Generation Game- David McWilliam's take on Irish economy

[Moggy]

I would be more interested to hear what he proposes we do about the impending doom.

Exactly. Apart from saying we need to be smart he hasn't said 1 thing about what he thinks needs to be done. And how often do you see made in Ireland on products around the world? China is hardly robbing our business. After surviving the IT (dot com) bubble pop I can now look back and say its the best thing that has ever happened to the industry. Gone are the days of working with complete muppets who know nothing about computers (there's still a few hanging on mind you ) Things like this put the professionalism back into the industry. Think of it as a forest fire, it looks devastating but its actually a very good thing for the forest. We might start to see houses with gardens and bedrooms to fit a decent size bed in....and a professional touch.

 

[MichaelDes]

"Think of it as a forest fire, it looks devastating but its actually a very good thing for the forest. We might start to see houses with gardens and bedrooms to fit a decent size bed in....and a professional touch".

I think everyone will echo your last sentiment. Let normality rule for a change..less oversized EA Range Rovers too.

 

[Carpenter]

He spoke about how we cannot compete with China and India, I am not aware we ever did really compete with them, they generally make mass produced low value products,

That's not the case any more, a lot of our higher value manufactured goods (from passenger lifts to electronic consumables) are being produced in China and consequently Europe has lost much of its manufacturing jobs. His point was that they (China) will soon be competing with Ireland for our "knowledge based" or "highly skilled" manufacturing and IT jobs.

 

[MichaelDes]

The only problem we have is that with a growing family we'd like to trade up but refuse to get into higher debt. So teh option is to get a bigger house in a cheaper area. That's what we're currently looking for. Of course stamp duty means that the area has to be considerably cheaper so we can pay the duty without having to add it to the mortgage.

Trish,

Would you not stay put and just add an extension or do an attic conversion? I think the paralysis in the market has been caused by stamp duty. People instead of trading up and adding liquidity to the market have been extending properties instead. That way they get what they want, at a cheaper cost without giving money to the government for what amounts to nothing. In London the new craze for the hnw's (£50m+ brigade) are subterranean basements, which are the full size of back gardens & going 4 storeys down. Might catch on here yet?

 

[Carpenter]

We might start to see houses with gardens and bedrooms to fit a decent size bed in....and a professional touch.

This is starting to filter through to the market already- developers are already offering a completely fitted out package now (with fitted this, solid stone that etc) to lure the customer in a more competetive market. when I bought my home 9 years ago I was offered lousy allowances and a take it or leave it attitude from the builder's agent. In simple terms we have become fat and lazy (uncompetetive) and the market (like evolution) will correct this imbalance....

 

[joe sod]

That's not the case any more, a lot of our higher value manufactured goods (from passenger lifts to electronic consumables) are being produced in China and consequently Europe has lost much of its manufacturing jobs. His point was that they (China) will soon be competing with Ireland for our "knowledge based" or "highly skilled" manufacturing and IT jobs.

another crucial point is these "knowledge based" jobs are not ours, ireland does not own the intelectual property rights, they are owned by the multinationals head offices in america and they licence the irish operations to produce their products. Ireland has done little to develop its own intellectual property, this is another case of lack of long term planing. Rather than use the multinationals operating here as a base to develop our own products we simply took them for granted. Intel probably the most high profile multinational in ireland is opening a huge plant in china. Therefore irish middle income workers working there will be in direct competition with chinese workers. They will be doing the exact same work as the irish workers, therefore irish middle income workers are directly benchmarked against chinese workers.

 

[MichaelDes]

They will be doing the exact same work as the irish workers, therefore irish middle income workers are directly benchmarked against chinese workers.

Good point but watch out for more trade tariffs on China from America (steel a big issue at the moment) - many new sectors being considered by the hawks around Washington as a result of the American mess. However China is now so big a monster its to big for America to handle, not the same as the Tiger Economies of the 1990's who had there wings clipped and exports retrenched, e.g. S.Korea. However of these types economies, I do not think Ireland will suffer same fate as Japan and have a lost decade in the wilderness. Well I hope not?!

