Using the Irish model in vain

It absolutely amazes me when people study the Irish model of economic growth and the use it to support their own view of the world. The Left will say it was the billions in EU subsidies. The Right will say it was tax cuts. Educators will say it was the free university education. Economic developers will tout the IDA and its innovative approach. Or they might say the billions in tax incentives and grants were key.

I read in the TJ that a Toronto-based consultant is coming to Saint John to head up an initiative. Here’s a quote from the lead consultant:

“What we’ve been looking at very closely is the Irish model of growth,” said [Dave] Hardy, whose firm has helped manage growth in other communities that have undergone rapid economic expansion. “Ireland liberalized tax laws and really put a push on education and quality of life – the kinds of things we’re pushing here.

Now, let’s be crystal clear here. Mr. Hardy. Cutting taxes is not unique. Many countries do it. Liberalizing trade policies is not unique. Free education is not unique. Pushing quality of life is not unique.

The only thing – here me on this – the only thing unique about the Irish economic miracle is that Ireland led the world in foreign direct investment – by far – for almost two decades. Many years in the 1990s Ireland attracted more private business investment than Canada – a country seven times larger.

That is the only truly amazing thing about the Irish model.

So for a Toronto consultant to come down here and talk about “liberalized tax laws and really put a push on education and quality of life” will just be another distraction like all the distractions before.

Until New Brunswick can attract -at least its share – of global business investment – the rest of this stuff is just distraction.

Sure, I realize that there is an interdependency here. You need workers to attract investment. You need good education and quality of life to attract workers. I realize all of that.

But what annoys the crap out of me is that we work on all that other stuff and ignore foreign direct investment attraction.

Saint John will have success. But what is at the core of this success? Billions of investment. That’s the core. And that’s what needs to happen in Moncton, in Fredericton, in Miramichi, in the North.

I’ll leave you with this. From 1999 to 2003, the height of inward investment into Ireland, there was $106 billion (USD$) of inward foreign direct investment into that country. A country that is about 6.5 times larger than New Brunswick.

In addition, the vast majority of investment into Ireland was employment intensive unlike an LNG plant, or a refinery or Lepreau II which combined will be billions in investment but only maybe 1,000 jobs or so.

How about billions of investment in animation or life sciences or aerospace or auto or green energy or IT outsourcing or medical tourism or financial services back offices?

Here’s my worst case scenario for New Brunswick. Restated.

Irving builds Refinery II.
NB Power builds Lepreau II.

We get through the construction phase and have about 1,000 net new jobs.

Meanwhile, the forestry sector fizzles. The mining sector gets a little momentum but limited. The call centre industry goes to the Web and we lose thousands of jobs.

The NB government distracted by the good looking GDP #s for a 4-6 year period forgets other eocnomic sectors. So we miss the boat on every other potential growth sector.

It’s 2015 and we are still up to our ears in Equalization, the construction workers that came back to build Lepreau and Refinery II are gone back to Alberta and we are back into the same old cycle we have been mired in for the last 25 years. Out-migration. Traditional sector decline. Increasing dependency on Federal transfers.

Remember. We already have a Refinery and a Lepreau and while those have been important economic tools would anyone say they were the anchors of the Irish style economic growth in New Brunswick of the past 25 years?

That would be silly. And that’s what they will be saying in 2015 if we don’t start to understand the bigger picture here.

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0 Responses to Using the Irish model in vain

  1. nbt says:

    “What we’ve been looking at very closely is the Irish model of growth,” said [Dave] Hardy, whose firm has helped manage growth in other communities that have undergone rapid economic expansion.

    I don’t mean to be skeptical (yes I do!!), but what region or regions is he [Hardy] speaking of? The Ontario I know is inundated with plant closures, corporate welfare and high taxes. Not exactly rapid growth measures.

  2. Anonymous says:

    I agree with everything that you said and I will add the financial services industry which kicked the whole thing off. The small matter of the Peace process clearly helped and the Irish are looking for a Clinton win to kick on their economy further. The economists in Ireland are complaining about a mere 4.5% growth this year but give me that ahead of what we have here.
    One other thing I will correct you on, David, the Republic of Ireland (the part where the Celtic Tiger operates) is not 6.5 times larger than New Brunswick. The Republic of Ireland is 5,000 sq kilometers SMALLER in area than New Brunswick with a population hovering around 4 million people (including approx 500,000 immigrants). Compare this population count with during the famine years (approx 8 million) and New Brunswick’s population migration can be put in prespective.
    It is very easy for someone to quote “the Irish model” or the China model or any model they wish when they arent backing it up with hard statistical data and being allowed to go unchallenged. I commend you for doing it here. Maybe it would be worth doing it in the TJ next week.

