May 23, 2004

Ireland behind the veil

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More Irish secondary schoolgirls drive to school than cycle. This statistic captu res Ireland in 2004. It’s a far cry from the “We used to walk to school in our bare feet” stuff of our grandparents.


Schoolgirls eschewing bikes for cars reveals just how prosperous the country has become. What is driving this prosperity, and can it last? Crucially, on what does it depend?

To answer these questions, let’s take a bit of altitude and regard the economy as two specific worlds.The economy in front of the veil – the one you see in press releases – is the motor of the country. The one behind the veil, the one where most of us live, has a severe design fault.The extent to which Irish schoolgirls continue to drive rather than cycle to school will depend on whether the prowess of the motor outstrips the structural faults in the design.

In front of the veil is the glittering, successful world of the Intels, Dells and Microsofts that grabbed the headlines this week. It is a world of smart, well-paid workers with good career prospects. Most importantly, it is a world where `best practice’ applies. Best practice in organisation, production, management, technology, finance and all aspects of the workplace.

Best practice is not unique to multinationals. There are plenty of Irish companies in this league. It is the world of the business pages, company announcements and Davos.

Behind the veil is the place where we live. It is the dark side of the veil for many of us – whether we work in front of the veil or not.

It is a world that we run and administer, where the concept of best practice is not even entertained. It is the world of shoddy expectations, traffic hell, trolleys in hospital corridors and rip-offs. It is the Ireland that is disguised by Intel’s announcement this week.

Yet the fascinating thing is that for most people, Intel’s world and our world are one and the same place. Many of us leave our world at nine in the morning, slip behind the veil into the world of best practice and slip back into the shoddy world again in the evening.

But what happens to us when we move from the light into the darkness? Do we change? Are we not the same people?

For example, how can we explain that the workers in Intel or Dell can respond in minutes at work but spend hours trying to get home? Do we have frontal lobotomies when we leave work, or do we leave our brains behind?

Behind the veil, where we all live, we put up with things that we would be fired for at work.

Think about the waste of time that is Ireland’s traffic. Or the waste of money that is Ireland’s greatest rip-off – our ludicrous house prices. None of this would be tolerated in a competitive firm, so why is it tolerated in a competitive country?

If we can make Irish companies world beaters and make foreign companies here the most profitable of all their global operations, then the shoddiness of our real lives is not endemic.

Rather, it is a reflection of a lack of organisation. We are not biologically or genetically a chaotic nation, far from it. But we have allowed ourselves to evolve into a dual nation, not necessarily of rich and poor, but of organised and disorganised.

This disparity, commented on by many visitors who cannot understand why the richest country in Europe feels decidedly tawdry, can be explained by economics. Ireland excels at macroeconomics, but fails lamentably at microeconomics.

For 15 years the overall level of income has been rising rapidly. Budget deficit and debt ratios are healthy. Interest rates are low and the exchange rate is stable. Ireland gets top marks in the macroeconomic best practice.Why is this? Maybe because we do not control these things. Do you think this is a coincidence? Possibly not.

The reason that our macro indicators are all so positive and read well on the back of OECD and World Bank publications is because these are the areas which the government gave away influence over years ago.

The EU controls budget deficits, exchange rates and interest rates. Our income levels are boosted by the big three industries – computers, chemicals and pharmaceuticals – all of which exist in front of the best practice veil.
Ironically, by giving away competence over all the crucial levers of economic power, we also dispensed with ideology and emasculated the political system.

What is the point of having opposing political parties when the essential difference between a good and bad government is down to the management of public services?

Behind the veil we re-enter the tawdry, tattered world where “Paddy practice” reigns. At the micro level of organisational competence, we appear to be obsessed with entirely inappropriate battles.

Take for example the deregulation of Dublin Bus. The government appears to think the issue is ownership. If you change the owner, Seamus Brennan thinks, the bus service will improve. The unions too are obsessed with ownership. They contend that if you change the owner and introduce competition, the service will collapse. (Both are examples of straw man arguments put up and knocked down by the other side.)

Why not ask where the bus system is best? If it is France, then copy the French system fromtop to bottom. Why has the New York subway re- mained publicly owned, funded by pub- licly-backed bonds within the privatised culture of Manhattan? Maybe because it makes sense.

