patrick honohan : good times and bad for a globalised economy – macroeconomic policy lessons from ireland address by mr patrick honohan, governor of the central bank of ireland, to the gilman rutihinda memorial lecture, bank of tanzania, dar es salaam, 12 august 2011. * * * the lecture draws freely on the output of the research project “ turning globalisation to national advantage : economic policy lessons from ireland ’ s experience ”, part - funded by the irish council for the humanities and social scientists and led by profs frank barry, john fitzgerald and iulia siedschlag and the author. thanks to eddie casey, peter dunne, suzanne linehan, yvonne mccarthy, kieran mcquinn and gerard o ’ reilly for assistance and comments. the global crisis has left no part of the world unaffected. tanzania may have weathered the crisis better than many, but even here an externally - driven credit crunch resulted in a temporary growth set - back in the period 2008 – 9. market turbulence has increased again, but i do not want to discuss those very current matters today. after all, it is not only the immediate and direct impact that needs to be considered arguably more important is to reflect on the lessons that are to be learnt in terms of how a relatively small economy should be positioned in regard to global trade and finance in order to survive well from that experience. in order to learn those lessons, there is no more instructive example than that of ireland, albeit a country in a very different state of development to that of tanzania. after all, ireland is one of the most globalized economies in the world, and it consolidated this position in the period 1986 – 2007, during which aggregate living standards rapidly converged to those of the world ’ s leading economies. during that apparently highly successful period – dubbed the “ celtic tiger ” commentators – ambitious countries at lower levels of per capita income, such as tanzania, began more and more to look to ireland as a potential model against which to evaluate their own growth strategies. but ireland ’ s navigation through the hazards of the emergent global economy hit severe shoals in 2007 – 8, since when an acute economic contraction has seen per capita gnp fall – faster than almost anywhere else – back to the levels of 2000, a return to high net emigration reflecting job losses and high unemployment, and a loss of access to financial market access reflecting international financial market concern at the extent of bank losses and the sustained jump also

counties. reducing poverty is a major challenge for policymakers. the new york fed ’ s measures of regional credit conditions suggest continued financial challenges for families here. as of the second quarter of 2012, for those people with a credit report, average debt per person in new jersey was about $ 63, 000, roughly unchanged over the past several years. delinquency rates on that debt are high : 8. 4 percent of all debt in the state is seriously delinquent, up from 7. 4 percent in 2011 and above the national rate of 6. 7 percent. so, many new jersey households are still struggling with their finances. although there are some recent signs that home prices in the state are starting to firm, nevertheless, the housing crisis continues to take a toll on our homeowners. as of june, 9. 3 percent of all mortgage debt in new jersey was 90 - plus days delinquent, three percentage points above the national rate. and that delinquency rate is actually a little higher here in northern new jersey. national economic conditions the performance of the u. s. economy since the end of the recession in 2009 has been disappointing. real gdp has grown at an annual rate of just over 2 percent over this period, and it was even slower in the first half of 2012. as a result, employment gains have been modest, unemployment remains above 8 percent – an unacceptably high level – and participation in the jobs market remains depressed. moreover, about 5 million workers have been unemployed for six months or more. this is important because long - term bis central bankers ’ speeches unemployment can cause job skills to atrophy making it more difficult for such people to find jobs in the future. while the good news is that the job - finding rates of the long - term unemployed have not yet deteriorated as many feared, we ought not to take this for granted going forward. although energy prices have begun to rise again, total inflation, as measured by year - overyear changes of the consumer price index, is still around 1¾ percent – less than half the rate in september of 2011. in recent months, core inflation has also slowed and it is now also under 2 percent. higher energy and grain prices mean that headline inflation will likely edge somewhat higher for a few months before moving slightly lower again. but measures of the underlying rate of inflation are moderate, wage gains remain subdued, and longer - term inflation expectations are fully consistent with our longer run inflation objective of