Comment Sunday, August 16, 2009 By Graham Love The problems of the banks and the public finances are the two main items dominating the media of late. It is apparent that the dense column inches and busy airwaves improve both the quality of the debate and public understanding of the problem.
Although many of us are angry and frustrated with our financial institutions and other pillars in society, we also have come to realise that we need an effective banking system, and therefore must overcome our desire for revenge and plough on with recovery. Likewise, there is the pressing need to balance the nation’s books. Although terrifying, we simply cannot continue to spend €60 billion each year if we are only taking in €30 billion.
The public finances, like the banks, must be fixed - and fast. Let’s assume that we get the banks lending effectively and stabilise the public finances (and yes, these are big assumptions).
What is alarming is the lack of debate in the media on how we are actually going to drive growth in the economy. It is within this vacuum that it was encouraging to see Richard Tol’s article in this newspaper last week, entitled ‘Ireland’s flagging innovation strategy needs a radical overhaul’.
While peppered with individual points of merit, the overall message was somewhat confusing and contradictory.
‘‘Policymakers also write reports and sit on committees. The latest is the Innovation Task Force, a body of over 20 middle-aged men [and a few women] largely drawn from the civil service,” wrote Tol.
It is important to point out that policy makers do exactly what it says on the tin - they make policies. If they do their job well, they create the conditions in which things can happen. Just think of the policy-makers who wrote the report that helped initiate our advantageous corporation tax rate. Or those who sat on committees that resulted in a long-term focus on education.
Without such policies, the surge in economic growth that started here in the mid-1990s would never have happened. Acknowledging that new conditions are required to improve innovation in Ireland, and then pillorying the Task Force charged with identifying those conditions before they have had time to act, appears contradictory and is hardly constructive.
Tol goes on to attack Science Foundation Ireland’s strategy of focusing its research within the themes of biotechnology, ICT and energy. But his attack crudely misses the key point. Until ten years ago, Ireland had chronically underinvested in scientific research. The catch-up required was enormous.
Despite the very significant investment in research of late, we are still investing only 1.5 per cent of GDP in R&D, which is less than the EU average, significantly less than the OECD average, and less than half that of advanced economies like the US, Sweden and Switzerland.
Therefore, it was and remains critical to focus the Irish investment in a number of selected areas to achieve the critical mass effect necessary to deliver world-class quality in research and its follow-on outcomes. The notion that we could genuinely compete internationally across all disciplines, with the level of investment of which Ireland is capable, is fanciful and delusionary.
Focus is required, smart bets must be made, and excellence must be concentrated within areas that have a higher chance of delivering economic benefit.
Tol further questions the success of SFI in the fields of ICT and biotechnology, in a manner somewhat similar to the An Bord Snip Nua statement: ‘‘public investment in R&D has not had a compelling impact on economic activity’’.
Both have missed the fact that Ireland is successfully transforming its industrial base, thanks in part to the visionary investment in research.
Five years ago, less than a tenth of IDA investments were in R&D. Last year, this had grown to over 40 per cent with 56 projects worth over €400 million, a fact that is undeniably linked to the research capacity generated by SFI.
Expanding the debate on Ireland’s recovery beyond getting the banks lending and stabilising the public finances is to be welcomed. Exactly how we grow our economy is the missing third element, and we need to talk about it, as much as we talk about banks, tax and spending.
But let the debate be factually correct Misinformation muddies the waters, prevents the building of consensus and derails this critical aspect of the road to recovery.
Graham Love is Head of Strategy at Science Foundation Ireland
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