It is the best practice. Public transport is not supposed to make buckets of cash. Even the Americans see that the crux is not ideology but best practice. What about the row about private schools and universities? The issue is not about ideology. If it were, and you wanted to ensure fairness, there would be an overwhelming argu- ment for hefty fees in universities, because no fees are simply a way for the poor to subsidise the rich. The binman subsidises the doctor because the binman pays the university fees. If the consultant is not asked to forkout in later life he gets a free lunch, because the state pays for his fees,which enables him to make considerablymore than the average worker. But the most compelling argument for private universities is that they engender excellence. BeforeWorldWar II all the world’s top universities were in Europe.

Now they are all private colleges in the US. Why? Because theAmericans decided that their universities had to become cen- tres of excellence, financed by the private sector. American colleges have flourished, pushing the country ahead,while in Eur- ope our universities have stagnated.

The difference in achievement is now staggering. For example, Berkeley in Ca- lifornia has just fallen out of the American top 20 list of colleges – despite having eight Nobel Prize winners on its teaching staff.Youwould be hard pressed to name eightNobel Prize winners in the all the halls ofacademiaonthis side of the pond. Again, it’s not about ideology. It is about best practice. What is the best way to run a bus service, a university or a housing market? This is the question.

Not whether it is fair – if the result of the pursuit of fairness is a drive to mediocrity, congestion and underperformance.The choice is ours. How long do we want to continue living behind the veil?  


  1. Michael O Reilly

    David,

    You raised a very interesting question in your
    article, you asked the question why has Ireland become a
    wealthy country. I think many people in the country have
    also asked this question because deep down it seems to
    belie belief that we have become so wealthy and yet
    everyone can see so much incompetence around them. You
    also answered the question in your own article when you
    point out that our incomes were boosted by the big three
    industries of computers, chemicals and pharmaceuticals. So
    the shining stars in our economy and the basis of our
    wealth are foreign owned multinationals. Surely this is a
    very unhealthy state for our economy and country to be in.
    The computers and pharmaceutical products being exported
    out of the country may have “Made in Ireland” stickers on
    them but they are not Irish products in the same way as
    Kerrygold is an Irish product. These products were thought
    up and developed in other countries most notably America.
    At the end of the day we are merely manufacturing other
    peoples products rather than our own. Intel’s announcement
    last week may not be as rosy as it seems. Mary Harney was
    gloating about them investing 1.6Billion to manufacture
    there third generation chip here. But they are investing
    1.6Billion in their new chip, not in Ireland, some of this
    no doubt will end up in the Irish economy but the vast
    majority of it will be for the very expensive machines
    needed to manufacture it which will of course be brought
    in from America. Also it was estimated that the IDA may
    have given an 80 to 100 million grant as a sweetener but
    of course this is only an estimate because this
    information was not released.
    The government is addicted to bringing in
    multinationals because they get an instant hit such as
    last weeks announcement however they have a far poorer
    record in developing Irish technology because this won’t
    give them the instant hit. The benefits in developing
    Irish technology may not be seen for 10 or 20 years. I
    think that the IDA’s huge budget should be diverted
    towards developing Irish technology and Industry and away
    from Multinationals. The big grants they are giving to the
    multinationals should be diverted to Irish research and
    development. That 80 to 100 million grant would have a
    lasting impact if it was invested in this country’s
    technology. This is the only way I think that we can hope
    to maintain our wealth into the future. We should now be
    aiming to be like the Scandinavians who own their
    technology rather than the Asians who we are now trying to
    out produce and out compete. At the end of the day we
    can’t win against the Asians.

    Michael O Reilly

  2. Tom Farrell

    David,

    Your article goes to the core of the modern Ireland
    paradox. As someone who has lived and worked abroad
    extensively since 1993 but also lived in Dublin during 2000-
    2002 (and currently living in Finland), I have always been
    puzzled by this dichotomy. Your article paints compelling
    arguments for understanding the root causes. As well as the
    clear economic and governance factors, I believe a root
    cause often overlooked is simply that of cultural norms.

