Here is a car. In fact, it’s quite a special car. It’s the Duesenberg Simone, a one-off car produced in 1938/9 by the American car manufacturer Duesenberg. Duesenberg was like the American Rolls Royce in the 1920s and 1930s, producing luxury cars that would cost over €1m in today’s money, but has since disappeared as a manufacturer. In 1938 it was commissioned by the French cosmetics and perfume magnate Guy De La Roche to design a car for his lover, Simone. And in 1939 the one-off car was finished and delivered toFranceon the eve of the Nazi invasion of that country. The fate of the car and the two Americans who delivered it is not known. There is a film in there someplace.
Ireland never had a totally indigenous car industry but we did have a substantial Ford plant in Cork for decades in the last century until it was closed in 1984. We don’t make cars any more, unlike the Swedes, Poles, British, French, Germans, Italians, Belgians, Dutch, Czechs, Spanish, Finns, Danes and others in Europe.
Wouldn’t it be great if Ireland could produce a car?
Here is a gun. In fact, it’s quite a special gun. It’s the Daewoo K11, a gun which is designed to fire two projectiles, conventional high-calibre rifle bullets and the magazine at the back fires high explosive air-burst projectiles. Not just that, but the device on top of the gun allows the operator to “tell” the air-burst projectiles where to explode, and when they do explode, they kill anything within 5 metres. So if this gun existed in WW1, it would have rendered trenches useless, because the operator could “tell” the air-burst rounds where to explode and you would explode them just over a trench and kill all the Johnnies within 5 metres. The K11 costs just over €10,000 and has at least one Western competitor. See how the rest of the world is advancing?
Ireland doesn’t have an indigenous arms industry, though apparently we do make bits for a few American/British companies. Mind you we are a neutral country with armed forces which number just under 10,000. But so is Switzerland, home to many arms manufacturers.
Wouldn’t it be great if Ireland could produce a gun?
Here is a mobile phone. In fact, it’s quite a special mobile phone in that it is designed to facilitate secure text messaging. Canada doesn’t have much of a presence on the global stage for manufactured product, but here in RIM’s Blackberry, it is a world leader.
Wouldn’t it be great if Ireland could produce a mobile phone?
During the week, the Central Statistics Office released its Industrial Production and Turnover report for April 2012, which provides a sense of what Ireland is making today.- of the €30bn of annual “Value Added” production, €5bn is in food, €13bn in chemicals and pharmaceuticals, €4bn is computer, electronic, optical and electrical equipment, €2bn in “other manufacturing”, €1bn in paper products and €5bn spread across a whole range, from clothing to uncategorised machinery. There is no breakdown by indigenous enterprise and Multi National Company (MNC) but the understanding is the majority of non-food production is ultimately controlled by MNCs.
So what is Ireland’s industrial policy and how do we plan to establish industries that are commonplace amongst our partners in Europe? And how do the industrial policies of the political parties stack up against each other? What plans, there are none. Of course you could argue that industry should be left entirely to free market entrepreneurs who can start business on a small scale – after all, old man Bart Beretta originally made his shotguns in his home workshop five hundred years ago – but if Ireland is to establish major industries, it will need joined up thinking that integrates education, enterprise and initial state support. And there is no sign of these policies being developed at all by political parties who still innocently think that most jobs are created by building roads and attracting yet more Foreign Direct Investment (FDI) – both construction and FDI are important, but isn’t it curious that indigenous industry is being totally ignored?
Of course, establishing major industries from scratch is a tall order, but it might be that Ireland can take a more modest approach initially. What about joint ventures with other manufacturers. Surely the Chinese or Indians are looking for European manufacturing bases? And speaking of Indians this is a rich Indian who also happens to be Ireland’s richest man, Pallonji Mistry.
The source of 82-year old Pal’s wealth? Tata motor vehicles in India. Might Ireland’s richest man consider an expansion of his family’s business to a location which would allow it avoid EU import tariffs? As one of Pal’s fellow countrymen once said in a different context, “that would be a splendid idea”
An Taoiseach Enda Kenny is reputedly a fan of the US president John F Kennedy – for his inspiration rather than his boudoir antics – and President Kennedy famously told the American people in 1961 that it was his aim to put a man on the moon by the end of that decade. Would it be beyond the ambition ofIreland to have a car industry or indeed any other major manufacturing industry by the end of this decade, or will we still be sitting around on our asses waiting for the next Yank company to be swayed by our low corporate tax rate to set up an office here?
