News that the global technology slowdown has claimed another victim in the form of General Semiconductor sent shudders across the country last Friday.
Coming less than a fortnight after Gateway's announcement that it was shedding some 900 jobs, the loss of mid-Cork's largest employer has heightened fears that the Irish economy's golden age is coming to an abrupt and unsightly end.
Inevitably, workers in multinational enterprises across the State are nervously contemplating the prospect of the global slowdown laying siege to their livelihoods over the coming weeks. Faith in the future of the Irish economic model is being severely tested.
Despite an array of positive fundamentals such as robust disposable-income growth, the real prospect of lower interest rates and the roll-out of the National Development Plan, there is now a palpable fear that the IT slowdown will be our undoing.
Since the start of 2001, IDA-supported industries have lost 4,300 jobs. In terms of its human dimension, this loss cannot be quantified in any meaningful way. However, it is worth noting that high-profile multinational departures are not new to the Irish economic landscape.
We seem to have indulged in an act of collective amnesia that has destroyed memories of the exodus of Seagate, Fruit of the Loom and Rayban Sunglasses, among other foreign-owned companies. Most find it difficult to accept that 1999 was a disastrous year in terms of gross job losses, with more than 9,000 multinational jobs eliminated.
We should not lose sight of the fact that Ireland's labour market is in remarkably good shape, with unemployment at a record low of 3.6 per cent. We should also remember that the number at work in the State has increased from 1.1 million in the late 1980s to 1.7 million today. Critically, this change has involved not only more jobs but better jobs. In a process that is best described as Ireland's industrial evolution, we have ascended the economic pyramid by moving away from low value-added, low wage industries towards sectors with the opposite characteristics.
The factors underlying these welcome changes are as much a feature of the Irish economic landscape today as they were at the start of 2001.
The decline in importance of traditional, low value-added industries such as clothing, footwear and basic foods has been more than countered by explosive growth in the contributions of the pharmaceutical, IT and service sectors over the past 14 years.
While these shifts inevitably gave rise to short-term problems in the form of regional employment volatility, their contribution to the profitability of the economy and to employee income levels has been central to the State's economic transformation.
While some may ascribe this success to proximity to European markets or the availability of a well-educated workforce, local taxation policies and global industrial trends towards increased manufacturing mobility have been the true drivers.
Some time ago Ireland realised, perhaps by default, that it is economic folly to try to compete internationally on cost grounds. I certainly do not want to live in a country that tries to outdo developing nations in terms of the parsimony of wage levels.
An economy is far better served by seeking to attract profit-led rather than cost-driven industries and in so doing giving its citizens the opportunity to enjoy decent living standards.
The success of Ireland's low corporation tax regime in encouraging the world's most profitable, mobile industries to establish manufacturing presences here stands as a testament to the remarkable efficacy of budgetary policy in an increasingly globalised marketplace.
The reasons for describing Ireland's industrial change as an evolution rather than a revolution are readily apparent. In the absence of innovation, as industries mature, profitability declines and the attractions of low costs will begin to outweigh the magnetism of low taxes.
Companies, such as Gateway and General Semiconductor, which offer increasingly generic products in contrast to industry leaders such as Dell, Intel and Microsoft for instance, will be forced in time to depart these shores.
However, innovative genius and entrepreneurial spirit give rise to the emergence of new super-normal profit-earning global businesses. This ongoing evolution will allow Ireland to continue to attract the world's best industries and shed those that have matured as long as we maintain low corporation tax rates. The dynamic nature of this evolution, however, will lead to short-term employment volatility and painful personal experiences.
This process, which has been a feature of the Irish economy since the early 1990s, has been unfortunately accelerated by the marked decline in fortunes of the US economy and the high-technology sector in particular. When the dust settles, Ireland's attractiveness for the world's most successful companies will see it right despite the current climate of near-despondency.
One word of caution is appropriate. Confidence in the solid fundamentals of the economy should not be used as an excuse for complacency. Given the surprising magnitude and durability of the US economic slowdown, policy should now respond to the deteriorating global environment.
Talk of task forces is welcome. However, the Government could help to improve Ireland's industrial magnetism at a time of profit compression by reversing the illogical move in last year's budget to remove the ceiling on employer PRSI contributions.
That decision, which significantly increased the tax burden on the very industries that Ireland is seeking to retain and attract, those of a high-value-added variety, was inexplicable at the time of its introduction and should be reversed in this year's budget.
Irish economic policy has been renowned for its responsiveness to changing economic circumstances. Policy-makers should now be willing to demonstrate their continuing commitment to the flexibility principle regardless of the political costs. Saving face is far less important than saving jobs.
Colin Hunt is head of research at Goodbody Stockbrokers