Smart economy plan ‘flawed’

THE Government’s smart economy policy is fundamentally flawed and lacks ambition, according to UCC economist Eoin O’Leary.

Mr O’Leary points out that the Government’s objective is to target high-technology sectors and source innovation by commercialising science and technology developed in universities to boost competitiveness and national prosperity.

“This policy is fundamentally flawed in assuming that a government or its agencies can decide on the sectors and businesses in which Ireland will be competitive and that academics can play a central role in business innovation.

“The main difficulty facing policymakers is that an innovation driven economy requires a different policy mind-set than the one that delivered the Celtic Tiger. In that hugely successful era the prevailing mind-set could be characterised as was one of active intervention,” he argues.

He said the most important policy was low corporation tax, which made Ireland a tax haven for multi-nationals and that industrialisation by invitation was a policy to fast-track Irish economic development through state intervention.

“The idea was to embed the multi-nationals in the local economy with the result that clusters of indigenous businesses would appear around them,” he said.

He said that while this approach was hugely effective in delivering thousands of jobs there are strong concerns about the failure of multi-nationals to be embedded.

“A successful strategy would result in resilient clusters, in which as businesses close down, including the multi-nationals themselves, new start-ups emerge organically to replace them. Typically, this is not what has happened when companies such as Dell in Limerick close down.

“Instead, there is a clamour for politicians and state agencies to set up task forces to look for replacement industries. As a result the IDA pipeline is as relevant now as it ever was. If the strategy was to be deemed a long run success there would now be no need for a pipeline.”

He believes there has been an increasing politicisation of the market process where only the so-called smart, high-technology or knowledge-based businesses need apply.

“The fact that the Green party’s membership of the coalition government has changed the smart economy rhetoric to that of a green smart economy is testimony to the superficiality of enterprise policy thinking.

“The effect is likely to be a waste of increasingly scarce tax-payers money on initiatives of doubtful value but also, and perhaps more damagingly, discrimination against existing and potential entrepreneurs in wealth creating sectors not favoured by government,” he said.