THE PUBLICATION of a hard-hitting assessment of the competitiveness of the economy on the same day that Dell announces the loss of 1,900 jobs in Limerick is no doubt coincidence. But the timing could not have been better. Anyone struggling to understand why, after 18 years, Dell has called it a day for manufacturing in Ireland will find some answers in the report of the National Competitiveness Council (NCC). One figure in particular stands out from its pages: Ireland has experienced a 32 per cent loss in international price competitiveness between January 2000 and September 2008.
Put simply, it means that what made economic sense for Dell in 2000 – the manufacture and export of PCs from Limerick – does not make economic sense in 2008. Ireland has progressively become a more expensive place to do business as other lower-cost locations have multiplied. The problem is compounded by a number of Dell-specific issues – the move away from the direct sales model and the rising popularity of laptops – which have seen it knocked off its perch as the world’s biggest maker of PCs.
By its own admission, there is nothing particularly new in the NCC report which is an annual publication, but yesterday’s news from Limerick throws the issues it raises into sharp focus. Declining competitiveness has been a feature of the economy – and thus NCC reports – since 2002. But its impact was masked by the construction and consumer booms that led on from the export-driven growth of the late 1990s and early 2000s which were underpinned by our global competitiveness.
Unfortunately, there is no silver bullet to be found in the pages of the report of the NCC or elsewhere. Its recommendations echo those of other commentators, which all have identified stabilisation of the national finances as their primary target.
Specifically, the NCC calls for a focusing of public investment on projects that are relevant to export industry and a widening of the tax base – through measures such as property tax – rather than increasing the taxes on wages.
These policies and others all potentially form part of the mix that will, if implemented with determination, offer the prospect of a recovery of competitiveness and in time a return to sustainable economic growth.
It is debatable whether significantly more jobs at Dell could have been saved had the issue of our declining competitiveness been faced up to with the appropriate urgency. But without a doubt the lack of any sort of meaningful response to the issue in recent years will contribute to the scale of the current downturn and job losses in sectors that should be less vulnerable than manufacturing to competition from low-cost locations.
The failure to act on the warnings of the NCC and others about competitiveness can be added to the list of economic policy blunders that will be part of the legacy of the Ahern years. Yesterday’s news from Dell will hopefully come to be seen as a watershed of sorts, where political expediency will give ground to the need to pursue sound, medium-term economic policies.