Reblogged this on Brian M. Lucey.
“but isn’t it curious that indigenous industry is being totally ignored?”
Hasn’t indigenous industry always been ignored? As outlined in Conor McCabe’s “Sins of the Father” the entire industrial focus of Irish governments since the creation of the free state has been, export live meat to Britain or later to attract FDI, and then only to service that FDI with property, accounting, legal representation and medical care, with pretty much no thought to even setting up industry which would supply that FDI with raw/processed materials.
As per hoping for our great and golden billionaire business geniuses (GGBBGs) to help us out (eg. Eamon Dunphy’s oft repeated dream of Taoiseach Michael O’Leary or NWL’s hope for Mr. Mistry) if these GGBBGs are indeed such and great golden deserving geniuses of industry, why would they need to wait for our sluggish state leadership to call upon them at all? They have the money, the ability, the connections, and the opportunity, do they need permission too? Why do we have amongst (if not “the” my memory of Seamus Coffey’s presentation on investment at the DEW Conference on Irish Economic Policy from last January is a bit hazy now) the lowest levels of private sector investment in Europe?
Hang on. We had a pretty long and deep detour into import-substitution,, didn’t we? Which went pretty badly, yes?
“Wouldn’t it be great if Ireland could produce a car?”
We have done so in the past – Delorean, Shamrock, Chico and TMC Costain (which gave rise to the US-produced Panoz Roadster). More at http://www.carsireland.ie/blog/hidden-history-the-irish-motor-industry/
and for anoraks at
http://www.boards.ie/vbulletin/showthread.php?t=2056361147
As a follow up comment, I wrote a published report back in the 1983 about developing indigenous high-tech industry as a follow up to the ground-breaking Telesis Report (which could do with a dusting off).
Chris Horn, a well-known “tech champion” and member of the Innovation Taskforce (2010), identified so many similarities between recommendations in the 1983 and 2010 reports that I have concluded that Ireland’s industrial policies have evolved at a snail’s pace.
More at http://www.planware.org/briansblog/developing-high-tech-businesses-in-ireland.html
Theyres also the otherside of the equation. The protected sectors of medicine, law, public service, energy, construction (until recenty) give a risk free high life to a lot of those involved, most of these people dont want to, or aren’t brought up to even consider trading it for a risk full life as an entrenpenuer. The other talented are hoovered up by the NMCs.
I think Michael Hennigan at Finfacts is alone in drawing explicit attention to the unreality of Irish GDP (and GNP too to an extent) figures given the explosion in IP-based tax structuring activities mainly by US multinationals since the mid noughties. This is most apparent in multinational cloud computing-based services companies but in fact is now a major part of Ireland’s ‘value proposition’. In this regard Ireland is closer to the propositions of Singapore, Switzerland and Luxembourg than those of the mostly de-industrialising Western countries you recite. Provided that this activity produces payroll and consumption-based tax flows and we retain our sovereignty I think its a pretty good model.
However the real threat is the accelerating outflow of technology and innovation know-how from developed Western economies to the BRIC’s and Chindia in particular. Because such flows lead to an irreversible loss of whole industries (first commodities such as textiles and steel, then products such as domestic appliances, motor parts and electronics; now aircraft, munitions, medical devices and optics…) it has the effect of equilibrating average wage rates between West and the BRIC’s. Hence there is negligible growth in the West.
Ireland is not a player in this global realignment and (as its sterile SSTI continues to demonstrate) its government lacks even the capacity to understand the trends and issues involved never mind formulate strategy. There is negligible cultural understanding of engineering, design and manufacture among the non-travelled Irish and no prospect of significant product engineering accomplishment, ever. Our strengths are in food and services.
The proof of these statements may be found objectively by analysis of trends in patent output by Irish assignees over the decades.
As an investor my attention would be focused on Irish mini-multinational ICT businesses who assiduously develop IP. These are not capital-intensive, can market their services internationally at low cost, and do not suffer from Ireland’s lack of an industrial heritage as this is irrelevant to ICT. They benefit from the same business friendly environment that attracts US FDI and can source IT development resource at value pricing anywhere in the world.
