In this interview Ibec chief executive Danny McCoy talks about the erosion of trust between the government and NPHET, the outlook for the future of business in Ireland and what kind of shape the recovery will go, and why he believes some sort of all Ireland reunification will happen within this generation. He also talks about the scale and scope of Ibec, and his own career journey.

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Ian Kehoe (IK): Hello, you’re listening to The Currency podcast. In this episode I’m joined by the chief executive of Ibec, Danny McCoy. Danny, you’re very welcome. 

Danny McCoy (DM): Thank you. 

IK: We’re going to talk about lots of things today. We’ll talk about Ibec’s role, its future, your own background and career, the future of industrial relations in Ireland. We might even get to Brexit. But I suppose we better start off with the current difficulties between NPHET and the government.

I’m sure you saw Leo Varadkar’s intervention on the television in relation to Dr Tony Holohan. It was quite a statement.

DM: Well look, these are going to be natural tensions, but the process and communications from NPHET over the weekend was extraordinary. And in fact, in retrospect, it was irresponsible given the uncertainty that it created.

The problem here is that the decision and the recommendation by NPHET might be right, but it’s now gotten confused in the manner and the process in which it was escalated. So I think there is a bit of time here, don’t throw the baby out with the bathwater, But I thought the tánaiste reclaimed what is a much more complex decision. It is not just about public health through Covid, it’s about the wider public health issues that come from the economic circumstances that people find themselves in. But likewise, there’s the sustainability of the business model.

So I think in the round, the last couple of days have been very damaging. But if we can get to a better place now that the actual process and communications won’t be repeated again, that NPHET’s role is to advise but not to advise in public. Is NPHET, in its big configuration of over 40 people, actually fit for purpose?

“The trust has been eroded by that interaction between government and NPHET.”

Danny McCoy

IK: In relation to the decision. Phase 5 all around the country would have been an absolute, unmitigated disaster for business. Instead we’ve gone to Phase 3. Do you think it was the right thing to do?

DM: Oh it definitely was the right thing to do in terms of the reaction from the figures that we have at the moment.

But as I said, it may be the case that NPHET are right in terms of the seriousness of this and that elimination and the strategy for a much stricter lockdown might be required. But I think as the Tánaiste himself said last night, that can’t be just jumped upon a society and particularly a government. And so the process and communication from NPHET is not fit for purpose. And if we are to see this go forward, then I suggest it’s done behind closed doors with the chief medical officer actually advising the Taoiseach and the senior officials group, the system has to change because frankly, the credibility of that system now, of the different levels, it’s just confusion. And it’s been really eroded. The trust has been eroded by that interaction between government and NPHET.

IK: Danny, the one thing even in relation to the decision that frustrated an awful lot of business owners and business people out there, was the level of confusion and how it all played out. Messages seem to get changed. Public health advice changed almost overnight. And I think just chatting to people, there seemed to be a real sense of ‘what’s going on here?’

DM: Yeah, there definitely is a disconnect because one of the things that we had hoped for was when the government brought in the five levels that we had a codified system. And we’d know that we’d go through the phases and there’ll be some predictability. There is absolutely no predictability at this point. Last weekend’s NPHET intervention was irresponsible, truly irresponsible, because it’s not just about public health. It’s about the business community. It’s about people’s livelihoods. It’s about their family circumstances, about making decisions.

So they’ve really put a gap between the citizenship and the business community in terms of the process. The decision may ultimately be right and that may be a function of our health system, not having the capacity to deal with a small surge. But I think the process at this point is not fit for purpose.

IK: Is it the process or the communication of that process that you have the issue with?

DM: I think there’s two parts. I think the communication is definitely a scandal at this point in terms of its trauma for all of the agents in our society. But the process itself just looks unwieldy when you’ve got a NPHET of nearly 46 people. Look, come on, it’s good to get different voices

IK: And various committees then up the way before a decision is ultimately taken.

DM: Absolutely. And what we see is that, government has basically jumped into this decision because people’s lives are absolutely crucial, but we also know, as do the medics, there are many other lives that are going to be in jeopardy as a result of this uncertainty that’s created and then indeed, the livelihoods of so many people is going to itself bring forward morbidity and mortality, unfortunately.

