Strong leadership must avoid past mistakes

Erosion of Catholic influence weakened political responsibility

Ireland’s economic Nostradamus, UCD Professor Morgan Kelly, has once again created newspaper headlines for suggesting that all is not as rosy in the Irish economy as it seems.

Professor Kelly essentially has contended that small businesses in Ireland have too much debt relating to previous bad property investments. He further argues that the European Central Bank will force the Irish banks to hold a hard line against these businesses in shutting many of them down. Professor Kelly’s alarm bell signal for how small businesses that employ between 60% and 70% of people in the Irish economy are treated, hopefully, will kick-start a larger debate in Government on how our tax and social welfare system is structured for these small business employers and employees.

There is very little that Ireland as a tiny country can do to force the huge multinationals based here to contribute more by way of taxation without risking losing further or continued investment from these businesses. There is, however, a considerable amount that could be done to make it easier for small businesses in Ireland to grow and help them compete with many of these large businesses.

Professor Kelly has suggested the Government don’t care about small businesses because they are not big enough for press conferences and journalists won’t show up for the creation of two or three jobs. That is perhaps too cynical a broadside on politics and people’s motivation in politics.

Fine Gael traditionally have always tried to help small businesses, whereas Fianna Fáil and the Labour Party, more closely captured by big business and the organised labour movement, have been reluctant to change taxation or welfare structures towards small businesses.

Labour movement

A group of 10 employees in a firm is of no real interest to the organised labour movement because leaving aside the fact that the fees they pay are minimal, their collective power to push the type of left wing political agenda the leadership of SIPTU or IMPACT are interested in, is severely diminished by their size. The Trade Union movement concerns itself with large employers where the workers’ fees that can be collected are scalable, and the power to use the workers to pursue the political objectives of the leadership is much greater. With the largest trade unions affiliated to the Labour Party, by and large the employees and employers of small businesses are not relevant to the economic thinking or modus operandi of that party.

Similarly, for years Fianna Fáil successively increased the number of public sector employees and public sector wages. These increases had the economic effect of increasing the price of property in the entire economy, as well as uncompetitive wage increases in the private sector economy.

The economic crash has by virtue of its existence, caused people’s wages to fall in the private sector and in the public sector, and therefore a resultant collapse in property prices. So when small businesses make profits in today’s economy, in a lot of cases, they are using those profits to hire more workers. They are not doing this because of some virtuous desire to be seen as a job creator, they are doing it because currently it is the best economic choice to make for the owners of that business.

We are now at a tipping point in this process, however. As the economy begins to improve the demands from the organised labour movement for higher wages in the public sector and higher wages for the workers of big business have already started to come to the fore.

A train of thought exists that a clear way for Fine Gael and Labour to win back a huge block of voters is to adopt the same strategy that Fianna Fáil used to cling on to power for so long, and that is to target wage increases for the one third of the Irish economy that are Trade Union members. Notably, 61% of all public sector workers are trade union members, versus 21% for the private sector. So clearly targeted wage increases for the public sector is likely to buy you many more votes come election time, and then to assuage the rest of your voting bloc, some income tax relief for the entire economy can be provided.

While many employers and employees of small businesses may for a short period of time experience an improvement in the amount of money they have at the end of the week, eventually these policies dictated by electoral desires, will lead us back down the same disastrous economic path we came from


Unless we create dynamism in the Irish economy where small businesses can grow, collapse and start again, the sustainability of our economic recovery will be severely threatened.

Self-employed people must be allowed access to our social welfare system if their business fails. The tax that employers pay for hiring people should be significantly reduced for new employees earning a low wage or coming off the dole. Our banks should be filled with people from agencies like Enterprise Ireland that have a proven record of helping and growing small businesses, rather than just debt collectors which is what much of our banking skillset has become. Entrepreneurship should be taught in a structured way in our schools and taxation levels for investment in small businesses should be radically reduced.

All of these choices are feasible, and we know they work in other countries in growing entrepreneurism and developing cycle of sustainable recovery for the real job creators in an economy, namely small businesses.

Another interesting remark from Professor Kelly concerned the extent to which the absence of a sense of duty in Irish society had been instrumental in causing the economic crisis and perpetuating a slow march to its return.


Professor Kelly, citing how politics operated in Ireland, posited that the erosion of the Catholic Church’s influence in Irish society has actually served to further weaken responsibility by political leaders. Describing the process, Professor Kelly said: “When you get in, you look after yourself. There is no such thing as duty, there are only entitlements. This was kept in check by Catholicism.”

Whether or not Catholicism is the only counterbalance to creating a greater degree of duty in society and political leadership, is perhaps a debate for another column. I actually believe that Professor Kelly is too fatalistic, not in his prophetic analysis of the Irish economy, but in the Irish people’s own self-awareness of what is going on around them. Nobody in Ireland wants a return to the boom/bust of recent years, and equally I don’t believe the Irish people will be as easily bought off by income tax relief as perhaps Fianna Fáil managed to do in the past.

If this Government wants to, they could show honest leadership in how they intend to deliver on the long term improvement of the economy versus the short term objective of votes. Voters will recognise honesty and truth and actually have a burning desire for it to be delivered to them. The desire for these values amongst Irish people is even greater currently than having more euros in their pockets at the end of the month.

It is no coincidence that, even though in the early days of this Government enormous expenditure cuts, tax increases and wage cuts were imposed, support for the Government and particularly Fine Gael endured. Irish people recognised in the face of a financial storm, by and large, the Government did the best they possibly could to keep Ireland safe from facing total economic annihilation.