What's Great about the “Great Recession”?

Ronan Lyons
06/16/2009

2009 IBM Corporation

 Contents
― Four elephants in one room
― The world turns a corner
― The 21st Century creed
― Crisi-tunity

Ronan Lyons – Economist

June 11, 2009 2/x 2009 IBM Corporation
 Contents
― Four elephants in one room
― The world turns a corner
― The 21st Century creed
― Crisi-tunity

Ronan Lyons – Economist

June 11, 2009 3/x 2009 IBM Corporation
 Four Irish elephants are trying to hide in the back of the room
• Banking
– NAMA or nationalise or ...?
– Who pays? This generation or the
next?
• Unemployment
– Over 230,000 'unexpected
unemployed' since 2007
– Another 100,000 a possibility
– Commuter belt worst hit
Ronan Lyons – Economist
June 11, 2009
• Budgets
– €25bn hole in revenues – income
tax not the problem, wealth taxes
are
• Property
– 15 years property built in the last 7
years... and in the wrong places
– 1 in 5 face negative equity and 60k
households face negative equity
AND unemployment
4/x 2009 IBM Corporation
 Contents
― Four elephants in one room
― The world turns a corner
― The 21st Century creed
― Crisi-tunity

Turn a different corner

And if all that there is is this fear of being used,
maybe I should go back to being lonely and confused...

George Michael on the fate of small open economies?

Ronan Lyons – Economist
June 11, 2009 5/x 2009 IBM Corporation
 Measured by job losses, recessions up to the 1980s were short and sharp
Private sector jobs lost from peak
1%

0% ― US as the
-1%
bellwether
economy for the
-2% OECD
-3%

-4%
― Recessions
-5%
were frequent in
-6% the post-war era
up to the 1980s
-7%
2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55
"1950s" 1974/75 1981/82 2000-03

Ronan Lyons – Economist

June 11, 2009 6/x 2009 IBM Corporation
 Since then recessions have been getting less frequent, milder... and longer
Private sector jobs lost from peak
1%

0% ― Since the 1980s,

-1%
recessions have
become more
-2% once-a-decade
-3% episodes
-4%

-5% ― The early 1990s

-6% recession was
long – but not
-7%
2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 severe in terms
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 of job losses
"1950s" 1974/75 1981/82 1990/91 2000-03

Ronan Lyons – Economist

June 11, 2009 7/x 2009 IBM Corporation
 The “dot bomb” recession was particularly long, in terms of job recovery
Private sector jobs lost from peak
1%

0% ― The dot.com
-1%
bubble created
an unsustainable
-2% amount of jobs
-3%

-4%
― It took almost
-5%
five years for
-6% private sector
employment to
-7%
2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 recover
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55
"1950s" 1974/75 1981/82 1990/91 2000-03

Ronan Lyons – Economist

June 11, 2009 8/x 2009 IBM Corporation
 This recession combines the worst of the different post-war recessions
Private sector jobs lost from peak
1%

0% ― Jobs losses
-1%
have been as
intense as any
-2% post-war
-3% recession
-4%

-5%
― It's likely to be
-6% the longest post-
-7%
war recession,
2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 barring rapid
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 employment
"1950s" 1974/75 1981/82 1990/91 2000-03 2008/09 growth

Ronan Lyons – Economist

June 11, 2009 9/x 2009 IBM Corporation
 Globally, trade and output have fallen at least as much as in the 1930s

Source: O'Rourke & Eichengreen, http://bit.ly/korbe

Ronan Lyons – Economist

June 11, 2009 10 / x 2009 IBM Corporation
 The severity of the crisis has led to an unprecedented policy response

Source: O'Rourke & Eichengreen, http://bit.ly/korbe

Ronan Lyons – Economist

June 11, 2009 11 / x 2009 IBM Corporation
Confidence and activity are returning... slowly
US - manuf UK - manuf Eurozone -manuf
US - services UK - services Eurozone - services

65

60

55 Growth
50

45
Decline
40

35

30
Ireland:
06

07

08

09
6

9
6

8
8
6

7
r-0

r-0

r-0

r-0
-0
-0

-0
l-0

l-0

l-0
n-

n-

n-

n-
39.5
ct

ct

ct
Ap

Ju

Ap

Ju

Ap

Ju

Ap
Ja

Ja

Ja

Ja
O

O
12 / x 2009 IBM Corporation
Each region faces its own growth challenges and opportunities
Where will
growth come USA Europe Asia
from?
Company balance sheets in good Business - and consumers - Shift towards domestic consumption
Business shape pre-recession... vigorous cost particularly dependent on bank and welfare systems likely to offset
cutting since lending trade's weaker growth contribution