IK: That disconnect point because there is an increasing disconnect between government/public health advice and the business community, I put it to Leo Varadkar, the Tánaiste and the Minister for Business when I spoke to him last week and he went to a place I didn’t really expect him to go in his answer, where he said, look, are we using the right metrics to determine what level we’re at and what the public health advice should be. So instead, he pointed to Belgium and said that instead of just using the number of cases, that we need to look at ICU capacity, that we need to look at the number of deaths. And he was calling for a change of that nature. Is that something you’d welcome?

DM: Yeah I think so. Look, the ultimate outcome is to avoid deaths and to avoid people actually getting into serious distress. Unfortunately, people will get ill with Covid, and that’s inevitable with a pandemic. But the cases as they’re now measured, there really is a doubt over that. You see, you don’t have to be any kind of Covid denier to say, we must see whether the testing system is actually picking up true positives.

“We know Covid is capturing all our minds at the moment, as should Brexit, because that’s serious as well. But the one thing about the budget next week at one level is it couldn’t be easier, because everybody agrees on what needs to be done.”

Danny McCoy

Chances are, if the prevalence is low in a society, then you’re going to have a whole rack of false positives. Now, this means that they’ve got something of the virus in them, but it’s actually either residual or they’re not infectious. So people get spooked by the number of cases every night as they come out. And you can make an argument that this thing is becoming exponential, but it’s actually it’s ultimate outcome in terms of the capacity of the hospital system that needs to be measured.

IK: Yeah, it’s an unusual one for government. There’s a budget next week, the economic situation is changing hour by hour, day by day, depending on what decisions the government are taking. What will you be looking for to come out of that budget?

DM: Well first of all, just coming off the back of Covid, we know Covid is capturing all our minds at the moment, as should Brexit, because that’s serious as well. But the one thing about the budget next week at one level is it couldn’t be easier, because everybody agrees on what needs to be done. And the other great thing for a budget day, there’s a lot of money around. So those two characteristics are generally not available to most.

So, we’ll be certainly hopeful that we’ll have a reaction to moving the economy back to a reboot, to make sure that we can get people back. But to reboot, you have to be open. And right now we’re in that reopening…

IK: It’s in limbo, yeah

DM: But let’s not lose heart completely, reboot, reimagine. The reimagining piece is that there is an opportunity here to take the economy on because one of the fair winds we have compared to other jurisdictions is we are experiencing a very sharp K recovery, but the upward arm of the K is actually a lot better than other societies. So our economic activity, the momentum there is really, really strong.

IK: I know you’ve been looking for an extension of the wage subsidy scheme. Leo Varadkar has hinted that there is going to be a Vat reduction of some sort if he gets his way for the hospitality industry, there might be some movement on CGT. It’ll all help.

DM: Yeah, I’m not so confident in the CGT because I think that’s philosophical.

IK: But the Greens seem to have a real problem with it.

DM: Yeah, I think, and the left more generally. the Greens just happen to be in government, but I think the opposition are in effect, a very strong opposition on this occasion as well. So I think CGT makes so much sense, but unfortunately, that doesn’t deliver.

But I think the government really should cut the Vat rate on the hospitality because this winter is going to be really extreme. The households have the money, they don’t have the confidence to go out and spend it. Maybe some changing of the price points like that. But the irony of the Vat rate is actually to be kept by the business, not to be passed on to the consumer. So there might be other ways of doing that.

IK: Yeah, you spoke about the K-shaped recovery. We’ve all become somewhat ‘anoraks’ in relation to the alphabet economy. People have been talking about the V, the W, the L. K, what do you mean?

DM: Well you see, we were very limited by these Romans, the Greek alphabet would give you a lot more shapes if you require them. But on the K shape, I think that’s a phenomenon internationally, which is generally you’re looking at sectors that have congregation aspects of them in terms of hospitality. They’re suffering right around the world. And then, of course, you have the pharma, biotech, technology, food, the groceries and so on. Home ware, et cetera, they’re going to boom.

And Ireland just happens to be more exposed to the medtech biopharma tech than any other place on Earth. So we actually have the resources, as a resource generative economy we have, and we can compensate those who are being discommoded, but we need to actually give them certainty and we need to let them know where they are. And that’s why this disconnect between the public health dimension and the economic dimension is really a scandal actually, because it’s such a strong economy, we shouldn’t be suffering this type of uncertainty in provision for people. So I think the government’s got the right instincts here. The wage subsidy schemes have to continue. They shouldn’t actually have a date. They should say, we will give you six weeks notice when they’re ending rather than putting down artificial dates along the way.

