From Socialist Voice, January 2010

State-led development should play the leading role in recovery

A recurring prescription within political commentary at present is that Ireland needs to return to export-led growth as the dynamic of future economic recovery. Much of this is based on the argument—no doubt largely correct—that the economic growth the country experienced from the mid-1990s was initially grounded in the export sector and export-led foreign direct investment.
     Furthermore, recent statistics suggest that the export sector has held its own, despite the current recession.
     According to the Central Statistics Office, exports increased by 4 per cent in the twelve months to June 2009 (from €7.2 billion to €7.5 billion). Much of this has no doubt been due to the relatively insulated nature of some of the relevant sectors, notably medical and pharmaceutical goods.
     However, while these sectors are still performing, there remains a question about the aggregate impact the export sector will have on job creation now and in the years ahead as a means of providing work for Irish workers.
     Much emphasis at present is being put on the future role of service exports or internationally traded services, with a recent Davy Research Report singling this sector out as a hope for the future.
     In this regard, however, when we examine export-led employment growth in this sector we see that the existing data is hardly promising. In the total service export sector, which covers computer and related activities, R&D, financial services, education, and business services, we find that employment between 1996 and 2000 increased from 25,000 to 63,000.
     Of course this reflected the substantial flow of foreign investment into the economy at that time. However, between 2000 and 2005 employment increased by less than 8,000 in the service export sector, despite a strong performance of a 30 per cent increase. Thus, between 2000 and 2005 employment increased by less than 2,000 per year.
     These numbers are hardly spectacular for sectors accounting for 60 per cent of our total exports.
     Of further note is the composition of the service sectors by ownership. As might be expected, service exports are dominated by foreign-owned transnationals. Indigenous enterprises made up only 7 per cent of export value.
     Furthermore, in spite of the performance of this sector throughout the period 1995–2000, indigenous firms managed a mere 16,000 jobs; that’s just 1,600 a year.
     One possible lesson to be drawn from such figures is that we shouldn’t necessarily expect this sector to provide working people with jobs any time in the future, even should the global recovery begin to develop some momentum.
     Certainly if we consider that global demand is unlikely to exhibit pre-recession growth rates for some time, reliance on service exports does not appear a very viable option. The economy may experience some export-led GDP growth, but it is likely to have little in the way of actual job creation.
     In effect, this is what the economy is reaping for its reliance on both market-led and export-led growth and an inflated construction and property-led development. What we now need is a more sustainable and interventionist dynamic, particularly within the indigenous sector, which should be developed as part of an alternative economic vision for the serious political left.
     A few possible developments in this regard might include establishing a job retention fund available to viable small and medium enterprises and refocusing the National Development Plan towards labour-intensive and necessary infrastructure, such as schools, hospitals, energy-efficiency in homes, and public transport, which in turn would provide jobs in construction, architecture, engineering, and other trades. For example, a programme of home insulation and micro-energy generation would get unemployed construction workers off welfare benefits and back paying taxes and would reduce the national energy bill.
     Money needed to fund such initiatives could come from the National Pension Reserve Fund (whose present value is approximately €19 billion); but it is clear that other revenue could be generated through a suitably tailored system of new taxes, the phasing out of public subsidies of private profit, and the curtailing of wasteful public spending.
     These are simply suggestions; while they might not satisfy the abstract sloganeering of ultra-leftists, they could feature as part of a serious programme of building political support, whereby the labour movement and wider progressive political forces could develop and offer working people an alternative economic strategy that is not rooted in the neo-liberal orthodoxy of the McCarthy Report and the Department of Finance.
[AOM]

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