A new Irish economic and environmental plan for next 20 years
The coverage by The Irish Times newspaper of economic issues has been poor in recent years while many Opinion Page pieces generate few online comments from subscribers or social media shares.
Last week David McWilliams, in his inaugural column for The Irish Times, 'A new economic plan for Ireland: If we redefine our relationship with multinationals, Ireland can be a global leader,' proposed that the American multinationals who avoid roughly €9 billion in tax on profits that they steal annually from other countries with Ireland's help, should put this money in the form of shares in an Irish sovereign wealth fund. "This fund could grow rapidly, creating a real source of wealth for this country, which could be between €110 billion and €140 billion over a decade – €23,000 per Irish person."
Besides the fat chance that companies like Apple would agree to this strange arrangement, the putative leprechaun's gold assumes that other countries will continue to turn a blind eye to our connivance: In 2015 for a similar level of sales, profits booked in US majority-owned affiliates were at $131.6 billion for Ireland and $15.7 billion for Germany, where 703,000 were employed compared with 125,000 in Ireland.
There is a need today for a credible 'economic plan,' almost 60 years after the 1958 'Economic Development' plan that coincided with key moves to modernise the Irish economy and take advantage of globalisation.
The following is a summary of a detailed article we published last July on preparing Ireland for the coming 20 years.
We sent a copy to John McManus, the Opinion Editor of the Irish Times, and it's not surprising that he binned it!
A new Irish economic and environmental plan for next 20 years
Brexit and changes in global business tax rules, coupled with climate change, require a new vision for economic and related environmental outcomes
“We cannot solve our problems with the same level of thinking that created them,” Albert Einstein once said, and this year, the 150th anniversary of the Confederation of British colonies in Canada, has been marked by a government plan linking economic prosperity to sustainable ecosystems, which it calls the “ECOnomy.” It could also be called the Green Economy where Ireland has potential to gain, including providing for better regional balance as the standalone large manufacturing plant becomes a rarity while international services concentrate in the capital city.
The Irish conventional wisdom was not prepared for Brexit or the international backlash on tax avoidance by multinationals based in Ireland, and a small number of other European countries.
A credible plan to meet the challenges of the coming 20 years is now required. There are no short-term magical remedies and durable positive economic change typically happens over multiple election cycles.
Globalisation good for Ireland
Globalisation has been good for Ireland by reducing trade dependence on the UK, but incomes in the non-exporting sector of the private workforce are low as is the coverage of occupational pensions.
In 1973 when the UK, Denmark and Ireland joined the then European Economic Community (EEC), Ireland was the poorest of 18 developed countries in Europe, based on gross domestic product per capita, according to the Organisation for Economic Cooperation and Development (OECD), a think-tank for 35 rich and emerging economies. Latest OECD data on the average Irish household net-adjusted disposable income per capita (after taxes and adjusted for pricing differences) was $25,439 a year in 2015 ̶ a 15th European ranking, just behind Italy but ahead of Spain, Portugal and Greece (Greece was Europe’s star performer of the 1950-1973 post-war period and its GDP per capita in 1973 ranked with Japan’s).
In November 2015, Catherine Mann, chief economist of the OECD, said in Dublin that Ireland will have to sell itself as more than just a low-tax destination in the new era of global tax transparency.
She also highlighted the poor links between the foreign-owned sector and the rest of the economy, with Ireland having one of the lowest EU spends on research and development (R&D), despite housing some of the most innovative firms in the world.
"Global capital has come into Ireland...but somehow it hasn't translated into Irish-owned firms," said Dr Mann. "The patents are here, but they're not being linked into the domestic economy, not being levered up by domestic firms or married to domestic workers."
Leo Varadkar, Irish taoiseach, meets Theresa May, British prime minister, before EU Social Summit, Nov 17, 2017
Indigenous firm underperformance
Over past decades Irish policymakers have mainly focused on getting ready-made jobs from typically US companies while the persistent underperformance of the indigenous international sector has been largely ignored.
Ryanair’s annual revenues of €6.6 billion in its 2016/2017 financial year almost match Enterprise Ireland’s 2016 data for Europe-excluding the UK, plus Africa, Middle East, Russia, Central Asia and India.
Food accounted for 49% of exports of €21.6 billion in 2016 and 4 Anglo-Saxon countries accounted for at least 55% of total indigenous tradeable exports.
Ireland at €12 billion had a 10th ranking for total agri-food exports (including by foreign firms) in 2016 and the Netherlands, the world’s second-biggest exporter in the sector after the US, exported €85 billion including €24 billion in transhipments to other countries. In addition, the value of Dutch-related innovations and high-quality technology was €9 billion.
In 2016 Norway’s fisheries exports were valued at €10 billion compared with Irish exports at €557 million.
In 2014 University College Dublin in a report selected Denmark as the most innovative country for agri-foods in the EU.
“Ireland has a number of truly world class innovative companies, but at present, there are too few newly emerging companies that will develop into world-leading companies,” said Professor Alan Renwick, UCD School of Agriculture and Food Science, the lead author of the report.
Climate change
Denmark, another small economy, has become a world leader in wind energy and the exports of wind energy and wind turbines are as big as Denmark’s exports of food and drink.
Denmark has 33,000 full-time employees in the wind industry with a concentration in West Jutland providing regional balance in the country.
In 2015 according to Eurostat, Sweden got 54% of its energy from renewables; Denmark got 31% and Ireland’s level was 9%.
The opportunities
With a rising global population, food should be our strength but it’s the Dutch with a smaller agricultural area who are leading the way with farming of the future. Two decades ago the Netherlands made a national commitment to sustainable agriculture using the slogan 'Twice as much food using half as many resources.'
Responding to climate change should promote Irish innovation but the commitment has been lacking as it has in developing competence in foreign languages.
Ireland has one of the lowest ratios of exporters in the EU, to both total enterprises, employer enterprises, and population.
This is a big problem for domestic companies looking to new markets to replace possible declines in indigenous exports to the UK market post-Brexit.
Ireland has 5,000 to 6,000 active exporters compared with Denmark’s estimate of 30,000 firms.
Developing new overseas markets is generally a hard slog but when there is an insufficient number making the effort, success becomes more elusive, and that has been the record of Irish indigenous firms over the past 60 years despite low corporate taxes and employer social security costs.
The need for a credible economic and environmental plan is obvious.
Michael Hennigan is editor of Finfacts.ie
Pic on Top: Leo Varadkar, taoiseach/ prime minister, and James O'Connor, American Chamber of Commerce Ireland president, giving Anne Anderson, former Irish ambassador to the United States, a lifetime achievement award at the chamber's Thanksgiving lunch at the Clayton Hotel, Burlington Road, Dublin, Nov 23, 2017.