June 25, 2008

Don't panic! Smart tactics will get us back on our feet

Posted in Celtic Tiger · 45 comments ·

Don’t panic! The worst thing we can do when faced with an economic slump is to lose the head. Yes, the economy is moving into recession — but this has been known for a while. Anyone who cared to listen to a taxi-driver, let alone look at the hard numbers, has been concerned for a few months now. We are where we are, and now it’s time to formulate a plan to get the economy moving again, so that a serious situation does not become a crisis.

Given that the European Championship is reaching its climax, let’s use a football analogy. As we’ve seen time and again in the Championship, teams are faced with difficulties. When a team goes two down and the clock is ticking, the manager needs to remain calm. The first objective is to get level — which might demand one set of tactics and one type of player. Once that has been achieved, winning the game might demand a different tactic, that could involve bringing a certain type of player off the bench and sacrificing another player for the sake of the team. The consummate manager understands the short-term tactics and the medium-term strategy to get the best out of his resources. He also understands the opposition’s strengths and weaknesses and how best to exploit these. Critically, he stays calm and offers leadership.

To prevent a difficulty becoming a crisis, the manager must also be honest with himself about the weaknesses in his team. He needs to rise above the hype to better marshal his defence and organise his attack.

When faced with an economic challenge, the imperatives are similar. The first thing our manager — in this case Brian Cowen — must be is honest about the extent of our difficulties. Honesty is not easy at this juncture. Most of us want to massage the truth and avoid it.

In difficult times, clarity, rather than nostalgia, is needed. In the same way as nostalgia for an ailing team can be exposed at the highest level — as it was with France in this championship — loyalty to an economic model that has outgrown its usefulness can be fatal. The French coach should have seen that the likes of Henry and Makelele were not the players they were two years ago, but he ignored the signs, believing that the old magic could be rekindled.

Similarly, the Irish binge is over and the present recession was not flagged properly because the economy’s early warning signals were ignored. Huge increases in personal debts, massively overvalued houses and a lamentable fall in competitiveness were dismissed as being part of a “new paradigm”.

So we could have reacted two years ago by reigning in spending and raising taxes. In addition, the banks could have been brought to heel by reminding them that they operate here under a license and that bad behaviour, like reckless driving, comes with penalty points. We all understand the basic idea that too many penalty points will result in your license being revoked. The banks should have been similarly disciplined by the Central Bank. But we didn’t do any of this and now there ‘s no value in blaming or pointing the finger.

So, like a good football manager, let’s first be honest with ourselves. How bad is this recession likely to be? Will it be as bad as the 1980s?

There is a very compelling argument to say this downturn will be worse than the 1980s. Ireland is about to experience a “debtors’ recession”, where enormous personal debts saddle people with huge monthly payments to pay for things that have already been bought and fun that has already been had. During the boom, we became the most indebted people in Europe and our banks operated a scam that can only be described as “industrial scale loan-sharking”. This money will have to be paid back — at considerably higher interest rates than it was borrowed.

In the 1980s, the government was the debtor; today, it is all of us. At least in the 1980s, you could emigrate and escape paying the higher taxes that were necessary to pay back this national debt. Close to half a million of us made that choice. Now there’s nowhere to run, nowhere to hide. Personal debt follows you around; national debt can be shaken off!

In addition, the most indebted generation are the young generation of workers who bought into the property market in the past five years and find themselves trapped. Therefore, the very generation that typically drags an economy out of recession through hard work, is carrying a “debt monkey” on its back.

Normally, when a country finds itself in such a dilemma (as the US also finds itself today), it devalues its currency and prints money to inflate away the debt. The Federal Reserve is doing this at the moment, which is why Irish people find it cheap to shop on 5th Avenue.

In the early 1980s and the 1970s, we also tried this. Mortgage debts were eroded by almost a decade of double-digit inflation. People who took out large mortgages in the early 1970s, found that inflation had reduced them progressively by the late 1980s. This safety valve is not an option for the present generation of debtors.

This means that, if we are being honest, we’re faced with a period where our bills are likely to be expensive and the available cash we’ll all have to cover these is likely to be modest. With that in mind, what are the options?

We are now like the football team that was coasting, but suddenly finds itself two down. We have to take remedial action to get back in the game.

The first thing we need to do is cut costs. Obviously, this implies an immediate pay freeze and significant cuts to public expenditure. This is not because the people and services involved are any more culpable than anyone else, but it is because the State can’t afford them. When your revenues fall, something has to give. By reducing government costs, the State sets the example for the rest of the country and a few years of austerity will make us competitive again.

Germany is a good example of this type of economic management. After the post-unification bubble, it took the Germans six years of retrenchment to regain competitiveness. Today, German companies are once again world-beaters.

If we do this, we’ll pull level and vow, “never again”. Never again should we be enthralled by the illusion of easy money in property and never again should we allow vested interests to hijack our economy.

The next part of our strategy is to win the game. We can do this by learning from our mistakes and adopting best practice from elsewhere. As Jack Charlton did, we should devise a game plan that suits our talents, not anyone else’s. This will demand less accounting and more vision, plus an amount of risk taking.

