InterTrade Economic Forum

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On the 28th of April InterTrade Ireland held their second Economic Forum entitled Shaping Recovery. Speakers included Barry Eichengreen (Berkley), Linda Yueh (Oxford), Will Hutton (Work Foundation) and Michael O’Sullivan (Credit Suisse). The presentations have now been put on the web and can be found here. As the speakers took a wider perspective the presentations are still relevant.

Barry Eichengreen argued that Zarnowitz’s Law – the deeper the recession the stronger the recovery – would not hold this time. While he argued that the US won’t experience a double dip, he also thinks that current projections are to optimistic. He believes that Europe will underperform relative to the US. He also had a few words on Greece.

Linda Yueh focused on Asia. She was upbeat but also highlighted the issue of global rebalancing. She pointed out that as China has a very poorly developed financial system the exposure to the financial crisis had been minimal. However, internal rebalancing and re-orientation of the economy towards domestic consumption were important challenges. She highlighted that China is becoming a capital exporter particularly in relation to energy, minerals and other raw materials (this has implications for Europe).

Will Hutton focused on innovation. He also commented on the economic problems in the UK and Ireland (he made a few comments that might provoke some debate – unfortunately he had to leave the discussion early). In general he argued that since innovation depends on the cumulative stock of scientific and technological knowledge most innovation will continue to take place in the EU, US and Japan but that it was important to put the appropriate structures in place.

Michael O’Sullivan took a closer look at Ireland, outlining achievements, comparing the latest crash with previous ones and argued for institutional reform He also had a very interesting quote about the Irish by Fridrich Engels that I had not heard before. His graph on the growth of Irish golf clubs also caught attention!

All in all  there was plenty of food for thought including lots of interesting graphs and I suggest you have a look yourself. You can also listen to the presentations.

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25 Responses to “InterTrade Economic Forum”

  1. Seamus Says:

    Does anyone here agree with Will Hutton’s assessment of Ireland’s position. Its seems incredibly doom laden. Is it over done? In view of the moves the EU made last night.

  2. Edgar Morgenroth Says:

    @Seamus – I am glad you spotted that. Will made a few comments that suggest that he did not understand what started the Celtic Tiger, so I wonder how well informed his assessment of Ireland is. He did make some interesting points about innovation though and he is better informed about the UK for which he was more optimistic.

  3. Maurice O'Leary Says:

    Strange that the peak of the golf bubble was about 1994.
    I would have expected it to be 2007.

    The suggestion that the answer to the question as to whether we are closer to Boston, Berlin or Beijing might be Birmingham is very true.

  4. Michael Hennigan - Finfacts Says:

    Will Hutton may or may not have addressed 2 pertinent issues (I have looked at the presentation not the video).

    Job creation in the so-called knowledge economy is low and the majority of sales revenue in the UK is dependent on the public sector – - currently a cash-strapped one.

    The biggest and oldest tech cluster in the UK is the so-called Silicon Fen in Cambridgeshire, which is of a similar geographical size to Santa Clara county in Silicon Valley.

    Affter 30 years, it employs about 30,000 in high tech and the majority of firms have less than 10 employees.

    Today, the implementation committee for the Innovation Taskforce report was announced by Minister Batt O’Keefe.

    2 of 15 members have an entrepreneurial background and most of the members have no business experience or expereince of selling or living overseas. Nevertheless, the committee has been tasked with the creation of 117,000 net new high tech jobs in 10 years – - just above the current level of jobs in IDA Ireland assisted companies in Ireland – - after 54 years of support.

    http://www.finfacts.ie/irishfinancenews/article_1019640.shtml

  5. Edgar Morgenroth Says:

    @Michael Hennigan – “2 of 15 members have an entrepreneurial background and most of the members have no business experience or expereince of selling or living overseas.” What do you mean by entrepreneurial? Of the 15 (+Minister) 6 are civil servants, 8 of the remaining 9 are from the private sector. Lionel Alexander for example has been responsible for bringing some Hewlett Packard R&D to Ireland, and has of course lots of experiense of living and sellign abroad. I wonder are you a bit unfair.

    The issue of job creation in the knowledge economy is interesting. If you take a narrow definition you are right, but once you account for the fact that lots of products even in traditional sectors have a lot of knowlege and often new knowledge embedded in them this looks very different.

