Enterprise approach the key to our success

Almost everyone sees that we have made Ireland a place with a stronger economy and a generally more prosperous society, almost…

Almost everyone sees that we have made Ireland a place with a stronger economy and a generally more prosperous society, almost everybody other than Kieran Allen, who sought to depress us in this column in last week's paper. We see our glass as virtually full while he insists on seeing it as almost empty.

Even the critical EU Commission believes we are growing too quickly but acknowledges clearly the huge social and economic strides made here over the past decade. A constant stream of delegations of business people, journalists, trade unionists, policy makers and influencers from all over the world continues to visit on fact-finding missions.

This is not surprising since we ourselves are still amazed that the major social scourges of emigration and persistently high unemployment have been dealt with. We do have remaining serious problems and they must be dealt with - but not in the outdated ways trotted out by Kieran Allen.

When we take a realistic look at the sources of Ireland's progress, we see how we should tackle problems both of social exclusion and remaining economic bottlenecks. The fact is that social partnership has helped Ireland make its leap forward; it was not the only factor but without it we would not have had the success we now enjoy.

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In the background, there have been other factors such as the reduction in the birth rate and the huge improvement in participation in education. External factors such as the EU single market and the stimulatory effect of EU transfers have been vital in supporting our export drive. Consistency in industrial policy, particularly in relation to corporate taxation, has fostered confidence and investment. A modern, competitive, enterprise-based economy will provide much more sustainable solutions to social problems than the model hinted at in last week's article.

The social partnership consensus has been based on this longer-term perspective and while it is undoubtedly under pressure at present, it still has potential to help us manage success. For it to work, the trade union movement must honour in letter and spirit the agreement that has so recently been amended to address issues raised by it. The core principle must be to protect competitiveness in order to achieve other objectives.

Just look at the facts: there are 600,000 more people at work in Ireland in the past seven years or so; female labour force participation has risen from under 40 per cent to 50 per cent as women took up opportunities long denied to them; emigration has reversed as many who left in despair have returned to good employment; real net wages of all workers - after tax, after inflation - have increased each year since 1987, in sharp contrast to the debilitating wage price spiral of the past. The spending power of working people has grown - more than doubled in real terms since 1990. Retail sales continue to grow strongly - probably by more than 10 per cent in real terms last year. More and more Irish people own cars and home computers and mobile phone owners are now well above the 1.5 million mark.

Consumers now have more choice as well as spending power - assisted by stronger competition and innovation. As more informed industrial policy took effect Irish companies began to sub-supply the multinationals, thus spawning more and more sophisticated business services.

In turn, the rest of the domestic economy, including personal services like hotels and restaurants, has prospered and has delivered huge increases in employment. Liberalisation has also played a role, for example in air transport and telecommunications.

Mr Allen's reference to the relative share of capital and labour in the economy cannot be left unchallenged. This was analysed closely by the NESC, most recently in its December 1999 strategy report, Opportunities, Challenges and Capacities for Choice. Table 6.3 on page 241 shows in fact that the capital income share in the economy was more or less static since 1990 when profit outflows of multinationals are adjusted for.

This is a rational analysis since these surpluses are attributed to the parent investor companies abroad who engage in research and development, marketing etc. and have little relevance to the domestic Irish economy. Irish industry has been moving very sharply up the value added chain and its structure in 2001 bears scant resemblance to the scene even 10 years ago.

Poverty still exists in Ireland and far-seeing strategies under the Programme for Prosperity and Fairness are in place to alleviate it in a sustainable way and economic success should not blind us to the challenges involved.

Yes, Ireland must work to share prosperity. The necessary prerequisite to this is to focus on competition and so generate prosperity to share.

Brian Geoghegan is director of economic affairs, research and information at IBEC.