{"id":10521,"date":"2010-07-05T16:22:02","date_gmt":"2010-07-05T06:22:02","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=10521"},"modified":"2010-07-05T16:22:02","modified_gmt":"2010-07-05T06:22:02","slug":"the-celtic-tiger-is-not-a-good-example","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=10521","title":{"rendered":"The Celtic Tiger is not a good example"},"content":{"rendered":"

\t\t\t\tI am back from the US now and have been reading a lot about how Ireland is poised to show all of us deficit supporters the “what for”. The crazies (the Flat Earthers or deficit terrorists) are now starting to suggest that the recent Irish national accounts results for the first quarter 2010 are the sign that the austerity drive has made Ireland more competitive and that an export-led growth era is emerging. You always have to be careful when using official data to conclude anything. The reality is that the national accounts data show that the Irish economy is still declining domestically and this is causing the labour market to deteriorate even further. The growth that is being observed is generating income that is being expatriated to foreigners. So not only is the Irish economy sacrificing real goods and services to increase exports but then the benefits of that sacrifice are being sent abroad to foreigners. If that is an example of how austerity benefits the local population then it just shows how impoverished the conception held by the crazies is. Ireland remains a good example of what happens when you withdraw public spending support for an economy facing a major collapse in private spending.
\n<\/p>\n

The Irish Times<\/a> reported on Saturday (July 3, 2010) that there were now “(h)opeful signs on the economy”. The article said:<\/p>\n

\nTHE ECONOMIC tide is slowly turning. For the first time in three years, there are now more reasons for hope than for despair.<\/p>\n

This week a raft of indicators, when taken together, give grounds to believe that the foundations of a jobs-generating recovery are falling into place. By economists’ standard definition, the recession ended in the first three months of the year according to the CSO’s latest GDP data. There are tentative signs that consumers are spending again. Every measure of retail sales in April was up, albeit marginally, on the low points registered at the turn of the year. All the latest exports numbers – also available to April – show strong growth, and a weaker euro since then should provide some additional boost.\n<\/p><\/blockquote>\n

Ireland was the first of the EMU nations to embrace the austerity mantra – the first of the governments to openly engage in economic policy malpractice by abandoning their responsibilities to advance public purpose. The data supporting that claim is easily available (see below).<\/p>\n

But the deficit terrorists are starting to claim victory as a result of the latest national accounts data. The Central Statistics Office for Ireland released the National Accounts<\/a>data for the first-quarter 2010.<\/p>\n

The CSO said in their release that:<\/p>\n

\nInitial estimates for the first quarter of 2010 show an increase, on a seasonally adjusted basis, of 2.7 per cent in GDP and a decline of 0.5 per cent in GNP compared with the previous quarter. In comparison with the corresponding quarter of 2009, GDP at constant prices was 0.7 per cent lower while GNP was 4.2 per cent lower.\n<\/p><\/blockquote>\n

The following graph shows quarterly growth rates in real Gross Domestic Product (GDP) and Gross National Product (GNP) from the first quarter 2007 to the June 2010 quarter. Clearly the GDP growth in the June 2010 quarter is what everybody is focusing on. The most recent quarter shows a 2.7 per growth although GNP continues to be negative.<\/p>\n

\"\"<\/a><\/p>\n

<\/div>\n

Before I come back to analysing what is driving this result, you need to first understand the difference between GDP and GNP. Wikipedia<\/a> is a reasonable place to start in this respect (but not always). A more thorough (very) understanding of these concepts is provided in the excellent publication from the Australian Bureau of Statistics – Australian National Accounts: Concepts, Sources and Methods, 2000<\/a><\/p>\n

The two concepts are defined as such:<\/p>\n