Irish competitiveness - Accept the cuts or lose everything

EVEN though the writing was on the wall since the day workers at the Raheen plant in Limerick started training their Polish successors to run the new €200 million Dell plant in Lodz, yesterday’s announcement that 1,900 jobs, and anything up to another 10,000 downstream jobs are to go, is a huge body blow to our economy and our country’s badly shaken confidence.

The inevitable announcement, following so closely on grim news from Waterford Crystal, Tara Mines and so many other businesses, could not have come at a worse time for the workers or the country.

It undermines too our notion of what we thought we had become. We wanted to believe that we had evolved into an adult economy where good jobs can be secured by being exemplary employees, by providing attractive government supports and by being reliable, hard-working, English-speaking Europeans.

We wanted to cling to the hope that doing the right thing, that embracing new business and work cultures counted for something and that, if we did all of this, we could hold on to enviable manufacturing jobs.

We wanted to hope that if we surpassed all industry standards, as Dell’s Irish workforce have done year after year, that we had a chance of staying in the game.

And though we all knew, in our heart of hearts, that these commitments stand for nothing in the face of an ambitious, energetic and well-trained €3-an-hourEastern European worker, the closure of Dell’s manufacturing operation is a terribly bitter pill to swallow.

These worries are strengthened by the fact that our remaining manufacturing jobs operate in the same cost environment as Dell. Everyone in manufacturing, except the most insulated or delusional, worries about someone, somewhere doing their job for €3 an hour; that is if they are not doing it already.

The workers in Lodz, as they begin their decade or so in the sun, need not worry about that today but in time they will fall victim to the same merciless cycle that made the Raheen workers redundant. They will enjoy the Dell jobs only until living standards improve to the point that makes them susceptible to attack from below.

We are at a different point in that cycle and if we harbour any notion of returning to economic growth, however feeble, we can have only one objective: the immediate restoration of value-for-money competitiveness across our economy.

Costs, and too many people’s estimation of their entitlements, have become wildly unrealistic. If we do not — each and every one of us, from the €350,000 a year hospital consultant to the €130,000 a year electricity worker — acknowledge that we are part of the problem then there is little hope of us offering our children any future much less a viable one.

We gleefully accuse Beverley Flynn of being shamelessly greedy and self-serving — as she is — but in reality far more of us than would like to admit it are equally vulnerable to that accusation.

Take just one example. Ireland has the most expensive industrial electricity prices in Europe — they are nearly twice the comparative Polish cost. A decade ago our costs were below the European average. Oil prices made a contribution to the change but other controllable internal costs increased significantly as well. You don’t need to be Warren Buffet to realise that the charms of doing business in Ireland do not outweigh this great disadvantage. Sadly that same principle applies in far too many spheres of our economy.

The threat to 25,000 jobs in tourism is because of our costs though some people will delude themselves that the weakness of the dollar and sterling are the reason. The credit crunch has contributed to the collapse of new car sales — down 75% in a year — but we are back to 1995 sales figures because cars cost too much in Ireland and people might have put up with being ripped off either by government or importers in the good times but those indulgent days are gone for the foreseeable future.

Though the Dell and Waterford Crystal announcements are tremendous hammer blows, it should be remembered too that they came in the week that Finance Minister Brian Lenihan told us that €1 in every €5 spent by the exchequer this year on day-to-day expenses will be borrowed.

You don’t need to be Warren Buffet to realise that this can’t continue either.

These are gloomy and worrying times. We can either succumb to pessimism or change our ways to try to restore sanity to our economy. We cannot afford a private sector/public sector stand-off and we need real leadership right now. We must all change our ways or face the gloomiest of prospects.

Things are that critical.

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