We really think we're rolling in it

The great economist JK Galbraith, who died on Saturday, coined the phrase "conventional wisdom". He would have greatly enjoyed contemporary Ireland, where conventional wisdom is pretty much all we've got.

One of its dictates is that "we" are rich. It is an assumption that governs public policy: we don't need public healthcare because we can afford to pay for it. It governs pay talks: we're paying ourselves too much and need to be careful about losing competitiveness.

It governs a great deal of private behaviour: we can afford to buy houses at vastly inflated prices, to take two foreign holidays a year, to pay unnecessary school fees, to buy expensive cars. It shapes our collective psychology, giving us the buoyant swagger of the nation that broke the bank at Monte Carlo. And it is a grand illusion: neither in a public nor a private sense are "we" rich.

In the public sphere, these are some of the things we don't have: a national education system (the vast majority of our schools are privately-owned and controlled); a national health system (our hospitals don't belong to us and we go to them either as paying customers or as desperate supplicants); a national childcare or pre-school system; a national telecommunications system (we did have one, but gave it to a series of international venture funds, in the process transferring large sums of money from the middle-classes to the ultra-rich); an adequate railway system; a decent stock of public housing; ownership of our own oil and gas resources.

We think none of this matters much because we are rich. Public provision is unnecessary in an economy where ordinary individuals have money to burn. But do they? Are Irish people in general actually rich? By some criteria, the answer might be "yes". If the measure of wealth is having more money than sense, then, yes, we're rich. If it's being better off than the impoverished global majority, then call me Croesus. If it's being more comfortable than we used to be, then, sure, we're doing okay. But if it's being as well-off as the people we see as our economic peers - the citizens of the prosperous western world - then we're kidding ourselves.

Collectively, if Ireland was a state of the USA, it would have ranked as the 35th richest state in 2002 - not much to boast about.

GDP per capita in Ireland in 2002 (a measure which substantially overstates Irish wealth) was $31,000 compared to $84,000 in Inner London. In terms of real purchasing power, the average Irish household spends about €13,700 a year. The average US or Swiss household spends about €20,800.

The reason for this disparity is obvious, or would be if we could see through the hype: we work longer hours for less money than most of our counterparts in the developed world and our cost of living is higher. The IDA gives figures to prospective foreign investors which highlight the gap in wages between workers in Ireland and elsewhere, even in the successful high-tech parts of the economy. An entry-level programmer in the software industry in Ireland earns €50,300 a year. In London, that would be €61,300; in Germany €69,700 and in Switzerland €86,000. A software-product engineer gets €47,900 here; €64,400 in London; €71,700 in Germany and €86,600 in Switzerland. A call-centre manager gets €31,700 in Ireland; €39,800 in the English midlands; €53,400 in Germany; and €34,700 in Holland. A quality-control technician gets €37,800 in Ireland; €44,300 in the UK; €56,700 in Germany; and €47,200 in Holland.

These differentials wouldn't matter if we worked less hard and lived more cheaply. But we work harder than many of our counterparts - 48 hours a week on average, compared to 40 hours in Germany, Holland or Spain and 35 hours in France. We get fewer holidays: nine public holidays a year compared to an EU average of 11; 21 days paid annual leave compared to an average of 26 in the Euro zone.

And the cost of living here is very high. In Mercers Consulting annual surveys, Dublin ranks as the 13th most expensive city in the world, jointly with New York. For purposes of comparison, Frankfurt is joint 34th with Singapore and Montreal is 107th.

So why the delusion that we are fabulously well-off? Partly, of course, it's a matter of where we've been: being richer feels like being rich.

Partly, it's the house-price bubble which, for the lucky ones who own houses, has produced a massive increase in theoretical wealth. Partly, it's the shift from single income to double income families. But mostly, it's a very clever taxation con job. Low taxes produce net take-home wages that are indeed higher than the EU average. We pay this back in very high indirect taxes and in stealth taxes and we get a very poor return in terms of basic public services. But the illusion, so far, works. Because the money rests for a few moments in our own bank accounts before it goes out again, we think we're rolling in it. Whether the trick keeps working, whether we fall for promises of lower taxes, will determine whether we've got the full creamy combination: rich and thick.