@bossbutterer
“As an investor my attention would be focused on Irish mini-multinational ICT businesses who assiduously develop IP. These are not capital-intensive, can market their services internationally at low cost, and do not suffer from Ireland’s lack of an industrial heritage as this is irrelevant to ICT. They benefit from the same business friendly environment that attracts US FDI and can source IT development resource at value pricing anywhere in the world.”
Very true and correct. Unfortunately, the pattern has been for these indigenous high-growth businesses to get taken over and become FDIs and/or move their operations to lower cost economies.
I’ve never understood why trade sale exits seem to irritate. Early stage investors need an exit to recover their money time and labour. IPO’s are expensive, laborious and rarely possible anymore and MBO’s are almost as bad. Provided early investors (including enterprise agencies on behalf of the Irish State) manage their stakes to ensure there is some upside in the face of ongoing dilution, whats wrong with trade sales?
As for moving operations elsewhere to follow value or for strategic reasons, that is a reality in a globalised world, especially in ICT and most other services businesses where geographical proximity to ones customer are essential. Given that the Irish State broadly refuses to procure its own services from indigenous Irish and prefers to buy from non-Irish FDI firms, it is hard to argue that following the money beyond Irish shores is ‘unfortunate’. Irish ICT firms globalise almost from infancy as they rely on the web for early internationalisation, which is in fact a major reason why they survive and grow better than non-ICT businesses. An EI report in 2008 here: http://www.software.ie/Sectors/ISA/ISA.nsf/vPages/Member_services~Knowledge_base~indigenous-software-ecosystem-report-executive-summary-25-06-2009?OpenDocument
summarises the vital statistics of the ICT sector including the fact that 75% of turnover is export-earned, compared with 45% for indigenous EI-supported businesses overall.
There is an apparent conflict here. On the one hand some feel it is sad that the most energetic and capable Irish entrepreneurs either leave Ireland to build business, or build businesses which later leave. On the other hand those that follow that path are more successful for themselves and their businesses than those that remain in the small sheltered Irish market. Is it not more honest and mature to see Ireland as a nursery for breeding businesspeople, researchers, professionals and creatives who if they have ambition will leave the nursery to prosper elsewhere?
It seems to me, if anything, during the noughties there was a problem with a rising proportion of over-nourished sons and daughters of Ireland who preferred to rent-seek within a bloated public sector and connected sheltered professions, often contributing little of societal value. That is now beginning to be corrected thank goodness.
@bossbutterer
Having our indigenous growth companies taken over by foriegn firms is infinitely superior to having none in the first place so I couldn’t agree more with you. I was only lamenting that it would be very difficult to create and grow an indigenous business like a Nokia in Ireland.
“,,, preferred to rent-seek within a bloated public sector and connected sheltered professions, often contributing little of societal value. That is now beginning to be corrected thank goodness.”
I hope you are right on this. The internet has really been a huge game changer in terms of facilitiating expansion by SMEs. My modest business has sales in about 110 countries. Prior to the Internet, it had sales only in Ireland and the UK. Really amazing, the way in which Net has opened up innovative opportunities for new products, markets, channels, structures etc. Bit like the arrival of the telephone in terms of impact.
Give everybody a shovel ’cause you guys need to go back to the land,
Countries that makes cars(or shovels) and advanced phones have metal depositis and Universites.
Countires that are used for short term gain have low corporate tax regimes.
Get some tools, build a giant food court in the midlands, invite some tourists.
Ireland as any kind of industrial force?…striding the world stage no doubt with spades in both hands, punching above it’s weight….just like before.
I think you should make Ireland the greenest large farm/farmers market in the world and stop pretending you could even begin to compete as an industrial nation.
Put another way…
There will be a day that being a large scale, green, food producing nation will be the height of intellectual, engineering and artistic endeavor.
You guys will miss it trying to build factories like everybody else.
And what country actually “is” a farm if not Ireland.
“Hello McFly” as some yank might say
Car factories in particular are subsidy-lovers. We’re better off without them. Peter Hennessy has a story about the British Treasury in the 1980s trying to work out which of British car factories or the Royal Opera House were more subsidised measured in pounds per square foot. We dont need car factories (and we dont need a Dublin opera house either).