Retirement of baby-boomers... USA Rapidly growing populations in most

Population at work is shrinking...
Demographics will need to remain open to migration
rapidly in some countries
countries – China and Japan ageing
in the future as it has in the past very fast though

Major problems remain in banking Concerns over transparency of banks

Lessons from 1980s and 1990s mean
Banking system but some signs of confidence and ability to develop Europe-wide
financial system in good shape
returning solutions

Significant fiscal boost in short-term... Administrative burden and red-tape A lot of countries are in catch-up,
Government but the shift to bigger government is an issue for business... being tackled with significant infrastructure
likely to last by the EU head-on programmes

Huge variety between large and small,

A very flexible economy, close trading
Other rich and poor across the 40+ Major environmental challenges
links with Asian economies
countries
13 / x 2009 IBM Corporation
 Contents
― Four elephants in one room
― The world turns a corner
― The 21st Century creed
― Crisi-tunity

Ronan Lyons – Economist

June 11, 2009 14 / x 2009 IBM Corporation
 This recession has shattered some myths of the early 21st Century

• “The new global financial system does not require a new level of surveillance”
– The recession has made entire models of finance disappear, as well as bringing about
a global re-evaluation of risk and widespread nationalization of banks
– Pervasive crashes in stock and housing markets starting in 2007 have destroyed
anything up to 30% of global wealth

• “Emerging markets have enough economic strength to decouple from the OECD”
– The widespread economic contraction in developed economies has been
accompanied by a huge slowdown in growth in emerging markets

Ronan Lyons – Economist

June 11, 2009 15 / x 2009 IBM Corporation
 Other beliefs remain firmly in place

• “There are always opportunities to establish or expand”

– Inc.com identifies almost 20 industies and activites in demand
– They range from small flexible activities (such as home healthcare, niche consulting
and repair services) to large industries (including education and construction)
– Some are staples – like fast-casual dining and temporary staffing – while others are
hi-tech or green-collar, such as cloud computing, education technology and energy
• “Technology is a game-changer”
– In the dot.com collapse, belief in the potential of ICT to change our world was shaken
– In the current recession, faith in ICT is – if anything – stronger, as policymakers and
business people see how it can cut costs, inform decisions, and change business
models

Ronan Lyons – Economist

June 11, 2009 16 / x 2009 IBM Corporation
 Contents
― Four elephants in one room
― The world turns a corner
― The 21st Century creed
― Crisi-tunity

Lisa: Dad, do you know that in China they use the same
word for crisis as they do for opportunity?

Homer: Yes... Crisi-tunity!

Ronan Lyons – Economist
June 11, 2009 17 / x 2009 IBM Corporation
 Technology really is flattening the business landscape

• Disruptive technologies do not care

whether it's boom or bust

• At the height of the boom, Facebook

grew from 14m users in mid-2006 to
27m users by mid-2007

• At the height of the bust, Twitter grew

from 0.5m users to 4.5m users over the
course of 2008

Ronan Lyons – Economist

June 11, 2009 18 / x 2009 IBM Corporation
 Technology means SMEs can focus solely on their core competences

• SMEs can penetrate new markets easier

– Websites such as Applied Language can translate your website's
1000 words into Chinese within a week for less than €100
– Sites such as elance match experts with work
• SMEs can treat ALL non-core competences as utilities
– Manufacturing, packaging, warehouses and logistics can all be
outsourced – e.g. Amazon Fulfillment Services
– There are dedicated online services for accounts, project
management and collaboration
• SMEs can manage their own brand among their audience
– Identifying more of their audience, and engaging in more interactive
communication, through online social media
Ronan Lyons – Economist
June 11, 2009 19 / x 2009 IBM Corporation
 Technology creates opportunities for new creative brands

• Sites like Cafepress offer

manufacturing and shipping services
for a range of consumers goods...
... like my mug!

• Authors and researchers can sell

their work on sites such as Scribd

• Etsy is an online marketplace for

“buying & selling all things
handmade”, connecting artists and
craftspeople with new markets
This is actually for sale online, €9 -
http://bit.ly/ro-mug
Ronan Lyons – Economist
June 11, 2009 20 / x 2009 IBM Corporation
 Some of Ireland's most popular Twitter brands...

• Over 100,000 Irish brands – people and

companies – are on Twitter
• The most popular are dominated by
people and SMEs
– Some well known brands are there
• These brands have generated
audiences of hundreds – or thousands
– for free
– The only investment is time

Ronan Lyons – Economist

June 11, 2009 21 / x 2009 IBM Corporation
 Thank you

• For more, see ronanlyons.com

• If you're on Twitter: @ronanlyons

• Happy to connect on LinkedIn too

• And don't forget to buy your limited edition mug!

Ronan Lyons – Economist

June 11, 2009 22 / x 2009 IBM Corporation