Wednesday, October 30, 2013

30/10/2013: Welcome, Dublin Web Summit... Here Two Questions to Think About...

On the first night of Dublin Web Summit 2013, here's my bit of thinking:

For executives and corporate leaders:
For policy makers: when will you stop pretending that you understand innovation?

Government after government around the world is harping on about 'innovation-driven growth' 'knowledge economy' and 'creative economy'. Government after government charges human capital - the main generator of value added activity in all of these economies - a 50%+ tax rate, so it can subsidise building & construction, property investments, roads and transport, farming and forestry, fishing and tourism - the parts of the economy that are anything but 'knowledge' or 'creative' or 'innovation-centric'. In fact, the subsidies are flowing to these sectors irrespective of whether their recipients in any way shape or form engage in or support knowledge generation or commercialisation, creativity deployment and embedding into their processes and outputs, or innovation-driven transformation of their sectors/firms/services or outputs.

Give a thought to the above two questions, folks, while inhaling the airs of the Web Summit. And keep remembering: you are in the city where human capital is being taxed at 55%+ to fund services not available to the holders of that human capital. And corporate capital is taxed at 0%-12.5%. Where the Government has just passed a new Budget hiking indirect taxes on human capital (amongst other) to fund subsidised home improvements for small builders.

Welcome to the Creative Knowledge Innovation Ireland... did you declare your human capital at the customs?..


Brian O' Hanlon said...


I can tell you what I would do, in order to invigorate some reform in politics in Ireland. I wouldn't even bother with Seannad referendums or anything like that. I'd drag the whole lot of them out of their nesting place in Kildare street, and put them in a new head quarters somewhere on the centre of the island, and say, now get on with doing some real governing for a change.

Having done that, I would give back more autonomy to cities such as Dublin and Cork, who already know what needs to be done, and let them get on with doing that.

And in time, as other urban centres around the countries gained a firmer footing, they could actually gain more autonomy for themselves too. The whole idea with government in Ireland, if it is to serve any useful purpose at all, is to figure out some direction for the island as a whole. But from a political perspective, it is much safer to remain in someplace such as Dublin city, and any thing good that comes along, the PR goons of the politicians make sure to stand their card board cut out clients there on the podium, to allow all of that magic pixie dust rub off on them.

Politics shouldn't be about magic pixie dust and PR, or not to the extent that it has become like that in Ireland.

Instead, what we hear is the opposite (wrong) strategy.

When FG talk about political reform, they talk about giving back autonomy to local government - which is EXACTLY, and PRECISELY the wrong thing that should happen. Because most of the 'back water' local authority regions around the countryside, have never had good central government, capable of doing anything for them.

It all gets back to the magic pixie dust formula, that PR consultants going back decades devised for their politician clients. Make sure to be in the camera shot, when something good happens, and that normally means being in the thick of things in somewhere like Dublin. It is redemption by association.

So when something happens in Dublin, that everyone says, how wonderful! It means from a political perspective, oh, look at what my party is doing for the country!

When in fact, many of these larger urban centres such as Dublin or Cork, can practically navigate their own course, as global cities at this stage. And they need far less intervention from politicians, and the like. Far less.

But the attitude seems to be, that as long as Dublin scores the odd goal - the politics must be working. And if any other poor backwater of a place, on the rest on the island manages to score something for itself, then well and good. And if it doesn't, well and good too.

And you see, that is not a strategy. We have never had an all island strategy for rejuvenation or re-development or anything. As I said, I would move the centre of parliament to the middle of the island and have the central government, interface with a much stronger local administration in the major urban centres. And going forward, encourage the urban centres to develop more of their own autonomy.

But the likes of FG, want to go about it the opposite way around. Stay in Dublin themselves, bunkered in Kildare street, just close enough to rush out and show face for the odd conference photo shoot, be associated with the 'success' in the big city, and get the footage out for the RTE main evening news, just in time to tell the rest of the country, 'we are helping you'. Look, I was out today at this photo shoot.

This is PR led politics, writ large, it is not politics for real. It's just all complete stage management, where you get guys with out-of-Dublin accents, to have kind of soap opera parts in a sort of Coronation Street version of what politics ought to be.

Brian O' Hanlon said...

A couple of other data points on this particular theme.

Ronan Lyons writes in 2012, about a de-coupling of Dublin property market from the remainder of the island of Ireland.

Barry O'Leary of IDA, in February 2014, makes an attempt at an analysis too.

What is really interesting in both contributions, is the focus on a tiny part of the whole problem. Both authors are no doubt, really expert in their own field.

If I looked hard enough, I might locate many other authors, many other articles, which all try to tackle the Dublin versus Ireland 'divide' in different ways. Really, there is the makings of an entire book on this.

But the main point to understand, is that no government, or no critic, or no author, has ever quite managed to put very many of the 'pieces' together.


TrueEconomics said...

I termed this "our polarised and paralysed economy" here:

Brian O' Hanlon said...

Constantin wrote on December 26th 2013,

"In other words, some EUR83 billion of domestic economic activity has been suppressed over the duration of the current crisis".