The best mechanism to achieve lasting economic progress is the market, not the State. Bureaucrats can’t pick winning businesses; entrepreneurs, on the other hand, can.

Therefore, the State has to facilitate and create the environment for Irish entrepreneurs to invent a new Irish model whereby people are incentivised, not penalised, for taking risks and brainpower is recognised as the most significant comparative advantage we have. The objective should be to create a European Silicon Valley in Ireland, with an Irish flavour.

We’ve done it before, with our world-class multinational industries, and we can do it again. The message now is game on, don’t panic!

  1. Malcolm McClure

    David: Sometimes you seem to vacillate between being a Harbinger of Doom and a Texan High-school Cheerleader, complete with high-kicks and pom-poms.
    All good knockabout stuff, but not really very informative about economic realities.
    No discussion of the ESRI report? Are we still one of the wealthiest countries per capita in the world? Please provide us with some glimpse of the current economic situation, as seen through your economic monocle.

  2. MK

    Hi David,

    The football analogy is useful: I would suggest that most of the people (ie: the players) do not trust the manager nor the management staff/team any longer, and perhaps the manager and his colleagues are culpable of why we were 2-0 up or perhaps thought we were when in the dressing room at half-time but now suddenly find ourselves 2-4 down. The manager and his team perhaps could be honest with himself and resign, but like football managers, they usuually wait until they are kicked out.

    The other thing about honesty is we could say that such and such a player is crap, but that wont incentivize them or motivate them. We can be too honest.

    If brain-power is our comparative advantage, collectively we have done a bad job of using it and have allowed the malaise to occur. I agree that there is no point on pointing the blame now, but some review should take place so that the systemic faults can be rectified so that the malaise could not present itself again or at least be recognised and mitigated. There has to be lessons learned. I’ve mentioned the Central Bank, you’ve mentioned them above, indeed you’ve worked there at one stage iirc. Dare we setup an Oireachtas commitee to find out where it all went wrong? Do we set-up Oireachtas commitee questioning the Central Bank ala what the Fed have to do, and also have it in public, or is this taking place and I’m not noticing it?

    As for the suggestion of creating another Silion Valley, well it doesnt have to be like that. We can be good at other industries as well (as the Germans are, and the Japanese). Building is doing CRH no harm. We may or may not have a vertical niche. Indeed, diversity is a good defence mechanism as even in Silicon Valley they have had major depressions as well, and much worse than Ireland has witnessed or will witness, fingers crossed.


  3. JN

    Sorry to be smart, but Sillicon Bog doesn’t quite have the same ring to be honest and why are TV3 still showing “How to be a property developer” on last night? Is this part of the lest we forget movement or are they taking the proverbial?

    Anyway, quite how we got from a forecast of 3% growth to negative growth in 6 months really should be examined and fingers should be pointed. We are where we are because no-one takes responsibility for their actions and there are no consequences (at the top) for making monumental errors of judgement. Heads should roll!

  4. David:
    The State/IDA/Enterprise Ireland, does need to facilitate a new environment for Irish entrepreneurs and investors. Take the panic out of the market place by finally moving forward with great ideas. Like it did for foreign investment since the 80′s.

    To invent a new Irish model, from developing and designing wave power, wind power and most of all our free resource; OUR BRAINPOWER. We could be flooding Europe with our energy!

    Is it possible to use our land to grow large quantities of quality food again?

  5. B

    The State is only interested in big bang American investments. They could not give a flying shite about smaller companies because they don’t grab the headlines.

  6. dermopj

    As the Dutch say “If we had Ireland we would feed Europe,If the Irish had Holland it would be underwater”.

  7. Paul

    Irish entrepreneurs are unfortunately treated like lepers by Government bodies.

  8. Al

    Now that everyone accepts that the dark clouds on the horizon are “for real” we need to tread carefully.

    In all the years of the “Smurfit school of Business” and all the other bastions of Third level Entrepeneurship how many businesses (with some level of a global presence) have emanated?? Not many that I’m aware of.

    Yet the soundbyte “knowledge based economy” is being bandied about.

    Many many millions have been pumped into research in the country with (in my opinion) limited return – I’d be absolutely delighted to be corrected on this by the way, hope I am wrong.

    How come those two kids from Limerick (16 and 18) managed to sell their idea for over a million……….yet I’m not aware of the (many) fledgling software research projects in our 3rd level institutions yielding similar offers. Why???

    My main point is that whatever we have done over the past 10 years (regarding the commercial development of intellectual capital) has yielded nothing of significant consequence.

    Before we start ploughing in more millions (to the reserviors who have already delivered little) I think a review (or at least defined deliverables/more accountability/clearer metrics etc. etc.) are URGENTLY required.

    Whatever we research/support/fund needs to have a clear goal of delivering “stuff” from which money can be made. Not everything will deliver but surely there is a better way to do things then what’s happened in the past (or are there a load of global Irish concerns that sprouted up over the last 10 yrs that I’ve missed??)

