It is time to think about solutions. How are we going to get out of this mess and how are we going to keep the maximum number of people in work over the course of the next three years? More importantly, how can we create jobs, not just by keeping people in work who might not be affordable, but by getting the best out of all of us?
Such questions demand home-grown initiatives, in order to fix home-grown problems. There is no point playing the conservative game and waiting for the global economy to pick up. Either it picks up or it doesn’t. Equally, we should stop trying to be respectable members of a monetary union dominated by ‘‘balanced budget fundamentalists’’ when we are faced with an economy which is contracting by the hour due to a lack of demand.
The Great Depression was caused by trying to balance the books in the face of debt deflation. Listening to mainstream economic discourse in Ireland, it looks as if we are going to repeat the mistakes of history. This is social vandalism. If we actively accelerate the slump by slashing and cutting simply to balance the books, we will never be forgiven.
The key to rebalancing this country’s economy is to keep wages flat across the board and confine spending as much as possible on public infrastructure. To use the Americanism, we need to get a ‘‘huge bang for our buck’’. This comes from getting the same thing next year at half the price it would have cost you two years ago – be that a railway, a bus corridor or a motorway. Crucially, we have to avoid the mantra of increased taxes to balance the books. This canard, to which many economists amazingly subscribe, mistakes economics for accountancy. They are not the same.
If Ireland continues to make massive cuts in public spending, the country will simply contract further. No economy has ever deflated its way to growth, and the most important thing to bear in mind is that companies closed due to lack of demand do not reopen when times are better. Therefore, the most crucial objective must be to try to preserve employment.
Jobs are crucial because, long after the bond markets have had a hissy fit and the respectable financial press has forgotten its indignant editorials, the generational impact of long-term unemployment will be felt. The human costs of unemployment and idleness are family breakdown, mental illness, depression and crime. These costs go way beyond the financial costs of less taxes and higher spending.
This weekend, Ireland is home to thousands of wounded people who have been told that they are redundant. Their self worth has been reduced to a severance cheque, a squeeze of the shoulder and an insincere pep talk about the needs of the company. These are real people and they are humiliated and frightened. In many cases, they are in the middle of their careers, they have huge experience, contacts and networks. Yet they are being told that they won’t work again because they are too expensive or they are ‘‘overqualified for the job’’.
Many can’t face – nor do they have the energy to entertain – the enormous effort it takes to start again on their own. Their confidence is shot. Equally, many will hoard their savings and won’t have the courage to throw their precious ‘‘nest-egg’’ into a new venture. They will shrink from risk and become the walking casualties of the depression. We will see these middle aged zombies, the ‘‘might have beens’’ walking around our towns or glued to afternoon TV, wasting away. Yet they have so much to offer.
If only we could find away of using their years of experience constructively.
At the other end of the generational scale, we have thousands of young people ambitious graduates and school leavers who will not find a job. This is the generation of Irish people who have nothing to fear; they have buckets of energy and can set up on their own, creating businesses from ideas. But how will they commercialise this raw enthusiasm? What they have in energy, they lack in experience. What they have in vision, they lack in contacts, and what they have in stamina and technological savvy, they lack in business nous and sales smarts. This is where the older people come in. Would it be possible to fuse together the two generations, the recently redundant middle-aged and the hugely robust twenty somethings?
Argentina suffered a dreadful depression in 2001/2.Unemployment skyrocketed and, with no jobs around, young Argentinians were forced to set up their own small businesses to survive. These small businesses sprang up all over the place and, because the local economy was in tatters, the companies had to export to survive. (Precisely the same will be the case in Ireland.) But they didn’t know where to start. How could they? For most, this was their first venture. They knew nothing about marketing or banking and neither did they have contacts.
At the same time, thousands of middle-aged executives with tens of thousands of years’ experience were being laid off every day. They were destined for the scrap heap.
At the time, an economist friend of mine was brought in to be the chief of cabinet of the Ministry of Finance in Argentina. He told me he spent nights with his head in his hands trying to figure out what to do when everyone was telling him it was over for the country.
