March 9, 2003

Investing in land will send us hotfoot on the road to poverty

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If Ireland continues to plough money into land, incentivised by bizarre tax breaks and hyped by an all-pervasive industry peddling the virtues of land, we will be immeasurably poorer in 50 years time than if we invest now in science, technology and innovation.

Just look at financial and economic history. One of the great mysteries of economic history concerns what happened to China.Why did Europe conquer the seas,why did Europe emerge in 1500 as the powerhouse of the world and what happened to the advantage that sophisticated China had over the rest of the world at a time when we were still cattle rustling?

In 1400 China was so far ahead of Europe that anyone would have forecast that London would become a trading outpost of the Chinese Empire rather than Hong Kong being part of the British Empire. The list of Chinese inventions a few years before Columbus set sail is impressive: the wheelbarrow, the stirrup, the rigid horse collar (to prevent choking), the compass, paper, printing, clocks, gunpowder and porcelain.

The Chinese had water-driven machines for spinning hemp 500 years before the Europeans. In the 11th century the Chinese were churning out 125,000 tons of pig iron – a figure that Britain only surpassed 700 years later. Yet something happened in China and it never realised its potential on the world stage.

It appears that China failed to commercialise these inventions.One of the major reasons for this was the fact that the mandarins or scholars who ran the society never allowed ideas to disseminate down to the artisan class.

The mandarins believed knowledge was power and maintained a 700-year tyranny of academic snobbery. So they invented the clock, without encouraging clockmakers. They invented paper and printing, but didn’t educate people to write.They invented the compass, but failed to allow merchants to travel the seas to trade.

The mandarins believed that agriculture and land were superior to commerce, so money was ploughed into land, making it more productive and expensive. China had land price booms, bubbles and troughs, whereas Europe was noted for innovation, profits and trade.

These lessons are crucial for Irish competitiveness. My China syndrome was sparked by three apparently unconnected events this week.

First, I chaired an academic conference on science and economics.

Second, this week’s Young Scientist exhibition attracted thousands of scientifically talented youngsters.

Third, it was revealed that Irish investors had ploughed over €3 billion into the British property market (not to mention the huge amount invested here) in the past few years.

All three circumstances are related. The conference was an eye-opener. A few years ago,while flirting withthe more academic side of economics at the Central Bank, I was perplexed to find that economists spent an inordinate amount of time writing difficult articles for obscure academic journals that were read by a tiny audience of other academics.

The people who sat in judgment on the content of these journals – the pompously titled `editorial board’ – seemed to me to be more interested in humiliating young academics, tripping them up on esoteric technical issues, rather than encouraging ideas. Therefore, all the pressure on academics was (and still is) to impress their peers with their cleverness.

To progress in academia, scientists and economists have to publish more and more to a narrower and narrower audience.

Each publication brings them further up the academic ladder and further from the public.

If ever a system was designed to make scientific enquiry irrelevant both commercially and socially it is this.

Yet this is the way some of our best brains are judged, ending up knowing more and more about less and less. If the objective is to be the cleverest boy in the clever club, well, then so be it, but such petty vanity should not be allowed to dominate academia.

In contrast, for society and academia, the objective should be to democratise learning, making it available and comprehensible to all. This demands getting the ideas out there into the commercial field.

Instead we have a strange situation where the mandarins have taken over the asylum, and great Irish invention is not getting to the commercial stage and not getting paid properly. Not surprisingly, science does not appear like a smart career move to students.

Might the lack of career transparency explain why all our young scientists disappear? Every year,thousands of teenagers spend huge amounts of time and effort entering the Young Scientist competition. What happens to them all?

Clearly they do not go into the sciences. Maybe because they see the snobbery involved in academia? Maybe because they see that the market does not reward scientific effort? Maybe because the education system bores them after the age of 15 with its obsession with learning rather than thinking and enquiry?

Many thousands of schoolkids, whose imaginations are sparked by Newton, Watts, Crick and the like, end up in jobs like marketing, for example. Obviously, the market tells them to forget the science and learn how to flog houses instead.

This is where the government should get involved, tinker with the market, enthuse and encourage young scientists by making science lucrative.

How would you do this? We only have to look to the last piece in the jigsaw: the great Irish land obsession is driven by tax favouritism.

