Despite the woeful state of the domestic economy, the innovation economy is building steadily

POLITICS: 'GOVERNMENTS DON'T create jobs, entrepreneurs do: the risk takers, the business people, the exporters up and down the country who have succeeded often despite, not because of, government action."

So stated the May 10th press release from the Minister for Enterprise, Jobs and Innovation, Richard Bruton, on the Government’s new jobs initiative. In presenting the initiative to the Dáil, Minister for Finance Michael Noonan used the word “jobs” 43 times; “enterprise” eight times; and “innovation” just four times. The only time he said innovation was when he explicitly referred to the “Minister for Enterprise, Jobs and Innovation”.

What catalysts does the jobs initiative give to the “innovation economy”? A partial loan guarantee scheme, to be operational by the autumn, certainly should help company debt financing. A micro-finance scheme for loans to start-ups could also be very valuable.

Government bodies, with the exception of the semi-States, will be required to pay suppliers within 15 days. I would love to believe this target will be widely achieved. Removing employers’ PRSI from share remuneration is correct and essential. Allowing companies to claim for research and development tax credits against corporation tax on profits or against the cost of employing researchers is also very attractive. Increasing public procurement from the small and medium-sized enterprise sector would be wonderful.

However, in general, of course, the public sector should be a conservative buyer of well-proven solutions rather than take risks with new innovations. Public procurement from risky innovation is an oxymoron.

More recently, Bruton announced a three-person review group of copyright legislation for the digital economy, following a similar United Kingdom initiative. At the Irish Internet Association on May 12th, he announced some further publicly funded research projects; a modest increase to 100 high-potential start-ups targeted by Enterprise Ireland; and a €750,000 Enterprise Ireland seed fund for life science and green technology start-ups. Additional risk capital, rather than just debt and loans, is welcome even if the amount is very modest.

The new administration seems to have parts of the jobs engine but it is unclear whether it has all the necessary pieces; it appears uncertain whether the pieces fit together so that the engine is working and ticking over, and still less that it can accelerate from first to second to higher gears. What is the Government’s vision and strategy to rebuild the economy? Provide hope and confidence? Get as many as possible back to work? Grow overseas earnings, and trust that this will spill over to the rest of the domestic economy?

The jobs initiative targets the tourism sector with a VAT reduction, air travel tax elimination and holiday visa-waiver scheme common to the UK. More could be done to improve the national brand and tourist experience. Some simple examples are ensuring that queuing at immigration controls for non-EU nationals is drastically reduced; eliminating tourist intimidation in urban areas such as Temple Bar; and providing an arrivals pick-up lane for the glitzy new Terminal 2 at Dublin airport.

The holiday visa-waiver announcement could have been so much more. President Obama spoke in El Paso, Texas, on May 10th: “Look at Intel and Google and Yahoo and eBay – these are great American companies that have created countless jobs and helped us lead the world in high-tech industries. Every one was founded by an immigrant.” What are we doing to encourage entrepreneurial immigrants to found companies and create jobs in Ireland?

I agree with Bruton: governments don’t create jobs, entrepreneurs do. We need as many entrepreneurs as possible – our own, and immigrants from elsewhere in the European Union and beyond. Each start-up on its own, in general, is unlikely to make a material impact on our unemployment rate. Collectively, the impact for jobs could be immense.

A very small number of ventures grow into large companies. Many more are sold before they become large, but each such sale yields experienced serial entrepreneurs, business angels and new aspirant entrepreneurs keen to replicate the success. Some ventures fail, but those involved almost inevitably try again. Each cycle of the engine generates experience, new business angels and an even greater pool of entrepreneurs and ventures. More entrepreneurs and more ventures mean more jobs, and more spill-over wealth to fuel the rest of the domestic economy.

Despite the woeful state of the domestic economy, the innovation economy is steadily building. We are attracting more entrepreneurs and increasing the interest of the younger generations in entrepreneurship. We have a nucleus of experienced entrepreneurs and business angels investing time and money in the next cycle. We have a unique multinational sector, which is keen to stimulate and benefit from indigenous entrepreneurship.

The Minister for Innovation (which leads to jobs and enterprise), the Minister for Finance and the Taoiseach have so far been rather mute on the “innovation economy”.

There is more they could do to promote it, not least encouraging entrepreneurs to use Ireland as a base. Most of all, they need to understand and believe in the innovation economy themselves.