Danny McCoy believes the government need to cut the hospitality Vat rate in the upcoming budget. Pic. Bryan Meade

IK: And you mentioned the multinational economy and the pharma and the tech, they really have put their hands up during this crisis in terms of their contribution to the exchequer. And I think most people, including those within the Department of Finance and Department of Public Expenditure, have been surprised, quite surprised at how well the tax take has actually held up.

DM: Yeah well, I think that’s a function of what’s been happening in the last five years. The investment going into the economy has truly been extraordinary. It is estimated by the CSO that last year, 2019, the investment by firms was €163 billion. Now you say a number like that and throw it out, do it per week, €3 billion per week. The scale of investment that’s been accumulating, that’s only been one year, is an investment that’s going to have recurring income.

They don’t put it in the ground for nothing or they don’t bring their patents and corporate balance sheets here just to burn them. So they’re going to expect a recurring income. And if you’re exposed to those things that have been done well during the pandemic, as I said earlier on kind of health related, tech related, you’re going to see that kind of surge.

So profits in Ireland are north of €200 billion a year. The capital, the write offs, about €100 billion, exposures, at least €100 billion of profit and at an effective rate of 12 and a half per cent headline, possibly more like 10 to 11, You get your €11 billion corporate tax last year, going to be higher again this year.

But as capital write offs start to erode, it’ll expose even more of the growth. So corporate taxes is as likely to rise in Ireland over the next five to six years as it is to go down. It may well go down, but it’s not inevitable.

IK: Well, if the OECD have their way, it could go down.

DM: Well, the OECD are the opposition, the enemies are presumably on the same team. Yes, other member states will if they have their way, but they won’t get their way inside a five year window, you can be sure, there’s a lot of sabre rattling.

IK: The other thing I just want to touch upon and we’ll talk about Ibec and some other points in a moment Danny, but no one’s really been talking about Brexit. It latches onto the agenda, such as when Boris Johnson announced that he was trying to undermine certain parts of the withdrawal agreement. But we seem to be looming, or limping towards a no-deal Brexit. How big an impact is that going to be for business and for your members?

DM: Oh, it’s by far the defining change of our generation. When Britain left on the 31st of January this year, that was the date, the rest are just the details. I said at the time, we said at Ibec, it was an economic order change. It’s not just an economic arrangement change, for us, this is a new order. And its ramifications, I think, will be significant for some time.

Take for instance, Covid has demonstrated that we share a labour market. We knew that through the common travel area, but also on the island. When you have different welfare systems, you can see the phenomenon where in the Republic on the pandemic payment, you get €350 a week and possibly in the north, as low as €100 a week. Those kind of price point differences would be replicated on lots of other activities, could be a corporation tax, capital gains tax, you name it. And they are competitors. If we leave gaps, we’ll certainly have difficulties in the future.

And so the irony is we’ll be watching Westminster much more closely outside of the EU and possibly having to adjust our system to reflect what they’re doing, I think that’s lost on many people who have got this kind of Narnia that we are so embedded in the EU. Irish people couldn’t name a TV host from another jurisdiction. We know very little about our member state colleagues.

IK: Yeah it’s funny, Leo Varadkar made the point last week where he said, in the same way that there is a potential and we will be watching it and he spoke in relation to the Vat rate, that Britain’s decision to keep it low will actually drive Ireland’s decision to do something around that.

But he also made the point that he hoped Ireland could become what we are to America, the gateway into Europe, or in the same way as we are the US’s gateway into the continent, that we could become Britain’s gateway into the continent. Although he prefaced by saying it’s not quite clear if Britain wants that.

DM: Well that’s true. And I think he was right in saying that Vat rates and differentials there would be important in effect. One appalling vista I suppose for those, is the welfare system. If they go low, do we go high or do we go low?

Because, you’ve seen things like the knocking down of the sector employment orders for the construction industry that were deemed unconstitutional in the construction side. How do you ensure that you’re not undercut in your contracts with labour that’s coming in? These are all real order shifts got to do with Brexit. Because we’re so obsessed with Covid and we’re actually in quite a sweet spot economically, all of the things being considered, we’re forgetting about the long term, I’m talking about the medium to long term impact of Britain having left.

IK: I was up in Monaghan last week with Martin McVicar of Combilift, which is an amazing Irish company which makes forklifts, he’s essentially the Willy Wonka of the forklift industry, employing 650 people in Monaghan town. He was saying 25 per cent of his business is in the United Kingdom, it’s a border county but goes into the United Kingdom. The rates, if there isn’t a trade deal done, it’s going to be 4.5 per cent, which someone’s going to have to eat one way or the other. So he’s losing a bit of his competitiveness and he’s also had to reframe all of his supply chains. So instead of using the land bridge in England, he’s trying to ferry things through Rotterdam. So it’s more expensive and it’s more cumbersome. And that experience has been felt by businesses all over the country.