 

[csirl]

I dont entirely agree with his views on China. I think China is in for troubled times in the future. Reason?

A consumer driven middle class is an autocracies worst nightmare. If the Chinese middle class continues to grow, the Communists will not survive. And "smooth transitions to democracy" just dont happen, even with the best will in the world - ask Gorbachev.

As the % of middle class people grows, it will eventually reach a tipping point. And like a titration experiment, things will change very quickly. The autocrats will not be able to keep up with the demands of the people for a greater say and more freedom. There will be a revolution and in a country the size of China with many different ethnic provinces, it will split into many different countries ala USSR. Some of the countries will probably do well long term, others wont.

What does this mean for the economy? It means a short period of unstability and uncertainty, causing a short sharp shock to the markets. What happens afterwards depends on how things pan out.

But the idea that China, as it is today, will get more powerful and the communists becoming a major world force is a fantasy.

The nightmare scenario (for the Chinese) is the communists refusing to go quietly and using military might against there own people - thus turning a quick transition into a long drawn out devastating process.

 

[room305]

That collapse could be sooner than you think.

[broken link removed]

Price freezes always fail.

Expect shortages of the regulated goods and possibly major civil unrest.

 

[command]

A consumer driven middle class is an autocracies worst nightmare. If the Chinese middle class continues to grow, the Communists will not survive. And "smooth transitions to democracy" just dont happen, even with the best will in the world - ask Gorbachev.

From my experience middle classes in China are not looking for policitical freedeom. In that case so longs as the Party continue to pump the ecomony and allow the middle class to acquire more wealth, whether it is through owning property or investing overseas.


China's stated aim is to move up to 400 million people form the countryside to the cities over the next few years. So long as the goverment can supply them with electricity and jobs there will be no pressure for change.

The middle classes in Shanghai and Bejing don't want power. They know that running a country of that size would be impossible and are also aware the the paralasis that arrives with democracy would never allow the enviromentally destructive projects like the dam on the yangtze and foreign policy in Darfur to persist. They just care about the hydro electric power the dam will bring them and the oil the arabs in darfus will continue to supply their factories and 4x4's.

I think the biggest threat to China is America defaulting on their debts. What would happen if an American Government turned around as said that they wanted ot renegotiate the trillions of dollars in government bonds that China has bought with all the cash that the consumer spending boom in the US has given them?

Refusing to negotiate could cause a recession in America which will affect Europe and the rest of the Americas which in turn will cause a slow down in demand for those consumer products that have fuelled the success of the Middle Kingdom.

Would an american president have the balls??

 

[csirl]

The middle classes in Shanghai and Bejing don't want power.

That is because most of the current middle classes are already in power - part of the establishment - they are members of the communist party who have been given favourable jobs as a reward for their loyalty.

The problem is that a new larger middle class will emerge from those who are currently ordinary workers. These people will resent the closed shop establishment.

 

[command]

The chinese are a comliant people, they do not question authority like we would. I don't mean it badly.

I have worked with them in the area of tax and while I and most Irish people would be programmed to always look for a loophole in a tax the chinese accept the tax law as a law. This include individuals who are managers and partners in large accountacy practices. These are middle class.

I have been there a few times and still can't get my head around it. This is what makes it hard for us to second guess them

 

[samfarrell]

There is no doubt that China is a major economic power and will grow more. this prospect must scare the US as their world dominance will be tested more and more. Inevitably there will be a major conflict between the US and China, but that maybe 50 years from now
We obviously cannot compete with China on cost, so we need to innovate, use our advantages, whatever they maybe

 

[joe sod]

it is amazing that for the last 20 years when china was producing cheap manufactured goods nobody saw it as a threat it was only the textile workers in donegal, or the electronics assembly workers that suffered. when these workers complained they were more or less told to shut up, this was globalisation and it benefited the economy as a whole. now that china is threatening middle class jobs the attitude to china is changing, the talk of tarriffs and reneging on debts surfaces. why is it always the case that globalisation is allowed to destroy low income jobs but when it threatens middle income jobs then globalisation becomes something evil to be controlled

 

[badabing]

I dont entirely agree with his views on China. I think China is in for troubled times in the future. Reason?

