Might we get it right this time around? - Managing our recovery

THIS week’s sale of Picasso’s 1955 painting Les Femmes D’Alger for $179.4m may be a temporary high water mark in two of the age’s defining characteristics — consumerism and materialism. It also points to an increasing concentration of wealth.

The piece’s cultural and artistic merit may be beyond question but when so many have so little, the transaction seems to epitomise how unequal and cruel our world can be. It may go too far to suggest that the moral integrity of the work is diminished by its inaccessibility, by the fact that it has become a plutocrat’s plaything, but it seems at least a reasonable question to raise.

The indulgences of the über rich have always needled at the idea of social equity and how the spoils of this world’s production are divided. However, the Irish consumer spending index — published by Visa Europe — suggests that after an exceptionally long hibernation we are growing in confidence and have started spending money again. Retail therapy is once again the default cure of choice for the Irish.

One matrix — car sales — is ebullient. Some 64,000 cars were registered in the first three months of this year. That’s more than the full-year figure recorded during the darkest days of the recession.

The jump in sales, something approaching 30%, hints that the car trade will this year pass the 100,000 units milestone for the first time since 2008. There is a caveat, though. Many of these sales represent an increase in personal debt and should, even if in a minor key and in the gentlest way, nudge if not ring alarm bells. It would be foolish, and show that we have learned very little from our recent calamities, to mark a nascent recovery by ensnaring ourselves in unsustainable debt levels

Consumer spending rose by 4.3% in April and there has been a dramatic increase in spending on food and drink — up 9.2%. Spending on household goods grew by 8.6% and clothing and footwear retailers saw sales grow by 6.4%.

These figures confirm a trend identified by the Central Bank. Household wealth has reached its highest level since late 2008, a recovery driven by rising property prices. The net wealth of Irish households rose to €600.8bn — or €130,331 per capita — during the fourth quarter of last year. This turnaround represents a growth of 4.3%.

Cheering as these figures may be for those able to play their part in this rejuvenation they do show how very hard it is to break the cycle of boom-and-bust; to organise our economy in a way that facilitates long-term stability and planning. The fact that the are based on notional rather than real wealth increases the need to be cautious too.

These positive figures will play a prominent role in the forthcoming election campaign. “You did what we asked, you took the pain and here are the rewards” will be the Coalition’s mantra. The achievement cannot be denied — indeed it should be celebrated — but we have yet to show that we can manage the boom part of the cycle as well as we can endure the inevitable bust. Maybe it will be different this time.