The Salmon School of Economics

Not many of us have the good fortune to found a school of thought. But David McWilliams is a fortunate man. In the final episode of RTE’s Generation Game he has conjured for us an innovative strategy to revitalising the ailing Celtic Tiger which deserves, if only fleeting, a recognisable status. I’d like to propose a title: the ‘Salmon School of Economics’. Like all innovations, it emerges out of things previous, but it is no less original for that – at least in its current application. Is it feasible? Is it desirable? Will it sell? Ah, well that’s a different matter. All innovations have to be market-tested. Not all survive.

Following a cogent summary of our economy – the over-dependency on foreign capital, the shift from making and selling to buying and borrowing – we were ready to be wowed with a considered prescription. And . . . wow.

In short, Mr. McWilliams proposes we open our borders to the children of the worldwide diaspora – from Argentina to Australia; that we provide them passports; that we create, among this disparate group, a worldwide network rooted in their spiritual home (here) to which they all, however subconsciously, long to return. All this in the hopes that a synergy that will bring to our shores new skills, creativity and money, to help us conquer new global markets. In essence, we should facilitate the arduous journey back upstream to create a new spawn, a new generation of prosperity. And more fish.

I will leave to others to discuss the spiritual-romantic aspect of the ‘nation’ or the ‘people’ that Mr. McWilliams crafts (it can, at extremes, be either sentimental or ominous). Essentially, this ‘salmon economics’ is no more than a variation on a theme that we have been humming since the late 1950s.

Following the collapse of protectionism, the Irish economy was opened up to foreign capital. The policy-makers never envisaged wholesale dependency on such inward investment. Rather, it was hoped that it would bring new skills, creativity and money from abroad into the economy and, for the native business sector, act as ‘teacher’, imparting the ways of commerce and trade. And one of the hopes expressed at the time was that émigrés might return with the skills and creativity they had learned abroad to help build a new economy.

Hit and miss though it was, some of it did rub off, aided by a more active Government in the economic and social spheres, but in large sections of the economy the native sector folded. The whole project went irreversibly south in the wake of the 1970s oil shock - inward investment dried up, local businesses continued to close.

There was one more shot at getting our native sector up to speed. In the late 1970s Fianna Fail engaged in an ill-conceived pump-priming exercise (labelled ‘vulgar Keynesianism’ and a ‘travesty of Keynesianism’). This was subsequently criticised as profligate public spending and it was – resulting in spiralling inflation and budgetary deficits. Ironically, it turned into a political attack on the public sector and planning; ironic because it was primarily an attempt to kick-start the native business sector. It was a market-driven project. But, as Joe Lee put it in his ‘History of Ireland 1912-1985:

‘The assumption that the private sector would respond with a surge of expansion to meet increased demand ignored the lessons of history. There was no historical justification for reposing such confidence in Irish business.’

How did we emerge out of the wreckage of the 1980s? We turned to the public sector, namely the IDA whose remit was to, hell or high water, get foreign capital into Ireland big-time. And, thankfully, they succeeded, for there was literally no other game in town. Yes, they were aided by a number of factors – the Single Market, the devaluation of the punt in the early 1990s, the wage stability of national agreements, rising infrastructural investment, beneficial demographics, a low tax-rate (but that had been knocking about since the mid-1950s); but all this would have come to nothing if we hadn’t brought in skills, creativity and money from abroad.

And here we are again. As Mr. McWilliams rightly points out, we are under increasing international pressure. Report after official report stresses the urgency of addressing our sluggish native enterprise base. But no political party is making this an issue, and all we have for ballast is the last word in economic thinking – the National Development Plan.

So Mr. McWilliams takes us down memory lane: we need to lure skills, creativity and money. From where? Why, abroad of course. Again. This time it is dressed up in diaspora clothes but it amounts to the same thing. Of course, we are not treated to any analysis of what particular skills and creativity, never mind the dosh, particular groups might bring to what particular end? We could just end up with our distant - sometimes very distant - cousins turning huge swathes of the country into luxury golf courses as is happening in Portugal. Or, more prosaically, we might only be fuelling a situation that Michael Hennigan highlights with such fervour: that overseas commercial property investment was €5 billion in the first half of this year while in that same period venture capital investment in Irish tech companies was €62 million. We are no better informed after watching Generation Game.

It is unfortunate Mr. McWilliams didn’t turn his attention to the real problems in building a skilled, creative and prosperous native enterprise base. In one of his many anecdotes he featured a young Asian woman claiming, quite rightly, that Ireland would benefit from employing immigrants with language skills to assist in marketing abroad. This would certainly help fill a deficit highlighted by the Enterprise Strategy Group. But there is a real danger that such skills would be wasted for there are a plethora of entry barriers to export development that stymie native businesses:

* Poor management skills, in particular marketing
* Small scale and under-investment
* Lack of R&D and innovation – both in products and processes
* The high cost of accessing foreign market information
* Lack of distribution networks
* Disconnect from ever changing consumer demands

Of course, to get into all this would be extremely boring and one thing Mr. McWilliams is not is boring. All this might lead us to new solutions – emphasising the potential dynamic of real ‘social and economic’ partnership, not only between capital and labour, but with the public realm and all stakeholders. But this could be boring, too. Delving might lead us to a profound, if obvious, insight: that ‘entrepreneurship’ is a social, not an individual act, requiring men and women at all levels of the firm and society to work together as equals – a tried-and-test dialectic of competition and cooperation. But such a programme wouldn’t be so sexy.

The problem is not lack of creativity or skills. It’s certainly not lack of money. We’re swimming in it. The problem is how enterprise and investment are structured or, rather, not structured. How, if it is left to its own unaccountable devices, they will seek out narrow, short-term commercial gain (e.g. property investments abroad) but not necessarily economic and social prosperity. It’s a matter of organising our skills, creativity and money.

Mr McWilliams has done us a significant service in highlight the deteriorating state of the Irish economy. But as to his solution, we are still swimming about the place in circles.