A consumer driven middle class is an autocracies worst nightmare. If the Chinese middle class continues to grow, the Communists will not survive. And "smooth transitions to democracy" just dont happen, even with the best will in the world - ask Gorbachev.

As the % of middle class people grows, it will eventually reach a tipping point. And like a titration experiment, things will change very quickly. The autocrats will not be able to keep up with the demands of the people for a greater say and more freedom. There will be a revolution and in a country the size of China with many different ethnic provinces, it will split into many different countries ala USSR. Some of the countries will probably do well long term, others wont.

What does this mean for the economy? It means a short period of unstability and uncertainty, causing a short sharp shock to the markets. What happens afterwards depends on how things pan out.

But the idea that China, as it is today, will get more powerful and the communists becoming a major world force is a fantasy.

The nightmare scenario (for the Chinese) is the communists refusing to go quietly and using military might against there own people - thus turning a quick transition into a long drawn out devastating process.

I don't think you are likely to see claims for a western style democracy in china. Look at their neighbour Japan, who have been running a centralised 'militarized' economy since WW2. 'Favoured' companies get investemnt till this day. As another poster mentioned, the chineese do not see the world through our eyes or crave our style of democracy. the 'communist' chineese government views that 'to die wealthy is glorious' and is succombing to growing demands for property rights. I would be careful about thinking that autocracy and democracy are mutually exclusive. Of course it will be the centralised economy that will bring the eventual downfall of China as we have seen with Japan. I think you are more likely to see economic adversity (which may it self precipitate a revolution) happening before a natural revolution.

 

[MichaelDes]

You are all caught up for some reason about China stealing middle class jobs. How can that be the case. The country can not compete on international commercial language, that is English. India is the big threat not China that will affect things. Whether it's ancillary services for banking (whom BOI now use very extensively), CAD services, accountancy etc etc. Anything that is data transferable. The country is producing 500,000 educated graduates per year that are highly skilled and highly motivated and are working on much cheaper rates. English again is their extensive language.

 

[brodiebabe]

I have some UK friends who experienced negative equity in the early 1990s and they reported the same feelings of entrapment and helplessness.

Britain had a high divorce rate at this time (as it does now) so when property prices crashed there was a hge amount of couples who had split up and who needed to sell their properties. If they did not have to sell their properties they could have had the option of riding the decreased prices, held on to their properties and hope they would have increased in value after 10 yrs or so.

How does this bode for Ireland - falling house prices combined with an increasing divorce rate?

 

[GeneralZod]

India is the big threat not China that will affect things.

They don't have the demographic problems of China's aging population either.
China is already losing manufacturing jobs to cheaper locations as they're becoming more service orientated.
Graduates from the Indian subcontinent are much more prevalent in the work place and in consultancy roles.

 

[noilh]

Were you living in a cave when the school bus tragedy happened in Kentstown a few years ago?

Were you living in a cave when good manners were being passed around?

 

[busman]

I like the comment 'Irish Celebrity Chefs' so wake up folks - they are only out for themselves. Hobbs, McWilliams, Ahern getting rich by using the 'fear' tactic. If they were genuine and actually knew something they would have made lots of cash on their knowledge rather than writing books and spreading fear to generate same.
We have lots of successful Irish people like - O'Leary , Desmond, MacManus etc - why should we listen to these guys shouting 'doom & gloom'.

Success is an attitude to a great degree and dont let these so called experts (only interested in personal gain) ruin it on everyone else.

As one great man siad "Limits exist only in one's mind"