Tuesday, 20 May 2014

Look at our GDP/Capita; Look at Ireland

This post is a distraction from the main argument but I have felt compelled to write it in response to some of the more ill-informed Twitterati...

I don't have the time or energy to go off on a massive side-bar analysis of UK versus Ireland and the impact of the financial collapse, bailout and austerity measures on the people of Ireland.

There's a good reason why the SNP don't point to Ireland (or Iceland) anymore as their exemplars of what an Independent Scotland could look like. Most people get that it has been pretty nasty, so it's a pretty niche argument I'm responding to here.

More generally I think those who quote GDP/Capita figures in an effort to make some vaguely undefined point about how Independence would "make us richer" are wide of the mark for many reasons. I'm not going to start explaining (and to be fair in many case understanding) the myriad of different measures that you would need to look at to make a balanced assessment of "in which country, over what period of time, who is 'better off'?"   Well not in this post anyway;  IMHO it is a distraction from the actual question that matters: "what will change for Scotland if we separate from the UK?"  [See my posts linked on the right for more focused analysis on that - far more relevant -  topic]

I'm sure someone with more time than me could find some better data and more rounded perspectives; I'm not going to expend more energy on this question so let me just throw this out there

1. For those who believe GDP/capita is the "best" measure
I'm not arguing that GNP is the best measure ... but it's arguably a better measure of how the nationals of a country are faring.  Ireland ranks behind the UK on this measure but I don't draw any conclusions from that; it simply illustrates that it is easy to find measures with rankings to support different cases if that is the game you choose to play (I don't).

Source: Diffen

Update 1: since I originally posted this following article was published in the Guardian which elaborates on this very topic:  New Doubt Cast Over Alex Salmond's Claims of Scottish Wealth 

Update 2: since I originally posted this I stumbled across the Tim Harford article below;

Update 3: this analysis by economists John McLaren & Jo Armstrong reinforces the GDP/GNP point with actual figures for Scotland > Scottish Independence: 'Richest Country' Claims Disputed

2.  For those who say "whats wrong with just comparing GDP/Capita"
Extracted from The Impact of Anti-crisis measures and the social and employment situation: Ireland

  • "GNP is a better guide to per capita income but even it barely rose and has fallen, by 15.3 % from peak. A far better way of evaluating real economic welfare is to examine domestic demand [...] it fell by a massive 24.9 % in four years. Other indicators of falling demand include falling retail sales, falling tax revenue (when rate increases are excluded), falling employment (down by 306,000), falling employment participation (down from 64 to 60 %), rising emigration, rising long-term unemployment (now 56.3%), rising under-employment (currently 25 %), rising business closures (up 20 % last year), and falling confidence, as orders fall per the purchasing managers' index. The economic collapse is the main cause for this fall in domestic demand, followed by the failure of the private banks" Dr. Peter Rigney, Feb 2012

3. If you want to look at some broader factors the OECD Better Life Index is pretty interesting

Examples from the Better Life Index:
  • "Money": 
    • In Ireland the average household net-adjusted disposable income per capita is $23,721 vs. $25,828 in the UK
  • "Employment": 
    • 59% of people aged 15 to 64 in Ireland have a paid job compared to 71% in the UK
    • 62% of men are in paid work compared to 76% in the UK
    • 55% of women are in paid work compared to 66% in the UK
I've chosen those two areas to illustrate my point, not to draw conclusions. My point is precisely that it is lazy and weak-willed to leap to snap conclusions from a handful of simplistic measures; I'm sorry, but it's just more complicated than that. 

4. For those who may not have noticed what has happened in Ireland since 2007

  • " in November 2010 the government had to seek a €67.5 billion "bailout" from the EU, other European countries (via the European Financial Stability Facility fund and bilateral loans) and the IMF as part of an €85 billion 'programme'. The Irish State assigned €17.5 billion to this 'bailout' an amount that was equal to the Total Discretionary Portfolio of the National Pensions Reserve Fund."Wikipedia (I know... I don't have time to go a level deeper for primary sources)

5.  For those (like the risible "@bizforscotland") who fire out Tweets like this (as if its making some kind of point);

If you look at the actual original Forbes table "best countries for businessit clearly explains that it's  "based on country’s major stock index returns for 12 months through November 20 [2013]".  Do I really need to spell this one out?  The Irish stock market has still lost about 50% of its value since 2008 even following the growth in 2013; hardly a great case for mimicking that particular Celtic Tiger is it?

1 comment:

fork boy said...

Your attack on Business on Scotland here is entirely unjustified. You are taking a Tweet and placing it into the context of your own discussion. It is simply a Tweet on a Forbes List with the original source cited. The Tweet makes no assertions about the data. If that is the criteria for 'risible' I could equally label your blog the same.

Secondly, I took your (slightly patronizing) advice and looked closer at the http://www.oecdbetterlifeindex.org site.

I found that Ireland ranks higher than the UK - averaged over all 11 indices, you only mentioned the indices where it ranked lower. It is the facts you miss out which makes me suspect your objectivity and balance.

However I agree with you wholeheartedly about GDP. Here is an excellent TED talk on the subject of the "Social Progress Index" explaining why GDP is pretty awful generally.

The one index that really matters to me on that OECD list is 'Life Satisfaction' and again its the usual suspects which rank the highest Denmark, Iceland, New Zealand, Canada, Sweden. Whilst I believe your stats to be accurate and your motives to be pure Kevin, it will take a huge number of these blogs before you can convince me that an independent Scotland would not be capable of joining these mature western democracies on that list.