We need a new economic plan to build local strengths

For Ireland to reach its economic development potential over the next 20 years, Irish policymakers need to undergo a change of mindset. 

Priority should be given to developing critical masses of internationally competitive indigenous enterprises. To do this involves seeing economic development as a bottom-up organic process as opposed to the existing over-centralised view. It requires that we design fit-for-purpose city regions, towns and rural places and that control and responsibility for enterprise development be decentralised to elected authorities in these places with tax raising powers.

The present Government is planning for Ireland 2040 through the National Planning Framework (NPF). Planning over 20 years ahead requires a deep understanding of the drivers of Irish economic development for the past 40 years. We need to build on our strengths but learn from weaknesses. We need to face up to the fact that the recent crash revealed policy weaknesses that cannot be ignored.

Of course, we must also face up to threats such as Brexit and corporation tax competition and actively search out opportunities.

Unfortunately, the Government’s current thinking on the NPF fails to address the enterprise sectors and the places which will drive Irish economic development and the governance arrangements required to fulfil Ireland’s economic development potential. This reveals three inter-related national problems: Weakness in developing indigenous enterprise, failure to see places as drivers of economic development, and a lack of institutional learning.

Ireland’s weakness in developing critical masses of world-class indigenous businesses has featured since the 1950s. Unlike most other developed countries that had no choice but to develop on the back of indigenous enterprise, we could turn to foreign-assisted enterprise. By 2000 these businesses, many of which were world class, were a permanent feature. During and since the crash they have performed very well. We now have internationally competitive areas, including pharma, information and communications technology (ICT) and finance, which are all dominated by foreign-owned enterprises. Others — food and tourism — are largely indigenous, and both underperform.

In policy terms, the dominant mindset is that the IDA delivers economic development top-down through its pipeline. The result is that politicians and central government have always seen Irish regions as being about redistribution, rather than development. This has been manifested in endless and meaningless revisions of regions and haggling over city boundaries that are wholly inadequate as city regions.

There have also been recurring policy mistakes and system failures that have undermined our ability to reach potential. While these problems are grave, they flow from policy mindsets that are deep-seated and slow to change.

However, it is never too late to plot a new course. Small changes at first may set in motion more fundamental reform. We need to view economic development as a bottom-up, organic process that taps into local people as best-placed for harnessing local potential to build concentrations of successful enterprises.

In addition, we should strengthen existing concentrations in food and tourism and build new ones. The result will be more sustained prosperity in decades to come.

These ideas will be debated at a Policy Forum: Re-thinking Irish Economic Development to be held in UCC tomorrow.

Eoin O’Leary is from the Competitiveness Institute, Department of Economics, Cork University Business School.


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