  9. John Q. Public

    Maybe Cowen should launch a massive campaign to attract venture capitalists and multinationals over here. That might do us some good in the short term only though.

  10. B

    What is measured is managed. We needed to look at what other Tiger Economies do or did. What we did do is look up our own arses and after long deliberation declare we are unique.

    We learned practically nothing from the boom other than the fact that there are far more stupid people than we could possibly imagine.

    If we want a “World Class” airport we need to copy Incheon airport in South Korea, Public transport in Copenhagen or Singapore and health from Cuba or France.

    What we do actually is let the lunatics in Government pick the shittiest most useless and expensive “solutions” without sanction or question. We KEEP on electing them and we KEEP getting the same old horse shite out the other end.

    I think that pouring massive amounts of money into R&D with no metrics or return is stupid but stopping this is also a road to nowhere. We need skilled people in government. They have the talent but they are kicking to touch and watching their pensions (at age 29) and strangling the economy. My brother is a civil servent and the waste that he and his mates generate for the rest of us to carry is a heavy burdon.

    We are trying to expand our business but we got such a hiding from government departments we are keeping well away from them.

    Doing the same thing over and over again and expecting a different result is a sign of madness.

  11. Look what the cat dragged in

    The dutch would be spot on then! And would you really trust the current mob to lead us out of the recession. Vision and Fianna Fail do not exactly go hand in hand! Although the alternative is no better! God help us!

  12. Ire_in_Exile

    A Football analogy?- right-
    The Irish have played half time and are now in the dressing room stunned that they went five goals down in the last 10secs.
    This is after a glorious first half playing against a novice team of aged, pedal extremity challenged Maori’s , that ensured that every shot scored a goal, and the more the crowd went wild, the more shots on goal were taken.
    Football for the average player had never been so easy, so rewarding or so much fun.

    But worse, The news now drifts into the dressing room that the match had actually been rigged all along-the team boss, manager , trainer and coach had all been in on the scam and had pocketed all the loot for themselves at the players expense but are making appeals nonetheless for the team to fight back in a spirited manner in the 2nd half for the sake of common morale and team solidarity.
    There just aren’t enough resources left though to pay them.

    Now it is back onto the field and the jaded,demoralised, and disillusioned Irish players wander out to see the Maori’s have fled and the Brazilians are coming on..

    There’s your analogy. Panic? I’ll say….

  13. Al

    We (obviously) need to pump money into r&d.

    We need to develop intellectual capital.

    We will NEVER be able to compete with China/India etc. on cost.

    HOWEVER there have been many many millions already pumped into r&d/3rd level etc. I don’t see many (any?) viable commercial entities that have emerged over the last 10 years as a direct result of this. Surely this is the point of any research/work that we are about to embark on/fund?

    I just think that this needs to be considered.

    Also, the fact that the gibbering morons are prattling on about a “knowledge based economy” when broad band is STILL not widely available tells you all you need to know about the calibre of those in charge.

  14. julian

    on the idea that you are working, it would seem that membership of FF does not matter. You will be cut one way or the other.
    On a another point, spelling, using useful colourful lingo or just plain bed language seems a bit beyondy some. Errors, are errors. And we arrived here economicly because of greed.
    There is nothing quite like the terror of your neighbor loosening money to ask about reality

  15. Malcolm McClure

    Of course a knowledge-based economy needs fibre optic cables to every centre of population larger than (say) 2000 people. Iceland is poised to become the world epicentre of “cloud-computing” (the next big thing). This could have been Ireland; all it needs is about 20,000 servers in a secure (remote and unapproachable) location. Maybe Tory Island would fit the bill?

  16. B

    I hate to beat on about it but in Waterford Port broadband arrived for us only two weeks back. We can now contemplate expansion and knowledge based work. Before we were being HAMMERED by ISDN costs.

    The State agencies up to the very highest levels in Communications weren’t engaged. We were first told it was in Wexford and as my KK registered van says it is in Co. Kilkenny.

    The State is a lame duck when it comes to SME business and just wants money and has no idea whatsoever outside this. They want control but don’t give any benefit or support for their greedy little money grabbing.

  17. Ger Kennedy

    Panic is never a good idea. I agree with that sentiment. Move on from property. Enough already. Never let it happen again. All good.

    However the people who caused it must be held personally accountable. This in my opinion should include prosecutions, financial consequences and possibly prison for those people who did this to our country and economy. I include central bankers, bankers, bulders, estage agents and mortgage brokers in this mix. I am not talking tribunals. They are pointless. I am talking fraud prosecutions for fraudalent mortgage applications, salary certs and “stress testing” and all the other fun and games that happened over the past 5 years. Also our government should fall on the mess that they have presided over ignored because they were in the vested intrests pockets however an alternative governement is not clearly identifable. Maybe we should had it all over to the Dutch as someone said earlier.

    Personal accountability is key here in my opinion. Make them pay for their dishonesty


  18. D. Roche

    Nothing is free in this world. The victims of credit culture are volunteers. Investing is speculative property, BBQ Sundecks, Christmas shopping in Manhattan, prestine Range Rovers that never will never use 4wd, and weekly trips to the to beauty salon to get that purrrfect orange glow. Myopia & stupidity.

