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Without multinationals, Ireland is a bad-weather Albania

It’s easy to be a little perplexed by attitudes towards multinationals, given their transformative impact on our economy, their complete upgrading of our industrial base and the enormous capital and technological transfer their presence in Ireland has facilitated.

Economically, without multinational investment, Ireland would be Albania with brutal weather. Politically, without multinational commitment to Ireland, Ireland would likely have succumbed to the populist, nationalist, protectionist disease that is afflicting most western politics.

Ireland’s economic performance can be divided into two time zones; premultinationals and postmultinationals. In the premultinational period, from 1921 to 1991, when multinational investment was modest here, the Irish economy was the worst performer, in terms of income per head, in western Europe. Not the fifth-worst, not the third-worst; the worst. Since the multinationals began to select Ireland as a bridgehead into the EU, from the early 1990s onwards, Ireland has been the best performer economically in western Europe. Not the fifth best; the best.

This national upswing is apparent not just from economic statistics but also from improvements in life expectancy, educational achievement, the size of the middle classes and, critically, the standard of living. Ireland has experienced enormous social uplift, the most impressive in the EU, according to the Pew Research Institute.

The centre has not only held; it has also flourished – in direct contrast to the rest of the West, where the middle class has shrunk, leaving people unmoored. In Ireland a whole new multinational industrial base has been created.

The economic recovery from recession has the fingerprints of the multinationals all over it. The easiest way to see this is to compare Irish performance with that of our neighbours and then speculate why that difference might have arisen. What was going on here that wasn’t going on in other countries?

Taking national income in the period 2010 to 2018, whatever measure you use – whether gross domestic product (GDP), gross national income (GNI) or modified GNI – the Irish economy has grown much faster than those of our European neighbours. Multinationals play a major role in this story, both in distorting the figures and in having a material impact on the real economy. Two things can be true at the same time.

Some economists understandably get exercised about the exactness of the statistics and cite problems with multinational money coming in and out. These issues are legitimate. However, we should never forget that it’s far better to be roughly right than precisely wrong.

If evidence points to an upward trend then this is what is happening, and it’s better to see the big trend and be roughly accurate. If we’re nitpicking over the quality of the data, in the microscopic world of number-crunching, then we’ll miss the real story or lack the confidence to tie all the information together and make a big call.

When we examine the basic foundations of any economy – employment, labour-force growth and population – we see Ireland continually outperforming the rest of the EU. Again the multinationals are the missing link, present in Ireland, absent elsewhere.

Let’s look at these basic foundations. Between 2010 and 2018, employment growth in Ireland has been nearly three times stronger than the EU average, our population growth has been twice the EU average over the period, and every year Ireland posts the most rapid growth in population in the EU. The difference between us and the rest is that there are far more multinationals here per capita than anywhere else. They plug us into the globe. Yet the critical positive role of the multinationals has been denigrated from almost every side.

The equality-concerned left sees them as errant tax-avoiders who don’t pay enough tax, which the left claims is inherently unfair. The fiscally concerned right worries that they actually pay far too much tax, which the right claims is inherently unstable.

Pro-European integrationists accuse them of smashing European solidarity by playing beggar-my-neighbour against our EU neighbours, while some of our EU neighbours, such as the Netherlands, have no problem playing the tax-arbitrage game deftly.

Across the water, English nationalists of the Brexit persuasion accuse us of trousering money that is rightfully theirs, while planning to set up a buccaneering low-tax haven as soon as they take Number 10. Scottish nationalists talk the language of the socialist Keir Hardie but admit they’ll pay for it by copying the Irish industrial policy of the capitalist Jack Welch.

All over the world there are conferences extolling the Irish model of tatty rags to reasonable riches, while here at home you could happily fill a talkshow with multinational-bashing.

Like all national conversations, there’s a bit of truth in all these positions, but – and this is a big but – policy is never black and white. Economic policy is ambiguous, operating in the grey. It regularly throws up uncomfortable dilemmas, particularly for those who prefer to take the side of the angels.

Today, western countries are mired in what the former US treasury secretary Larry Summers calls “secular stagnation”. This term describes an economic recovery that is extremely weak, because demand is not strong enough. It creates the conditions for populism all over the West because people feel threatened and they vote for those who promise to protect them.

Ireland has avoided this, which I believe is down to the much stronger performance of our economy. Multinationals boost internal demand with wages and employment. This difference in performance between us and the rest is driven by multinational investment, multinational jobs, multinational tax revenue and the dramatic upskilling of the Irish workforce associated with multinational corporations here.

In addition, people from the multinationals are heading out on their own, armed with the knowledge, contacts and experience garnered from working in a big corporation.

Many years ago, Ireland decided to transcend the limitation of geography, free itself of the tyranny of our own small market, break our dependency on Britain and play in the global world. We have done this with a decent degree of success. It is also our future.

Small countries trade or die – simple. Multinationals have allowed us to trade and have employed hundreds of thousands of us in the process.

In 1978, Deng Xiaoping, ushering in the opening of China, stated: “I don’t care whether the cat is black or white as long as it catches mice.” He meant that his job was to improve the lives of Chinese people and he didn’t care whether it was communism or capitalism that achieved this, so long as it did its job.

Maybe we might take this advice in the context of the multinationals. It is easy to criticise, from the certainty of the moral left and the righteous right, but we must be careful what we wish for, because plenty of countries would trade places with us right now and deal with their ambiguities. We live in a complicated, compromised world. All cats are grey in the dark. And we all live in the half-light.

Without multinationals, Ireland is a bad-weather Albania

It’s easy to be a little perplexed by attitudes towards multinationals, given their transformative impact on our economy, their complete upgrading of our industrial base and the enormous capital and technological transfer their presence in Ireland has facilitated.

