Building a balanced recovery is one of the key challenges for those who care about what we leave behind for future generations.
I was reminded of this on a recent holiday in the Canary Islands. There, and in particular on the island of Lanzarote, tourism is the industry upon which the entire economy pivots. Any shock to that sector would have a disproportionate impact on the economy’s performance. With employment and tax generation completely reliant on that single part of the economy, an event like the 2010 volcanic ash episode could have a catastrophic effect.
Of course, the Canaries have leveraged tourism with tremendous efficiency as it is the economic activity where they have comparative advantage. The geography severely limits its ability to foster other types of output such as food production and a small indigenous population makes education-based economics difficult.
Given those types of constraints, it is no surprise that those in charge have worked hard to make the Canaries truly competitive. The airport is hyper-efficient in processing large volumes of tourists, its hotels are well-priced, and food and drink are offered in a range of bars and restaurants at very compelling prices. Add in car rental at prices that would make those in Ireland blush and you have a package that generates consistently large volumes of visitors.
By having such a dependence on one sector, those in charge of the Canaries are hugely focused on offering a globally attractive product. There may be useful lessons there for Irish tourism as it plans initiatives to further its competitive advantages. The most important impression left on me from a holiday in Lanzarote was the range of economic strengths and opportunities that exist closer to home.
It seems, at times, that media and political discourse in Ireland is dominated by what is wrong with Irish society and amid that fog, the positives can be easily ignored. Unlike the Canaries, Ireland has:
* Highly productive agricultural land that is largely dependent on grass, which is the feedstock for dairy and meat products most in demand worldwide;
* Clean, highly productive ocean water with relatively shallow beds;
* A tourism product that attracts relatively affluent visitors;
* An education infrastructure and legacy that helps produce competitive English-speaking graduates that are attractive to employers here and abroad;
* A pro-business culture that responds actively and enthusiastically to globally mobile, job-rich projects.
I would add one other, surprising, piece to this jigsaw: Construction. Obviously, the bust was precipitated by severe excesses in the sector and now it is sensitive to suggest it as a valid piece of the recovery story. Yet, Irish construction companies and employees have a long track record of productivity and quality. It is an industry that can over-index its effect on the domestic economy because its economic benefits are primarily domestic.
At the height of the Celtic Tiger, construction grew into an economic ogre, as it accounted for over 10% of GDP when a more balanced contribution should be about 5%. It is slowly recovering and, as with all the sectors mentioned above, should be nurtured to contribute towards a well-balanced, multi-sector recovery that ensures Ireland is not exposed to a severe downturn in just one segment of the economy.
As Ireland continues on the path to better economic times, it should concentrate on having a cluster of economic focus points that are best-in-breed globally. By doing so, we can avoid the single sector risk factor that plagued Ireland in the run-up to 2008 and hangs over the Canaries today.
Joe Gill is director of corporate broking with Goodbody Stockbrokers. His views are personal.
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