Then he came up with the idea of a state-sponsored ‘‘match-making’’ service to match ‘‘young companies with old heads’’. To do this, the Argentinian finance ministry used a website which matched old experience with young companies. The new companies interviewed the old, recently-redundant executives. The state, instead of paying benefit, paid a much reduced salary to the older guys who got some small equity in the new companies.
The scheme worked amazingly well. Thousands of companies were set up and thousands of people went back to work.
Most crucially, the older heads contributed enormously to the success of the new companies with their knowledge and experience. Their contacts with international counterparts and multinational systems of management and production were invaluable.
Yet, had it not been for this initiative, this invaluable resource would have been buried between the ears of thousands of people, never to be used productively again.
Many middle-aged executives even went back to work for nothing and were reinvigorated. They acted as custodians for the new companies that dragged Argentina out of the depression. In addition, thousands of companies were saved from making the elementary mistakes that tend to scupper start-ups. These mistakes can be more easily sussed by someone who has been in business for years.
Crucially, the older heads were not consultants. They worked for the new companies. If the relationship was working, after five months the new companies started to pay their wages in full and the state disappeared, having done its match-making job.
This is a perfect example of how a simple idea can translate into a fantastic outcome and of how using our noggins in the depression can transform a crisis into an opportunity. The key now for all of us is not to despair, but rather to focus on getting out of our mess.
If you want to discover more about this initiative see www.experienciapyme.mp.gba.gov.ar — it’s in Spanish, but you’ll get the drift.
I think that the time for sitting on your hands either waiting for the State to help you out or equally sitting in a large company fretting about losing your job.
Small nimble business is where it is at. Being master of your own universe instead of relying on the whims of Wall Street or Kildare Street is a far better way to live your life. It is your life, your baby and your future.
It is what I do and what needs to happen. You have nothing to lose but your chains.
We need our Nokia. This might just work.
I agree with your comments but dont forget we are still sliding down and it is only when and after you reach the bottom can you then contemplate ‘to raise to the Lord Allelulia ‘……..now Lets Rejoice
Continue to enjoy your posts David.
Have a look at http://www.bizcamp.ie – a voluntary (and free) gathering of entrepreneurs for a day to share our experiences and support people who are planning to become self employed. Currently over 170 attendees registered for Dublin on Sat march 7th and another planned for Limerick on March 21st.
Speakers here:http://www.bizcamp.ie/speakers-and-talks/
Attendees here: http://www.bizcamp.ie/whos-attending/
Care to join us? :-)
keith
Everyone can wade in with creative ideas David. – I would like to see independent economists who care and want to do something about our situation hold an open public debate inviting policy makers and politicians to brains storm and research such new ideas. This would speed up the process of solution
A call to arms David….
David > long after the bond markets have had a hissy fit and the respectable financial press has forgotten its indignant editorials,
Sums it up perfectly. Crisis fatigue is starting to set in already.
Brilliant idea too, let’s hope we are selfless enough to help ourselves.
David, this is a great idea and for the ‘sceptics’ in the Department of Enterprise who are slow to adopt new ideas it has worked elsewhere. So they don’t need a long awaited ‘report’ to recommend its implementation as soon as possible. Some thoughts – FAS should be doing this with their €1 billion budget but would probably take months to out the ‘program’ in place. As for Enterprise Ireland, they had a recent program for matching ‘grey haired’ business people with state backed research projects. Nearly 200 applied, the fee is €20k per person, equivalent to the dole. So… Read more »
I had been waiting for years for the opportunity to start a business idea, while running an architecture practise. It couldn’t have happened without the downturn because people were too busy frantically making money for the big government/ developers/ corporations/ banks. I was too busy myself delivering an excellent service to my customers and going completely bust in 2008. The downturn in work has allowed me the time to start a 3d drawing training business with an IT consultant. Now that we have a chance to re-think maybe people will finally go feck this I’m going to put my money… Read more »
David, Thank you for this article; it may help prevent the education cuts my children will suffer. It suggests that even cutting public sector jobs is deflationary, which is an oft-made point of mine; it also bolsters my stern belief that education is the key to everything and we MUST NOT cut it back if we are to be ready for any eventual upturn. The young heads you speak of putting together with the experienced heads MUST BE educated well. Folks, For those of you interested in reading the spanish link David has provided, here is a free online translator:… Read more »
David, David, Great article and I agree wholeheartedly that we need to start focusing on the solutions. I also think that your idea of a match-making system linking experience with youth is a potentially powerful one. I also agree with the other comments that we need to take the initiative ourselves and not wait for the government or state agencies to convene their committees and their consultants to produce out-dated reports. We need something more dynamic, organic and that strikes a chord with people immediately. Perhaps, we could incorporate the match-making service as you describe into the Bizcamp website, and… Read more »
David, If Ronan is interested in setting this “Match-Maker” idea a reality on YOUR site, I will offer my IT geek services for free.