    I’m not bitter, fustrated. We blew a great opportunity and it’s frustrating. The Western Rail Corridor, broadband, safe roads, health services (cancer services at Sligo general), – are you telling me we couldn’t afford this if our finanances were managed responsibly! squandered. Ireland takes itself very seriously and to parapharase Brando, we could have been a contendor. However, what we have shown the world is a shambolic display of mismanagement.

    There has been a serious lack of financial savvy among the masses. We are not entitled to FDI and continued growth. We need to earn it & stay competitive to ensure we are cost efficient. Everyone has an opinion but nobody demands accountability – time to get off the fence. Enough tribunals aleady, a new system of legal accountability is overdue. It is not a function of tribunals to administer justice, their work is solely inquisitorial. Basically, a get out of jail free card.

    We can continue to point the finger at government (deserved) but the individual also bears responsibility where spending and investment are concerned. Ireland has embodied JP Morgan’s argument, ‘‘nothing undermines your financial judgment like your neighbour getting rich’’.

  19. Philip

    There is a clique in this country which has its origins as far back as Noel Browne’s time. They were trying to scupper the Mother and Child scheme back then and the same twats have been in there at the senior civil service level managing the mismanagement based on their view of the “general public”. This clique were the product of mother’s who either had you become a priest, banker or civil servant and they in turn gave enhanced the power of a breed of landowners who are laughing at this very moment. I believe David did an article on this some time ago.

    The government, our civil servants (I mean the administrators – not for example the poor underpaid health workers on temp contracts) our financial and legal system and our landowners are really unaffected by all of this stuff happening to the “general public”. For them this is just a grand 3D TV show – and you bloggers are just some of the actors.

    You’ll find a lot of these guys have been in this business for generations. All with colourful histories and grand stories. For them life just continues from generation to generation. The tribulations of the “general public” are that of a may fly.

    So what do you do? Very little can be done. Unless you are an exotica or some sort like an MNC, or from Brussels or Entertainer etc. you will be ignored. Court jesters in the form of SMEs who are lucky might attract some admiring condescending nod.

    OK…finished my cynical rant..but face it…it’s actually true and when you combine this with our curious catholic / mystic view of life, it means we are happy always to find positves and laugh it off…whatever you do keep laughing. In effect, I believe the Irish are the most manipulated group of people in Europe.

    I am not panicking. My sincere hope is that this recession may wake people up at last. Once anyone can show you can resist this nonsense, then maybe…just maybe… a panic in the gov/fin/etc sector may sparked off and may be just what is needed.

  20. B

    Noel Browne is an absolute Hero. He stood up to the unelected tyrant from Cootehill that was Dr McQuaid.

  21. B

    Philip you have nailed it on the head.

  22. Nagelz

    It’s going to be very hard for the tigercubs to keep a cool head when they have a property worth much less than what they’ve paid initially.

    I work in the building trade and it has always struck me as totally asshat that the developers can build a rabbithutch for 120k (less in some cases) and flog it for 400k.
    Greed is not good longterm, we’ve been building one off houses for clients and the actual cost of a housebuild has not increased substantially in the past five years.

    The sequence of loose lending and non regulatory capping on property costs has put us where we are.

    Its wrong on many fronts, the guys doing the work get paid basic earnings…many have had to contend with the same bs developer cutting the bejesus out of pricework by employing cheap foreign labour.

    The punters were sold a pup and the developer wonders where to put his next stash away.

    There needs to be some form of regulatory legislation attached to the construction sector in my opinion.
    I’ve seen the up close and very harsh reality of the heavily backed developers riding roughshod over the majority who worked in the construction sector.

    Whats needed is very simple, a watchdog that regulates consumer pricing for houses……the runaway profiteering that existed should never have been allowed to fuel its own fire.

    Everyone wants a home, that is understandable…..what was needed was everyone having access to an affordable home.
    The powers that be should seriously look at putting in place such a scenario that will allow everyone to buy their own home at a fair and actual price.

    Think about it, a standardised price capping system would ensure that we get to build a sustainable number of houses every year.The spinoff would be an actual maintainable level of output with the satellite industries kept busy too.

    Maybe it’s too much of a socialist suggestion for the unenlightened elite but surely keeping the country progressing at an attainable and realistic eco cycle would be worth a try.

  23. MK

    R&D: this has been discussed before I think. Its well known that Ireland Teo is getting bad value for money with whats going into R&D and academia and whats produced in terms of indigenous business. Its nearly a blackhole in terms of the money that goes in and what comes out. Fledgling businesses get a fraction of the resources that academics get. Academics dont have either the business nous nor the inclination or requirement to set-up a business. They can continue on the merry go-round of obtaining grants year-in year-out, etc, producing white papers and going to conferences rather than product. A tiny number (ab)use the time and resources they get and go commercial. I dont blame them per se as individuals as they are responding to the environment. It is a systemic problem.

