Monday 24 April 2017

Growth depends on disposable income

Forget tax increases, the only solution to our public finance crisis is rigorous reform and cost-cutting, writes Marc Coleman

Since seeing the cult film Withnail and I, I've had a theory about why John FitzGerald of the Economic and Social Research Institute (ESRI) is Ireland's best economic forecaster. In one scene, Danny, a man with shoulder-length hair, explains his coiffure to a friend: "Hairs are your aerials. They pick up signals from the cosmos and transmit them directly into the brain."

Meet John FitzGerald and the first thing you'll notice is a magnificent mane of hair. If my theory is right, this is his Samson-like secret to great forecasting. A cash register in the land cannot ring without an electro-magnetic impulse being instantaneously transmitted along the appropriate follicle. From every corner of Ireland's macro economy, every second of the day, armies of signals are assembled into macroeconomic forecasts in this man's mighty brain.

In the early Nineties, John and his ESRI team predicted the decade of growth that was the Celtic Tiger. When that growth outstayed its welcome, they warned how Ireland was pushing its luck and undermining its competitiveness by artificially prolonging growth. In 2006, an ESRI quarterly economic bulletin presciently warned that a global recession was possibly around the corner and that contingency action was needed to protect against it and against a rise in oil prices. Both events happened. But, sadly, the baldies had not been listening.

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