There is generally two types of manufactured goods. The ones that can be shipped and those that can not be. Some products like Guinness that taste like crap when it travels cannot be shipped, a house cannot be shipped. Others like a computer can be shipped around the world all it needs is a box. Whether it is made in Limerick or Vietnam a box is a box, a postman is a postman to the end receiver of the product. Anything that can be delivered down a line can also be off shored. Telly marketing is already mainly delivered from India. But also stuff like accounting can also be delivered down a line. Unions battling to stop companies moving are fighting a battle they can’t win. Neither will introducing protectionism into the market stop it. As Mr Universe said in the excellent Serenity. “You can’t stop the signal”. Services delivered over the net or phone can never be stopped.
One thing that is not mentioned often about outsourcing is that it has limited gains. If companies move to cheaper places like China. Not only will they dent the economies that they leave thus denting their market but they also add to the economies that they move too. Recently it was announced that China’s competitiveness had fallen this was mainly due to double digit rise in Labour costs. With rising wages comes rising standards of living. Countries like China eventually will not be the sweat shops of the world. As they will be in the same position as we are in at the same standard. Thus the reason for moving from Ireland to China is gone. Then the companies can move on to Africa. But the same thing happens again. The countries prosper and eventually there is no more cheap labour in the world to move too. So the countries will eventually find a place to settle. But with the rise of standards of living also comes the desire for stuff. Ipods, TV, Prada, etc. Creating a greater consumer drive for products and services leading to more jobs worldwide.
With the rise of the economies in these countries so to will the level of education in these countries. Thus they will be able to compete with Ireland for the high level jobs.
In Offshoring The Next Industrial Revolution by Alan S. Blinder in this months Foreign Affairs said that “just as with the first two industrial revolutions, massive offshoring will not lead to massive unemployment. In fact, the world gained enormously from the first two industrial revolutions, and it is likely to do so from the third so long as it makes the necessary economic and social adjustments.”
Now his answer was that we need to focus on personnel service industries. Where face to face interaction is needed such as taxi drivers and doctors. But what I disagree with there is the fact that face to face services will only keep money in the economy. If people buy their stuff outside the country then money is leaving the economy. If there is no services that bring in an equal amount money then we will have a massive balance of payments deficit. Much greater then the roughly 1% of GNP we have in Ireland at the moment.
So what we need to do is innovate to create the initial patented idea’s and products in Ireland so that the financial benefit comes to Ireland. Also if the companies are headquartered in Ireland they will be less likely to move off to India. If we do this then we have to make a 100% Irish silicon valley
Silicon valley has been responsible for much of the economic growth in the USA. So what has silicon valley got that Nashvile hasn’t. Frederick Terman was a professor in Stanford University back in 1930s. He had a light blub over the head moment and decided that the unused land the University had could be used to help students set up businesses, he also looked for venture capital for them. One of the first students he helped were called Hewlett and Packard. In the 1950’s the Stanford Industrial Park was created. This basically was cheap rental space for technological companies. This attracted many bright individuals that attracted more and new companies spawned more new companies and eventually Silicon came what it is today. The cradle of all innovation in the world.
So what is the moral of the silicon valley tale. Basically it is that to create a successful economy it requires innovation. We in this country can not depend on foreign companies forever they will move. To succeed in the future we have to produce our own companies. If we take the lesson from Silicon valley our mission is clear. We need to create a climate where innovation and ideas can flourish. This requires 2 steps.
The first step is the vast increase of funding in the Universities especially in 4th level. While the government is moving on this it is still very poor. Funding for a PhD in this country is about 12,700 per annum at best. This has remained fairly static for some years while the cost of living has not. Is there many people willing to live in Dublin on 12,700 a year. If you wish to keep the best and the brightest in the country and in research you have to provided them with a decent living wage. Feel free to say fecking student getting stuff for nothing. But if even one of those student can come out and create a company like Google then the benefit to the economy far out ways the initial cost.
Secondly once the researchers have the idea’s give them the financial means to implement these ideas. This means that Enterprise Ireland needs to be given more money to give them the ability to provide companies with the seed capital they need to blossom.
In the last Budget the government announced that €1.2 billion over 5 years was going to be spent on 4th Level education. This is a start but only a start. We are talking about the future of the nation here. The education system needs vast amounts investment. We have a limited population so we need to maximise the talent in the country. This requires investments in all levels of education. The person who will have the vision and the drive to create the Irish version of Google can come from anywhere be it D4 or the Ballymun flats. Thus children from both area’s need to be given the same chance in life. In places where parents don’t place enough emphasis on education then the state has to step in and invest in homework clubs. Force the children to do there homework if needs be from an early age. Schools need to be of a great standard no matter where they are. If someone wants to go to a private school so be it but they should not get an educational advantage for it. Not by bringing the private school standard down but by bring the public school standard up.
We can no longer rely on foreign companies in Ireland. We have to invest in innovation. Now.
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