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Obama won't bring all the jobs home

AS Machiavelli advised, you shouldn't put your faith in Princes. Much as I hate to break it to them, fans of Obama -- a prince as much by the nature of his profession as his character -- are in for a letdown. But not me. Having spoken to one of his key advisers last week, I am prepared to be pleasantly surprised.

Fears that the Democrats in office will revert to their old fashioned big government and protectionist instincts are, if this man is anything to go by, unfounded. Despite much "bring the jobs back home" rhetoric, this is unlikely to happen and even if it does, it will be slow enough to give us time to adjust. That's good news for both Ireland and the US: as well as 90,000 jobs here depending on US multinationals, some 70,000 US jobs depend on Irish companies.

One of the two key reasons that the 1929 financial crash became a slump was a series of beggar-your-neighbour protectionist measures that ended in tit-for-tat retaliation and a strangling of world trade. Unless we want the lights to go out all over the world once more, it is not something we'll do again.

But back to Obama. His election has given the US economy a boost and, in the short term, will be good for our exporters and for global economic confidence. That is because the success of his election campaign was, as it was for Clinton, down to his concentration on 'the economy, stupid'. His campaign advisor on that particular subject was Robert Shapiro. Also a former adviser to Clinton, Shapiro was in Dublin, on the same day Obama was being elected, to promote his book Futurecast 2020.

Shapiro agrees that the world's economies are unlikely to go down the protectionist road. "I think it would be very damaging and I think it wouldn't work. Markets have evolved past the ability of governments to impose protectionism in the way that they did in the Thirties," he says.

In Futurecast 2020, page 68 contains a revealing insight into how the new American administration views the Irish economy: "As the least regulated and fastest growing economy in Europe, the Celtic Tiger has . . . finessed its demographic shifts by sustaining higher birth rates and attracting large numbers of educated immigrants . . . if French, German and Italian elites could see Ireland as a salutary example, they might avoid some of the painful times that now await their societies".

For those here who want to use Obama's win to push an agenda of higher spending and taxes, it's a bitter blow. Not only is Obama's adviser praising us for doing the opposite, but he is holding us up to other European governments in this respect.

In only one respect is Obama a big government fan. Like his fellow Offaly man Brian Cowen, Obama is a fan of large infrastructure projects. But provided those projects are productive and cost effective, that is no bad thing.

Shapiro isn't uncritical of Ireland's economy. Our broadband penetration is, as he politely puts it, "low" and this needs to be dealt with "quickly". Communications Minister Eamonn Ryan take note.

He is also strongly critical of US policy to date. On previous US Federal Reserve chairman Alan Greenspan, he is particularly scathing: "Frankly everyone knew we were in a housing bubble. The whole world was in a housing bubble. The Fed could and should have taken measures . . . He was a great Fed chairman in the Nineties but his regime in the last four years of his term as chairman of the Fed was a failure". While not saying it directly, Shapiro is saying that the Republicans have been too loose on monetary policy. The Democrats are, in other words, going to revert to Clinton's policy of "tough love" on the economy. With emphasis on the adjective.

In other areas, he has words of comfort. With Democrats calling for US multinationals to be forced to pay tax on what they earn in low tax countries, like Ireland, our corporation tax regime looked to be facing a war on two fronts, against Brussels in the east and Washington in the west. If Shapiro's comments are anything to go by, the only real threat comes from the east.

"Senator Obama has not laid out any specific proposal. He has said he wants to look at the tax treatment of the profits earned by foreign subsidiaries of US corporations. This is a position that Senator Kerry took in the 2004 Presidential elections and a position that Vice President Gore took in the 2000 campaign. This has been a part of the dialogue in American politics for a long, long time," he says.

On the strength of that last comment, the idea will also continue to be a part of American politics for a long time to come. Long enough for Ireland to deal with what Shapiro says are the really important issues: "The important thing for Ireland is to. . . continue to invest in the things that really attract American and other foreign corporations to Ireland, which are the skill of the workforce, the quality of the infrastructure. Your broadband access rate is low. The government and business need to invest to raise that very quickly".

The current recession will, Shapiro says, be "relatively long and relatively deep" but the world will come out of it with most of the gains of the last two decades intact. So can Ireland. Provided, that is, that the Government weans us off dependence on multinationals, gets its broadband act together and so on. Provided, that is, that our government shows the same verve and vision that came from Washington last Tuesday.

Comments to www.marccoleman.ie Marc Coleman is Economics Editor of Newstalk 106 to 108FM.