A great idea David, I want Seanie Fitz to come work with me on my ultra sonic cleaning machines and my wind solar light and cctv traffic control systems.
A wonderful idea the up side is all the mice girls in P.R. will get to keep their jobs too. …… In ‘Sin E’ in Malaga Hola
Tim, You have no skills and too much time on your hands to create any thing .
This latest idea from DMcW sounds good to mop up a few percent of idle hands. But… 1) Argentina was blown out while the rest of the world thrived. It had a market it could export to. in Early 2009 I wonder how it’s doing now? 2) We have a huge proportion of our skillset biased towards construction. We need different ones perhaps. But it’s not clear what. Who is publicising what we need? Yes, I hear someone say..we need engineers and scientists…but these are getting clobbered as well. Perhaps we should be saying, we need better value for money.… Read more »
Bord Bia are already running a similar programme for the food industry, whereby successful individuals provide a mentor-type service to fledgling start-ups. I know the CEO of the company for which I work already fulfills such a role for a small but thriving (and international award-winning) company based in Munster. Mind you, for all their entrepreneurial flar, rock-solid brand development, use of cutting-edge technology and product innovation, they’re simply FUBAR’ed when it comes to dealing with the Tescos of this world. “Hello money” may be dead and gone but it lives on in the form of “Long Term Agreements”, whereby… Read more »
Dr Nightclub, you have hit the issue on the head. Unless you can break the ridiculous procurement muscle of these giants, we are wasting our time. Supply chains are very dangerous as they impoverish all who work within the chain to the benefit of the chain owners. The customer gets no extra value. But once a supplier leaves the value chain, they loose their market. Suppliers have to become smaller and learn to walk away of these value chains. Their over focus on volume for revenue is deeply damaging to all of them except the winners. I’d go so far… Read more »
You dont tax your way out of a recession, granted, but you do tax your way out of ruining a country’s solvency and reputation. We dont have the luxury of stimulus spending at the moment. That will have to wait until the public finances are in some sort of order.
http://nicescenery.blogspot.com
great idea, my brother’s business is an example of one such company that would benefit from this. He been searching for ages for someone to get on board with an objective point of view, and an axe to grind (in a positive fashion – being retrenched with a brain buzzing with ideas means she or he’d have something to prove). Someone with years of big picture experience and who knows nothing about his (quite niche) business thus offering perspective, and who isn’t going to skip for a few dollars more. Someone with a long view, and excitement about what they… Read more »
The welfare system at home has to be overhauled. Employing extra workers to ensure that we are not being robbed has the double effect of putting extra cash into the economy whilst basically paying for itself. Those who are legitimately on welfare should then be given food stamps issued by the government. Food stamps are proven to be the fastest way the multiplier effect tales place in an economy. Every penny of them is spent jump starting what is a dead economy at the moment . We really have to look carefully at our welfare system. It is not addressed… Read more »
Well now David you must have had a Moses type of experience when you went up Killiney Hill and Im glad someone is suggesting using the Taxpayer funded Graduates newly aquired skills for the benefit of Ireland and not to be exported for others like we had in the 80’s.I know the so called middle classes and D4 brigade are worried about their offsprings future now that there’s nowhere to hide Internationally.They cant sow their wild oats and come back to take over the Family firm in a few years when this “recession thingy that hubby bores us with at… Read more »
That is actually something that could work. Another thing that could work. Previously David has talked about the diaspora. I myself am a member of said diaspora. What about involving experienced successful members of the diaspora in a similar manner to mentor businesses in Ireland and develop export markets for products and services for Ireland. I think many of the diaspora (including myself) would like to help out our country men and women and provide a future fro our brothers, sisters, nephews, nieces and other family and friends back in Ireland. Ireland needs to export its way out of this… Read more »
Great idea, I agree with Ger too, there needs to be an inclusion of our widespread diaspora. We can’t wait for the government on this one,even if we did wait for them I’m sure they’d only pawn it off in someway to benefit their “buddies”. It should be started asap and linked to this website. There are many options we could export almost immediately while we still have connections in global business.