DM: Absolutely. And I think, if I had to make any prediction for the end of the year, there will be a skinny bone trade, There’ll be no tariff, no quota, because to that point, this is like nuclear disarmament. If you put in these tariffs and quotas, both parties lose. It’s mutual destruction. So it’s absolutely nobody’s incentive at the very end to actually put on tariffs for the sake of it unless you’ve gone into a full trade war. And I don’t think I don’t think that relations are so bad between the EU and Britain that it’s war. Different with the US and the EU, or the US with China, which we can become casualties of where we see tariffs put on products. But I genuinely can’t see that being the outcome at the end of this year.

IK: And in relation to an all-Ireland economy?

DM: So the dynamic just coming off Brexit is there is a real obsession about goods trade because they’re tangible and we can physically see the land border. But let’s not forget that the European Union is more about capital, labour, services as well as goods, and that equally applies in an all-island dimension. The island functions probably primarily as a joint people space in terms of the joint labour market, but also we can do services across the jurisdictions. Thankfully, no border, there’s no goods issue on that front, but the services will still remain connected.

“I don’t know whether it will be a political unification, but certainly we’re going to see a very close economic aspect. Whether that’s through backstops or protocols or the Good Friday Agreement actually being invoked, we will see a different relationship between North and South in the next few years.”

Danny McCoy

So, one of the things we really have learned from COVID is that we have to have an alignment. Without alignment, and that really gives the Republic the actual pressure point. The Republic of Ireland will be the hinge country between the EU and Britain.

Now, that makes it all sound nice, but hinges can go bad.

IK: The door can be slammed.

DM: Well, yeah, it can be an uncomfortable place being in the hinge actually, and we must face up to that. But one of the ways that definitely as a society, given our history and so on, is the forces where we’re towards a reunification or towards a shared Ireland is probably a better way to describe it, I think is definitely on for this generation. I don’t know whether it will be a political unification, but certainly we’re going to see a very close economic aspect. Whether that’s through backstops or protocols or the Good Friday Agreement actually being invoked, we will see a different relationship between North and South in the next few years.

IK: And do you think it’ll be a more positive relationship?

DM:  Well that depends on how, things are neither good nor bad, but thinking makes it so. That depends on how we actually resource it. And so in our thinking, including up to decarbonising the economy or actually dealing with a pandemic, we have to take an all-island approach and that will involve the richer part of the island, the Republic putting resources into the North. And I hear a lot of people saying we can’t afford it. Well actually, we can, as it happens, we choose not to pay it. And that’s a different issue. And if we go down that route, well, you might pay differently.

IK: We’re sitting here in the heart of Dublin 2. Most of the officers, including your own, are largely empty. What’s your read on the future of cities, the future of office buildings?

DM: Well as you saw with Combilift, that’s actually booming. We actually live in the Willy Wonka factory with nobody around here. The central business district is where a lot of the assets are. And of course, when you reimagine the future, you could see this blended working from home, work in the office. You could see some of the buildings here being turned into residential. We’re all talking about work going to where people live, but how about people coming now to actually live where they used to work?

“Those who would be of the view, you try and go for a short, sharp elimination strategy. They will generally be ones that can put their employees in their homes and still function without a beat, or even in another jurisdiction. Then you’ve others on the high street, in retail and they just need people to be in the central business district.”

Danny McCoy

But all of that will take time. And unfortunately, in the gap in the middle, depending how long this goes on and the uncertainty, we won’t be able to afford two systems in many cases. Having the access to an office is nice, but if the utilisation is down around 5, 10 or 15 per cent, it just doesn’t make economic sense. So we do need to get people back into an office environment, not 100 per cent, but some proportions. And that needs to happen over the winter months, Covid notwithstanding.

IK: And to get them back in. It’s funny, there was that initial euphoria around working from home at the start, but it quickly waned.

DM: Yeah of course, everything has its season, as they say, but the best of both worlds when you can blend it, and I suppose it’s obviously a stage of life as well. I’m probably too unreconstructed to not have an office desire. But I think we’ll definitely have that blended.

IK: Yeah but I think it’s fine. I’m sure, like I can work from home if I need to, at the capacity. But so many young people are operating, working from their beds with laptops, and that’s not sustainable.