  6. Barry Says:

    Trying to compare a potential Irish “innovation hotspot” to Silicon Valley or Silicon Fen is rather ambitious. Both those places are co-located with some of the finest scientific minds in the western world. Not to say that Ireland does not have suitable educational systems, but I think one would not compare UCD or Trinity to Cambridge or the name brand California universities.

    My point is not that it is a hopeless pursuit, rather that it appears the ‘Knowledge Economy’ drive coupled with large funding cuts for Irish higher education has put the wagon before the horse. Pretty hard to realize a return without first making an investment.

  7. Michael Hennigan - Finfacts Says:

    @ Edgar Morgenroth

    Entrepreneurs are people who start their own businesses as distinct from the hired hand who moves up the ladder in a corporate organisation.

    The head of Citibank is for example a hired hand and his work experience is likely to be very different to an entrepreneur.

    Alexander and the CEO of HP, Mark Hurd, are accomplished people but I assume they have had no experience of building a company from scratch and trying to sell a new product that has not got existing brand recognition.

    Taking a role in a subsidiary in some country is very different to trying to develop a new market there.

    As for taking a “narrow definition,” most of the funding is going into laboratory research.

    An example of a successful innovative company is Ryanair.

  8. Some thoughts on the future of research and innovation in the Irish Economy from Will Hutton « Irishscience Says:

    [...] Irish Economy from Will Hutton May 10, 2010 Shane O’Mara Leave a comment Go to comments From a post at Irish Economy, Will Hutton on the future of research and innovation in the Irish [...]

  9. Hugh Sheehy Says:

    @Barry
    One of the problems raised by Michael H is that even if we make a very large investment, it’s quite likely that the “innovation” jobs will never materialise.

    Apart from that, I’d second the view of Ryanair as an innovation company – and look how much support the government gives them…

  10. Brian O' Hanlon Says:

    @ Edgar,

    I was gathering some thoughts together in blog format following the Frontline and aftershock program on RTE television tonight. There were some excellent contributions from many in the two TV shows. But I felt what was left out big time, is the plain fact that young people in Ireland chose to work in construction – not because they were short on skill, ability or opportunities. But simply because they decided they were going to take the quick and easy spoils. Nothing more complicated than that. We are now dealing with the fall out and potential long term damage to the economy as a result of short term-in-ism, on the part of the youngest of the population. I can only assume that in other countries in Europe, there were already established industrial ‘sectors’ which could still attract the best of young human resources, even during the boom years. That wasn’t the case in Ireland, as we all know. Best wishes. BOH.

    http://designcomment.blogspot.com/2010/05/rubber-ducky.html

  11. Pat Donnelly Says:

    Take advantage of the carnage past and to come.

    What can we actually do without? What do we vitally need? What is a hopeless luxury?

    We need Gardai. We do not need an army nor a navy. We need the gardai less if we legalize and tax all drugs sold by licensed premises. There is I understand, complete penetration of the Irish market by the currently prohibited drugs. Legalizing and purifying will cut costs and increase revenues.

    We need nurses, and some hospitals. We need paramedics and nurse practitioners. We can institute insurance for all drivers in the registration of cars as is the case in many other countries. Time to sell off the ESB, Bord na Mona, CIE et al. We can no longer afford the illusions.

    Do we need a dept of social welfare if we give cash for the tax credit? The jobs can be transferred to Revenue. Fennelly will have lots of friends.

    Schools can be reduced for those who can study on their own. Use the internet. Many schools appear to be mini-prisons or day care.

    Can we afford to imprison for debt? Given the likely increases in debt? It appears not to stop them from wasting scarce cash on fines.

    FUN da Mental reappraisals!!!! Make savings and give people more time to find what is truly important in life. It certainly is not a mortgage. Increase happiness?

  12. Edgar.Morgenroth Says:

    @Michael Hennigan – thanks for the clarification. Yes you are right, one or two who started their own business would be important. I am not sure if any of the group qualify – it is not always as simple as to look at what they currently do. You might be surprised to find out that I once started and ran a business.

    I would not expect the number of direct innovation jobs to ever be that large. What is important is that if there are innovations that they are applied in a commercial setting in Ireland. In other words there must be an emphasis on commercialisation – this is not a new insight, we argued for this many years ago – but is the crux of getting a return on the investment.

