The strengths of the economy disguise its weaknesses

Economic and social recovery will depend on businesses being forward-looking and innovative in producing new and improved existing goods and services

The Intel facility at Leixlip, Co. Dublin.    The productivity of our multinational sector, which is hugely important to our economic fortunes, is boosting our national productivity levels and disguising the relatively poor productivity levels in our indigenous sector. Photograph: Dave Meehan/The Irish Times

The Intel facility at Leixlip, Co. Dublin. The productivity of our multinational sector, which is hugely important to our economic fortunes, is boosting our national productivity levels and disguising the relatively poor productivity levels in our indigenous sector. Photograph: Dave Meehan/The Irish Times

 

These are turbulent times we live in. We have hopefully seen the worst of the Covid-19 pandemic as our numbers move in the right direction and society begins to slowly and carefully gear up for recovery. But what of our economy?

Is being in the top 20 per cent of the global league tables when it comes to competitiveness a strong enough base on which to rebuild our economy while handling Covid-19? The coming 12 or 18 months will let us know. More immediately can we move quickly to improve our chances of a rapid and robust recovery? Those two questions are at the heart of our the decisions facing policy makers as we face into further uncertainty in an already turbulent time.

The annual Competitiveness Scorecard published today by the National Competitiveness Council highlights something of a recurring pattern; we score very highly in certain areas but continue to struggle in others. The danger is that the things we are strong on will disguise the weaknesses that persist and create a false sense of security. As a small open economy that our prospects during the coming turbulence depend on getting as many policy decisions ‘right’ now rather than waiting for some point in the future to act.

One of the inspiring aspects of the recent months is that we have seen so much of what is best in us all in our collective response to the Covid-19 crisis. We have watched as public and private sector, charities, NGOs, community and sporting organisations have all innovated, adapted, collaborated and worked both harder and smarter to allow us flatten the curve and keep basic services running. Let’s build on that experience, on that type of approach and give our economy and community the best chance of a strong recovery that is inclusive and sustainable.

There are areas where the type of innovation and agility shown by the groups above can be built on and improved quickly.

It has been particularly striking how many businesses, government departments and agencies have shown exceptional flexibility in the transition to remote working. Effective remote working and new methods of service delivery will assist recovery and reduce public health risks. Any loss of momentum in the agility we have seen will delay improvements in our quality of life.

Those in leadership positions have seen where the strengths and weaknesses lie in their organisations and their workforces. Economic and social recovery will depend on businesses being forward-looking and innovative in producing new and improved existing goods and services. Those who have invested in preparations for Brexit are likely to be better placed than those who have not.

On foot of learning from the current crisis, the public sector needs to deal with its complex issues in a more systemic and coherent way, so that scarce resources are used more effectively in the interests of society. Covid-19 has shone a bright light on longstanding challenges that we have not dealt with in aspects of health, education and housing.

Some areas where we do quite poorly in terms of competitiveness - are now of critical importance to our recovery. They include the environment, broadband coverage, digital skills, and the productivity of our SME sector.

The productivity of our multinational sector, which is hugely important to our economic fortunes, is boosting our national productivity levels and disguising the relatively poor productivity levels in our indigenous sector. Dealing with these types of competitiveness weaknesses is essential to achieving a sustainable and balanced recovery in this time of heightened global uncertainty.

Over many years the National Competitiveness Council has pointed to relative weaknesses in the Irish business environment, but the pace of dealing with them has been slow. These continuing weaknesses mean that businesses in Ireland facing higher financial or time costs than their competitors. Later this year, the Council will set out what it sees as the areas of challenge for Government, and make recommendations in relation to many of these long standing issues. Since the most difficult of times can bring opportunities for action, we hope to see these issues addressed, to the benefit of businesses, employees and the wider society.

Dr Frances Ruane is an economist and Chair of the National Competitiveness Council

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