Using the Irish model in vain

It absolutely amazes me when people study the Irish model of economic growth and the use it to support their own view of the world. The Left will say it was the billions in EU subsidies. The Right will say it was tax cuts. Educators will say it was the free university education. Economic developers will tout the IDA and its innovative approach. Or they might say the billions in tax incentives and grants were key.

I read in the TJ that a Toronto-based consultant is coming to Saint John to head up an initiative. Here’s a quote from the lead consultant:

“What we’ve been looking at very closely is the Irish model of growth,” said [Dave] Hardy, whose firm has helped manage growth in other communities that have undergone rapid economic expansion. “Ireland liberalized tax laws and really put a push on education and quality of life – the kinds of things we’re pushing here.

Now, let’s be crystal clear here. Mr. Hardy. Cutting taxes is not unique. Many countries do it. Liberalizing trade policies is not unique. Free education is not unique. Pushing quality of life is not unique.

The only thing – here me on this – the only thing unique about the Irish economic miracle is that Ireland led the world in foreign direct investment – by far – for almost two decades. Many years in the 1990s Ireland attracted more private business investment than Canada – a country seven times larger.

That is the only truly amazing thing about the Irish model.

So for a Toronto consultant to come down here and talk about “liberalized tax laws and really put a push on education and quality of life” will just be another distraction like all the distractions before.

Until New Brunswick can attract -at least its share – of global business investment – the rest of this stuff is just distraction.

Sure, I realize that there is an interdependency here. You need workers to attract investment. You need good education and quality of life to attract workers. I realize all of that.

But what annoys the crap out of me is that we work on all that other stuff and ignore foreign direct investment attraction.

Saint John will have success. But what is at the core of this success? Billions of investment. That’s the core. And that’s what needs to happen in Moncton, in Fredericton, in Miramichi, in the North.

I’ll leave you with this. From 1999 to 2003, the height of inward investment into Ireland, there was $106 billion (USD$) of inward foreign direct investment into that country. A country that is about 6.5 times larger than New Brunswick.

In addition, the vast majority of investment into Ireland was employment intensive unlike an LNG plant, or a refinery or Lepreau II which combined will be billions in investment but only maybe 1,000 jobs or so.

How about billions of investment in animation or life sciences or aerospace or auto or green energy or IT outsourcing or medical tourism or financial services back offices?

Here’s my worst case scenario for New Brunswick. Restated.

Irving builds Refinery II.
NB Power builds Lepreau II.

We get through the construction phase and have about 1,000 net new jobs.

Meanwhile, the forestry sector fizzles. The mining sector gets a little momentum but limited. The call centre industry goes to the Web and we lose thousands of jobs.

The NB government distracted by the good looking GDP #s for a 4-6 year period forgets other eocnomic sectors. So we miss the boat on every other potential growth sector.

It’s 2015 and we are still up to our ears in Equalization, the construction workers that came back to build Lepreau and Refinery II are gone back to Alberta and we are back into the same old cycle we have been mired in for the last 25 years. Out-migration. Traditional sector decline. Increasing dependency on Federal transfers.

Remember. We already have a Refinery and a Lepreau and while those have been important economic tools would anyone say they were the anchors of the Irish style economic growth in New Brunswick of the past 25 years?

That would be silly. And that’s what they will be saying in 2015 if we don’t start to understand the bigger picture here.