Sunday 15 September 2019

James Stranko: 'Irish must start believing economic success is more than dumb luck'

Ireland is now more influential in Europe and the world than it has ever been
Ireland is now more influential in Europe and the world than it has ever been

James Stranko

After a long and storied love affair, the relationship status between Ireland and Silicon Valley is slowly changing to "it's complicated".

European pressure on tax policies and global pressures on privacy are conspiring to harden Dublin's attitude towards American tech companies. Irish voters, well aware of the economic boost that their country's policies have created, are rightly nervous that they could lose investment, jobs, and economic cachet in the process.

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But unlike what many in Brussels and Berlin would like to think, Silicon Valley is not buying influence in Ireland. It is simply taking advantage of two fundamental flaws in the relationship.

The first flaw is the EU's messy governance from data governance - greatly exacerbated by GDPR - to tax policy. This is not Ireland's job to fix, and other countries in the EU have been unable to make meaningful progress to hold American firms accountable for jurisdiction shopping.

The second, and much more tragic flaw, is Ireland's persistent fatalism and unwillingness to believe in its own abilities. Daniel Patrick Moynihan, a storied New York politician and an unsung architect of the Celtic Tiger, may have said it best: "I don't think there's any point in being Irish if you don't know that the world is going to break your heart eventually".

Except after years of good policy and good work, the Irish need to stop worrying that the good times will end and appreciate how the country, not Silicon Valley, has the upper hand in the relationship. Ireland just needs a little boost of confidence to use it.

Ireland is plucky, not lucky

In 2019, Ireland can boast of having some of the strongest human capital indicators in the world, and some of the most welcoming and cosmopolitan cities in Europe. Today, the country has the fourth-highest Human Development Index in the world, 10 places above the US and the UK, and often ranks as the country that "brings the most good" to the world in global surveys. In mere decades, Ireland has evolved from being a country of emigration to being a country of immigration, with excellent connectivity with Europe and the world, an attractive quality of life, and enviable political stability.

Foreign direct investment, combined with decades of favourable tax policies, has built an unfortunate belief in Ireland that the country's core advantage over competitors is being a low-regulation tax haven. Underpinning this pervasive insecurity is an outdated nervousness that tech companies will pick up and flee if Ireland imposed greater taxation, or would find a friendlier government if Dublin imposed a stricter regulatory framework.

Five or 10 years ago, when tech companies had the luxury to fly under the radar on issues of privacy, or had the ability to lobby the British government for tax treatment similar to Ireland's, American tech companies might have strayed.

Today, Ireland is more influential in Europe and the world than it has ever been, and in a more constructive way than when it held the key to the Lisbon Treaty in 2008. The country is at the centre of the one of the fundamental sticking points in Brexit negotiations, able to influence policy in Brussels and beyond while decidedly sticking to the high road.

Now, as American businesses are navigating the shambles of Brexit, Ireland sits in the strongest position of any country in the EU to bridge American business to the European Union and the eurozone. It is poised to become the only English-speaking country in the bloc (save for a minority of Maltese), and is the only country that has a sizeable diaspora that continues to influence decision-making in the United States.

To that end, Irish citizens are on the cusp of receiving preferential work visa treatment in the United States, which will only increase the influence that Ireland has in corporate America's halls of power. Americans understand that Ireland's meteoric rise wasn't built on luck. It was built on business acumen and a lot of hard work.

Ireland's time to shine

Instead of fearing an exodus of American companies, every Irish person should be confident in the economy they have built over a single generation. Instead, many Irish have been led to believe that the country shouldn't risk the luck they have had attracting American companies with friendly tax and regulatory policies.

Ireland has changed a lot since Moynihan made his stoic remarks, and he may not even recognise the country he fought so hard to promote.

But he would likely recognise today that Ireland's economic fortune is not just a product of dumb luck, but the result of 50 years of careful cultivation, planning, and good policy. Once the Irish truly believe this, and begin asking their leaders to act accordingly, American tech giants are going to quickly find out who has the upper hand in the relationship.

Once Ireland begins to see its true reflection in the mirror, American tech giants are going to quickly find out who has the upper hand in the relationship. And they're also going to see that they don't have any other suitors anywhere in Europe nearly as attractive as Ireland.

James Stranko was on the founding team of McKinsey and Company's practice serving startups, and advises tech companies on building markets outside of the US. He is a dual US-Irish citizen and lives in Boston, Massachusetts

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