An excellent idea, really like the idea of the mentors having skin in the game, its all very real for everyone then from the matchmaking on….
The current system has mentors paid by EI but because they are paid anyways, its all to easy to just phone it in.
David McW. Once again you are looking for examples that show how we should be doing it here. It is now the case that an explicit Banana Republic like Argentina can be ahead of an implicit Banana Republic like Ireland. (Officially Ireland does not regard itself as a banana republic – but in many aspects Ireland does function like a banana republic – status obsession, corrupt politicians, politicians like Cannon who jump on anything that will preserve their career, inept regulators, wholescale nepotism, insider scams, laws that are as porous as sives, narco-capitalism, corrupt police like in Donegal, and unrestricted… Read more »
Entrepreneurs always tend to have skin in the game. They win and they lose, but mostly they are skilled at survival and usually never give up. They are the Monty Python head on the ground in “The Holy Grail”…. Come on you chicken, fight.. I can head butt you, can’t I?” There is another skill set in executives who survived well and thrived in corporate systems that are now redundant and tend to think only in terms of corporate structures which is not exactly conducive to early stage start-ups so I would be cautious about engaging a 20 years veteran… Read more »
>Argentina suffered a dreadful depression in 2001/2 >Then he came up with the idea of a state-sponsored ‘‘match-making’’ service to match ‘‘young companies with old heads’’ Argentina 2001/2 VS Ireland 2008-9-10-11-12-13 … Completely diferent economic contexts. English economy will contract by twice the previously 1.7% predicted. Steps towards the solution had to be taken a long time ago. Immaturity, irresponsibility and unaccountability prevented and still prevents Ireland from finding its own solution. In my humble opinion there is too much cleaning up to do and too little time left. There is very little Ireland can do but pray for the… Read more »
David: In this article you are beginning to show signs of real leadership but your approach is still tentative. Please forgive me if I condense the first few paragraphs to emphasise the positive in your message: “It is time to think about solutions. How are we going to keep the maximum number of people in work over the course of the next three years? More importantly, how can we create jobs, not just by keeping people in work who might not be affordable, but by getting the best out of all of us? Such questions demand home-grown initiatives, in order… Read more »
Some well needed optimisim there David.
I’m thinking of applying for a business loan, maybe starting my own Bank… hopefully the government can pair me up with some recently redundant bankers who can lend me some of their expertise.
Malcolm, you make an excellent point on leadership and being positive while at the same time being wary of poorly conceived mantras on education, smart economy and taxation etc. And that one on on scalability means we need to ensure that the shoes we wear are the ones that are fit for purpose are we climb out of this hole we are in. I hate to say it, but we need another mantra for the country…something a little meatier than “yes, we can”. Maybe…serve others before you serve yourself? To often we over focus on a mission of making money… Read more »
This must be getting to you David. Take a break, chill out, watch Slumdog Millionaire on the biggest screen with the loudest surround sound cinema audience you can find. Note the set of 4 answers to choose from at the beginning of the film and note the answer at the end of the film, in a blank screen, except for the answer at the bottom right. The role of an Irish economist is now a redundancy, face it, because you are all discredited as leaders, as prophets, as mechanics, and this inane column suggests that the world wide collapse somehow… Read more »
Hi David, Yes, you are right – it is time to think about solutions. Whilst the Argentina crisis was in a different environment than our current “storm” (and the global “storm”), there is a case for facilitating experienced people with those with fresh and innovative ideas, etc. Ireland is quite entrepreneurial anyway (GEM report) and we can leverage our people who are reasonably talented. However, a plethora of start-ups that do eventually trade succesfully wont be our saviour due to the scale of our problem. For one, the global market is not demanding products/services right now. Japan have just had… Read more »
ps: I just heard that the markets now think that Ireland WILL default …. !!!
