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Post #brexit – should Ireland attract big finance from the City of London to the city of Dublin?

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Friday 26 Aug 2016

Ireland has an exceptional track record when it comes to attracting Foreign Direct Investment, and this economic development strategy has fundamentally transformed our country and help us create and retain jobs in the country. However, I think the Irish establishment is dangerously dismissive of the impact, implications and consequences of what has amounted to a very much one-tracked approach.

It has been successful in many respects, but the lack of diversification and alternatives has also been extremely costly for a great number of our citizens who don’t get to reap the direct or indirect benefits of that “Ireland Inc” our elites lionise.

Of course, attracting investment and jobs into the country will necessarily be a major priority for the government.

But this worthy goal can be perverted when you get overly dependent on certain sectors, and this is compounded by what I would see as a culture of subservience on the part of our governments and elites towards the demands and expectations of multinational corporations.

This can turn into a zero-sum game between their interests and those of our citizens, where win-win solutions could prevail instead.

Think of financial regulation in the case of attracting big finance from the City of London to the city of Dublin.

In the previous decade, we went from a Celtic Tiger into the biggest property bubble in history not just because cheap credit flew in from the Eurozone core, but also because our economic elites were fully co-opted by the financial sector in this country.

A mix of self-interest and ideological faith in the self-regulating abilities of an inherently unstable sector had the Central Bank of Ireland and the Financial Regulator cheerleading us into disaster and bankruptcy, and that mindset led to the worst possible response to it, in the form of the blanket guarantee.

Now, when you look at the City of London and the financial sector’s influence in the UK Government, and how it was the most ardent champion of its interests at home and in EU policy-making, and you are armed with knowledge of past and current experience of Ireland Inc.’s ability to sell its interests as one and the same the national interests of our country, you can only conclude that we will be taking on the role of the UK government with a vengeance.

The sheer injustice of our tax regime is also a serious blight that stems from this culture.

Whatever about the need for a peripheral country to be able to offset its historical and geographic disadvantages with a more advantageous corporate tax rate, we also saw willingness to connive with strategies that undermine any significant revenue intake here or elsewhere.

Tax avoidance has become a burning issue in times of austerity and of leaks which revealed wrongdoing on a global and systematic scale.

If we are as concerned with our reputation abroad as our establishment claims when it comes to putting the taxpayer on the hook for corporate losses, we must step up the work to unravel the factors that enable this carry on.

I think in the process we will also have the advantage of finding out that we have more leverage and ability to attract sectors that benefit the real economy than we give ourselves credit for.

Thanks to our human talent, our language and EU single market access advantages, we do not need to play a losing zero-sum game with big business to the point of alienating our citizens and neighbours.

I believe this will be a matter of confidence and of the knowledge that we are a mature country.

I think we sadly remain invested in an approach that leads to boom and bust cycles which always benefit the same people, and always hit the most vulnerable hardest.

We did very little to channel some of the Celtic Tiger’s gains into proper infrastructure. Remarkably, amid our property bubble, we had serious issues with homelessness and lack of social housing provision for those priced out of the asset bubble.

At the same time, post-crisis austerity dealt a painful blow to some welfare progress we had made in recent decades, and Dublin is struggling to cope with the demographic pressure of the nascent recovery right now.

Engorging our Dublin financial sector will certainly add a cluster of highly paid positions, very many of which will have already been filled, add to the money that flows in and out of the country and to Dublin property price levels.

The question is, who in Ireland will really benefit from it, and whether the government still believes it will magically trickle down to our citizens, aside from the inflationary pressure on the cost of living of Dubliners?