If Ireland is facing a perfect economic storm, it’s surely time for a shift in strategy (and story)…

Good points here by Cormac Lucey, on the vulnerability of the Ireland’s long established and successful FDI (or what Arlene calls, poaching – but more on that later). First, he puts in the Republic’s clever exploitation of FDI into proper historical context:

Consider the impact of the foreign-owned sector another way, by comparing living standards north and south of the border. Half a century ago, living standards and income levels were considerably higher north of the border.

Today, thanks largely to the Republic’s successful attraction of so much foreign direct investment (FDI), the situation has been reversed. Living standards and income levels are now demonstrably higher south of the border.

But, despite the news that Citibank is preparing to move 900 workers from London to Dublin, the macro situation for Ireland is not great. As Lucey explains:

The Irish FDI fox is now being hunted down by a pack that includes the US and the UK (that are pursuing a strategy of emasculation through emulation) and the EU (which just wants to beat the Irish fox to death to stop it sniffing around their chicken coops).

So, what is likely to happen? My read of Donald Trump is that he is a narcissistic egomaniac whose primary goal now will be to vindicate his shock election this week by securing re-election in four years’ time.

Unlike Hillary Clinton (who had a detailed policy for every problem under the sun), Trump had relatively few policies. But they were visceral and easily understood policies: build a wall, abolish Obamacare, get tough on trade, cut back on regulation, repatriate jobs and cut taxes. 

Whereas a President Hillary Clinton could have justified not fulfilling certain promises, I’m not so sure, given that he made so few commitments, if President Trump will have the same leeway. I therefore expect him to cut the US corporate tax rate to 15 per cent. The rise in US stock values this week suggests that markets may share that expectation.  

That will significantly reduce the attractiveness of the Irish tax corporate regime in attracting new FDI in the future. I don’t agree with Stephen Moore, a senior economic adviser to Donald Trump, that a cut in the US tax rate would see a “flood of companies” leave Ireland.

Most have already invested large amounts here. And they would face significant costs rearranging their global supply chains to exit Ireland. 

Ireland should continue to follow its FDI strategy for as long as we can, we must adapt to a world where its relative appeal will be significantly diminished. We need therefore to devote greater resources to encourage indigenous entrepreneurial activity. 

It put me in mind of Stephen Kinsella’s great piece of Imagineering (when all around him were cashing into the doom and gloom of the bust), Ireland in 2050 (expensive, but worth it), particular where he notes in a chaper on production and the nature of work:

As a country, we have reached the last rung of a ladder we began climbing in the late 1960s. Sean Lemass, our then Taoiseach, set out a framework for export-led growth, where we would enrich ourselves as a nation by selling things to other people.

But who made those things? Anyone but us.

The things were made elsewhere, and packaged, or assembled, or sold from here. Only rarely was Ireland chosen as the site of the production of all aspects of a good or service, and even then the profits made by the company were taken out of Ireland to the home country.

Inevitably Ireland was used as a gate to Europe from the US, or vice versa. Rather than being a hub for trade, we were a lay-by.

The benefits of this arrangement for the export-led approach are obvious: increased employment for an up-skilled workforce, increased female participation in the labour market, higher wages, and increased demand for ‘Irish’ products abroad – all of it resulting in high growth.

One way to sustain some of the Republic’s trajectory in the new climate would be to cut costs and pull back on living standards. Now is the time (whilst there still is time) for a massive re-think over where the country is headed. To borrow an end quote from Kinsella’s 2009 book.

The power of an imagined end, and it literally can only be imagined, lies in its ability to influence current choices.

Daniel Taylor, The Healing Power of Stories