Feck that for a game of soldiers, if it does come to pass. Because if we (Government) cant get money, and lets face it, we havent been getting it cheap in the last while anyway, then the situation here is gonna get much much worse.
Within 3 years all of the net increase in private jobs created in the past decade will vanish.The Irish market is too small
for Dave’s idea to work, and thanks to weak sterling ,export opportunities are being and will continue to be lost.Employment will fall back to the same level as it has always been-circa 1.15 million.
David: Recent polls suggest that the country wants fundamental change, so an election is needed to clear the air. If the government refuses to call this, then perhaps you could be asked to lead The Long March. To set the ball rolling, Dr. Joe Mulholland and Austin Curry would be enrolled, and with their support Brian Friel and Seamus Heaney. With that set, an extraordinary meeting of the ‘MacGill Summer School’ would be organized in Glenties. There, you would outline the crisis and challenge those present to join you on a peaceful long march from Brian Friel’s House in Inishowen… Read more »
I think that Gerkennedy’s suggestion of including the diaspora within this match-makers concept is a great idea. Maybe we could have a three-way partnership – the young entrepreneur, the experienced Irish business person, and an Irish expatriate who can act as the eyes & ears in an export market in question. Several people have mentioned why David’s idea might not work and you raise valid points. However, what is the alternative, sit-around and let others kick the sh_t out of us? I don’t think so. When our backs are to the wall us Irish are fighters, we are resilient and… Read more »
Dilly, valid point and I can see where you are coming from. I also agree that selfishness (greed and consumerism) has grown and trust has diminished quite a lot over the last 10 years. In many ways, we may have become rich materially but we have become poorer with regard to community and helping others. The boom promoted the myth of independence and that we can have it all on our own. In reality, we are all interdependent and, in that context, beginning to trust each other again will be a challenge – one of the many we face. However,… Read more »
Dilly and Harve, it only takes one person in an are to start to make a difference. In my area (12 years built), people help eachother out every other day: jump-start a car, loan a ladder, mow a lawn, loan each other thier cars when someone is stuck. During the big snow the other week, I was unable to drive up the hill because I got no grip in the snow and two neighbours from around the corner came and pushed my car to help me.
Of course we can work together; decency and generosity are alive and well.