This sentence sort of sums it all up, as good as anything I have ever read. However, while this sentence does speak volumes about the condition of Ireland as a country, as a whole, it still doesn't get to the level that we can talk about 'regions', or lesser parts of the whole.

It is a little bit like that comment that Alan Greenspan often makes about the global economy, with the surplus of funds for investment, and no 'plan' of any real shape or form for what to do with that surplus of funding.

When we look at Ireland all of the time, in the aggregate, we can deduce that we require additional funding. However, when we look at the details, what we notice is that the funding gets used in different ways, in different parts of the island.

In some parts of the island of Ireland, such as like the great Dublin, or eastern region, you pump in the funding, and it has the effect of building things, that are soft as well as hard. It has the effect of joining up communities, making it all work better and giving people better lives.

However, in other more remote, wind swept parts of the island of Ireland, we see the funding being invested, it gets soaked up in no time by a group of civil engineering contractors, . . . where you get left with this large scale, robust, tough piece of road infrastructure. And that's it.

Limerick is a good example actually, of a city which has a lot of really world class infrastructure surrounding it. It will eventually use that, and more. However, at ground level, that infrastructure isn't doing an awful lot that improves the prospects of real men and women 'on the ground'.

In any case, an economist who can talk around this whole subject, and give very simple examples related to oranges and apples (which always helps), is a guy such as Clifford Winston. Clifford spoke to Russ Roberts recently at Econtalk about investment in transportation, government involvements in this whole sector of the economy, in a downloadable podcast.

I found the chat amongst the two economists to be very useful. We had to study a lot of civil engineering as part of our course requirements in surveying at Limerick recently. So I found Clifford's perspectives and examples very insightful.

Clifford emphasizes often, that spending on infrastructure is often done with an engineering view, as opposed to an economists one. He asks the question, if oranges are cheap and get very scarce, then what should happen. Do we invest more in orange processing capacity, or change the price of oranges?

Having said that, when one reads in the newspapers today about our water infrastructure, one does learn that investment is needed, and needed soon. All that one can say is that we now might start putting cash into something useful, instead of putting it into busted banks.

But I do think that the 'plan' for investment of portions of the €83 billion manifests itself in a different way, . . . when it is distributed in Limerick, for example, as opposed to Dublin. Somehow or other, the same money in Dublin can manifest in projects that give back to communities (and maybe Dublin city will have to draw water from as far away as the river Shannon).

But we can do this in a way, that helps both Dublin, and helps the Shannon river. I mean, Dublin can't go on drinking the whole Liffey dry, before it even leaves Kildare to flow into Dublin city. Ask any salmon fisherman down in Chapelizod, who has fished over the decades, and they know exactly how much water the city can drink.

While in other parts of the country, we get miles and miles of more tarmacadam to maintain and drive on. But not much else. So that €83 billion has to be broken done, to establish better targeted plan for the future of other parts of the country.

Brian O' Hanlon said...

One other thing on the subject of Clifford Winston, and his analyses of apples and oranges.

Down here in Limerick, just to take an example, at university of Limerick we have a new 'think tank' established to study the fertile interaction of disciplines such as economic planning, urban planning, employment generation and so on.

In all fairness to the economists in that group, they look at the big items of expenditure, the surrounding road network. They ask an intelligent question, of how Limerick as a place, can take advantage of what it has got in terms of infrastructure.

In other words, by the time that economic and urban planning academic 'think tanks' get their hands on the problem, . . they are tasked with joining together the big, concrete thing on the right hand, with doing something for the local people on the left hand, . . and there is a huge gap in between.

The fellows that I went to school with, can tell you what it costs in diesel to run an excavation machine flat out for one day, and what exact model of machine to use to shift 'X' amount of rock or soil. We're really well trained and motivated around here to do that sort of thing.

My department, is figuring out the sums in order to charge for each square yard of tarmac, or each drum of diesel used up.

But you put guys my pals into the same room, in the same conversation with economists and urban planners, and they just want to run out the door. The idea with those 'hard' professions, is to turnover the billions, make the profit on top, and move on, before you are asked anything about what the price of an orange should be.

I notice, when engineers talk about sustainability in civil engineering for example, it is often to do with sustainability as it pertains to the laying of more tarmac, the pouring of more concrete (while saving more polar bears, and making sure that ice caps don't melt into the ocean).

But the whole point is to keep pouring concrete, and keep breaking more rock by the square yard.

And it is left to the economics department over at University of Limerick afterwards, to figure out how the city can make use of its world class concrete infrastructure (once all of the guys in hard hats have gone to Abu Dhabi to do the same over there).

When the question that economists in all universities in Ireland, should be asking, . . . is how do we design the plan so that we can deliver but 'hard' sustainability, and 'soft-er' sustainability at the same time.

The problem is, I spent four years or more, learning all about how to deliver hard sustainability, or just 'hard' civil engineering on its own.

And you look at a city such as Limerick, which manages to acquire a Rolls Royce infrastructure in some ways, and on the other hand, we are now re-building houses on sites, where houses have been under water many times before.

You could argue that is giving back to the community.

But then you place it all into a perspective, of the total scale of the investment that can flow into a region, you begin to see where the civil engineering has gotten all off track, . . and where the economics has gotten lost too.