Report on smart economy is vague and pulls its punches

 

ANALYSIS:ECONOMIC PLANNING is never easy. TK Whitaker, the father of modern Ireland, was solely responsible for the first economic plan. It succeeded, but for reasons which were different than those envisaged, and subsequent attempts fared no better.

That is not to say that the exercise is not worthwhile.

Experience shows that having a target or goal is critical, and the process of planning can be just as important as the achievement of the targets aimed for. Indeed, the First Programme for Economic Expansion heralded an era of change in Irish economic fortunes.

There is also a large element of hit and miss. For example, the International Financial Services Centre (IFSC), usually attributed to Dermot Desmond and Charlie Haughey, had been proposed and rejected several times before either of them became involved. In the end, it was the need to have something positive in the 1987 Fianna Fáil manifesto that won the day.

Then as now, circumstances were pretty dire. Now the proposal is for a smart economy. This first appeared in a publication from the Department of the Taoiseach in December 2008. It had five aims, one of which was farmed out to an innovation taskforce established around the middle of last year. The taskforce has now reported.

The report is not an easy read – indeed, getting to grips with it is a bit like tangling with an octopus. As one might expect, it is long on vision, exhortation and objectives and short on facts and figures. This makes it almost impossible to analyse from an economic perspective.

There is only one real statistic in the report. The taskforce believes implementation of the recommendations, “supported by a favourable economic context” has the potential to create “of the order of between 117,000 and 215,000” high-tech jobs between now and 2020. This range should be “viewed as an aspiration rather than a definitive numerical forecast” and is based on experiences in other countries that have already achieved the type of development to which Ireland aspires.

Given the paucity of information, it is difficult to comment on this other than to note that it is five to 10 times the IFSC number. A repeat of the IFSC experience would be a less ambitious but still demanding objective. However, if you are going to do this type of thing, there is little point in aiming low. The target compares with the 236,000 jobs lost since 2007.

Overall, it might have been wiser to take a leaf out of José Manuel Barroso’s book. When launching the new EU 2020 growth strategy recently, he said it was “too risky” to speculate on a precise figure as the current economic crisis had made the situation difficult to predict. Instead, he confined himself to saying that the new strategy should bring “at least 2 per cent growth” to Europe.

The other big issue is the cost of the proposals. A total of 92 recommendations are made with no attempt to cost them. Instead, they are divided into high-cost (22), low-cost (27), cost-neutral (34) and cost-to-be-determined (8). This is hardly good practice, when you consider we are in such fiscal straits we have to cut social welfare and public sector pay. However, one has some sympathy here for the predicament of the taskforce.

The idea of reducing taxes today for uncertain benefits in the future was accepted by the unions in the late 1980s. Then, too, we had the enlightened Tallaght Strategy proposed by Alan Dukes, the former Fine Gael leader.

Both the unions and Fine Gael are taking a different tack nowadays, when a national coalition is arguably more needed than ever and this has, presumably, constrained the authors of the report.

There are lots of good things in the report. Two areas stand out. These are measures to promote and encourage venture capital, and well-crafted tax proposals.

The suggested tapping of the Irish diaspora is a novel feature in the wake of the Farmleigh experience. The Scots have long believed the diaspora was the secret to the Celtic Tiger. It would be nice to confound them again.

Its biggest defect is in pulling its punches. For example, it lists the agencies funding research but confines itself to recommending improved co-ordination.

“An Bord Snip Nua” would have recommended merging or eliminating the bulk of them.