I have to admit that at this stage it is almost too depressing to watch news and read papers. So I try to look on the bright side. I think this is the first time that we can really test and see if the move into the knowledge economy and the high amount of skilled graduates available in Ireland will be successful. Somebody once mentioned that it is a sad state of affairs that some of the brightest science graduates have found themselves in sales focused roles in the finance industry. And maybe that is similar to what has happened… Read more »
Pera, you are also hitting a very big and debilitating issue in Ireland. The lack of professionalism in our business dealings whether political or commercial. I saw a reference today by one of our esteemed journalists where he highlighted an example of this of PWC working for the Minister of Finance and Doing an Audit on a bank. 2 clients – conflicting goals and different aims. Conflict of interest seems to be ignored. The idea that we are all friends no matter what and we can always paper over the cracks has been effectively institutionalised. To be fair (as best… Read more »
Time to find out what is the cause of depression, and not get hyperactive to pretend there is no reason for it. That’s the basic understanding in psychology. The world is overloaded with – that’s what happened – business speculation and the debt it created to keep it all going. It has been a rollercoaster pyramid ride. The likes of Madoff (contrary to what most think) is a microcosm, and not the macrocosm. This is definitely the opportunity, to rethink the madness of what has really happened, and not rethink how to start it all up again. Morality must be… Read more »
I have no idea of what Irish entrepreneurial spirit and achievements were before Ireland joined Europe and before Europe funded most of the essential infrastructure a country needs to compete and trade with other countries. What was Ireland worth economically before then is the question I am asking myself because the past 10/12 years do not seem to be very economically convincing as most of the growth was, for most of it, reliant on financial subsidies from Europe and borrowed money from foreign investors. So where are we now? and who were we before the 90s? Because it is undoubtedly… Read more »
The thing is folks the levels of debt in existing organizations and companies could well be their achilles heel. Remember the suggestion of a new bank with the 7billion? Well this whole mess has tipped into the real economy and real companies selling real products to real customers are in real trouble. And that means opportunity. I know demand has dropped but it cannot drop for everything… Yeah you don’t need a 5’th pair of trainers but there stuff everyone needs, peoples taste changes…Whether small companies can take advantage of it is another question but its not all doom and… Read more »
I dont think the last 3 people in my family made redundant by Sr Technics are wondering about a 5th pair of trainers and their disposable income will determine their needs which in turn will be very easy to identify, so if you are thinking of Aran jumpers, it has already been done. Sorry for being so gloomy but I am getting annoyed with people who are trying to make it better, we have elected and are paying politicians and economists and a crowd of public servants, bankers and so on to make it better. It is their JOB and… Read more »
Hi Tim, > I could agree with you more quickly, of course, if the levy were equitable; It is not. I agree, there is unfairness. As to my other point about ‘capping’ PS pay at 100k by bringing in a new tax/levy that would divert anything above 100k to tax: would PS workers agree with this if the money saved, etc, was used to ensure better conditions for PS workers? I also think that the targetting of special needs assistants was a particulary soft one. The private sector needs to be tackled too and the first one will be to… Read more »
Match-making idea would be excellent if markets existed for the products/services provided. But where are they? Dubai? Japan? GB? Germany? The reality is that the global financial meltdown is assuming the characteristics of a black hole which will suck us all in within months. What we require is a siege economy which will ensure that every citizen enjoys food and shelter. The latter should present no problem as there are thousands of unoccupied houses/apartments which could be requisitioned. Feeding ourselves could be a problem as our farmers have probably forgotten how to grow wheat and a major retraining programme might… Read more »
I attended my local societie philosophique in Nice today . Included were Notaires & Banquers . Ireland dominated the theme and they are pessimistic and expecting our default . Also they said that Sarkosy is making excuses and saying that France never became what Ireland has now become and that he saved France.
They stated a fact that Dublin is the capital of Banana Isle off the coast of Sierra Leone …. what a coincidence
Perhaps the economic situation that Ireland is in at the moment might be a blessing for the ordinary Irish people, if they are able to take advantage and purge the corruption from political, legal, and religious areas, systematic since the foundation of the state. Let the New leaders come forward and take control. No the disease is terminal and too deep rooted in the system. Regarding the large payouts to the regulator on “independent legal advice” Which friend of the regulator gave the advice? The Regulator was working for the tax payer, and did not do his job, should be… Read more »
CREST, no. It is time to bring back Internment-without-trial.
Arrest first, investigate later, trial to follow, when ready. They are already talking about censoring the Pricewaterhouse-Coopers report.
No censorship – let’s know it all, now.
The levy is also a form of double taxation.
The levy money paid is then taxed again under the PAYE system.
I have a bucket of water at my door and I can’t wait for the first FFer to knock on it shortly.
MK1 > The private sector needs to be tackled too and the first one will be to curb pay in the nationalised and capitalised and guaranteed banks. Aren’t they paid from the public purse now too, or at least their pay packets exist because of the public purse? Hardly private sector anymore! Government intervention in private sector wages, other than through taxation, may not be the best idea. I think in these discussions it is important to highlight the distinction between financial capitlaism and real capitalism (for more on this see Martin Wolf’s excellent ‘Fixing global finance’) Financial capitalism, and… Read more »