This column has spoken before of the “10 million mindset”. The idea is that the population of the island is moving towards 10 million by the end of century and we should be planning for this. At the time, some thought this too ambitious. This week, the CSO suggested that the population could grow to seven million as early as 2057. If we add to that the population of the North, we are close to nine million.
And 2057 is only 33 years from now. It seems like a long way off unless you’re as old as me and stop to think about it. It was only 33 years ago that U2 released Achtung Baby and REM’s single Shiny Happy People topped the charts; Jack Charlton walked among us like a football god; Leinster GAA was competitive as the Dubs and Meath squared up to each other; condoms first went on sale in Dublin’s Virgin Megastore and the Birmingham Six were released. It’s all within memory. A forecast of an increase in the population to more than seven million, where 90.9 per cent of the increase is due to net inward migration and only 9.1 per cent due to natural increase, is a huge economic, social, demographic and – maybe above all – cultural shift.
There will be many asking whether the local population wants this, whether anyone has asked them. This question will become louder and opinion more divided. The CSO suggests that the labour force will increase to possibly as much as 3.3 million by as early as 2037 – only 14 years from now. What jobs will all these people do? Immigration is both a push-and-pull development. People come here because we need them (the pull) and they leave to get way from something (the push). On the basis that Ireland can’t affect the “push” factors in other countries, we must focus on the pull factors – what will these millions of people be doing here?
The CSO must be assuming that these people will be working, otherwise it wouldn’t have made the forecast. Its figures indicate that the labour force itself is set to expand by the entire existing population of Dublin over the next 14 years. What is the plan? What is the new Irish growth idea? The only way Ireland can sustain and profit from all this new talent is if we create, side by side with the multinational sector, a thriving small business sector, jammed with small, vibrant, innovative, locally owned companies. This is easier said than done.
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At the moment there are two parallel economies: the high-productivity, high-profit multinational one, and the low-productivity, low-profit local one, which is increasingly squeezed by higher local costs. The CSO suggests a stark contrast exists between the productivity (output per head) of each. Last year labour productivity for the economy in aggregate stood at €97.10 per hour. However, labour productivity in the foreign sector stood at €381 per hour, compared with a mere €53.80 per hour in the domestic sector.
It is easy to look at this as a threat, to fixate on the gap between the two and conclude that local business can’t compete. But there’s another way. Consider the huge multinational presence here as the bridge to a prosperous, innovative, small enterprise economy. All the debate and the language deployed when talking about the MNCs boils down to tax and the sustainability of that tax. We see these companies as extractive and tax generative, and we largely spend that tax on various social expenditure. The debate then becomes, like that in a fraught relationship, one of differing degrees of insecurity: will they stay or will they go? Will they sleep with someone else, or are we attractive, funny and intelligent enough to retain them? This lack of self-confidence is endemically Irish, but it is misplaced.
We should see the MNCs not as producers but as customers for the next phase of Irish economics. Why not see that gap in productivity between the two sectors not as a failure but as a target, a gap to be narrowed? Why not see their tax payments, not as an end in itself but as a sign of the amount of business we are leaving on the table, untapped? If we want to create a new enterprise economy – and there is no point creating any other type – that sector needs money and markets. The multinational sector can provide both.
On the money side, this column has regularly advocated a so-called sovereign wealth fund, but rather than designing it as a pension fund, a proportion should be used as a start-up fund to de-risk start-up financing. In effect, enterprising citizens could pledge their share of the sovereign wealth fund to the banks in return for financing for their new venture. If the venture goes belly up, as many will, the banks get liquid shares, reducing their exposure to commercial risk. In this way we prevent the Irish banking system from being a glorified and inert safe deposit box, and transform it into a source of finance for the economy.
That’s the money bit; what about the market side of things?
Building a small company designed for export is very difficult, requiring huge investment in marketing, foreign contacts and so on. What about selling to export-adjacent companies, such as the multinationals? The MNCs are a global exporting sector, with the highest standards of management. What about seeing them as customers for local producers? Multinationals operating in Ireland are part of a global supply chain, and the idea would be to insert new Irish producers into that supply chain where possible. We start by talking to the procurement people in multinationals, such as Amazon, Intel and Pfizer, exploring what they buy, from whom and from where. How do they kit out their factories, what inputs do they use, are there manufacturing processes that they import today that could be made here, to their highest standards, tomorrow?
By seeing the MNCs as potential customers, we can bind their businesses to our local ones, making them even more likely to stay here, while at the same time giving a new Irish enterprise economy a proxy export market, with export volumes and pricing. We should regard the multinational companies as small countries to export to, without ever having to leave home.
In this way we create a closed-circuit economy, entirely outward-looking, entirely modern, where the aim is to bridge the productivity gap between the local and foreign business sector by the daily grind of real business. Their standards become our standards and their management techniques become ours. As productivity rises, so too will profits locally.
Obviously such an approach has to be orchestrated from the top, from government, requiring a new era of partnership with the multinational sector. This could fuse our one real advantage over the rest of the world – the amazingly successful inward investment policy – with the requirement to leverage an entirely new economic sector, engaging hundreds of thousands as not only employees but also as entrepreneurs.
If we are going to absorb so many new people, we need a plan that goes beyond spending on infrastructure, housing and the like, although this is necessary. We require an economic and commercial plan for the coming years that plays to our strengths, minimises our weaknesses and sees our most productive and dynamic economic sector as a customer, not just a taxpayer.