Posted tagged ‘competitiveness’

In memoriam the Celtic Tiger

November 21, 2010

In the debates about current events in Ireland, it is often now suggested that the ‘Celtic Tiger’ was all an illusion and that it never really existed, or that if it did it consisted almost entirely of a sleight of hand connected with a property bubble and banking misconduct.

Without wanting in any way to take away from the seriousness of what Ireland now faces, that kind of perspective on the Celtic Tiger is seriously misplaced. Even after all the stuff we are about to experience, Ireland will be an immeasurably richer country, with a wholly different infrastructure and economic capacity, than might have been expected back in the early 1980s. The property bubble was not the substance of the Celtic Tiger, but rather an aberration that resulted from it. Until 2004 or so the bulk of our economic activity was in exports of goods and services, rather than trading in property or domestic consumption. You can trace the transition from this to the more recent unviable distortion of the economy by reading the annual reports of the National Competitiveness Council (which correctly identified what was happening and warned about it early on).

It is worth making this point in order to remind ourselves that not everything that we did, or even that our politicians led us in doing, was wrong. It is just that eventually we all lost touch with reality. But we can, and I suspect we will, return to a more viable version of economic success. Our ability to do that will not be helped by enthusiastically adopting a hugely distorted vision of recent Irish history.

Creative Dublin

May 12, 2009

It is probably not unfair to say that Ireland as a whole has always had an ambivalent perspective on Dublin. For some time now, in size and influence, Dublin has dominated the state, and certainly since partition (and the placing of Belfast in another jurisdiction in consequence) has been the only major conurbation. Of course there are Cork and Galway and Limerick and others, but without wanting to play down the importance and strong traditions of these places, it has to be said that of them only Cork could really be recognised internationally as a city, and even then it would be a small one (the definition of a ‘city’ being, under the terms of the 1887 International Statistics Conference, a town with over 100,000 inhabitants). But in terms of having critical mass, only Dublin could really be said to count.

Because of its size, together with the large scale clustering of government functions there, Dublin has been the country’s magnet for investment, for migration, and for wealth creation. This has of course produced a significant concentration of people, and over time the city’s quality of life was affected by infrastructure problems, social issues, and just general overcrowding. At the same time other parts of the country were experiencing problems due to population flight – going back to the 19th century at least.

So we have come to love Dublin and loathe it, to seek out its cultural attractions but despair of its discomforts, to admire its political clout and to resent it. So by the time we came to the current decade it had become the received wisdom that Dublin’s people, influence and wealth needed to be distributed around the country. We know about the government’s programme of decentralisation (which got a bad press but was not without logic); we also experienced a spacial strategy operated by economic development agencies, which at least seemed to involve an anywhere-but-Dublin approach to investment. But at the same time, the clustering in particular of so many higher education institutions in the Dublin area made it difficult to have an effective decentralisation of investment.

Last momth the National Competitiveness Council (of which I am a member) published its report Our Cities: Drivers of National Competitiveness, which placed some emphasis on the role of cities as drivers of competitiveness and creators of wealth. It recommended that the country should work positively with cities – and Dublin in particular – to allow them to be drivers of growth and competitiveness in these challenging times. By doing so we can engage the key aspects of national development that cities can help to deliver, including enterprise, connectivity, sustainability and attractiveness and inclusivity, using the key resources of education and research activities and health facilities in particular. In the meantime, driven by Dublin City Council and supported by the other Dublin region local authorities, the Creative Dublin Alliance has been formed, linking universities and colleges, local government and industry.

Dublin has a significant critical mass of Ireland’s higher education institutions, and these too must collaborate to reinforce the potential for the city to become the engine for national recovery. There is much that, between us all, we can achieve.

Are we competitive?

May 7, 2009

Tomorrow morning I shall be attending a meeting of Ireland’s National Competitiveness Council, of which I am a member. This is a government appointed body with a membership that is drawn from industry, trade unions, economics and other experts – as well as some senior civil servants in attendance. The Council advises the government on issues related to Ireland’s competitiveness. Perhaps I can underscore its significance by pointing out that it was pointing to a serious potential problem with Ireland’s economy long before anyone else was: by 2006 it was noting that we had ceased to base our economic growth on exports and were relying instead on domestic consumption and construction, and that this was unsustainable.

Over the past few years one of the recurring themes of the Council’s deliberations and reports has been the meaning of the concept of ‘competitiveness’. Previously it had always been assumed that, on the whole, competitiveness was to be found in lower prices and higher productivity – and indeed these are important elements. However, over the past decade Ireland has ceased to be cheap in any recognisable sense, while at the same time the significant national productivity gains of the 1990s had slowed down significantly. This elements of competitiveness still need to be brought under control. But we have also recognised that competitiveness has become a much more complex concept.

BusinessDictionary.com defines competitiveness as the ‘ability of a firm or a nation to offer products and services that meet the quality standards of the local and world markets at prices that are competitive and provide adequate returns on the resources employed or consumed in producing them.’ The National Competitiveness Council itself, in its 2003 annual Competitiveness Challenge report, defined it thus:

The ability to achieve success in international markets leading to better standards of living for all. It stems from a number of factors, notably firm level strategies and a business environment that support innovation and investment, which combined lead to strong productivity growth, real income gains and sustainable development.

The latter definition may betray a little the Council’s needs to accommodate the various interests of the groups represented by its members, but it was notable in introducing the concept of innovation as an element in the substance of competitiveness. We are no longer cheap, and we are unlikely ever again to be a preferred location for high volume manufacturing, but if we support and develop innovation indigenous to Ireland we have an opportunity to regain recognition as a competitive economy.

For this to be successful, it requires strong and well-funded universities, who are able to build up and maintain critical mass in areas of importance to the national and global economy. Universities, when properly developed, are magnets for and sources of innovation that can find a quick industrial application. In the decisions we take over the next while, we must ensure that we protect and enhance Ireland’s ability to prosper in global markets. The price of failure would be very high.

The road back to an exporting economy

March 28, 2009

The trajectory that led us to the particular circumstances we are now experiencing was becoming evident to some observers by the middle of this decade. It is interesting to quote what was said in the 2006 Annual Report of Ireland’s National Competitiveness Council:

‘While the economy has continued to grow strongly in the first half of this decade, the underlying impetus to this expansion shifted from the broadly-based, and export-led, growth of the late 1990s to a growth pattern that by 2005-06 had become entirely dependent on domestic consumption and investment.’

Of course other countries are experiencing the current recession also, as it is a global phenomenon; but Ireland’s position has been particularly stark. The problem for us is that we have developed a standard of living and a cost base that cannot be sustained on the back of domestic consumption only, as our economy is far too small for that. That fact was obscured for a short while by the abnormal volume of construction, but it was bound to become apparent to us sooner or later as demand for such levels of construction fell. So now we either need to scale back our expectations and living standards quite substantially, or we need to start selling our goods and services again in international markets. But here the problem is that what we were selling 10 years ago is now being sold at much lower prices by others; we are no longer competitive in those areas. So we need to start selling something new.

The goods and services we should now be exporting need to be much higher-value, and need to be innovation and knowledge-driven. We need to be offering new processes, new product design, new intellectual property to others who will then do the basic production. In short, if we are to become an exporting nation again we need to to support and develop the knowledge society.

The government has been right to support and fund high value research. We now need to make sure that this is being conducted in institutions whose overall funding base ensures sustainability.  This is the only realistic way out of the recession and back to prosperity for Ireland.