Boom time income wasted claims Davy Stockbrokers report

A report released on Friday by Davy Stockbrokers says that Ireland's years of high income were wasted because of shortsighted investment in Ireland's property bubble.

The report states: "One of the great misconceptions about Ireland is that it is a wealthy country...yet it was never wealthy: those years of high income were largely wasted."

From 2000 to 2008 net capital stock of the state had more than doubled from €222bn to €477bn, an enormous increase. However, the report criticises the allocation of that capital, stating most of it went into the "unproductive asset" of housing.

The result of this "misallocated investment" was that Ireland was hit much harder by the recession than comparable countries across Europe. Ireland had dropped to eighth in the income per capita tables across Europe by the end of 2009.

The report reserves particular criticism for the government's lack of investement into Ireland's communications infrastructure. "The problem with the glut of investment in the wrong places is that our technological capacity has not advanced much over the last decade," it stated. A lack of a top class communications infrastructure will undoubtedly affect the government's current plans to build a 'smart economy'.

However, it does state that investment in our road infrastructure was the government's "greatest triumph" of the period. Despite this, it states: "Irish residents would hardly claim that this country is wealthier than other small euro-area countries such as Finland or Belgium. Infrastructure...is far superior in those nations, even though Ireland is not far behind in the income per capita table." In other words, despite the investment in our transportation infrastructure, Ireland still lags behind comparable European nations.

In its final statement, the report claims that investment in human capital is key to securing Ireland's medium to long term economic future. "[Human capital] is Ireland's greatest strength," it said. "The economy has the highest number of graduates in the 25-34 population in the EU-27, with the exception of Cyprus."

However, as young people continue to emigrate, Ireland is in danger of becoming an exporter of human capital. The report states that our most highly educated young people have so far stayed in the country. However, as the recession drags on this could change, leaving Ireland without what Davy Stockbrokers believe is its greatest asset.

The report represents a damning indictment of the state's financial management over the past decade.

The full text of the report is available here.