Thursday’s 8.20am Irish Rail train from Dún Laoghaire to Drogheda, Co Louth is delayed. The packed train waits for what seems like ages, passengers begin to chat quietly to each other – when will we get going again? A babel of languages, the carriage is filled with Slavic inflections, Latin tones and a smattering of Urdu. Working Ireland is multilingual, multitalented and multicultural. This train, on the other hand, is old Ireland, spluttering fitfully on ancient tracks, belching out black fumes. One world is 21st century, modern, cosmopolitan and cutting edge; the other is rolling stock that wouldn’t be out of place in 1950s’ western Europe.

How can we explain the dichotomy between these two economies? Think of the Irish rugby team playing at Tolka Park and you get the picture. On almost every economic metric, Ireland has pulled ahead of our peers and yet many people are not feeling it. This conundrum can’t be explained by simple left/right, liberal/conservative interpretations – there is something else going on. Although wealthy, Ireland feels completely different from most other wealthy countries. In our commuting life, the daily grind from home to work is a hassle, homes are jerry-built, hugely expensive and second-rate, bottlenecks and holdups characterise much of our regular experience. If the economy appears to be straining at the leash, that is because it is.

It all comes down to a mismatch between supply and demand. In economic language, Ireland appears to be stuck in a permanent state of fragile equilibrium. Equilibrium is when the economy is in balance between demand and supply. Ireland’s paradox is that, in contrast to most other countries where external demand and internal supply are rarely out of whack, demand in Ireland far outstrips supply and this creates inflation, poor value for money, packed trains and roads, ridiculously expensive homes and “help wanted” signs everywhere. Irish demand, created externally in the freewheeling international economy of which we are a fully-fledged player, far outweighs the ability of the local economy to supply, so we get repeated crises. As a result many people are wealthy on paper but live without security. Irish people can be rich and poor at the same time.

Nowhere is the inability of local supply to keep up with demand more evident than in the housing market. The figures are startling. Ireland had the highest housing costs in the EU for the period 2010-2021, according to arecent report from Eurostat – 94 per cent above the EU average. Property prices have risen 130 per cent since 2013. There is no supply. At one point in 2021, just under 2,500 homes were available to rent nationwide, the lowest on record. A year later, on August 1st, there were only 716 homes available to rent in Ireland, according to Daft.ie. Last year’s rent price increases were the highest on record since 2005. Because the demand side of the economy is motoring ahead, our population rose above 5 million for the first time since 1851, a huge 7.6 per cent increase since the 2016 census. Birth rates in the EU are on the decline but Ireland’s fertility rate in Q1 2022 stood at 1.9 compared to an EU average of just 1.5 (as of 2020).

In the censuses of 2011 and 2016, the levels of home ownership were at the lowest (69.7 per cent and 67.6 per cent) since 1971 (70.8per cent).

In most countries, local demand and supply are more or less the same, allowing the economy to settle; but the Irish economy is overactive, fidgety, never at rest. We have juiced up demand with direct foreign investment, turning Ireland into a host for foreign companies. This has been extraordinarily successful but it has pushed demand far above what the local economy is able to supply. According to the IDA’s website, Ireland hosts the top five global software companies, and the top five industrial automation companies. We are a “home from home” for 1,700 multinationals (MNCs), and 33 per cent of MNCs have been here for more than two decades. Last year, foreign direct investment (FDI) increased by €109bn to €1,208bn. With a current GDP of €372.9bn, Ireland’s FDI amounts to 320 per cent of its GDP, compared to the EU average of 64 per cent.

Obviously, this fuels demand. US firms invested $556 billion in Ireland in 2021 and these companies provide close to 200,000 Irish jobs, placing Ireland 11th on the 2022 IMD World Competitiveness Ranking table and 15th when it comes to its talent. These jobs pay above the national average and demand for new workers is buoyant. In total, wages paid by foreign-owned firms are equivalent to 9 per cent of Irish GDP – one of the highest in the OECD. Around 257,000 people are directly employed by FDI in Ireland, representing a 35 per cent increase over the last five years.

Some of these employees are sitting beside me on the Dún Laoghaire to Drogheda express.

As well as these new workers, both Irish and international, there are foreign students arriving in Ireland all the time, pushing demand up yet further. Today, there are about 32,000 international students in Ireland, of whom 17,000 are from outside the EEA and are paying between €10-20,000 per head per year in fees. The education system is feeding demand. Around 30 per cent of higher-education students in Ireland are studying STEM courses, a massive attraction for foreign companies. Many of these students come from the US, China, India, Brazil, Canada and Saudi Arabia. The number of non-EEA students has doubled since 2011.

All this demand, both external and internal, is cascading down on an economy that can’t adjust quickly enough. If you have ever studied economics this dilemma would be seen graphically as a massive shift in the economy’s demand curve. At the same time, the nation’s supply curve has barely budged, leading to rampant inflation throughout the economy, but most crucially in the housing market. One way to get supply and demand to equilibrium is to stop economic and income growth, precipitate a recession, encourage defaults, lay-offs and unemployment, and actively foster poverty. The only other way is to expand supply, promote building on a massive scale of all sorts of housing and public infrastructure, loosening up planning restrictions and creating a local economy that is worthy of our international ambitions.

The choice is ours.

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