Incomes 'wasted' during boom
Infrastructure suffered as too much invested in property, says economist
IRELAND cannot be regarded as a wealthy country because it failed to invest in the right areas during the boom years, the country's largest stockbroking firm declared yesterday.
We "misallocated investment'' by investing too much in property and not enough in infrastructure like roads, rail, schools and telecoms, a report from Davy Stockbrokers said.
"Infrastructure should be far better than it is today,'' according to the report by economist Rossa White.
The level of income per head raced ahead during the Celtic Tiger, but has since slipped back because of the savage recession.
"Yet Ireland was never wealthy: those years of high income were largely wasted,'' said Mr White.
He said years of high income can be turned into "physical wealth'', but only if invested properly. Mr White said the best comparison was to look at other small countries like Belgium and Finland.
"No Irish resident who has visited Belgium or Finland would have the audacity to claim that this country is wealthier. Transport infrastructure is vastly superior in those countries, as is the telecommunications network.''
Mr White said investment by the Government, companies and individuals increased hugely, but it was not the correct type of investment.
"That bubble period was characterised by rampant investment in housing and other buildings,'' he said.
However, Mr White said the investment in roads was the "greatest triumph'' of the investment which did take place, because it improved productivity. This conclusion was welcomed yesterday by the National Roads Authority.
The value of our roads leaped from €13bn to €27.5bn during the boom years, said Mr White, who said the investment was vital to improve productivity.
"The reduction in journey times and greater certainty of planning have helped to significantly boost output per capita across the economy,'' he added.
Too often investments in infrastructure were made by semi-state companies rather than private enterprise, he pointed out.
Mr White said while physical infrastructure was not Ireland's strength, the quality of the workforce had not been damaged too much by the recession. Ireland still has the second highest number of graduates in the 25-34 age group in the EU.
"A high proportion of those who have left are low-skilled and worked in construction where employment has more than halved. Construction, by its very nature, is a highly labour-intensive and low-productivity industry,'' said White.
"Workers tend to be mobile, and emigration from this sector will not particularly dilute the quality of human capital in Ireland,'' he added.