The Economist Magazine released its index of the highest income countries during the week. For Irish readers, there was a curious omission: Ireland cannot be found anywhere in the rankings.
The accompanying article states that because Irish GDP figures are so skewed by the presence of multinationals, it is not possible to make accurate comparisons with other countries. In previous years, the Economist had ranked Ireland number two. Indeed, earlier this month Forbes Magazine ranked Ireland in second place in terms of its income level and last March Global Finance Magazine did the same.
Forbes and Global Finance Magazine are both correct that, based on GDP, Ireland is one of the better-off countries in the world. But the Economist is also right. Irish GDP figures are highly misleading and do not provide an accurate reflection of the health of the underlying economy.
The difference in interpretation has significant consequences for public policy debates here. How many times have public sector unions cited Ireland’s status as one of the highest-income countries in the world as a rationale for pay increases? Interest groups similarly use the same argument in pre-budget lobbying.
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Opposition politicians repeatedly claim that it is a lack of compassion rather than a lack of fiscal resources when the government doesn’t open the purse strings. But then again, too often in the past few years the Government has preached the need for restraint, yet unveiled budgets that did not always match this goal.
The national finances are among the healthiest in the OECD, but this is because of a surge in corporate tax revenues since 2014. The precariousness of Ireland’s fiscal position is underlined by uncertainties in parts of the tech sector, including at Intel, a big employer and taxpayer.
The reality is that Ireland’s status as a “rich” country is down in large part to a handful of US multinationals. Growing threats to the global economy would have a big impact here. Yet politicians, in particular, are partying like it is 2007.