Trade Unions.Problem !!!!
There are a few issues to consider when we discuss indigenous industry in Ireland:
(1) What’s in it for the chattering classes? Unless they’ll benefit, then the Irish Times, RTE, and the main political parties won’t take any interest.
(2) Ireland has no natural resources – no gas, oil, coal, minerals, etc.
(3) The industrial revolution never came to Ireland – hence, we have no history or legacy of being industrious (in more ways than one)
(4a) We are geographically isolated from Europe, so any manufactured goods we might export will have a transport premium. Similar to all our imported goods.
(4b) English is our first language – grand for exporting to Britain, but it means other European countries have to speak our language to deal with us. (This is more a general problem – languages should be emphasised more in schools. It would open up a whole new world for Ireland, beyond UK, USA, Canada & Australia).
(5) Agriculture could be modernised and we might take advantage of the clean, green Oirish brand. But who’s going to take on the farmers and the IFA? (See point #1 above also).
(6) Tourism is another possibility, but being a remote location will always make things difficult – as will a poor internal transport system (unless you drive).
(7) Software and ICT? Everyone’s doing it now and the FDI companies have whatever expertise is still in the country.
There are several others, but these are the issues that immediately spring to mind.
I’m not absolving the political parties from having an industrial policy – I just think they need to look beyond their usual bog standard ideas. Denmark, for example, is a country that is supposedly comparable with Ireland, in terms of natural resources, size, and relative remoteness.
The political parties and the civil service might do well to study the systems the Danes use. But then, the old language barrier thing gets in the way, I suppose. Ah well, let’s just look at what the UK and USA are doing again.
The premise of this entry is that Ireland has a weak productive capacity and that the state should rectify by this by picking some winner industries and building them up from scratch. Of course we should pick heavy industries like guns and cars because other industries are not real enough. This line of logic was often articulated in the 1980s. It was also tried in USSR and other failed entities where the state would devise an industrial plan and then fail monumentally and repeatedly.
The truth is that Ireland is an amazingly productive country generating huge (and increasing) exports equivalent to GDP, with a massive trade surplus, with huge GNI and GDP per capita. Our problem is that our current state expenditure is too high for our income. Each year this deficit is being reduced.
State industrial policy is to minimise the cost and delay in creating companies and transacting business in Ireland. This has been successful – see surveys on costs of doing business. Corp taxes are low which has led to a clustering of IT and Pharma MNCs. Education policy has led to the most educated workforce in Europe, Commercial rates are half what they were. Wages are still falling.
“The truth is that Ireland is an amazingly productive country generating huge (and increasing) exports equivalent to GDP, with a massive trade surplus, with huge GNI and GDP per capita. Our problem is that our current state expenditure is too high for our income.”
This is an evergreen fairytale I’m afraid. It simply reflects profit-shifting activities by multinational companies who attribute profit on their operations in many other jurisdictions to their Irish subsidiaries using internal accounting transfers involving royalty and licence payments. In other words much of this cash involves no Irish ‘production’ whatsover. Shorn of this ghost production (which is difficult to quantify precisely) the corrected GDP and GNP statistics for Ireland are very substantially lower than the published figures. This in turn puts a very different complexion on a whole range of macroeconomic ratios relating to Ireland. Among these, it would probably support your assertion that the slice of spending attributable to the public sector is excessive.
@bossbutter
FYI, here is a letter of mine published in the Sunday Business Post (13th September 2009) on this topic:
The CSO’s recent review of economic and social progress for 2008 incorporates EU-wide comparisons based on GDP (Gross Domestic Product) and GNI (Gross National Income). For Ireland, these measures differ by about 14 percent. In many situations, the lower GNI is the most appropriate measure of Ireland’s output as it excludes the huge profits generated by multinationals. However, comparative studies by the EU, OECD, IMF etc. are based on GDPs which for many countries are very close to their GNI values. Consequently, their findings over- or understate Ireland’s true performance as illustrated by the following examples derived from the CSO’s review and covering the 27 EU states:
# Ireland ranked second place in terms of purchasing power per person based on GDP but fell to fifth place based on GNI.
# For capital investment, Ireland jumped from 16th place based on GDP to a much more favourable 8th position based on GNI.