    As for succesful businesses, yes, we do have a few. There are many very small companies though that have minor success and which are under the radar. We dont have a Nokia nor an Ericsson. We do have a CRH though. And we have Norkom, had Iona, and we have 100′s of small companies. Why dont some of these merge is one of the ‘mysteries’ of Irish business. Competitive natures of individuals keep them apart and people are looking for exits. Ireland scores well in entrepenurship as measured by GEM for example, and we do have successes. It just seems that a lot of them dont stick around for the long-term.

    > it has always struck me as totally asshat that the developers can build a rabbithutch for 120k (less in some cases) and flog it for 400k.

    People are not paying for the physical bricks and mortar, which as you correctly point out is only 120k or so. Rebuilding insurance tells everyone that. People are paying for the land it sits on, such as 300k or 400k per site in some places. And seeing the most recent figure that builders wages have gone up 6% or so in the last year, house building costs are not coming down. Its the value of the land below that is dropping. It was over-inflated.

    Rent Controls: yes, this can work but takes a long time to build up. For example, in some other EU countries, such as Germany and Holland, there are rent controls in place for the majority if not all of the social housing. These prices are agreed and published in advance and the free market adjust to that. It acts as a large control knob or dampener on the rental market overall, which feeds into overall property values. In addition, large pension funds were allowed to invest in property and supply for the rental market. They now hold 1000′s of properties and due to their long-term outlook and in some cases regulated so that they cant sell for locked in periods of time, that cools the market, adds rental housing supply, and reduces overall flipping levels. These counties also have different planning regulations and actually plan housing supply to meet demands. These mechanisms dont prevent housing price bubbles or peaks and troughs, but they can smooth things over and remove some of the speculation effect and the lemming effect where everyone has ran over a cliff. Ireland’s property burst will be a lesson for many if not all. Its our first burst for this generation of 20-60 year olds. Is that correct David?


  24. Jonas

    There were people goin’ on like doomsayers even when it was a land of
    milk & honey. Its is all to do with the pay talks !
    Everytime they come up for negotiation there is always talk of
    downturn. There is indeed a economic downturn of sorts, but nothing like what we experienced in the 80s when you just could not get a job even as a kitchen porter and where even a manual job was a badge of honour.
    There were ques outside the American Embassy for visas, let
    alone 1983- even in 1991- with the Commitments coming out with
    the expression that the Irish where the ni**ers of Europe.

    There is still huge wealth in this country always was and it is the same old crowd
    that have it -shopkeepers, publicans and farmers, plus of course all the
    middlemen- ie any service you care to mention from law to pharmacy.

    Look at the mobile phone business booming away killer applications on
    the horizon all to play for!
    The old axiom is that the Chinese symbol for crisis is made up of two symbols one representing danger- the other opportunity-
    and that’s the way to look at the current situation-think outside the box.

  25. louise

    I don’t have much faith in Irish business people, like our soccer team they were overrated.youll never beat the Irish?.I euro championship and nothing since ’88 sums it up.

  26. Nagelz

    Self confidence is non existent right now and has the knockon of everyone watching what they spend.

    So the local economy suffers and the cycle of spending restriction begins in earnest.

    This is going to have a huge impact, anyone working at a cash register will tell you that people are not spending.

    The local paper will tell you where we are, services available outnumbering services required is an indicator that every parish economy is under pressure.

    How do we best keep a faltered economy moving upward and onward if people are refusing to spend?

  27. B

    Spend less than you earn. Get someone else to take the risk. If you rent the risk is on your landlord. If you buy it is on you.

    My spending has always been modest. I am 34 and I have never had a new car. I don’t own a house and I don’t have any debt. What I have is paid for and I view rent as a current expense and not a get rich scheme. Sure I don’t own where I live but if you are specualting on your own house you have nowhere to go when you sell it unless you buy somewhere else. The profit you make is cycled back into property and cannot be released in any kind of sensible or safe way. If yo make a loss you are stuck where you are or sell and wear the loss.

    A recession is where money goes back to its owner. We have all suddenly run out of credit and now are forced to live within the limits of our incomes.

    The economy will still move on. Most people will earn money but leaning on a personal loan, car loan, credit card and mortgage won’t be as free and easy as it was.

    Irish business is difficult. They brazenly won’t pay their bills unless it is extracted by force and have an arrogant over-optomistic assessment of their own strengths have a “vision” for the future but are ncapable of actually following the steps to get to that future. Investing for the longer term is alien to them. And the basics like getting money in the door from invoices and having efficent operations are neglected because it is too mundane and too boring.

    Luckily my business is in kicking these losers into shape before the bank forces them to close. Citing external forces isn’t what drives businesses under. It may be the final straw but barring a sudden legal ban on their products most companies die due to death by misadventure or suicide due to the sudden realisation that the company is doomed by their own (in)action.

    Short term-sim got us into this and short term answers are not going to get us out of it.