  13. Barry Says:

    The emphasis on commercialization puzzles me a bit. If I had a breakthrough product I would commercialize it in as big a market as possible. I know there are arguments for the regulatory environment and where to hold IP legally, but even if the technology associated with internationally mobile IP gets “commercialized” here, it is pretty obvious that any related manufacturing gets done elsewhere. So unless indigenous Irish companies generate products or IP that allow for a dominant market position then I am not sure what are the the benefits of striving for commercialization?

  14. Edgar Morgenroth Says:

    @Barry – what I was trying to get at is the fact that a lot of research never ends up producing anything that is used in a commercial environment and indeed sometimes research is not even aimed at this.
    Your point about IP and where manufacturing takes place is a very valid one. For example a lot of important recent innovations came from Germany but the commercial benefit was reaped elsewhere e.g. mp3 was invented in Germany. While the Fraunhofer Institute has made a lot of money from licensing their innovation, most of the profits are made outside of Germany.

  15. Geckko Says:

    “In general he argued that since innovation depends on the cumulative stock of scientific and technological knowledge most innovation will continue to take place in the EU, US and Japan ”

    Will Huttton again displays his inability to identify the obvious. Why anyone continues to listen to him is beyond me. Scientific and technological knowedge is probably the most completely and cheaply mobile factor known to man.

    It is more likely the stock of human capital and physical capital (especially infrastructural) exitsting in the developed world that will make countries such as the US etc. ongoing centres for “innovation”.

  16. Edgar Morgenroth Says:

    @ Gekko – interesting point. In essence you are arguing that the different types of capital are complements, which fits with my view that each type is necessary but on its own not sufficient. Shame there is not more research on this complementarity (I am only aware of one paper that looks at infrastructure and R&D, but there is a lot more on human capital and innovation, but again little on infrastructure and human capital).

  17. Michael Hennigan - Finfacts Says:

    Some additional points:

    1. Publicly funded R&D usually accounts for two-thirds of total R&D spending in an economy.

    It says a lot for Irish policymaking that the ‘smart economy’ PR has replaced construction as the perceived growth engine miracle solution for the economy but without any serious debate. There is direct participation of vested interests seeking large allocations of tax funds from amateurs.

    It’s a great time to be involved in university research given the ease in getting funding for proposals that press all the right buttons.

    2. The problem with university research, is that it is usually not a response to a consumer need; so commercialisation is incidental.

    3. ETH Zurich, one of Europe’s top science universities has produced over 100 spin-outs in 10 years and less than 1,000 jobs.

    4. Successful companies like Microsoft, Google and apple generally are not pioneers; they exploit the failures of the pioneers.

    5. Stokes Bio, a spin-out from the University of Limerick – which has yet to make any sales was recently sold to Life Technologies in the US in a $44 million (€33.4 million) deal. The founders owned about one-third of the company and will share about €11 million from its sale.

    Best of luck to them but this is the usual route for a start-up with a good idea – - a trade sale to a US company and little long-term value added in Ireland.

    Is there any reason to expect the future to be any different?

  18. Edgar Morgenroth Says:

    @Michael Hennigan – interesting points. The big question is, what should we be doing? Maybe instead of trying to do our own innovation we should prowl around looking for those ‘failures of pioneers’. I just wonder whether our banks would fund any of these (failed) projects??? In relation to the sales of startups, there might well be a case to think about the tax treatment. This has been a big topic in Germany with respect to inheritance. The traditional family businesses are very often sold when there is an inheritance as the inheritance tax is too high.

  19. Michael Hennigan - Finfacts Says:

    @ Edgar

    1. The skills needs of the multinational sector should be met. Caution however is required as almost every new project is promoted as having an R&D aspect including call centres and dubiously dubbed ‘centres of excellence.’

    2. The focus should be on the food industry which has the potential of providing the best value added.

    We have no international food brands and the dairy sector has concentrated on low margin products and in the past has been a big user of the EU intervention system.

    http://www.finfacts.ie/irishfinancenews/article_1017985.shtml

    Germany became a net exporter of food and drink for the first time in 2008 as Irish exports in the sector, reliant on the UK, fell.

  20. Brian O' Hanlon Says:

    @ All,

    There was one point I wanted to throw out, and I don’t think I’ve expressed it here previously. I hope this point I am about to express, will tie together two issues, both of which have been discussed at length and at various times here at the Irish Economy blog site. Here at the Irish Economy site, there has been much, much discussion and debate about universities and standards in universities in Ireland compared to abroad. The matters of funding etc have been discussed here at this blog. The fact that Irish universities are not in the same leagues with the funding they can source. The idea of universities producing ‘spin off’ companies has been discussed here at this blog site.

