I don't think we've reached the nadir of this recession just yet, and I don't think we've reached the highest levels of unemployment yet. And really, employment is as close to a panacea as we are likely to get - people in good jobs can repay their mortgages and loans, reducing default levels, people with spending money spend that money and increase liquidity in the economy. People in good jobs pay more taxes and aren't on social welfare, reducing the deficit. Businesses with plenty of customers can expand and hire more people.
The traditional answer in Ireland has been to get FDI in from the Americans, which is well and good as far as it goes, but we need to look a bit deeper at the more fundamental problems. People that want to start new businesses need funding, and this is a basic flaw with our version of capitalism. It has been said that the alternative to our version is government controlled capital where you have to convince faceless beaurocrats who have never actually experienced business that you have a good idea. When you look at it really though, that's exactly what banks do, there is no difference, right down to the permanent and pensionable position sitting across the table from you.
Some might say, ah but if the banks turn you down you can go to a venture capitalist! Seriously, I've been dipping a toe in the VC scene in the US for the last while, and the differences between here and there are stark. Not just in terms of structure and the amount of capital available, but in terms of the sheer energy and optimism represented by VCs in particular centred around the Silicon Valley.
Organisations like 500 Startups, set up by Dave McClure and a few hundred other VCs/mentors are buzzing with ideas and new businesses. They represent a new breed called Super Angels, who diverge from the traditional pick and pump model where one businesses is invested in by one or two VCs, towards a more scattershot approach, where smaller amounts are put into larger numbers of businesses by larger amounts of VCs. And they have been reaping the rewards!
Thats not to cast dispersions upon our own VCs, but conservative and staid might not be bad terms to describe what should be a vital part of our economic machinery; you are unlikely to see them referencing pirates in a presentation. Many commentators have mentioned that Ireland and Europe in general lacks an innovation hub like Silicon Valley or MIT, and that an opportunity exists to create that here. It does indeed exist, but we need to learn from those who have successfully built such hubs.
Not to ramble too far from the point, this is not a new idea. As more capital is concentrated in fewer hands, whether banks or government, enterprise falls by the wayside. This was observed as far back as Song dynasty China, a time of an explosion of wealth and prosperity. Entire villages and poor peasant families would pool their resources and invest them into merchant expeditions abroad.
"People along the coast are on intimate terms with the merchants who engage in overseas trade, either because they are fellow-countrymen or personal acquaintances...[They give the merchants] money to take with them on their ships for purchase and return conveyance of foreign goods. They invest from ten to a hundred strings of cash, and regularly make profits of several hundred percent."
The later Muslim Moroccan Berber traveler Ibn Batutta (1304–1377) wrote about many of his travel experiences in places across the Eurasian world, including China at the farthest eastern extremity. After describing lavish Chinese ships holding palatial cabins and saloons, along with the life of Chinese ship crews and captains, Batutta wrote: "Among the inhabitants of China there are those who own numerous ships, on which they send their agents to foreign places. For nowhere in the world are there to be found people richer than the Chinese".
So Fine Gael, in the unlikely event that you are listening, take IBEC's advice and get radical. Once you sidestep the banks (which is not socialist, this is a much purer form of capitalism that would not have been possible before the advent of the internet) and the slow moving VC sector, and connect up the people of Ireland with the entrepreneurs of Ireland, you've laid the foundations for a true innovation hub (I hate to say knowledge economy) for Europe. It's not hard to do, a few tweaks in corporate law and a nudge of initial sponsorship is all it would take.