Fintan O’Toole: Ireland has had one big idea in the last 64 years

The model of capitalism on which Ireland now depends requires a large injection of socialism. As the State enters its second century, there is little doubt that it has to get bigger, more active and more capable.

The odd thing is that almost all corporate capitalists would agree with this proposition. The even odder thing is that our political system has no coherent way of making it a reality.

What is the Irish model of capitalism? It has been, in a word, attraction. But increasingly it has to add another word: retention.

The State makes its living by displaying its charms. It survives on its powers of attraction. We are in the business of being alluring.

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We could have long arguments about whether this is the right or wrong way for a relatively poor country to develop itself. The fact is that this has been the State’s one big idea for the last 64 years – and that it is, right now, spectacularly successful. The €23 billion in corporation taxes the exchequer will take in this year expresses that success in astonishing numbers.

Our original seduction techniques, deployed in the first decades after the Whitaker/Lemass revolution, were pretty crude: very low taxes and cheap labour. If you are on the pull for assembly line mass production, you can score with these simple tricks.

These methods are quite compatible with a small State. Low corporate taxes are just a matter of not doing very much. Cheap labour is actually more available if the State fails to educate its citizens beyond the basics.

But these relationships are one-night stands. There are vast reservoirs of even cheaper labour and many governments willing to impose little or no tax. As Ireland found in the miserable 1980s, capital that is only after these instant gratifications is footloose and fancy free.

So the rules of attraction had to get a lot more sophisticated – and a lot less compatible with a passive State.

Ireland’s 21st century has been largely about replacing one holy trinity – father, son and holy ghost – with another: clusters of world-leading American corporations in IT, pharmaceuticals and medical devices. Having done that, we now have to figure out how to keep the faith – in other words how to retain at least this level of investment.

We ought to have learned from the 1980s, when so many big foreign-owned factories packed up and moved on to more profitable locations, that what is attractive in one period may go stale in the next. International capital is commitment-phobic – if it gets a better offer, it will be off.

There is, moreover, a very important shift in this game of attraction. We are no longer just seducing capital – we are also having to appeal to labour.

We could think of Ireland’s development in three phases. First our labour went to where the capital was – hence mass emigration. Then the capital started to come where our labour was – the flow of inward investment. Now, other countries’ labour also has to come to where this American capital is: Ireland.

We don’t produce enough highly skilled people (scientists, technicians, mathematicians, linguists) to meet the demands of the leading-edge multinationals. So Ireland has to be a place these people want not just to come, but to stay.

This broadens the meaning of attraction. It’s not just about big questions posed by corporate boards. It’s about quality of life.

And that in turn is about a whole range of things: housing, childcare, healthcare, public transport, the vibrancy of cultural and social life, the liveability of cities, the sustainability of the natural and built environments.

These are all things that the State has been quite bad at. It lags far behind comparable European countries.

In some respects, Ireland does have a very active State. The peculiar nature of our process of economic development has forced it to take a big part in the redistribution of income.

Because we have two economies – domestic and multinational – with very different rates of pay, Ireland has one of the most unequal distributions of earned income in the developed world. This means that, in order to sustain a degree of social stability, even right-wing governments have had to ensure that the State does a lot of heavy lifting, through the tax and welfare systems.

And broadly speaking, this highly interventionist system works. It keeps Ireland, which would otherwise be spectacularly unequal, at around the middle of the inequality range for EU countries – not great, but not too bad.

It sometimes feels, though, as if a centre-right political culture has to balance its very heavy interventions in this arena by being extraordinarily passive in other fields. Hence its obsession with giving subsidies and incentives to private forces and hoping that they will do the State’s work for it – in spite of the repeated evidence that they won’t.

This is why, after a century of existence, the State seems at best half-built: no coherent public education system, a two-tier health service dominated by private interests, a catastrophic failure of public housing provision, some of the most expensive childcare in the world, not a single urban subway system, not one port in the entire State capable of servicing an offshore wind industry, poor digital connectivity and services, raw sewage pumping into the sea, hardly any pristine rivers left, critical shortages of teachers, doctors and nurses, universities entirely dependent on private income – and so on.

Even a traditional conservative can surely see that Ireland is at a phase in its development where it needs, not the binge-and-purge fiscal policy of recent decades, but a sustained, planned programme of public investment and public provision.

But who’s going to do it? If there is such a thing as a “natural party of government” in a democracy, Ireland’s would now be a classic social democratic big State movement. Yet we don’t really have one.

Labour indulged its taste for self-immolation in 2011 and does not seem capable of recovery. The Social Democrats essentially take the other half of what used to be the very modest Labour vote.

That leaves a huge governing space for Sinn Féin to occupy. But it doesn’t really see itself as a social democratic party committed to building the long-term stability of the southern State. Its overwhelming priority is the replacement of that State in a united Ireland.

Maybe the penny will drop (not least after this week’s Irish Times polls) that the best case for a united Ireland is a State that proves itself capable of making the island one of the best places in the world, not just to invest, but to live and work. What might attract a corporate board in California and a skilled worker from Spain just might do the same for a Protestant in Ballymena.