    Economic theory is certainly necessary but not sufficient
    in explaining ‘the state we’re in’. A classic argument
    often used is the income v wealth difference, i.e. it will
    take a considerable length of time (decades) before our
    high incomes enable us to accumulate a large stock of life-
    enhancing assets (good infrastructure, good public
    services, etc.). This simply doesn’t cut it – there are
    bucket loads of examples from other countries where a given
    service or infrastructure was implemented rapidly (e.g.
    motorway, stadium). Furthermore, as your article clearly
    states, many of our continental neighbours (and those
    further afield) have reams of lessons learned that we can
    re-use to shorten the critical paths as we embark on our
    nation building. Something that has always frustrated me
    endlessly is the myopic approach to some major initiatives,
    i.e. the ‘must be invented here’ approach which often leads
    to ‘Paddy practice’ (nice term!). Sadly, we fail to ask
    some of our nearest neighbours for their opinion on
    the ‘best practice’ despite the fact that their landmass
    and/or population and/or social makeup is even more
    complex/larger than our own (by magnitudes). It’s not as if
    we even need a best practice…a proven practice would be
    quite sufficient a lot of the time.

    So I believe the root causes can be fully understood when
    you combine economics with culture. I agree that we are not
    a genetically chaotic nation. However, I think the
    interesting point is to observe when we are organised and
    when we are disorganised. Probably for historical reasons
    that affect our psychological makeup, we will always hold
    our own (and often surpass all others) when we are in the
    spotlight on the world’s stage or in a ‘compare and
    contrast’ battle. Whether it’s on the international
    sporting playing field, on the world musical stage, bidding
    for multinational contracts, or simply hosting
    international events domestically (e.g. Special Olympics,
    EU accession weekend), we generally deliver best in class.
    How many times have we all heard and seen (and even done
    likewise ourselves!) the ‘Irish working harder abroad than
    at home’? Conversely, when we do something for ourselves
    that only we have to deal with in our daily lives, we often
    go down the road of the half-baked, shoddy, and tawdry
    solution. Why? Because we still have the remnants of Paddy
    DNA in our genes and the ‘shur, it’s good enough’ short-
    term mentality – road repairs must be one of the best
    examples of this mediocrity. Nonetheless, I am optimistic
    because I believe it will disappear slowly (albeit, more
    slowly than we want it to) over time simply because our
    modern lives will make us increasingly intolerant of such
    values plus we’ve seen things done properly elsewhere.
    Maybe our children’s children will look back and smile in
    amusement at our escapades…such is the pace of behavioural
    change (unfortunately).

    Tom Farrell

  3. Tom Farrell

    David/Michael,

    Regarding the whole multinational issue (GDP v GNP), I
    believe we have to start somewhere and our success with
    Intel et al ought to be celebrated. Empirical evidence is
    available that shows wherever there are ‘clusters’ of co-
    located companies (e.g. Silicon Valley, Cambridge,
    Helsinki), domestic firms do emerge organically and
    prosper. This is particularly relevant to the high tech
    industry. Our challenge is to rapidly leverage this cluster
    ecosystem and provide the right incentives (via appropriate
    governance policies) such that domestic firms (and the
    multinationals we host) can migrate to the emerging high
    value areas of their industries. If a nation of 5m Finns
    can produce a company like Nokia, there is no reason why we
    cannot do likewise (I, for one, believe we will have one or
    two major Irish technology success stories on the global
    stage within the next 10 years).

    Finally, if we frame our competitiveness in terms of cost
    leadership and competing with the Asians, then we have
    already lost the game. Likewise, if we frame our thinking
    in terms of ‘owning’ technology, we have also already lost
    the game. Most technology eventually migrates from vertical
    proprietary architecture (high margins in the short run) to
    horizontal open modular solutions (commoditisation in the
    long run in the absence of horizontal platform leadership).
    Just think about the car industry – in the nascent phase of
    the industry, the leading car companies manufactured
    everything themselves while today they simply assemble
    parts from their suppliers. So it’s not about owning
    technology – it’s about building industry knowledge,
    analytical experience, and gut-feel intuition that will
    allow us to predict the lucrative opportunities arising
    from a change in market conditions/circumstances (thus,
    allowing us to continuously renew the focus of our efforts
    and resources). In this sense, having large multinationals
    on our doorstep is a terrific asset for fueling our
    knowledge economy.

    Like the website…pity I can’t see Agenda (yet) on an
    Internet webcast from abroad though. Keep up the good work!

    Best Regards,
    Tom Farrell

  4. DavidMc Williams

    Tom, thanks for such insightful comments, you should be
    writing these articles for the sunday business post, not me!
    Cheers David

  5. Buy tadalis….

    Buy tadalis….

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