Guest blog: Time to spread the love, evenly

Economy, Guest Blog | Tue 8 Dec | Author – Business & Finance
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Marc Coleman is founder of Octavian Research, an economic research publication and public affairs consultancy. In this blog post he argues for a more even recovery.

News that the economy as measured by GDP grew by 11.1 per cent in the third quarter would be heartening for two reasons. The first is that GDP in Ireland does not evenly reflect the reality of the domestic economy. Even during the lockdown, must of our export-oriented multinational economy was powering ahead. Despite domestic capital formation giving the alternative modified Gross National income measure a strong boost, most of the domestic economy remained on the floor in the third quarter and in GNP terms the economy declined.

The second reason is that the fourth quarter has seen a second lockdown that has knocked back confidence in the future and private sector investment. Christmas shopping should see some potential for a rebound. But will it be evenly spread?

In terms of the third quarter numbers, media focus in some quarters focused solely on GDP. In terms of the regional focus, media will most likely focus on reopening high streets in big towns, particularly Dublin.

But these mistakes were partly the reason that Ireland’s recent recovery failed, in so many ways, to lift all boats equally.

Some 8 months after publishing the first economic strategy response to Covid-19, our consultancy “Octavian Research” has now published the first comprehensive regional strategy. In “Ensuring Sustainable Recovery in the Greater Dublin Region”, we recommend that €3.3 billion of the €10.1 billion allocated to investment next year is directed towards the capital.

Ireland’s recent recovery failed, in so many ways, to lift all boats equally.

Far from being a case of “Dubs against the rest”, the report – already submitted to the Department of Public Expenditure’s “Review to Renew” consultation will, we hope, prompt all regions of Ireland to meet the 29th January deadline for their own submissions.

As far as recovery spending is concerned, it’s time to spread the love. And spread it as evenly as possible.

The last recovery was astounding. The economy not only rebounded from the financial crisis but reached new and undreamed of heights of economic success. Between 2015 and 2019 alone, the economy as measured by GDP grew by some 66 per cent, an absolutely staggering result that normally takes 20 years to achieve.

But it was uneven. Too concentrated in Dublin 2, 4 and 6. Too concentrated in high value and high technology sectors of the economy. And entirely unmatched by public investment.

Last year alone, overall investment in the economy was a staggering €162 billion. But public sector investment was just a tiny fraction of this.

The results of this policy misallocation was seen in both the surprising rejection in 2016 of the government that had rescued the economy – there were other, non-economic reasons for this – and again in the collapse of a century old political system in the February election of this year.

The system cannot take another shock like this.

Like no other economic recovery the forthcoming recovery needs to be channeled through and benefit towns and villages in each locality.

A clear region by region analysis of key crisis threats and optimum strategies for recovery will help various government agencies and bodies – Enteprise Ireland, the Western Development Commission, Údarás na nGaeltachta, Regional Skills Fora, Educational Training Boards and Regional Assemblies – to better understand and coordinate recovery policy responses.

Like no other economic recovery the forthcoming recovery needs to be channeled through and benefit towns and villages in each locality.

And here is the big dilemma: Regions like Dublin are more able to afford to make their voice heard. Regions like the North-West and Midlands have typically been on the back foot when it comes to being heard.

The problem is not just down to lack of resourcing for making a region’s voice heard: The fragmentation of business representation does not help.

This Christmas, government Departments will get more policy submissions than Santa Claus gets letters from children.

To get through and have impact, submissions need to be coordinated by local and sectoral groups with common interests. To date policy representation to government has been too fragmented by far. Representatives bodies can hardly complain about a lack of cohesion or joined up thinking from government if their own approach to making submissions is silo’d and fails to collaborate with similar organisations. If you want cohesion from government, demonstrate cohesion in your approach to government.

Government also needs to change, in several respects:

Firstly, Ireland’s spending is notoriously centralised. In fact as shown in Richard Boyle’s excellent Institute of Public Administration “Public Trends” report, Ireland has the most centralised public spending in Europe by far. Starting with – but not necessarily ending with – next year’s €10.1 billion public capital spend – local and regional authorities need to be consulted and as far as possible involved in the allocation of spending.

Secondly, procurement policy actively works against participation by smaller business. This is not just  bad for the economy but bad for the taxpayer: By raising the bar in terms of threshold and insurance levels for companies bidding for government business, procurement favours larger, less indigenous and city centre based companies at the expense of more employment intensive local companies and sole traders.

Thirdly, there remains a mentality of condescension and hostility towards the small business sector in some policy quarters. A real problem for government is that so few people within government or within upper echelons of policy making have private sector experience. Last January one state agency organised a seminar on small business funding with 13 speakers, 12 of whom came from state bodies or government departments and only one of whom had any experience of running a business.

The dominance by those who have never made a VAT receipt or payroll of our policy making and implementation could have an even more profoundly negative impact at the next election than did the neglect of regional Ireland at the last one.

Marc Coleman (marc@octavian.ie) is founder of Octavian Research, an economic research publication and public affairs consultancy that wrote the world’s first researched strategy response to the Covid crisis (download www.octavian.ie ) and currently produces the world’s first weekly Covid-19 specific economic and business client research note (now in its 32nd edition). He works with leading clients across industry, financial services and government agencies to produce policy influencing research and publications. He has authored five influential books on the current and previous recoveries and worked as an economist with the European Central Bank, Department of Finance, as Economics Editor of the Irish Times and Newstalk 106fm, a Sunday Independent columnist. He is a leading speaker, event host and policy analyst.