Economists’ disconnect with the real world not just confined to Ireland

Proinnsias Breathnach: The disconnect between the economics profession and the real world of business and commerce which is so apparent in Ireland is not, apparently, confined to this country. In an article on the strong performance of the German economy in 2010 in last Friday’s (January 14) Irish Times, Derek Scally quotes two German economists who attribute this performance to greater labour flexibility and associated lower labour costs. Scally appears to have accepted this viewpoint, given the article’s subtitle: “A decade of labour and welfare reform laid the ground for Berlin’s latest success story”.

Yet the one example from the real world of business cited in the article gives an entirely different reason for Germany’s export growth. Daniel Dreizler, partner in a producer of high-tech gas burners for boilers, attributes the firm’s success to “long-term thinking and consistent investment of 5 per cent of turnover in research and development of high-tech patents and products”. Dreizler goes on: “We aren’t the ones who can offer a standard product cheaper; we will never manage that…We can offer a quality product that is more efficient and offers technical advantages, and argue for the price premium on that basis”.

Scally describes Dreizler as a “classic example” of “all that’s right with the German economy”. Yet the rest of his article highlights labour market and welfare reform as the key to Germany’s renewed economic success, even though Dreizler makes no reference at all to these. Is it too much to expect joined-up thinking in what purports to be Ireland’s leading serious newspaper?

Posted in: Economics

Tagged with: Competitiveness

Dr Proinnsias Breathnach

Proinnsias Breathnach joined the Geography Department at Maynooth University as its second member in 1972. Officially retired 2010, he remains research active with Emeritus status.

His research interests are economic geography, national and regional economic development, transnational investment, informational economy and dairy cooperatives.