Tuesday, 20 July 2010

Caging Tiger-Think...

Caging Tiger-think key to Ireland's economic revival...

OPINION : Stimulus and mass job creation is a must as we leave behind crazy, jargon-filled days of boom and pursue a more concrete reality

THREE YEARS ago, it seemed Ireland was doing very nicely. And then suddenly it all changed. Our lifestyles were threatened; our wealth and dreams shattered. People had to try somehow to understand and come to grips with the frightening new reality of a rapidly deteriorating economy and a property market about to crash.

Jules Henri Poincare wrote: “To doubt everything or to believe everything are two equally convenient solutions; both dispense with the necessity for reflection.”

We have spent a lot of time since, necessarily so, reflecting on a continuous flow of appalling information about banks, developers, Nama, frozen credit, failing businesses, negative equity and a collapsing economy, accumulating in an astonishing and calamitous increase in unemployment. But unlike WC Fields’ comment about Philadelphia, surely they can’t let a country close down?

The issues have been and continue to be debated and rightly so, but at some point we must realistically endeavour to pick up the pieces and start implementing solutions to our problems. Isn’t it time to take the advice of Wayne Gretzky, the Canadian ice-hockey star who said “I skate to where the puck is going to be, not to where it has been”.

It is quite clear that we need to change some of our values and beliefs.

The guardians of reality have recaptured the Celtic Tiger but our thinking hasn’t necessarily moved on. To have any realistic chance of implementing solutions to our problems may I suggest we need to kill off the last vestiges of what could be termed “Tiger-think” and realise there is a vital need for change and the need is here and now.

Tiger-think includes, among others, the following sentiments: the “I’m entitled to syndrome”; the “why not first class syndrome”; the “I’m not responsible for it and it wasn’t my fault syndrome”; the “do nothing and it might go away solution”; the culture of enormous salaries/fees and expenses for the new elite, the well-connected, the golden circles and those in the know; the innumerable consultants’ reports, costing the State millions, a lot of whose recommendations have never been implemented; the “you can’t rush these things, they do take time syndrome” (the excuse for doing nothing); the “propensity to defend first and discuss later syndrome”, and the “let’s have another quango solution”.

The Tiger years often fostered a tolerance of mediocrity in performance, an explosion in costs and a serious deterioration in our competitive position. To progress, we need to go back to basics and call a spade a spade and not a “new-generation agricultural implement for turning earth” (Tiger-think).

In the Tiger years, in the race to lend ever increasing, ridiculously large amounts, banks became seriously overweight in lending to the construction/developers segment. Not happy to keep up with the Joneses, the banks sought to overtake their rivals in the race to lunacy lending. When reason is consigned to the back-burner, the results are often dangerous and chaotic.

The years of plenty from 2003-2007 are gone and not likely to return. In the last few years we have been transfixed with a reluctance to spend and deflation is still a worry. But most things come back to unemployment levels.

While the first quarter of 2010 has seen a very welcome increase in exports and some lift in spending, will these be enough to solve our problems? It is one thing to stabilise the numbers of unemployed people but it is quite another matter to seriously reduce the numbers. We have 450,000 people unemployed now and the figure could get worse. We need jobs for the present as well as the future.

We will benefit from a recovering world economy (if it overcomes the sovereign debt crisis) but surely we can’t wait for the rest of the world to help trade us out of our difficulties? What is our plan B if the world recovery stalls or fades?

What new thinking and practical implementable steps can we take to help ourselves into a recovery? There probably won’t be any meaningful recovery in anything until we make serious inroads into reducing the number of people unemployed.

We must become passionate about creating jobs, with an utterly single-minded focus on jobs. A can-do attitude on jobs instead of a “let’s hope so” attitude. Of course it is absolutely necessary to continue to cut Government expenditure but the deficit reduction programme would be helped also by a reawakening economy. But where will these jobs come from? Should we not evaluate and consider all options large or small, be positive, and drive on?

If we could produce locally an additional amount of the type of goods/ services that are being imported into this country there would be a reasonably quick impact on jobs. Costs are being reduced here now and in these different circumstances are new opportunities emerging?

If costs can be reduced more to help restore our competitiveness, why can’t we make progress with import substitution? What wasn’t possible previously for companies, might be more possible now. What needs to be done to make it happen?

Craig Barrett, former chairman of Intel, said in reference to Ireland: “You need to grow your economy from within and that will come from start-ups and risk-takers”.

The Government must provide the conditions to allow and encourage existing firms to expand and many new start-ups to get going. Can operating costs be made more attractive to encourage these entrepreneurs? We are in extraordinary times and the old responses will not be enough.

Can we, subject to EU and other regulations, consider incentivising small and medium-sized companies to achieve increases in exports? Could certain State-related operating costs, incurred by companies through an increase in exports, be charged at a reduced rate, the rate of reduction being dependent, for example, on the percentage increase in exports achieved by the company? If achieved, this would help in improving the competitive position of our exporters. We need to permanently improve our core cost base for home market businesses.

But, again, so much is dependent on unemployment levels. Vitally important though the economic figures are, there are other considerations. There are the human costs of unemployment, including people’s dignity, confidence and ambitions.

However difficult the circumstances in which we find ourselves, we must make every effort to ensure they don’t choke the enthusiasm out of thousands of people by condemning them to the dungeons of unemployment; the shorter the stay in the dungeons the better.

It has been argued that a stimulus programme will just encourage higher imports in a small open economy like ours. That could happen, but I believe that in our current circumstances it is unlikely to be of major effect. Another objection to a stimulus programme is often that “we don’t have the money”.

However, if a stimulus programme were adjudged to be useful by the authorities, the money would be found. Where there’s a will there’s a way.

For a start, the economist Colm McCarthy, in his report last year, highlighted very substantial potential savings. Would it not be a good idea to convert some of these possible savings into reality and invest them in good productive opportunities?

Any stimulus given to the economy is better than none and such a programme could easily be phased in, the effects carefully monitored, with the amount of the programme dependent on the timing and strength of the world’s recovery and on the success of the stimulus on the local/national economy.

All parts of this country will not benefit to the same extent in any recovery but every county has, without doubt, a number of beneficial and necessary projects, manageable in size, which would provide good returns to the economy. The multiplier effect could add a serious further boost.

We live in extraordinary times. People are gripped by apprehension and the sovereign debt problem is further exacerbating the situation. The world is stumbling from one financial crisis to another.

I have outlined some ideas for possible job-creating opportunities and how we might implement some solutions to help ourselves in any recovery. This calls for a passion in locating and pursuing jobs and will require an utterly single-minded focus on job creation.

As Johann Wolfgang von Goethe advised many years ago “whatever you can do or dream you can do, begin it. Boldness has genius, power and magic in it”.

Report by VINCENT O'SULLIVAN - Irish Times.

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