The possibility of a perfect storm grows

The economic crisis facing the Government continues to grow. While economic data paints a much rosier picture of the economy, thanks to the dominance of foreign direct investment (i.e. transnational corporations), the pandemic is having a wider and more lasting impact on the domestic economy, in particular on small and medium-sized businesses.

On a global scale we can see the growing monopolisation and concentration of capital. Amazon continues to tighten its grip and its monopoly position in the on-line market. This will have long-term effects on small and medium-sized businesses and thereby on jobs and family incomes.

The latest research shows that working people in Ireland experienced one of the largest falls in household spending in Europe during the quarantine, while on the other hand there was robust export growth in a small number of important sectors (computer services and pharmaceuticals), led by the transnational sector. But this growth in exports masks the true extent of economic contraction.

The research also shows a picture in all sectors of the economy of two extremely different economic experiences. “While industrial value added grew by over 10 per cent in the first half of 2020,” it reports, “value-added in construction fell by over 40 per cent, value-added in arts, entertainment and recreation fell by nearly 75 per cent—both of these represent the largest declines of any EU country or the UK.”

Why one sector has grown and the others declined can be put down to a number of factors, including a concentration of exports in companies that did not experience lockdown. 26 per cent of Ireland’s exports are computer services, and a further 11 per cent are medical and pharmaceutical goods. Exports in both these areas grew annually during the last few years, despite the lockdown. These companies and sectors experienced growth throughout the first half of 2020.

While medicinal and pharmaceutical exports show consistent growth, they are completely outweighed by the decline in travel, tourism and transport activities, which have almost collapsed from the impact of the pandemic.

What it shows is that the local economy has been severely hit, one of the hardest hit of EU member-states. These sectors employ large numbers of workers and depend very much on the strength of the domestic economy. While exports from transnational corporations in such areas as computer services and pharmaceuticals increased relative to 2019, this growth may well be affected as the global economy slips into recession, if not depression.

The establishment will most probably face a perfect storm: a huge slump in the domestic economy coupled with a significant reduction in exports by these transnationals.