The School of Public Policy (SPP) at Central European University and the Embassy of Ireland in Hungary organized a public lecture and discussion by Dan O’Brien, chief economist at the Institute of International and European Affairs (IIEA) on March 16. After a brief welcome by SPP Assistant Professor Michael Dorsch and Irish Ambassador Kevin Dowling, CEU Business School Associate Professor Peter Szilagyi introduced O’Brien, who is also adjunct senior research fellow at the School of Politics and International Relations, University College Dublin, and a columnist and economics analyst with Independent Newspapers.
O’Brien highlighted some of the particularly interesting features of Ireland’s economy, and also its “miraculous” economic recovery. Noting that GDP is historically an unreliable indicator, O’Brien focused instead on other data including employment and the number of people receiving unemployment benefits to demonstrate the extent of Ireland’s economic recovery since 2008. He said that although there has been good news in Ireland recently, there remain some challenges: household debt, for example, which tripled between 2002 and 2007, is declining only gradually. “It is much easier to borrow money,” said O’Brien, “than it is to pay it back.” Another challenge facing the Irish economy is stagnating wages and salaries.
O’Brien elaborated on some of the ways that Ireland’s economy differs from that of all other OECD countries pointing in particular to the dominant role that foreign companies play in the economy accounting for 90 percent of Ireland’s exports. O’Brien said that it was the size of its export sector that was the single most important element in Ireland’s recovery.
O’Brien then turned his attention to Europe reminding his audience that it was important to look at both the strengths and weaknesses. Among Europe’s strengths, O’Brien listed political stability, rule of law, human capital, physical capital, a globalized corporate sector, and some highly competitive economies. As O’Brien noted, Europe faces some formidable weaknesses as well: “There has been no economic recovery in Europe,” said O’Brien.
He went on to point out that even countries like Germany that are often described as having strong economies are struggling. “Germany grew more rapidly when it was ‘the sick man of Europe’ than it is now,” he said. In per capita terms, Italy is poorer today than it was 20 years ago. O’Brien observed that there is no simple “north strong/south weak” divide in Europe today: Finland, for example, has been in a recession for the last three years; the Netherlands and Denmark have the highest household debt levels in the world.
O’Brien also spoke about some of the worldwide trends that are having an impact on Europe. “We can no longer assume that growth is the norm” said O’Brien noting that GDP growth has been slowing down for the last 50 years. “Our political systems are based on growth,” said O’Brien. “Without growth in the economy, we get bad political and policy outcomes.”
Watch O'Brien's full lecture below.