  28. Mike Berry

    I beleive out of 57,000 leaving cert students there is less than 30 engineers evolving!!! how can we grow innovation with this? And the opportunities out there are amazing in the embedded, wireless, GSM worlds which are coming together. All they need is 3-4 guys in a innovation centre to create world class products which can utilise the huge capacity available in our manufacturing base. And i still see the selling of pints, burgers, insurance and apts leading the pack……

    and the public service baying for more whom produce NOTHING for this country

    disappointing :(

  29. EOC


    Dont hold your breath waiting for innovative decisions. Decades of sleevenism and cronyism doesnt fade away quickly. The old cartels are still very much intact. They dont give two hoots about small business in this country.

    I hear them harping on ad nauseum about Enterprise Ireland etc….An organistaion run by civil servants who have never taken a risk in their lives deciding what to invest in at punitive cost and telling entrepeneurs how to run their business. You couldn’t make it up.

  30. Nagelz

    Bottom line with business in this country is you’re on your own.
    There are no think tanks or assistance worth speaking of…..lots of thick tanks dining on Brussels pate and doing nothing for Irish businesses.

  31. My Lost Generation

    The football analogy is very good and if you look at the only good Irish soccer players, they are over in England. I know they still play for the national team but let’s be serious for a second; they don’t really give a damn.
    Not to give a damn about your country is what is wrong with a lot of young Irish people. In the same way our financial institutions, bankers, developers let the “industrial scale loan-sharking” happen, some of us are now trying to flee the country.
    My point is that I do not think we have respected ourselves an our country well enough in order to prevent opportunists from abusing Ireland. Most Irish people did not keep their pride and calm and instead took advantage of the situation by over-speculating, taking out loans and mortgages they soon will have some difficulties paying back. Having said that the people who provided these unbelievable deals are mainly to blame.
    We have allowed our economy to be treated like a disposable one. Now it is being disposed of. This was a 100% inevitable.
    We should have had more pride in our country and looked after our interest, cared for our new position in the heart of Europe and as serious partners in a global economy, instead a majority of us acted irresponsibly and in a very deluded way, unaware of European and even global economic basic principles, the fundamentals of economy were laughed at… at times one really felt we lived on a remote island.
    We acted like poor and dispossessed minions, which is about to happen for real now. I wonder whether our past still influences are ways of being.
    Anyway, you are right Dave ‘even the dogs on the street knew this was coming’ so why panic? I think the Irish people need to start to take more pride in their own country and not try to flee ‘like rats’ it as I read in previous comments.
    Ireland and its people let themselves down by letting the economy being treated like a disposable one.
    Ireland needs a surge of pride and fleeing the country is certainly not the solution, not this time. We have to stay, be proud and face the music even for the sake of the Irish identity. This is a test and people are watching.
    Oh! and to the guy who needs more facts, details, hard evidence on the state of the economy… just keep your head down, it has been unravelling so fast these days that any advice might be irrelevant by the time you get it. (and if you have any financial interests at stake then you should have known what you had let yourself in for in the first place)
    Good luck.

  32. Smart tactics with leadership from whom?

    What can we seriously expect from the “messenger boy” system of clientism politics where the buck stops nowhere?

    We want accountability in Brussels but sfa of the same in Dublin.

    The country is still 15 miles from Leinster House as it was in the era of the donkey and cart.

    But don’t fear as we have this example of delusion from the IDA Ireland annual report today: “We are seen as a creative, imaginative and flexible people. A highly skilled workforce with an almost unique capacity to initiate and innovate, without being directed. What makes us different, apparently, is that we like to think on our feet. This kind of agile thinking is a rare commodity and much sought after by knowledge-based businesses.”

    We are back to the old reliables – a public sector staff embargo and maybe a pay freeze as supported by IBEC.

    The 120 constituency staff of ministers will no doubt remain unaffected.

    The wage slaves in IBEC of course have to remain silent on so many other aspects of competitiveness.

    The most expensive agricultural and development land in Europe; Dublin office rents 3rd highest in Europe and so much more. Land for roadbuilding at 23% of total cost is double the EU average. Big swathes of the service sector are still protected from competition.

    Agriculture is at the dawn of a global boom and the farmers want more welfare and protections from competition.

    We have to mainly depend on continued foreign direct investment. The wealthy will still opt for commercial property overseas. We will cointinue to develop some start-up but they will end up like Parthus and Iona.

    Tech company Xsil, the winner of the Deloitte Fast 50 in 2006, transferred most of its operations from Ireland in recent months and despite all the blather about a knowledge economy, it’s about providing researchers for multinationals – but as the ESRI paper on manufacturing showed this week, the foreign-owned sector is not focused on innovation. In 2013, we will have thousands of researchers on the public payroll but will be be able to afford to fund them?

  33. Sound advise David, the only problem is the politicians; do the have the courage to think past getting reelected making the country take the bitter medicine it needs?

  34. sara

    Crap weather, personal indebtedness greater than a year’s national income and politican’s wasting money worse than the 1970′s.Will the last person to leave take the time to switch off the lights’?.

