Saturday, May 09, 2009

Silver And Gold

While Fianna Fail (fada deliberately omitted) are, rightly, taking all the blame for the mess they've gotten the country into a side comment usually made is that Ireland's 'low tax model' has been discredited. So on top of leaving many of Ireland's 30-somethings living in badly built shoeboxes in the middle of nowhere, the property craziness could be responsible for undoing all the good work that breathed life into this country in the first place.

The fact remains that producing goods and services that both foreign and domestic consumers want to pay for is the best way to run our economy.

Low, but reasonable, taxes on those businesses facilitates competitive pricing and protects jobs. Low, but reasonable, taxes on employee incomes SHOULD facilitate wage restraint (further protecting competitiveness) and should facilitate low, controlled inflation.

Maximising the total tax take is what matters, not maximising what you can take from the individual.

Celtic Tiger 1.0 got old and started to die at the turn of the century. Irish full-time employment in manufacturing and internationally traded services fell 10,297 in the period 2000-2007. But we didn’t notice because, after the mini-recession of 2002, we had Celtic Tiger 2.0 - the property boom that masked what was really going on. Direct employment in construction rose from 126,000 in early 1998 to 282,000 in December 2006. The nonsense of the last few years made us forget all that got us into our healthy position and we ended up in a spiral of rising prices, rampant consumerism and excessive wage demands across all sectors.

It would be a shame if the genuinely good ideas that kickstarted the economy in the 90s took the blame for a crash caused almost entirely by the herd’s infatuation with owning property and getting rich easily.

Nostalgia for the Ireland of January 1st 2007 is not a good thing.
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