A huge amount of the wealth generated in the Celtic Tiger years has not been invested productively in Ireland, writes FINTAN O'TOOLE.
PICK A number. Let's say 41 billion. This is the number, in dollars, of the national budget of Iraq. It is also the amount of dollars that the US Federal Reserve has pumped into the banking system in response to the credit crunch. It is the number of gallons of water that the 31 miles of tunnels in Chicago's flood defence system can hold. It is also the number of gallons of bottled water sold worldwide every year.
What if we imagine the number in euro? It then represents all the money that all Irish farmers have received in payments from the European Union since 1973. It is what the Government spent on all public services in 2004. €41 billion is the value of all the exports from the most vibrant part of the Irish economy - the pharma-chemical sector - in 2006. It took the work of almost 25,000 people to generate that money.
Having got some sense of the scale that €41 billion represents, let's consider two other things that equate to €41 billion. It is, firstly, the amount of money that Irish individuals and companies made in capital gains from investments in land, property and equities in the three years between 2004 and 2007. To put it starkly, the very wealthy elite in Ireland made as much profit in those three years as the entire government budget in the first of them. It made as much in three years as all Irish farmers have made from EU subsidies in 35 years and as much as the value produced by 25,000 people's work in the most productive part of the economy.
There is another €41 billion twinkling in the statistical constellation of Irish wealth. It is the amount invested by Irish people in commercial property at home and abroad between 2001 and 2006. In 2006, Irish people invested €8 billion in overseas property, and in 2007 the figure was €11 billion. Even with the slowdown, Irish investors put €1.5 billion into overseas property in the first quarter of this year alone.
What do these two €41 billion figures tell us? Firstly, that a small number of people made vast amounts of money from the Irish boom. The 450 people with at least €10 million each have done incredibly well from the Celtic Tiger. The hundred people with at least €100 million have done even better. There is a nice pyramid of money, with 330 individuals worth in excess of €30 million, a further 3,000 with a net worth of between €5 million and €30 million, and 30,000 worth between €1 million and €5 million - even when their principal residence is discounted. But this elite of the rich and super-rich is still a small one - it accounts for less than 1 per cent of the population. In 2007, this 1 per cent had an asset base of €100 billion - more than a third of national non-residential wealth.
The second €41 billion tells us something else - that a huge amount of this wealth has not been invested productively in Ireland. The justification for the accumulation of such vast sums of private capital is that the super-rich generate more wealth for the rest of us. They are the innovators and entrepreneurs whose vision and guts create the wealth that the rest of us get to share.
Some of them are. Undoubtedly, in among the 450 super-rich there are people who have invented new products or generated new ideas or founded companies from scratch where there was nothing before. But it does not take much entrepreneurial skill to sell your farm to the National Roads Authority for a bonanza price that arises from nothing more than the dumb luck of location.
According to a report published by Investec Wealth Management last week, about €11 billion of the €41 billion was generated by farmers and others selling land for development - much of it to the State. And a vast amount of the private wealth generated in recent years has either come from or gone into property. Much of it has gone, moreover, into overseas property, especially in the UK. Venture capital investment in Ireland in 2006 was less than a tenth of 1 per cent of the investment in overseas property.
From these two conclusions we can draw two more. The first is that there are people here who can well afford to make the sacrifices necessary to keep the public finances on track in straitened times. Simple justice demands that those who benefited most from the boom should bear most of the burden of the post-boom adjustments. If we date the Celtic Tiger as running between 1995 and 2007, then over that period the top 1 per cent of the population gained about €75 billion. Those people, not the sick, disabled and poor, should pick up the tab now. The other conclusion is that this can be done without harming the economy. The tax system can encourage productive, entrepreneurial investment and discourage investment in foreign property. If Brian Cowen is serious about restoring a sense of common purpose in Irish society, this is where he must start.