Jun 24th, 2010 by Ben
I gave up on Irish journalism about 18 months ago, just after the 2008 bank guarantee scheme and the December budget of that year. And while this has done my blood pressure no end of good - it’s not the news that drives me mad, it’s the inane analysis - it also means that I am more than a little out of touch with the Zeitgeist of the chattering classes.
Yet even I cannot fail to notice that there is a consensus of sorts building up these days, around the idea of a Good Tiger/Bad Tiger in relation to the Irish economy of the past 20 years.
There are traces of it in Frank McDonald and Kathy Sheridan’s 2008 publication, The Builders: How a Small Group of Property Developers Fuelled the Building Boom and Transformed Ireland, which I am reading at the moment.
The good/bad argument is a lot more forceful in Shane Ross’ The Bankers - not that surprising given the difference in publication dates.
For this post, though, a quote from The Builders which caught my attention early on:
The economic basis of the building boom were pretty simple. Increasing national prosperity and a growing population (fuelled by rising birth rates and positive net immigration) boosted the demand for residential property and office space. During the same period, the supply of credit grew vastly… Interest rates dropped dramatically… mortgage lenders had loosened their criteria, bringing ever more buyers into the marketplace. The result was that in the 10 years to 2007, the average price of a new home in Ireland rose by 153 per cent, while construction costs went up by only 41 per cent. (p.7)
There’s a couple of things going on in this quote - including the idea that babies somehow increase the need for office space - but for now just a quick look at the bullshitters’ friend, Irish demographics.
The Irish birth rate hovered around 21.5 per one thousand of the population from the 1950s to the 1970s. It then dropped in the 1980s, from 21.5 in 1980, to 15.1 in 1990. Ireland’s birth rate may have been high in comparison with other countries, but it had been in and around the same rate (21.5) for at least the previous forty years. There was no sudden boom.
From 1991 to 1996 there was a 12% increase in the working population, with around 157,517 more people at work. Of that figure, 25% (or 40,681) were employed in personal service and childcare, 14% (or 22,137) in building and construction, 8% (or 12,593) in business and commerce, 8% (or 12,572) as managers and executives, and 8% (or 12,120) in sales. That’s 41% of all job creation taking place in what is now ‘Bad Celtic Tiger’ occupations, and at a time when, supposedly, all was good.
The ‘Good Celtic Tiger’ occupational groups of computer software occupations, Chemical, paper, wood, rubber, plastics and printing workers, Scientific and technical occupations, and Engineering and allied trades workers, accounted for 25,872 jobs - or 16.4% of the jobs growth.
The idea of good growth (i.e. high-tech exports) followed by bad growth (i.e. non-export construction and personal services) is a false one, and in fairness to McDonald and Sheridan, the idea of a good tiger/bad tiger relay race is not one they make strongly in The Builders - a book that has a bit of the Flurry Knox about it: tugging the forelock with one hand, while thumbing the knife with the other.
Ireland did became a beneficiary of net migration, however, in 1996. From that year to 2008, an estimated 403,700 people emigrated, while 861,300 migrated here. This leaves an estimated 457,600 more people in the State through migration.
Yet, over half of that figure is based on the years 2005-08, during the height of the construction bubble. The years 1996 to 1999 account for 14% of the figures for the period. Net migration, from at least 2000 onwards, the years during which Charlie McCreevy’s tax incentives were in full effect, was being fed by this boom in commercial and residential property construction, not the other way around.
So, just to recap, we have nearly 40 years of an almost static birth-rate of around 21.5, which is followed in the 1980s by a substantial drop to around 15.5. It hovers in and around this figure until 2007, which is the end of the commercial and residential property bubble and the start of the bust, at which point the birth-rate rises to 16.5. There is a turnaround in migration patterns in the late 1990s, but again this starts to break 20,000 a year after the McCreevy building boom at the turn of the millennium.
Where does this leave the residential property market? Whereas the birth-rate argument in terms of demand is a bit weak, to say the least, the turnabout in migration and the rise not just in the workforce but in the general population is not. There are more people working, and there are more people here.
Job growth in the 1990s warrants a separate post in itself, as does the second issue in the Builders quote - namely housing supply and demand - and hopefully I’ll get to that over the weekend, but I just want to flag that from 1991 to 1996, just over 40% of Ireland’s job growth is accounted for by construction and personal services occupations.
The actual picture of Ireland in the 1990s is a lot more complicated than the one gaining currency among both the Left and the Right at the moment, of two tigers, not alike but opposite in dignity, in fair Éire where we lay our scene.