Economically, without multinational investment, Ireland would be Albania with brutal weather. Politically, without multinational commitment to Ireland, Ireland would likely have succumbed to the populist, nationalist, protectionist disease that is afflicting most western politics.

Ireland’s economic performance can be divided into two time zones; premultinationals and postmultinationals. In the premultinational period, from 1921 to 1991, when multinational investment was modest here, the Irish economy was the worst performer, in terms of income per head, in western Europe. Not the fifth-worst, not the third-worst; the worst. Since the multinationals began to select Ireland as a bridgehead into the EU, from the early 1990s onwards, Ireland has been the best performer economically in western Europe. Not the fifth best; the best.

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A Swift lesson in Irish economics

Today is Dean Jonathan Swift’s birthday. He was born on November 30th, 1667, in the parish of St Werburgh’s in Dublin. Last weekend, I was asked to speak at his cathedral, St Patrick’s, as part of the Swift Festival.

It’s not every day you share an altar with the Archbishop of Canterbury, Justin Welby (or indeed, with a former president of this country, Mary McAleese). The subject was identity and, specifically, Irish and British identity after Brexit.

Given the enormous constitutional upheavals that could be triggered by Brexit, not just in Britain between England and Scotland but obviously on our island too, “conflicted identity” may become a political buzzword of the third decade of the 21st century.

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The post-Trump era could see the disruption of capitalism

The word impeachment comes from the Latin “impedicare” meaning to catch with the foot or trip up. The American process of impeachment was inherited from the English. In pre-independence colonial America, the British instituted a process of impeachment to make sure that the king of England’s officials in the colonies, who had enormous powers, remained straight.

Originally, impeachment was a process whereby a grand jury was instructed to find sufficient evidence to commit to trial a high-ranking official – or indeed colonial governor – who might be taking bribes, using his position to advance his personal cause or consorting treasonously with a foreign power. Back then the foreign power would have been France, as imperial France was constantly at war with imperial Britain in north America and the Caribbean.

After the War of Independence, the USA did not start as a republic with a constitution but as a loose confederation of equal sovereign states. This messy arrangement proved far too disparate; and the revolutionaries decided to create a strong centralised executive with a president.

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Ireland’s Monopoly money rents are no game

Looking out at the Atlantic from Lahinch in Co Clare, it’s hard to believe that one in 10 people was evicted in Ireland during the Famine. Two million Irish people emigrated in the 15 years from 1840 to 1855. Out here you can still sense this emptiness. Most Irish emigrants left from the west coast, heading across the ocean. Imagine what this part of the country would look like had they stayed.

The Famine, the result of immediate crop failure, was also the direct consequence of the conflict between a land-owning class and a landless class, leading to the Land League, which, most Irish historians agree, was the catalyst for the independence movement that led to the creation of the State.

Seen against this background, it can be hard to understand why the interests of the land and its income – rent – are still regarded as sacrosanct in Ireland.

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Ireland was the big winner from the fall of the Berlin Wall

Thirty years ago today the Berlin Wall fell. At the time it was widely thought that the main economic beneficiaries of the collapse of communism would be the former Soviet satellite states of eastern Europe, suddenly liberated from the stultifying grip of Marxism-Leninism.

This was particularly the case for countries such as Czechoslovakia and Hungary, which had impressive manufacturing bases before the second World War. The theory at the time was that educated and technically able communist workforces would embrace capitalism, attracting western investment due to relatively low wages, thus propelling those countries upwards.

However, the country that benefited most from the end of the cold war was one that had been neutral, poor and peripheral to the major conflict of the 20th century. That country was Ireland.

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Burger King, Irish farmers and the end of meat

Are we witnessing the beginning of the end of meat? Will future generations regard our habit of using an animal’s digestive system to turn vegetable protein from grass into living body parts, and ultimately slaughtering that animal in order to ingest what was the original vegetable protein, as not only barbaric but idiotic?

I say idiotic because, already, science can replicate meat using plant-based proteins.

Burger King this week announced it will be selling two plant-based burgers at its burger joints all over Europe. The Rebel Whopper and the Rebel Chicken King are already available in Sweden and are soon to be “rolled out” across Europe. When Burger King – hardly a cutting-edge player in changing dietary tastes – embraces synthetic meat, you know something significant is afoot.

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Pessimism is the enemy of entrepreneurial creativity

This week an American survey ranked Ireland as the eighth most entrepreneurial society in the world. This is an essential characteristic if we are to maintain our relatively high standards of living.

In economics, not enough attention is paid to this cussed, sometimes unreasonable creature, the entrepreneur. Without the relentless pursuit of new business, an economy will stagnate, and without economic growth, tax revenue dries up, resulting in less money to fix social problems. A healthy economy is a risk-taking economy.

Over 70 per cent of Irish people are employed in small domestic companies. This is higher than the EU average. More than half of all Irish people are employed in small or micro companies that employ under 49 people.

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The economics I learned are now wrong

What if everything you know is wrong? Imagine what it would be like, had you devoted your professional life to a discipline governed by reasonably predictable rules, only to find out, 25 years later that the rules no longer applied?

Spare a thought for the traditional macroeconomist, who has seen this happen. But the changing economic rules also affect your pay packet, and not in a good way.

For most of the past century, the world’s policymakers have been on the alert for inflation. The 19th century was an era of practically zero inflation, whereas the 20th century, in economic terms, was a period characterised by inflation. This was most notable during the 1920s in Germany and Austria, the 1970s in the United Kingdom, and the late-1960s to early-1980s in the United States.

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David has been writing for almost 20 years and there are plenty of articles covering some of the most turbulent times in the world economy.

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