Pity the poor American expatriate. He moves to Ireland thinking prices will be wee. Well, after all, people do earn less than in the US, right? So, it only stands to reason that things are cheaper. Food. Booze. Cigarettes.
He can't bring his beloved yuppie toys, not even the stereo and TV, because those wacky Europeans are still using 220 volts. But that's OK - he can buy all that stuff in Ireland for next to nothing. No need to bring the essentials, either - aspirin . . . coffee . . . tennis balls. It's all cheaper in Ireland. Oh, it will be grand! When he gets to Ireland, he'll change his name to Plenty O'Cash!
Reality hits home quickly. "£5 for tennis balls," he screams. "I used to pay two bucks!" If you ever see a bug-eyed American violently twitching and moving his lips, he isn't having a seizure. He's calculating the exchange rate.
It goes on and on. "£10 for a pound of gourmet coffee! It's five bucks in the States!" And then he discovers that even Guinness is more expensive in Ireland. (Don't bother writing: I called St James's Gate and they confirmed that the quality is the same around the world.)
You can hear the Americans screaming for blocks. In fact, that howling sound you hear at night as you lie in your bed isn't the wind picking up as winter nears, it's the spirit of expatriates crying for their lost dollars. Call it the legend of the screaming Yankee - my contribution to Irish folklore.
I won't bother with a chart comparing the costs of various items. Everyone already knows how much cheaper things are in the US. Charts like that only depress everyone. Including me.
At issue is why. Why do commonplace necessities across the Atlantic suddenly become playthings of the super rich the moment they land upon these shores? I asked many people, but nobody knew. The general consensus seems to be: "It's an Irish thing - the world is against us."
So, I did my own investigation and came up with seven very valid reasons why prices are higher here. I was startled by the results . . . the general consensus is actually pretty accurate. Economically, at least, the world really is against you.
1: Cheaper By The Dozen
A huge factor, possibly even bigger than the VAT. "Ireland is the small store on the corner, not the giant super store," says Terry Baker, senior economist of the Institute of Social and Economic Research. "It's a simple and obvious fact that the more items a store sells, the less it can charge per item." The shops in Ireland just don't have the volume.
This affects virtually all enterprises. Take the price of dry-cleaning. There are six dry- cleaners within two blocks of my apartment in New York, and each has a line of customers every morning. It costs $4.50 to dry-clean a suit. But note that in my hometown, where people typically own one suit (for weddings and funerals), it costs $6.50. My local place in Dublin charges the current equivalent of $8.
The "cheaper by the dozen" rule has two parts; it applies not only at customer level. Retailers get better deals from wholesalers if they are buying en masse, and that saving is also passed on to the customer.
Hence it's no surprise that B & H Photo in New York City, which sells 450,000 cameras a year, charges $179 for an Olympus 115 Zoom camera, and an Irish store charges £199. At Christmas last year that represented a price difference of 40 per cent.
"Note, however, that when you take away volume, the price change isn't as drastic," said one wholesaler, who wished not to be identified. "If you're talking about a speciality item, like an expensive professional camera, the prices in Ireland and the US will be much closer."
2: Competition
Because there are so many customers in the US, the market will bear a much higher number of stores. They compete with each other and with mail-order businesses. The competition drives the prices down. Further, unlike Ireland, they are permitted to sell items at cost or below, which creates those wonderful price wars.
"The Irish are less inclined to be aggressive," one economist said. "There's a unwritten rule that everything will cost about the same." Mr Baker concurred. "Adam Smith said that, if you have one store, there is no price competition. But, if you have two, they will compete with each other. In truth, they often don't."
3: Shipping
Most people, understandably, have trouble believing that this is a factor. Sure, it's easy enough to see why something big and bulky, like a refrigerator, would cost more to ship. But could it really cost that much more to send a smaller item - say, a VCR - to Ireland than to the US?
Again, it's all about volume. It's simply more cost feasible per individual unit to ship 500,000 VCRs than it is to ship 500. And the distribution system is different. Cargo ships float directly into US harbours. Because they deal with such high volume, sophisticated and efficient transportation systems are in place for distribution.
Electronic goods that come into Ireland are typically the last link in a chain that starts in the East and goes through Britain. So, it's no surprise to get a VCR that doesn't work - the poor little thing has travelled so far that it's exhausted.
To use a better example, New York is a huge gourmet coffee market - you can buy the stuff at practically any deli. Zabar's alone sells 200 tons a year. Someone's shipping a lot of Java into NYC.
Comparatively speaking, the Irish market is a speck (or a grind, if you like). It's hardly any wonder that a pound of hazelnut costs $6 at Zabar's and £9.58 at Norma Jeans. If you examine world-wide prices, even its price for Jamaica Blue Mountain - £39.95 a pound - is almost justifiable. (As far as I'm concerned, it's a non-issue anyway. If you're crazy enough to spend 40 quid on a pound of coffee, it's probably the least of your problems.)
4: The Common Agricultural Policy
This is why food in general is more expensive. "Europe has an elaborate system of price supports which keep agricultural prices higher than the rest of the world," said one Government economist, who did not wish to be identified. And, of course, this isn't limited to the grocery stores.
5: Labour
`There is a shortage of labour in Ireland," said one Government official. "It costs more these days to get people to work for you." And not just in salary. Suppose, for example, you have a small store with five employees. In the US you can pay them the minimum wage - you don't have to pay them for Christmas, let alone all holidays and four weeks vacation a year. You don't even have to pay for their medical costs.
6: VAT
I am simultaneously fascinated and revolted. All along I thought the price was fixed by the EU, and it got all the money. But the bulk of it goes to the Irish Exchequer, and the Irish Government could set it to as low as 15 per cent if it wanted to.
And, at 21 per cent, it's high. Absurdly high. Higher than all the EU nations, except the crazy Scandinavians. Yumping Yimminies. It's 4.5 per cent higher than Britain! It's even five per cent higher than the taxhunds of Germany.
Yet it won't be changing anytime in the near future. "For one thing, people don't really complain about it," says Mr Baker. "For another, politicians are reluctant to change it. If they're cutting taxes, they'll cut income taxes before the VAT."
I told Mr Baker that from a US point of view, VAT was stifling the economy. If it didn't exist, people would put more money into the system, and you could achieve growth.
"I think a case can be argued against that," he replied. "An economy that has grown eight per cent a year over the past five years can hardly be said to be stifled."
Score one for the economist.
Another anonymous Government official had a slightly different point of view. "I'll tell you why we don't change it," he said. "Because, unlike in the States, we like to take care of our pensioners." Yeah, I thought, but at least ours can afford tennis balls.
7: The Economic Environment
ALL of the factors above drive prices down, creating a perfect spending atmosphere. Hence the economic environment in the US is self-perpetuating: the cheaper things become, the more people buy; the more people buy, the cheaper things become.
There are still many other expensive facets of Irish life that I've yet to figure out. Like why it costs so much more to make a local phone call, and yet the service is so terrible. For some reason, the Telecom Eireann people haven't returned my calls. Or maybe my line is down again.
The good news could be that prices may not be as bad as we think over here. Comparing prices with the US can be quite misleading, since there are state taxes. And everything depends upon the currency exchange. Last Christmas the dollar was weak, at a rate of 1.50 per Irish pound. Right now it's 1.33.
All the same, a friend is visiting me in a few weeks and already I've put in my order: three cans of tennis balls, four pounds of coffee . . . but I'll buy the Guinness.