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Read the article I wrote exclusively for members of the Institute of Directors in Ireland
Ireland’s exceptional progress in recent decades has given rise to risks that must be addressed if we are to retain our position as a leading nation, writes Mark Henry, author of In Fact: An Optimist’s Guide to Ireland at 100.
Second-Highest Quality of Life on the Planet
Ireland’s progress has been remarkable by any standards. Our quality of life has risen above that of twenty-two other nations since 1990, according to the United Nations, who now consider Ireland to be the second-best nation on the planet in which to live.
The UN assesses an individual’s potential to live a long and fulfilled life by examining education attainment, longevity and income. At the start of the 1990s, 15% of Ireland’s working-age population had a third-level qualification. That figure is now 51%.
We have added six years to the average lifespan of Irishwomen in that time, and seven years for men. Our average of 82 years is now only two years short of the world leaders, Japan.
Our national income (GNP) per capita is two-and-a-half times what it was in real terms. Even if we eliminate all multinational impacts by substituting modified gross national income (GNI*) into the UN calculations, we remain the seventh or eighth highest ranked country in the world.
Although COVID-19 took a huge toll on some sectors, the economic recovery is well underway. Export growth continues unabated, consumer demand will reach a new high next year, and we will see a return to near full employment the year after.
Why has Ireland enjoyed such outstanding success? I point to four factors in my book, In Fact:
The improvements of recent decades cannot, of course, be replicated on the same scale in the future – it is impossible for us to climb another 22 places in the UN rankings. The challenge becomes sustaining such a high level of performance in an ever more competitive world. And that puts increased focus on a series of risks that require successful management.
The Value of a Home
Addressing the housing shortage is a critical one because failure to do so will fracture our sense of community and threaten the social cohesion that our success has been built on.
The Central Bank estimates that we need 34,000 new homes annually for the next decade to keep pace with population increases. However, if you account for the fact that our average household size is falling – and, therefore, you need more homes for the same number of people – then that figure rises to 47,000. It appears we will deliver around 20,000 this year.
The main barrier to meeting demand is rising building costs which reduce the number of affordable homes that can be profitably sold. Land prices are surging – especially in urban areas – and construction costs are rising just as building standards increase. A comprehensive site valuation property tax can be part of the solution, but progress is urgently needed.
Paying for Our Privilege
The shortage contributes to a greater cost of living through increased rental costs. Ireland is now one of the most expensive places to live in Europe. A comparable basket of goods is 35% more expensive here than the EU average and second only to Denmark.
Our prices are most out of line for alcoholic and tobacco products – although we have made a deliberate decision to tax these highly for health reasons – but we are above average for communications, restaurants and hotels, food, energy, and transport. Our childcare costs, furthermore, are adjudged to be the fifth most expensive in the world.
These clearly impact on our competitiveness and reduce our attractiveness as a location for foreign direct investment as wages for highly skilled employees constitute the bulk of their cost base. As Professor Ronan Lyons of Trinity College Dublin told me: “It’s how many projects have we lost, rather than have we lost any projects”.
The preservation of that high skill base is essential for our continued success. Yet, Government expenditure on higher education per student is half what it was before the Great Recession. Investment was cut as student numbers surged.
Irish universities are now tumbling down the league table of international rankings as a consequence. TCD, UCD and UL have each dropped by around 40 places over the past decade; DCU and UCC have both dropped around 100 spots; Maynooth University has dropped 200; and TUD has dropped more than 400.
Our Debt Mountain
Reconciling the demands on the exchequer will not be easy given that our Government debt is now amongst the highest in the world. While increasing GDP gives the appearance of good progress in reducing our relative debt level, in absolute terms we are making no progress at all.
Before the crash of 2008, the Government had borrowed €10-12,000 for every man, woman and child in the country. The figure then quadrupled so that we owed nearly €46,000 for every one of us by 2012. The COVID crisis has pushed our borrowing to record heights of c.€50,000 each.
We are now amongst the most indebted nations on the planet alongside Japan, the US, Belgium and Italy. Interest payments total over €5 billion annually – equivalent to what we spend on capital investment each year.
Natural Capital Catastrophe
Perhaps the greatest area from which we have unwittingly “borrowed” to fund our progress is our natural capital. Our CO2 emissions per capita are amongst the highest in the EU and the vast majority of our protected wildlife habitats are in a bad or inadequate state. And these are the protected areas, I hasten to emphasise.
While we did not fully appreciate the impact of our actions in the past, we now know the scale and breadth of what is required to transform ourselves in the decade ahead. Opportunities and benefits abound – from new, high-quality employment opportunities in local communities to improved air quality, reduced traffic congestion, warmer homes, and better health.
A Democratic Deficit
Managing these risks mandates us to utilise our highly educated workforce, to be open to learning what is working elsewhere and to import the technologies and strategies we need. We will also have to bring our population with us to protect our community cohesion and preserve our democratic stability.
Declining voter participation is a risk to that. The turnout in our most recent general election was the joint-lowest in over 90 years. By looking to our Anglophone neighbours to the east and to the west we can see that failure to build a shared understanding of the country’s successes, and comfort with its current direction, can tear the place apart. In complacency, there is jeopardy.
Yet, Ireland is considered a global leader in deploying new democratic processes through the ‘participative democracy’ of our citizens’ assemblies and Constitutional Convention. These contemporary approaches to solving complex issues offer the promise of moving society forward in an inclusive manner that engages with the issues and minimises polarisation. We should expand this to cover other topics and other levels of government.
Managing Our National Risk Register
The country’s risk register, therefore, needs updating in light of these challenges. New risks need to be added – our falling education rankings, loss of natural capital, and reduced democratic participation, for example. Others need upgrading – such as the housing shortage, the cost of living, and our high national debt.
Managing this increasingly risky environment is not a role for government alone. The private sector and the wider public sector have roles to play in engaging the population on the need to act and in providing solutions.
We have a lot to celebrate as we commemorate our first century as an independent nation in 2022. Failure to swiftly and comprehensively manage the risks we face will undermine the foundations of our success. However, we can look forward optimistically to addressing the challenges – we have never had a generation as highly educated, healthy, and as wealthy as today’s.
Mark Henry’s book, ‘In Fact: An Optimist’s Guide to Ireland at 100’, explores the remarkable progress of Ireland’s first century, how we outperformed other nations, and why we find it hard to acknowledge how far we have come. It is available now in all good bookstores.
Our success owes much to joining the European Community fifty years ago