    I have spent some time in the past reading what Bob Frankston and Dan Bricklin have to say. They were two guys behind a software product called VisiCalc. It was the standard spreadsheet application prior to Microsoft Excel’s dominance later on. Bricklin is based in the Boston area, if I remember correctly and a number of podcasts I listened to, were about the fact the Boston area found it so difficult to build good companies. It had its glory days in the 1950s and 60s with companies such as Digital Equipment Corporation. But since then the region has struggled to re-capture that earlier promise. The point that Bricklin made, was the Boston region had many prestigious universities – actual centres for excellence in higher level education. Yet it seems the west coast manages to produce the really large companies at the moment.

    I have read some of the comments above about intellectual property and so forth. It is worth noting too, that a guy called Richard M. Stallman worked at MIT a long while ago. Stallman is passionate about the concept of sharing good ideas and facilitating cooperative innovation across many countries. Stallman was very, very upset towards the end of his time at MIT. Because too many of his colleagues there had been offered large sums of money to leave the campus life and ring fence many of their ideas and intellectual property in private companies around the university. Stallman realised that his old colleagues who moved to work in the private sector could no longer talk openly about technology or innovation to one another. Because they had signed agreements with their employers in return for the financial rewards. Stallman was very upset, because the environment conducive to research and development at MIT had been sabottaged by the events I describe. It is interesting that some decades later, it hasn’t worked out as planned for the region immediately surrounding MIT, Havard and other such institutions. They can’t quite compete in terms of ‘commercialisation’ with the west coast region of the United States.

    We should all be careful not to use that handle – the United States – too casually, when discussing it as an environment for innovation and the knowledge economy. There are a lot of sub-regions within the North American continent. Heck, some of the urban centres in Canada are now some of the leaders today in terms of producing strong innovative companies with strong market share. BOH.

  21. Brian O' Hanlon Says:

    Apart from the odd sort of interaction between educational institutions and industry in Silicon valley, there is also the odd way that Venture capital and industry developed in parallel throughout the history of the valley. That is a combination of elements and occurances unlikely to be replicated again. A video which is quite entertaining. Innovation is Nothing New: 100-Odd Years of Venture Capital Wisdom. BOH.

    http://video.google.com/videoplay?docid=3589792037039791370#

  22. Brian O' Hanlon Says:

    @ Michael Hennigan,

    Best of luck to them but this is the usual route for a start-up with a good idea – - a trade sale to a US company and little long-term value added in Ireland.

    Is there any reason to expect the future to be any different?

    But there has always been that cut throat relationship between Sand Hill Road venture capitalists on the west coast of the United States and many of the entrepreneurs who actually bring products to market, having creating the opportunities and fostered the innovation. Lets remember that Steve Jobs got kicked out of his own company, Apple, to be replaced by someone from the soft drinks industry! I even remember reading a history about Digital Equipment Corporation where the sales and marketing department got the upper hand there, and virtually took over all of the key management positions towards the end of DEC’s time as a company. Steve Jobs is really funny though. Having left Apple many years, he had a little company he didn’t know much about called Pixar, which he had funded for years on the back burner. It turned out to be the success that re-launched Jobs back into the big time as a credible CEO. Having drifted around in the wilderness for years, getting locked up with all sorts of deals with Ross Perot, IBM and so forth, most of which came to zero. BOH.

  23. Mickey Hickey Says:

    Robin Wells and Paul Krugman have an article in New York Review of Books titled Our Giant Banking Crisis– What to Expect. Provides a good perspective on the issues by reviewing three books.

    http://www.nybooks.com/articles/archives/2010/may/13/our-giant-banking-crisis/

  24. Brian O' Hanlon Says:

    Thanks for the link Mickey, I’ll look forward to reading the review. BOH.

  25. Brian O' Hanlon Says:

    I dumped some old paperwork today and I came across a scrap of paper on which I had scribbled down a quote from the architect Louis Kahn. It was a nice quote and I would like to share it with you. BOH.

    All that we desire to create has its beginning in feeling alone. True for scientist, for artist. But to remain in feeling away from thought means to make nothing.

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