  35. “The State/IDA/Enterprise Ireland, does need to facilitate a new environment for Irish entrepreneurs and investors”
    Yes David Nolan quite.
    I do hope the new Irish entrepreneurs – and more so than the old Irish entrepreneurs did – keep in mind social security. Business should always keep in mind what it’s like to be at the bottom just in case they end up there with the old Irish entrepreneurs.

  36. JN: The downturn didn’t appear that quickly. Those in the retail trade have seen 2 Christmas seasons where less sales occured later. Perhaps it didn’t happen in Dublin but I know traders in Waterford and Cork and they’ll say we’ve been sliding for 2 years as enormous house prices affected David’s “jugglers”. I own a high-end retail shop and gallery and our customers are mostly “jaggers”. Since 2006 less and less young couples have been able to afford luxury goods. Using dangerous :-) inductive reasoning based on our own records I’d suggest that what has been bought in that time has been on credit cards and personal loans which is very worrying. However, FF talked up the economy for one last hurrah before the last election, proving that they care more about reelection than the state of the economy, but we all knew that. So on to the so-called “knowledge economy”. Well I’m an IT graduate (MSc and MEng.) and I can tell you that the numbers of students studying IT in colleges has dropped substantially. Many of the jobs just don’t pay highly enough to entice graduates and they’ve given way to business and construction related courses. Before the tech boom IT jobs were more stable engineering positions with reasonable expectations and competitive salaries. After the dot com boom we were left with many relatively low-paying jobs with outrageous expectations of working hours. Young tech engineers nearly killed themselves to earn bonuses and gold dust share options during the boom years. Some got lucky! However, the expectations didn’t end with the opportunities and I know many tech workers who are completely disatisfied with their careers. Throw in the uncertainty of working mostly for foreign multinationals and it’s easy to see why less and less school leavers found these jobs attractive. Funnily enough we have ever increasing numbers of well educated economic migrants finding jobs in the tech multinationals here. Often, Irish are the minority. Then there’s the state’s methods for incentivising new growth in the knowledge economy. In my experience we have totally unrealistic expectations of how cheaply high-tech products can be created. We fail to see that companies like Yahoo and Google were the culmination of millions of dollars of research when they first launched. With some exceptions, the state funds too many tech projects and gives each too little money to achieve their unrealistic goals. Where US universities can raise bursaries to recruit some of the top scientists from industry, most Irish universities can’t. Indeed we pay research scientists in academia quite badly. My own experience of the funding process for high tech startups is that it’s adversarial rather than collaborative with the emphasis on “weeding out” bad ideas rather than collaboratively working for solutions. Sometimes we try to out “hard ass” the Americans and it just doesn’t work for us! Often those doing the weeding out are distinguished by having never run a business in their lives. Under these investment programmes the rules for rewarding those who innovate (create Intellectual Property and companies) are unclear and inconsistent. Sure there have been some great initiatives like Science Foundation Ireland (SFI) but the process of deciding funding can be flawed and decidedly arbitrary. Examples include asking internationally and nationally competing research institutes to decide on the funding of Irish research proposals. So that’s state funding, what about VCs? Well the amount of non-state investment in indigenous tech companies pales beside the investment in property. One was perceived as a high risk investment especially after the tech bust, the other as a highly leveragable “sure thing”. David suggests a pay freeze in the civil service. Actually, this will only exaserbate the problem of creating an effective civil service as it will discourage some of the genuinely talented individuals there. What we actually need is realistic performance appraisals and redundancies. I agree that a pay freeze is easier to implement and more likely in the next 50 years :-D
    To summarise the rant there are systemic reasons why apparently tonnes of investment are not delivering the vaunted knowledge economy and we need to refine our strategy to improve things.

  37. Nagelz

    Performance based appraisals should be the norm for the civil service as you say Shane.
    Will it ever happen?…….wouldn’t think so tbh.
    The expenditure of government finances has been mismanaged for so long that it’s the norm now.
    And I mean government, no party affiliation on my behalf.

    Think about the strategy/research/bunkum reports commisioned for almost everything and serving no purpose other than “We’ve researched the proposals and are waiting on a full report”.

    Whats needed is practical fiscal expenditure, something thats just not genetic in the hereditary traits of our gombeen politik.

    We were punching above our weight for the past number of years with our illusions of heavyweight potential, now we’re getting bitchslapped for our selfdeception.

  38. blow in


    This is a delayed response, your comment about Silicon Bog really made me laugh out loud. Ireland has been through worse than this it will all turn out OK in the end.

