THE stunning success of the IDA in attracting high-powered investors to Ireland is also its weakness: the next IDA CEO will need to target middle and rural Ireland to avert chronic social division.
Last Tuesday I was in the amazing Cashel Palace Hotel, Co Tipperary, giving a presentation on the future of the Irish economy. My prognosis was that we are heading for deepening and ever more dangerous divisions. And the setting for my presentation spoke volumes.
Frequented by the cream of Irish and global business leaders, this magnificent hotel symbolises a resilient, high-tech multinational side of our economy where resources are plentiful. But to be near a train (I like to work while travelling) I was staying in nearby Thurles. The contrast between the two towns is shocking.
It is fair to say Thurles has not only not recovered from the pandemic, but it never even recovered from the global financial crisis.
This is not just a visitor’s impression but backed up by hard data from the Central Statistics Office (CSO). Thanks to multinational success our latest GDP figures show a strong 6.3pc annual growth (let’s call that the ‘Cashel Palace hotel economy’). But retail sales – driven by the domestic economy – fell by 6.6pc (Let’s call that the ‘Thurles town centre’ economy).
After eight successful years as CEO of the IDA, Martin Shanahan – a Kerry man – has done much to direct FDI into rural and regional Ireland. But as I wrote in my book, An Economic response to Covid-19, much more needs to be done.
To see just how successful the IDA has been in overall terms, consider that a staggering €163.2 billion in inward investment entered the Irish economy in the last year before Covid-19, 2019.
That was 5pc of total investment in the EU, or five times more than justified by Ireland’s share of EU population. That the CSO last week also reported a staggering 2.5 million in employment shows the overall benefit of this.
But nominal incomes are becoming divided and inflation is pushing more indigenously employed workers into poverty and inability to afford accommodation. Our ‘Thurles’ economy is becoming bigger.
Between 2015 and 2019, as Director of Financial Services Ireland and then Head of International Business Development with Ibec, it was a pleasure to play a small part in the IDA’s success.
I worked with Martin Shanahan, Mary Buckley and Kieran Donoghue – all three of whom hail from outside Dublin – to promote not just Ireland but rural and deprived inner city Ireland. This relates to places like Limerick, Cork and inner city Dublin.
We did this through collaborative events with major job creators like Citi and Northern Trust and realisable but ambitious jobs targets (that are now being reached). We even created an apprenticeship model to give more people in rural Ireland the skills to work in FDI industries.
But there is much more to do. This work needs to be continued at a much higher level. As tax revenue figures show, we are too dependent on multinational corporation taxes.
This is because FDI is not filtering through sufficiently to the domestic economy. As a result our debt-to-GDP ratio – which is, on paper, bearable – overstates our ability to service our debt. By closing the gap between our GDP and Gross National Income (modified) in the ‘Cashel’ and ‘Thurles’ sides of our economy, we will improve the regional equality of incomes and make our debt more fiscally sustainable.
There is also an essential political need for such a strategy. When Martin Shanahan became IDA CEO, Ireland needed to show a new, more globalised face to the global business world. Together with the passage of the marriage equality referendum, Martin communicated that brilliantly.
But with that mission accomplished, the growing economic divide compels the IDA to focus on the home front. Besides which, a range of developments – the Katherine Zappone saga, public concern about global “vulture funds” and big data centres – are all creating a sense that economic and business policy is too dominated by global elites to the detriment of the “plain people of Ireland”.
SMEs also increasingly complain how they are being priced out of labour/property/professional service markets and sidelined by policy makers by a richer and more influential multinational sector.
For that reason it is vital that the next IDA boss is not seen to be a corporate lobbyist. And it is no longer acceptable that the official language of the State (Irish) now has equal status in the EU Commission but the IDA website isn’t even available in Irish.
As someone who has worked with the IDA to promote multi-lingual events where Mandarin, Italian and German were spoken – and as a native Irish speaker – I remain crestfallen that the IDA fails to respect our native language, while expecting Irish people to respect other languages and cultures.
And as the 2020 general election showed, our political system is fragmenting dangerously between the perceived elite powerbrokers in the corporate world and public sector and the mass of people in Ireland.
Whether the next IDA CEO is a woman, man or other is immaterial. What matters is that a toxic sense that economic success is leaving swathes of the country behind must not be allowed grow legs. Otherwise the alienation of young people in the 2020 general election could be repeated, this time amongst over a third of a million SME owners.
Marc Coleman is Founder of Octavian Economics www.octavian.ie and a former senior manager with Ibec, Economics Editor of the Irish Times, and European Central Bank economist. He has authored five books.