RealTerms

A fine figure

Well, 2005 is a quarter over and the clocks are about to spin to summer time. Outside the sky is blue, though not with that uncanny pre-heatwave depth of spring 2003.

The economy doesn't look that hot, either. With oil prices past $50 a barrel, little wonder stock markets are starting to creak. Europe's economy is already flat, and everyone is clamouring for more growth. A good time to ask, how well off are we really?

The answer may be more sobering than we think. GDP - gross domestic product - is what it is all about. This is a measure of production or spending, period. Well-being hardly comes into it, though it's better to be with than without. GDP is also a deceptive figure, so much so that that "serious" think-tank, the OECD, has added a handle-with-care warning to it, and cites Ireland as one good example of why.

As we all know, Ireland's economy has performed brilliantly in recent years, shooting up the income per head league-tables with abandon and overtaking the likes of France, Britain, Germany and Japan. It is now in the top five countries in the OECD.

The trouble is, though GDP per head accurately reflects what is produced, spent and traded by companies, households and the state, Ireland's actual wealth is lower. The reason? All that inward investment (and foreign labour) that has been part of the Celtic Tiger also sends its profits and income back home to places like Silicon Valley.

The OECD recommends another measure, gross national income, to takes account of these flows in and out of the country. For most OECD countries, GDP and GNI are similar, because income in and out cancel each other out, but in Ireland, there is a wide gap because far more income flows out from our giant corporate guests than flows back in from our brave but piddling overseas corporate presence. The Irish diaspora has dwindled too, resulting in less money home to Mammy Ireland. So, rather than being in the top five for GDP per head, for GNI, Ireland is an average 17th! Okay, we still rank ahead of Italy and Germany, but this is hardly fit company for a Tiger. Japan in contrast receives so much income from all its car and game factories abroad, and has so few foreign investors, that its rank rises a little. But the real GNI winner - a Global Lion - is Britain, whose 12th place for GDP transforms into 6th.

Don't get me wrong, Hibernia's transformation has been outstanding, and even its GNI per capita has leapt from about 20% below the OECD average in 1995 to 4% above it in 2003. Still, a few more home-spun dynamic businesses venturing abroad and sending home the spoils would do wonders for Irish incomes.

©RJ Doyle

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