  3. mikel says:

    The problem is what you say in your first paragraphs, then forget about in your second. Lots of places have ‘foreign direct investment’, hell, most african countries have been awash in FDI for centuries.

    What is UNIQUE about the Irish model is that it is, I can’t state this lightly, A UNIQUE IRISH MODEL. But again, we can go back to numbers, and remember how Ireland also leads in child poverty, etc. So don’t underestimate people’s intelligence, they know that ‘what is best for the business sector’, is NOT ‘what is best for everyone’.

    But again, there is nothing inherently wrong with FDI, it depends on the FDI. For example, I guarantee that you are about to see more FDI-they are called ‘public private partnerships’ and they come about when government opens up its health care and educational sectors to private investment.

    I read a study about a year ago that showed the VAST majority of FDI is NOT ‘new investment’, it is simply investment that ‘buys out’ public investments. And that is NOT always good news, in fact it is usually bad news.

    I’m not splitting hairs here, we know you are an ED guy and we know that ED is seriously misaligned in NB to certain powerfuls sectors, however, that shouldn’t let you get away with talking about the irish model as though Ireland were heaven on earth (I’ve been there, its not, in fact Irish immigration to Canada is way up, and I know many Irish who left because Ireland ‘is not Ireland any more’) and that FDI is the reason for it, and that it is the ‘de facto’ reason for it.

    First, of course, you yourself have said you need the POLICIES to get the FDI here in the first place. We’ve seen it in Nova Scotia, most recently in the film and industry sectors, and NB should immediately have crunched some time to either work WITH Nova Scotia, or else find a way to keep that investnment in NB. Instead, they all panicked, and for all that has happened, they appear to be panicking still and simply accepting that since there wasn’t a huge industry there anyway, then at least they won’t be missing much.

  4. David Campbell says:

    Mikel, much of what you say is true. Luxembourg has very high FDI but it is just money changing hands. In addition, a large foreign buyout is also FDI but no new jobs necessarily.

    So, the best thing to do is go to the IDA website and download their progress reports. They actually track the number of jobs attracted by their organization and the amount of money they used to attract those jobs. They track by sector and they list the companies. It is very clear from this data that Ireland has attracted hundreds of multinational firms that have put financial services, call centres, R&D centres, manufacturing facilities, etc. in Ireland and hired now several hundred thousand folks in mostly good career jobs. That’s on the ground, real information – not abstracted FDI or GDP numbers.

    I will restate here; however, that Microsoft in Ireland now pays more corporate tax in that one country than all NB companies combined.

    So, I believe that a good investment attraction strategy can provide not only good jobs and attract back people, but can actually provide the tax revenues needed to be a compassionate society.

  5. mikel says:

    I wasn’t talking about Ireland, I was talking about New Brunswick. But again, Ireland has some very unsettling characteristics that have accompanied economic growth. Its true they don’t ‘necessarily’ have to do with one another, but FDI often has the effect of lowering living standards-New Brunswick’s joining to Canada was proof of that.

    However, the question is of the policies though. The IDA makes a big point about ‘its people’ being the root of its success. To a large part that is true, in order to even go to university in Ireland, while it is ‘free’, you also need to be able to speak three languages, one of which needs to be french. This means the ‘bilingual’ nature of the workforce has a big impetus, which brings us back to the educational system, which is danced around in NB. It is not free, it is not intensive in sciences, and it does not have a lot of success with languages. For example, a call centre in St. John recently advertised for two languages, but one wasn’t french but spanish.

    But therein lies the rub. How do ‘we’ get the policies to create the opportunities?

  6. nbt says:

    If we are one thing in this region, we are definitely compassionate. Which is why many able bodied NBers can stay home and watch dog the bounty hunter and still collect enough cash to live.

    And I can see why they do as call centre jobs are nothing more than a headache for an expanded welfare check.

    Oh that reminds me, I hear ICT is hiring 150? Things must be looking up again. Either that, or they only make big announcements when their creators party’s back in power.

  7. Leisure Society says:

    The loss of our culture is not worth a hundred-thousand call center jobs. The NAFTA/SPP gang have brought us nothing but McDonald’s coronaries, call-center carpal-tunnel syndrome and leaded Walmart toys.

    You can’t really talk rationally about a global system that fails to price-in risk on sub-prime mortgages then cries like a baby for bailouts.

    You want to do business with countries that back their currency through military force and rely on never-ending exponential growth in production and consumption just to remain solvent?

    This while fat-cats take home billions a year in “compensation”… The greed of the market knows no bounds – they’ll corrupt everything they touch in the pursuit of bottom dollar.

    If you think we can compete in markets with billions of Asians working twice as hard for a quarter the money without loosing our character – you’re either dreaming, or unconcerned as to the effects of mass corporatism on the general populace.

    Hope those stock options keep you warm this winter.