Social protection expenditure based on GDP placed Ireland in 20th place. This improved to 15th based on GNI.
# For public expenditure on education, Ireland ranked 15th based on GDP but rose to a commendable 7th place for GNI.
# Ireland’s ranking for public health expenditure jumped from 17th place when related to GDP to an above-average 11th place for GNI.
Surely, domestic and international studies should assess Ireland’s performance based on GNI as well as GDP, even if only in footnotes. For example, the projected exchequer deficit for 2009 is 10.8 percent of GDP and extraordinarily high by international standards. If based on GNI, it rises to 12.7 percent and points to an even more serious position.
By contrast, I believe that the oft repeated’profit-shifting MNCs’ story is a data-free fairy tale. MNC activities are taxable in Ireland at the same rate as Irish companies. Many tech/pharma MNCs employ >1,000 staff with consequent income tax revenues in the 10s of millions and similar staff salaries contributing to the economy. MNCs buy from local suppliers, lease property, pay rates, utilities and so on… Royalty payments count as imports and are deducted from GDP. Google for example has thousands of staff in 3 large city centre offices and data centres serving a larger market than the US operation. This is no brass plate operation. The taxes paid and the profits booked are commensurate with the quality and number of the staff employed, The core IP was not developed in Ireland, so there is no surprise that it is not taxed here and does not appear in GDP figures.
I did not assert ‘that the slice of spending attributable to the public sector is excessive’ rather that government spending exceeds government income and that this is a problem. This is true regardless of the size of GDP/GNP.
State spending is not all or mostly public sector pay. Welfare payments make up a higher proportion. Tax reliefs are another large component.
@Des, “By contrast, I believe that the oft repeated’profit-shifting MNCs’ story is a data-free fairy tale. MNC activities are taxable in Ireland at the same rate as Irish companies.”
Ah… no, Des. Not quite. I paid more tax in Ireland than Google did. You must have heard of the “Double Irish and “Dutch Sandwich”?
Typically, US companies arrange for the rights to exploit intellectual property outside the United States to be owned by an offshore company. This is achieved by entering into a cost sharing agreement between the U.S. parent and the offshore company, in the terms of U.S. transfer pricing rules. The offshore company continues to receive all of the profits from exploitation of the rights outside the U.S., without paying U.S. tax on the profits unless and until they are remitted to the U.S.
It is called “The Double Irish” because it requires two Irish companies to complete the structure. The first Irish company is the offshore company which owns the valuable non-U.S. rights. This company is tax resident in a tax haven, such as the Cayman Islands or Bermuda. Irish tax law provides that a company is tax resident where its central management and control is located, not where it is incorporated, so that it is possible for the first Irish company not to be tax resident in Ireland. The first Irish company licenses the rights to a second Irish company, which is tax resident in Ireland, in return for substantial royalties or other fees. The second Irish company receives income from exploitation of the asset in countries outside the U.S., but its taxable profits are low because the royalties or fees paid to the first Irish company are deductible expenses. The remaining profits are taxed at the Irish rate of 12.5%.
The addition of a Dutch Sandwich to the Double Irish scheme further reduces tax liabilities. Ireland does not levy withholding tax on certain receipts from European Union member states. Revenues from income of sales of the products shipped by the second Irish company are first booked by a shell company in the Netherlands, taking advantage of generous tax laws there. Funds needed for production cost incurred in Ireland are transferred there, the remaining profits are transferred to the first Irish company in the Cayman Islands or Bermuda. If the two Irish holding companies are thought of as “bread” and the Netherlands company as “cheese,” this scheme is referred to as the “Dutch Sandwich.” The Irish authorities never see the full revenues and hence cannot tax them, even at the low Irish corporate tax rates. There are equivalent Luxembourgeois and Swiss sandwiches.
@DKD, “Education policy has led to the most educated workforce in Europe,”
Really?
For those who had never left Ireland, the mantra used to be that O’Connell Street was the widest in Europe, The Phoenix Park was the biggest in Europe and we held the world’s biggest St. Patrick’s Day party. Oh…. and we won’t mention the world’s biggest ship that our Northern cousins once built.
