Another issue on which there has been much comment is the alleged disadvantage to Ireland of being in the eurozone. In reality, Ireland may have been saved by its membership from the possibility of a run on its currency – however unwarranted such a run would have been. The UK, meanwhile, has seen its currency fall by 30 per cent against the euro and this is likely to bring short-run benefits. This option is not, of course, available to Ireland; flexibility has had to come instead from an adjustment in real wages. But – and this is the most important positive for Ireland’s long-term prospects – there is clear evidence that it is dealing with the competitiveness issue in a sustainable manner and one I believe to be unprecedented in the OECD area.
The latest data suggest there has already been an 8 per cent drop in private sector wages and salaries and, via the “pension levy”, there has also been in effect a 7-8 per cent fall in public sector pay. It is hard to imagine wages in other economies displaying such flexibility. If these figures are maintained or even supplemented, the Irish economy should emerge from the recession in a highly competitive position. Meanwhile, the minister of finance has given an undertaking to maintain Ireland’s low corporation tax rate of 12.5 per cent.
My old sauna buddy and golfing partner Peter Sutherland there. What he appears to be saying is that the the Irish ruling class’s collaboration with global capitalists has proven surprisingly fruitful at driving down workers’ wages of late, and that if this welcome trend continues, Ireland will be a very propitious location to invest in once again. After all, if the rulers have conscientiously driven down wages and undermined job security once, it becomes a safer bet that they can be called on to conduct a similar operation at some point in the future. That this might result in the immiseration of vast swathes of the population isn’t too worrying: after all, the fact that China is a slave state never was much of a brake on inward investment.