

So, if not from resurgent growth in the U.S. or China, just how will the anticipated recovery occur? Or, is there some other reason to be cheerful? Might it be that Ireland’s European partners offer succour here? Are we on the verge of a new period in Ireland’s economic relationship with Europe? Or, as lots of people in the country expect, is Ireland just on the verge of a sustained downturn / fully-fledged long term crisis? If the latter, how can Nama expect to return a profit to Irish taxpayers? And if it will make a loss, just how much of a loss, year-on-year, are we looking at? And precisely which sectors of Irish society are going to have to pay for those losses?

Alistair Fraser