How about teaching Mandarin Chinese in our schools instead of Irish and science and technology instead of fairy tales about virgin births?
yeah, ‘most educated’ is a vague phrase. oecd measures educational attainment annually. 48% of 25-34yr olds have reached 3rd level in Ireland vs 34% in the EU. Also we have a large cohort of population in this age group. There are many other choices of metric but they show similar results (top or high ranking). You can argue that Irish education is of lower standard than elsewhere even if they have the certs, although the uni ranking stats do not bear this out. Irish & religion could be replaced with algorithms and Cantonese.
http://www.oecd.org/dataoecd/61/2/48631582.pdf
@Des, the Times 2012 university rankings are here. TCD is 117 and UCD is 159
http://www.timeshighereducation.co.uk/world-university-rankings/2011-2012/top-400.html
It’s not dreadful for a 4.6m population country but it’s not stunning either.
That survey lists a dozen universities for Germany (pop 80m). TCD ranks higher than 7 of them. UCD ranks higher than 6 of them. Not bad but could always do better.
Ireland’s university performance is hampered because we have 2 real universities and 5 runner-ups, leading to a fractured, distribution of talent. 2 universities is plenty for a country of 4 million. e.g. 7 economics departments. in different corners of the country is nonsensical and wasteful.
The most credible world ranking of schools performance, showed the US above Ireland. Both were ‘average’.
However, in the US this was broadcast loudly through all media as a failure.
A slightly inferior result for Ireland has people saying “sure we have the best education system in the world”.
Maybe it is a question of standards.
US “fails” link here
http://www.huffingtonpost.com/2010/12/07/us-falls-in-world-education-rankings_n_793185.html
Mandarin Chinese has and is being taught in 105 schools for over five/six years (in the 26 cos.) as have science and technology for much longer. Maidir leis an nGaeilg, síscéalta agus creideamh daoine eile, is cosúil go bhfuil an méid céanna le foghlaim agat ansin chomh maith.
@ASM,
Would you like to substantiate your assertion? Because, according to UCD in 2009 there was NO Mandarin Chinese courses being taught in Irish schools.
http://www.ucd.ie/news/2009/12DEC09/021209_mandarin.html
Re Irish education and world rankings
http://www.guardian.co.uk/news/datablog/2010/dec/07/world-education-rankings-maths-science-reading.
Trends matter too and Ireland is in decline from an already weak position.
Reality please.
BTW….. US is already ahead of Ireland, and improving . But everyone already knew that.
@whoshot the tiger,
Your link actually shows that UCD figured SIX schools had run Chinese courses. (The take on it was different in Munster.)
I’m not a party person, Fianna Failure or a Green included, and I don’t want to blow their trumpet. They and their successors both seem to put on the same show.
(I’ve been on the road from very early this morning surviving on naps; yes, self-employed; hence the delay in replying.) Five to six years ago, at the outset of this ‘project’ I’ll call it, 105 schools in the Munster – Leinster area started learning Chinese. One is a Gaelcholáiste, which means that 104 were English medium schools. (I worked in something else at the time. I asked the question of those involved, so I distinctly remember the figure given: 104 + 1)
What you’ve read recently, 2012, throws in the figure of 22 schools:
http://www.irishtimes.com/newspaper/finance/2012/0508/1224315732697.html
The 2009 take on it in Cork, teaching 805 students in 24 schools:
http://www.ucc.ie/en/AsianSchool/News/NPCDelegationtoUCC/
Same but different, mentioning the last academic year 2011-12:
http://www.ucdcii.ie/index.php?c=project&t=project_detail&id=3&PHPSESSID=79053362f7a7024eb781c8ca0d3eaa9e
Positive meanderings at the time on the matter:
http://www.ncca.ie/en/Publications/Reports/Modern_Languages_in_the_Primary_School_Curriculum_Feasibility_and_Futures.pdf
The people I spoke to some five/six yrs ago were teaching and were very enthused. I’m sure, having looked into the matter now in 2012, that they’ve become less enthused in the interim. Is anyone enthused by the latest 2012 take on Chinese in Irish schools?
It’s a cultural problem, an inability to carry through; something that a fluency in Chinese is not going to solve. The core problem of the Irish people themselves must be solved if they wish to progress.
By the way, the Chinese have more problems than the Irish (what with American black boxes and the largest building bubble in human history).