  39. Ha, the only thing that will turn out in the end is the end.
    You are a big bunch of go-shites quote the usual gob s remark: “we need to refine our strategy to improve things.”
    It’s all gobble-de-gook speak. Business is in un-chartered water.
    This the 21st. century. The steam (“old Charley stole the handle, and the train it wont stop goin’ no way to slow down”) has run out, and the means to produce it has reached far beyond what the running of the whole operation is worth.
    The hand that feeds is so-to-speak feeding on itself now. There’s no money now, and what money there is is not worth the paper it’s printed on- it can’t generate more of what’s not there.
    We all knew that would happen when China, and India (thank God in one way Africa has been held back) came into development.
    Simple put: the pyramid selling is over boys. There is no point in starting another scam- the biggish heist in history. You were had, Now you’re left with a room full of tuba-ware, and no a hope in hell of selling it on. The clever bankers in America (most of them) got away with your money; it’s helping/working to set up Arab/Chinese banking in America, and build revolving buildings in Dubai for a bright new future, and not your future. Soon in the next six months repossession in Ireland will take hold to a stark new reality.
    Stock up;-)

  40. paddy: Not sure what your point is beyond calling us all gobshites and misrepresenting extracts from other people’s comments. Despite what you believe a few hundred million euro will be invested in third level research over the next few years. I can assure you It WILL be invested and I’m suggesting that the current strategy for deciding who gets it and what’s done with it isn’t as effective as it could be. It’s a simple point. Also every time there’s a recession there are a school of gobshites/muppets/whatever who want to describe it as more cataclysmic than anything before, sometimes due to technological, social and geopolitical changes, and yet life goes on.

  41. Dear Shane Dempsey,
    I don’t see your comment on board?

    What the hell’s third level when business has no regulatory level playing field?
    Well I’m quite exhausted with it all quite frankly; business that is.
    David’s idea of patriotic business makes me vomit.
    Business is business for itself.
    I live in Finland, and have witnessed first hand what business advising government has/is doing: ripping the heart/cold cash out of the social services, and lining the pockets of the small businesses
    (((Recently in the northern of Finland a 70 year old man shot his severely physically challenged twin daughters, and his wife who was also disabled. With the cutbacks in care he could no longer look after them. He then shot himself.
    (small businesses “rules OK”)))

    You’ve got to run your own business (employing people from back to work schemes, or students.
    It’s very rare to find full time or qualified workers; very rare to get any kind of a decent wage.

    The term “GOB-SHITE” refers to those who imagine business in any shape or form as long as it’s viable -business – is the ticket to go.
    Business is the very thing destroying the fabric of our life.
    Take a look at the recent The World Uncovered documentary on business in Iraq, it’s funnier than (more so because it’s real) “The Three Penny Novel,” by Bertolt Brecht.
    The World Uncovered investigates claims that $23 billion may have been lost, stolen or not properly accounted for during the Iraq war.

    Business is needed, but like the banks if there’s no regulation it devours itself, and all around it.

  42. [...] McWilliams on Wednesday should be fun in the Indo. Will he continue in the “Don’t Panic” vein – while telling people this Irish downturn will be worse than the 1980s? And are the banks really [...]

  43. M


    I agree that this recession has the potential to be severe, however, I also believe that we can innovate our way out of it, but this requires significant changes in the way we approach innovation. I think that the current system of providing large grants to academia is mis-guided. I am based in an academic environment at present (but not for long more) and with the practices that exist here, it is almost like another planet vis-a-vis the business world. What we need to do now is to invest in the real entrepreneurs who will make things happen, not the academics who will suggest that “more research” needs to be conducted. Sometimes I wonder that if academics were in charge of aviation would the Wright Brothers have taken off yet??

    I also agree that public sector reform is URGENTLY needed. “Agency-mania” needs to be reversed and quickly. Lack of communication within the public sector and academia is rife. The project that I have been working on costing well in excess of €100K (funded by a government agency) is being almost entirely duplicated by another government agency and this duplication has been taking place for several months until I found out about it a few weeks ago. This is just an example of the lack of communication and inefficiencies that these public agencies are creating.

    We need to streamline the public sector. Some of these savings need to be invested into meaningful innovation projects that are based on market needs (as opposed to academic interests) and backing entrepreneurs is the best way to make this happen. This needs to be backed up by the continued provision of suitable infrastructure to give Ireland the opportunity to compete. This would be a start…

  44. Not exactly panic, but I did begin to sweat when I saw the title of this article.

    Surely my company isn’t solely resposible for getting country back on its feet?

    Seriously though this a time for smart thinking and even smarter tactics. As business owners we know it. Its what we do that really counts. Oh sure, the politicians will grab the headlines but the world economic order is bigger than any country, particularly Ireland. The reality is that politicians do not call the shots in our economy. Personaly glad that is so, for the Irish political system seems incapable of delivering leaders with the integrity, acumen and personality needed to make a real difference. What we have a instead a interfering gongs, clanging loud and hollow.

    But what of business? Well that depends on what we do – what decisions we take.

    I have already heard one business owner tell me “times are hard so we have to cut back on marketing”. My response to him was the same as it was to similar comments in the 1980′s. “Times are hard, so you need to fight harder, and smarter. You need to cut out waste, but never cut real marketing”.

    Waste includes fruitless ‘corporate’ junkets that serve no purpose other than to massage the ego’s of staff and customers, and advertising that brings in no new customers but makes the company ‘look good’. These activities are NEVER marketing, and always waste. Its right that they should be cut – for good.

    So my ‘ten penneth’ – Rip up old plans they are a worthless. Make new plans, and focus on what you really need and want to acheive now. Make savings from where you can, and invest in making your plan happen.

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