Global Crisis Blog

A Country Is a Business: Where to Place Your Bets?

By Shlomo Maital

An article in The Irish Independent by Brendan Keenan helps answer the question:  Which countries will emerge quickest and strongest from the global crisis? [1]

Ireland has taken an enormous ‘hit’ during the global crisis, because its banks were overleveraged and undertook huge risks.   Ireland has gone from being Europe’s poster boy for strategic planning to becoming Europe’s basket case, with government debt threatening to destabilize the economy and with unemployment high and growing.

But don’t count Ireland out.  After all, a country is a business.  Ireland’s business is being well run.  Recall that Ireland, as a nation, has several centuries of crisis-ridden history. Its people are used to crisis and are flexible, resilient and tough.   The collective memory includes the Potato Famine of 1845-7, when a million Irish died or emigrated.   Ireland now has a large trade surplus, as Keenan notes.  And the Irish people have shifted from debt to asset accumulation, with an extremely high rate of saving.

The last piece in the strategic puzzle for Ireland is this:  Businesses need to resume investment spending, in plant, infrastructure and R&D.  So far they haven’t.  When they do, they will find plenty of funds in capital markets, from the high savings of individuals.   For banks to resume investment, two things need to happen:  First, businesses need to be persuaded that the mid-term prognosis for the Irish and world economies is favorable (so far, it isn’t, especially because of the weakness of the Euro zone),  and the financial intermediaries (banks) need to resume lending and stop hoarding cash to build up their shaky balance sheets.

Which country should we bet on, to emerge strongest from the crisis?  The country that is run like a well-run business,  and the country where businesses resume investing in the future.    So far, it looks very unlikely that America will be able to fit that bill, in the foreseeable future.  But Ireland?  Well, it just might.


[1] “The Keenan View: Our trade surplus and huge savings make us different”, Irish Independent, Thursday July 22, Business section, p. 4.

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