Notes on the Front

‘I started on it but I always thought I had it under control. Now it controls me.’

‘Hey, I was young; a little bit wouldn’t do any harm. It’s not fun anymore.’

‘You don’t start off with the intention, y’know, it just creeps up on you . . then all of a sudden it consumes you.’

No, these are not tales from the sufferers of substance abuse.  These are the accounts of victims of an economy addicted to multi-nationals.

It all started with Sean Lemmas but this is not how he intended for it to end up. Having thrown in the towel trying to create a modern, innovative industrial class (for 25 years he used tariffs, subsidies, tax breaks, corporatist arrangements, even a bit of command economy during the war) he decided to open up Ireland to foreign direct investment. His hope, among other things, was that by positioning multi-national corporations (MNCs) here that some osmosis would take place whereby native enterprise would learn the tricks of, well, enterprise.

Well, we got the MNCs – in spades. But on the way, with some notable exceptions, the osmosis didn’t kick-in. As Joe Lee wrote of the attempt:

‘Economic policy since 1922 has evolved around the search for that elusive factor, enterprise. Sean Lemmas sought it in industry. Lemmas turned in desperation to importing it, if only to provide yet a further breathing space for an adequate native supply to emerge. It didn’t.’

The current situation is that we are so reliant on foreign capital and MNCs that were they not here – or only here to the extent that they are in other EU states – we’d be an impoverished country. And reliance is an under-statement.

When considering the combined manufacturing and internationally traded services sector, we find that foreign-owned firms make up:

• 89% of all exports
• 76% of all sales
• Slightly over 50% of all employment

So when you read reports about how high Irish productivity is, remember that the driving force behind this and so many other international comparisons (R&D, etc.) are the MNCs.

Yes, the vast majority of manufacturing units are Irish-owned, but nearly 70% of them have 20 employees or less. And many of these native units exist to primarily supply the MNC base, without which there would be even less native industry. This is hardly a base from which to launch an internationally competitive export sector. And, yes, indigenous firms make up nearly 50% of the workforce. But there is a qualitative difference in skill-base and pay.

For instance, wages in the chemical/pharmaceutical sector are 41% higher than in Ireland’s premier indigenous sector, food (the Irish food sector – which accounts for nearly 60% of all indigenous exports – was described by the Enterprise Strategy Group as ‘primarily production rather than market led’ which doesn’t bode well for future competitiveness). And the growth in wages between the chem/pharm and food sectors is instructive: the former has seen wages rise by nearly 7% during the last 18 months, while in the latter they have actually fallen by nearly – 3%.

In many respects, the Celtic Tiger boom passed the indigenous manufacturing sector by. According to the Enterprise Strategy Group, real growth in sales and exports was negligible for the years 1990-2002. This doesn’t mean that there weren’t expanding Irish-owned firms; it’s just that, taken as a whole, the native sector stagnated, losing as much ground as it gained.

Even in the relatively new and rapidly expanding internationally traded services sector (which is dominated here by computer and software activities), the indigenous sector is hardly getting a look-in. The figures quoted above are for both manufacturing and service sectors, but taking the latter on its own we find that

• 71% of employment is located in the MNC sector.
• MNC makes up 93% of all export sales
• In the 10-year period since 1996, indigenous employment expanded by 16,000 while MNC employment expanded by 30,000.

The Exchequer feels it, too. Again, taking the combined manufacturing and internationally traded service sector, we find that 92% of the total tax yield comes from MNCs.

I am often amused to hear parties and commentators of the Right go on about how they are ‘the champions’ of enterprise and competition. If so, indigenous firms need these champions like they need a bankruptcy petition. Between 1999 and 2004 (the latest data we have available) the number of indigenous manufacturing units declined by 6%. Even more worrying, the number of indigenous exporting firms fell by 30%. Our native sector is becoming rapidly less export-focused. The champions of competition are taking a scythe to (rather than carrying a torch for) Irish enterprise.

Here is, if you will, a market opportunity for the Left. For too long we have ceded the issues of enterprise and competition to the right, content to fight over where the proceeds of growth should go. When was the last time Labour, ICTU or any other progressive organisation issued a comprehensive policy document on enterprise strategy, outlining their own approach to creating, sustaining and growing modern and innovative businesses that look out into the world, not away from it?

We give out about the way businesses treat employees, the environment, the consumer, their social responsibility, etc. What we don’t do is look at the way business does business itself. This is not about chasing MNCs away. If anything, we need more at this stage, to try to stop the erosion of our manufacturing base. But what we desperately need to do is build up our indigenous export base – both industrial and service.

And it is only the Left that has the potential to resolve many of the problems confronting Irish enterprise. In subsequent posts I’ll be analysing the recommendations of the Enterprise Strategy Group and the Small Business Forum. These reports are not a clarion call for some ‘Left blueprint’. What is clear, however, is that what is required is greater state involvement in the organisation, at all levels, of the enterprise sector, combined with more effective interventionist instruments and higher levels of investment.

This is not something the Right is comfortable with. But then, all they have to offer are slogans – less tax, lower wages, less regulation. Well, we have all that. We have had that for decades. Countries with higher tax, higher wages and stricter regulations are running circles around us. The Right have nothing of substance to offer either Irish enterprise.

So how long are we going to let them get away with this?