The start of the 21st century has coincided very closely with a crucially important stage in Irish economic development: the end of the dominance of manufacturing as the mainspring, and the start of a new period during which services have taken over this key role.
Already more than one-third of employment in IDA-supported projects is in financial and internationally traded services. And since 2001 total employment in manufacturing has declined by one-seventh, from a peak of 255,000 to under 220,000.
While some of this recent decline certainly reflects the impact of a temporary European recession, it is now unlikely that a recovery will see a return to the 2001 record manufacturing employment level.
From now on, any growth in jobs will be concentrated in the services sector, where since 2001 employment has in fact already risen by more than one-quarter, from 555,000 to almost 700,000.
An important fact that is often overlooked is that service exports have a much lower import content than have exports of goods.
When this was last measured in 1998 it was found that in the case of goods exports, the import content was 53 per cent, so that when allowance is also made for the outflow of profits from manufacturing, only 24 per cent of the value of exports would be retained in Ireland.
Because the import content of service exports was a good deal lower, at 42 per cent, the proportion of the value of such exports retained in Ireland after allowing for profit outflows must have been at least 35 per cent.
Service exports now provide one-third of all our external receipts, and this differential in import content means that well over 40 per cent of the contribution of exports to our domestic economy now comes from services rather than goods, a proportion which in the years ahead seems likely to move upwards towards half.
I don't think this reality is widely understood, perhaps even at government level where, I suspect, industrial rather than service exports remain a primary focus of attention.
The importance to our economy today of the role of service exports reflects the fact that since 2001 there has been a huge contrast between the dynamism of exports of goods and exports of services. In the past four years the value of exports of goods has risen by only 6 per cent, and this has been more than offset by a 12 per cent fall in the prices of such exports.
As a result, the actual value of goods exported in the year just ended will have been about 6 per cent lower than in 2001.
By contrast, the value of exports of services rose by almost 80 per cent between 2001 and 2005. This means that, to the extent that economic growth during the past four years has come in part from increased exports, it is services that have accounted for all of that contribution.
Much of this rapid growth of service exports has clearly reflected a much higher volume of activity but, in contrast to the situation with goods exports, there have also been increases in the prices commanded by service exports.
This has improved our terms of trade with the outside world.
Just what form do these rapidly growing service exports take? Of the €43 billion of service exports recorded in the 12 months ended September last, computer services accounted for more than one-third, business services for one-fifth, insurance for one-sixth, and tourism and transport for one-seventh, with transport services (mainly receipts of Ryanair and Aer Lingus) accounting for the bulk of the latter.
During the past four years, insurance and business services have been the most dynamic of these elements in our service export boom.
The huge current changes in the pattern of our external trade and in the sources of our economic dynamism pose important policy issues which do not seem to me to have yet attracted sufficient attention. Perhaps not surprisingly, for policy-making at government level and in government agencies tends to respond sluggishly to new challenges.
For this reason attention needs to be drawn to the sections of the ESRI's Medium-Term Review that address policy issues, and particularly, I feel, to what they have to say about planning for an increasingly service-based economy.
The review points to our domestic supply of highly skilled labour, supplemented by immigration mainly of skilled workers, as the most obvious factor differentiating us from our competitors. It also notes that the average educational attainment of our work-force will continue to rise quite rapidly over the next 15 years.
With 57 per cent of each new cohort already entering higher education, and given a policy directed towards raising this proportion to 66 per cent over the years ahead, we are in fact very well placed in this respect, especially as our universities have exceptionally low dropout rates.
Our situation contrasts sharply with that in Britain, where Labour government proposals to raise the third-level entry rate to a modest 50 per cent of the school-leaving age cohort have actually evoked opposition from the Tory party: "Why would we need all these overeducated workers?!"
Noting the current public policy focus on the promotion of investment in research and development, the ESRI questions whether in an economy rapidly reorientating itself towards services rather than manufacturing, an almost exclusive focus on research in science, technology and engineering should be maintained, for this focus is directed mainly towards spinoffs in the manufacturing sector.
Without prejudice to the importance of ensuring the maintenance and upgrading of the valuable high-tech manufacturing sector, the institute therefore suggests that there may now be a need to broaden the focus of such research.
It points out that while a reputation for excellence in biomedical research may help in developing the pharmaceutical industry, it might now be equally valuable to promote such developments as the further promotion of accountancy services abroad, or of exports of TV programmes or creating an Irish centre of excellence in respect of international law, or even history.
Developments such as these might all contribute equally to the long-term growth of the economy.
Finally, the institute points out that if we are to attract talent from abroad, including persuading Irish emigrants to return, we need to ensure that Ireland is an attractive country in which to live.
While, of course, high pay can always persuade skilled labour to come to work in an unattractive environment, it argues that "by making Ireland an attractive place to live in, the cost of attracting and holding skilled workers will be reduced".
That has evident implications for environmental policy, an area where we have fallen dangerously behind many other EU countries.