Thursday 23 May 2019

Our wealth creators deserve much more respect

Richard Curran

Richard Curran

WHAT on earth should we do with our wealth creators in this country? After decades of suspicion around business and the creation of wealth, the boom years brought a new and appropriate respect for those people who through a combination of circumstance, background, personality and hard work, managed to create wealth and jobs for others.

Sadly, the extent of the crash in the last six years has brought with it a massive step backwards in our attitudes to business and wealth creation. Too often, those who used to be seen as the creators of wealth are now seen as the destroyers, tarnishing everybody in business as an architect of the collapse.

This ambiguity about wealth creation in a post-Celtic Tiger Ireland, which is still in austerity mode, runs right through what policy makers, politicians, the media and a large swathe of the population think of the business community.

The simplistic, thoughtless and crude logic goes something like: They used to be crooks. Then they were heroes. Now they are crooks again.

Yet it is extraordinary just how many managers, executives and company directors, from the local petrol station to the boardroom of massive stock market corporations, have worked through the crisis. Some have just survived. Others have re-invented their business and managed to grow.

Some of them are afraid to spend their money in case it sends out the wrong signal. Others are afraid to trumpet what success they have achieved in the last five years, in case it sends out the wrong signal.

Yet, before we simply applaud the efforts of every wealth creator in the country, we also have to deal with the legacy issues of the crash. At the heart of the problem was the fact that too many of them abandoned the idea of sustainable wealth creation. Asset flipping in a boom was a no brainer at the time. Buy it today and sell it tomorrow. But don't build anything lasting.

Ever-increasing borrowing from banks that were falling over each other to lend was not only irresistible, but it fundamentally altered what many of our smartest people understood to be business success.

Take Richard Nesbitt at Arnotts. He took a department store with generations of tradition and attached a boom-fuelled property development business on to it. Take Bernard McNamara, whose building business had a track record lasting decades. Yet he took some of the craziest property decisions in corporate history, from the Burlington to the Glass Bottle site – all backed by bankers operating in a similar fog.

The list goes on and on.

There is little doubt that many lessons have been learned. Long established sectors, like food and IT, got on with their business during this period. They continue to do so now. Sustainable wealth creation is a much more likely outcome from today's business activity.

But what do we do with the business class that made mistakes? What do we do with the risk takers, who never acted greedily and never broke any rules, but simply got caught on the wrong side of a global financial crash?

This dilemma is a necessary part of coping with the crash. It affects politics and the pending decisions on the next budget. Should we tax those earning over €100,000 per year, a lot more? Should we provide a state-funded stimulus package which will benefit certain people in certain sectors, like construction, for example?

Enda Kenny said he wanted to do away with so-called "cowboy builders" who might otherwise win state contracts. If he'd had the political courage to make such an announcement in 2005 or even in 2011, he would deserve some credit for it.

The dilemma about wealth creation is affecting the debate about tax breaks for foreign executives of foreign multi-nationals. It influences Nama's protocols and procedures for dealing with developers who have no hope of paying what they owe.

It also affects the debate about mortgage arrears. Should the bust former builder or developer in a massive country pile, get to keep the house or lose it? Neighbours in smaller houses will part-fund the losses, but equally, the house reflected his ambition, risk-taking and desire to create wealth.

There are no easy answers to these difficult issues. However, there are a few guiding principles that could help us come through this period, and out the far side with a healthy respect for business and a progressive risk/reward ratio.

1. Wealth creators have not all been wealth destroyers.

2. The destruction of wealth was not the sole preserve of business people, but also politicians, regulatory failure and a much wider pursuit of self-interest.

3. Businesspeople have been among the biggest personal financial losers in this crash.

4. The Government must lead from the top in helping to counter anti-business and anti-wealth sentiment.

5. People who run their own businesses work extremely hard to keep things going. Those in the sustainable wealth creation game, namely making real things for real customers, work even harder. They deserve to be financially rewarded for that.

6. Equally, people who have broken the law, misled agencies like Nama or transferred assets surreptitiously should have the book thrown at them.

7. Those who pursue quick financial rewards should realise they will have to pay a hefty price when it goes wrong.

8. Creating a pro-business environment does not mean letting private enterprise have everything its own way. Creation of wealth should contribute to building a fairer society.

I remember interviewing over a dozen top entrepreneurs for a book I wrote in 1997. They all said the greatest obstacle to business in Ireland at that time was begrudgery. By 2007, that had changed dramatically. I fear it may be coming right back on to the pitch again.

Irish Independent

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