We are told that the reason Paddies invest in land stems from a post-colonial fixation with a few acres or bricks and mortar. Nonsense. The real reason is simple: land has been made tax-friendly.

Land absorbs huge amounts of capital and crowds out investment in other areas such as science and innovation.Think about the tax breaks for landlords and homeowners.Why subsidise a totally unproductive asset?

This is the paradox of property: it generates profits without productivity only because, like gold, it is an entirely speculative asset.This makes it inherently less stable, and the tax breaks increase that instability, leaving land subject not to small fluctuations in price but to large, epoch-making booms and busts.

So we have very expensive land, which is crippling the younger generation of first-time buyers, while real scientific innovation is left to wallow.

Science is too important to be left in the hands of the sleeveen politicians that thrive in university departments.

If Ireland wants to be competitive, we need to foster our own talent. We need to get the most out of a world where the ability to translate science into commerce is the key to wealth.

We can no longer depend on tax breaks for multinationals or cheap labour; we must innovate and be entrepreneurial.

For starters, we could reduce the tax incentive to own land, and apply a bit of fiscal imagination to fostering science – moving, as Einstein said, from perspiration to inspiration. Otherwise, medieval China shows us what can happen to economic sprinters that confuse speed with distance. 


  1. Ray

    Dave, I don’t know where you find all these ancient
    references for your arguments and ideas about the world
    today, but they are brilliant. This one in particular
    highlights the long narrow and dark corridor that is our
    educational system.

    Who’s to blame for the lack of imagination in our schools?
    We’ll its not just the system, it’s the parents aswell. So
    many kids are sent off to schools every day drilled with
    the advice of their parents to listen carfully and learn
    all you can. I know for the most part the parents have
    their kids best interests at heart, but all they are doing
    is sending them off too learn the lessons that snobby old
    farts at the hierarchy of acedemia thnik they should learn.

    In some parts of the system there are teachers who have a
    vison of what kids should learn. They have the ability and
    vision to teach their subjects in a way the lights up a
    class room and the subject. They can even introduce
    different methods of dealing with disruptive students that
    doesn’t instill hatred of that teacher in the student, but
    serves to teach them a lesson. I was lucky to have had one
    good teacher in my time that thought me lessons in the
    subject but also in attitudes and behaviour in general.

    The children in all levels of the education system need to
    be encouraged to think creativley. I believe that this
    generation is too used to the guaranteed job when they
    leave school. It might not be the best job in the world,
    but if you leave school today you are going to able to pick
    up something if you want to.

    But what will happen if the economic climate turns colder?
    are the students of today going to be able to handle the
    icy waters. Maybe the students of the 70′s and 80′s came
    through the system better prepared for such times. They
    didn’t have the luxury of being able to walk into some form
    of employment. They needed and had a survival instinct that
    is inherent in the majority of imigrants that land in
    Ireland today. Maybe it was that survival instinct that
    helped drive the new industries in Ireland over the last
    decade. But is there enough people with the same qualities
    in the system today to deal with the uncertainties that are
    out there on the economic front? I think the lack of
    creative thinking in the educational system along with the
    easy money that has been available to this generation
    ensure a hard landing for the unpreparied.

  2. michael o reilly

    A very interesting article and very true. The main
    reason as you have shown in your article why students are
    shying away from science and technology in ireland is the
    lack of visibility of secure and quality employment on
    graduation. The rewards are not there for all the hard
    work you have to put in and this is especially so in
    Ireland. Many of our graduates end up working in the
    multinationals in not hugely rewarding roles. Most of the
    multinationals don’t carry out a huge amount of
    development work. Ireland acts as a manufacturing and
    distribution base for american technology products to
    continental Europe. The “Made in Ireland” sticker is
    really just a flag of convenience, the reality
    is “Developed in USA”.
    This is the key weakness in the Irish economy we
    have very few Irish technology companies and therefore not
    much development and innovation. This means that there is
    not a huge demand for our top graduates in science and
    technology. The government is largely ignorant of science
    and technology. Its main strategy is to get get american
    hi-tech companies to locate here and then jump up and down
    when one does. However they have done precious little
    about trying to encourage innovation in Irish technology.
    Even the words “Irish technology” seem strange because we
    have very little that we can apply them to.

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