The commercial reality that the computer market is highly vulnerable to economic downturn has been cruelly visited on workers in Gateway's Dublin and UK plants, which are to close. This is a dreadful blow to them and their families. The question it raises for employees of the other US multinationals which dominate this State's high technology sector is whether the industrial trend confirmed by yesterday's news could have an equally devastating impact on them.
So far the evidence is that it will not, despite the continuing gloomy economic news from the United States. Gateway's business is the assembly of personal computers rather than the manufacture, research and development of the elements from which they are made - which most of the other US multinationals are engaged in. The company's fortunes were severely hit by a collapse of European, Middle Eastern and African sales in the second quarter, with direct effect on their assembly and sales staffs. Its management is trying to diversify out of an area assumed a few short years ago to provide an unassailable path of growth, immune from market cycles.
The depth of this cyclical downturn is what must concern policy-makers in the wake of Gateway's closure. Fortunately the high technology and high skills sectors represented by such firms as Intel, IBM and Hewlett Packard are not as vulnerable at this stage, despite some job losses. But they will be more affected if recession in the US is longer and deeper than currently expected and not counter-balanced by European recovery. The most recent news from Germany and the Eurozone is not hopeful about that.
The Government's efforts to find alternative jobs for Gateway workers is made easier by continuing solid growth in the economy, albeit at a reduced rate compared to the extraordinary pace of recent years. But that boom has bequeathed its own problems -notably higher costs affecting Ireland's competitiveness. This bad news reinforces the need to deal with that effectively at governmental and industrial levels. The case for a cautious approach towards framing the Budget is further underlined, despite the temptations of popular gestures as a general election approaches. To succumb to them would probably be politically as well as economically counter-productive, as voters concentrate increasingly on how well the Government manages the effects of this downturn.