Over the past 15 years we have seen a substantial increase in foreign direct investment. A general criticism of this emphasis upon ‘FDI’ is that Ireland has paid less attention to supporting indigenous industry. The absence of a ‘national system of innovation’ has limited home grown employment. Ireland has increasingly become a regional economy of both the United States and the European Union. It is a fragile dependence. This calls into the question the relationship between the state and job creation (presuming this is the objective of attracting FDI). The Irish state is reluctant to create employment directly but rather facilitates private market investment. This, of course, has not always been the case.
One of the rationales behind the creation of public sector enterprises in the 1950’s – 1960’s was to create demand for local human capital. The state offered skilled employment to an existing workforce that could otherwise only be got through emigration. The public sector enterprises of CIE, Bord na Mona, Telecom Eireann, ESB, IDA amongst other public sector agencies gave employment to a whole new generation of Irish workers. It helped build a local culture of work, industrial development, applied skills and management that would have never occurred in the private market. It created the initial wave of networks for Irish business. This important role of public sector enterprise has been neglected by economic commentators during the past 15 years.
This educational role of public sector enterprises offers an important lesson to current state-economic policy. The recession has resulted in many skilled construction workers losing their jobs. These workers do not require re-skilling. They offer a labour base for the state to create employment. The government could begin the development of a ‘Green Energy’ industry across Ireland. Supporting a clustering of state sponsored firms to develop wind and sea energy across the West coast. In 1950 the state established the IDA to stimulate a new wave of economic development. The state should consider establishing an AEDA (Alternative Energy Development Authority) to stimulate a past carbon sustainable economy.
The bursting of the Celtic Tiger bubble has coincided perfectly with a global rejection of the neo-liberal consensus regarding the role of the state in a market economy. It took 15 years of uncritical consensus to acknowledge the inescapable embeddedness of markets-society-state. The institutional innovations of the state are essential to economic development. Creating demand through new-innovative public sector enterprise’s should be a central policy option. Financing this national system of ‘green’ innovation would not only build confidence and provide employment to skilled workers but establish the basis for an indigenous institutional comparative advantage. Furthermore, it would offer an alternative model of socio-economic development to the liberal-market framework. The GEI (Green Energy Industry) could just be the beginning.
In a time of economic crisis doing too little is worse than doing too much….(Paul Krugman)