DM: Absolutely. And of course, all of that is predicated on everyone being individualistic. And of course, what we know is networking about team working, about the coordination of being with the right people at the right time, in the right place. That’s all getting more complicated when people have these kind of choices.

IK: Let’s talk about Ibec as an entity. Obviously, it’s the employers organisation, but it’s big. It’s much bigger, I think, than people would really imagine. And the number of trade organisations that it hires under its remit is vast.

DM: Yeah. So we rebranded Ibec to be Ibec a few years ago because it used to stand for, and it’s probably helpful to say, the Irish business and employers and the ‘and’ is important because a lot of people say it’s an employer’s organisation, which it is. But to be an employer, you need to have an employee and that’s the labour market. But businesses are so much more than just about the relationship with an employee. So the business part of Ibec, I think, is what’s really become much more pronounced over the last decade.

The employment piece would have been associated with social partnership and centralised wage bargaining and so on. Still really crucial things, which we might come back to.

IK: I do want to touch upon that.

DM: But on the business side, as you rightly say, Ibec itself has 240 employees, we’ve seven locations, six on the island here, one in Brussels. We’ve got 38 trade associations, things like Small Firms Association, Retail Ireland, Biopharma, Medtech. Could name them all out.

IK: It’d be a good test!

DM: I hope I could do it. But the reach I think reflects the kind of globalised nature of Irish business. So in my time in Ibec over the last decade is when you look at the scale of the business footprint in Ireland, it is just extraordinary, it’s wild. I gave some numbers earlier on about the investment, at its peak in the Celtic Tiger, that €163 billion equivalent got to about €50 billion. It’s a factor of three.

And when you look at, again, it’s something we’ll probably come on to because we’re seeing it right now. When you look at the workforce, back in the Celtic Tiger again, we would have had about 300,000 to 350,000 public sector workers at one point, two million private sector, it was about 1.6 million for workforce. It’s now 2.3 million and it’s now two million private sector workers to possibly the same scale of public sector. And something that kind of surprised people at the start of the year.

Danny McCoy states there is a growing shift now from tangible to intangible assets in business and beyond. Pic: Bryan Meade.

I made the point that I felt that the state had gotten too small for the scale of the private sector. And that seems ironic, given that the state has put a lot of private sector into care. But the circularity of this, where does the state get the money? It gets it off the businesses, when you look at the corporate taxes and the income taxes have stayed up. So in other words, it’s a public-private partnership at work here. But some of the things have actually got too small for our society, our public services.

And we see this with our hospital system right now with the capacity on ICUs, it’s not reflective of where we are now. There’s now five million of us, the CSO have updated the census number in April this year, it has passed by, we were all in the first wave of Covid, but there’s 4.98 million. And if the lockdown has done anything, I’m sure that the population is rising.

IK: We’ll see in a couple of months time. But even after that, 230 people working with you, I mean, it’s a big business to run. If you look at it as a company or as a business, that’s a pretty hefty operation on a day to day basis.

DM: It is. It’s a professional services organisation in a membership context, is how we’d like to describe it, or probably more accurately, it’s a professional member services business. And the membership piece I suppose, is the idea of collective, that professional services tends to be a one to one kind of private service transaction. We also have what economists would call club goods, in the sense of we bring people together under a brand and they work together, but they’re in the club. It’s for their interests.

And the wider things we would do is probably for effect, members of the business community, whether they’re members of Ibec or not, they don’t have the good taste to be members of Ibec. And so that’s quite exciting to lead that kind of dynamic. But as you say, it’s professional services. So you’ve got all of the pressures of people, making sure that they’re fulfilled, that they’ve got purpose, they’ve got a mission.

IK: They’re bringing in income.

DM: Absolutely. Yes, I think, again, just to give that we are €31 million turnover, so we’d be by far bigger than the vast majority of our own membership.

IK: Is there a conflict? It often struck me, I’m interested in this, is there a sort of conflict between your members? People often talk about this homogenous term, ubiquitous term, ‘business’, as if all business is aligned in one direction. But the needs of someone in the Small Firms Association are different than that in the financial services industry, in itself are different from those in the farming industry. Is it a tough balancing act to keep them all aligned?

DM: It sure is, and people have conflicts with each other and even conflicts on, say, the pandemic response. Those who would be of the view, you try and go for a short, sharp elimination strategy. They will generally be ones that can put their employees in their homes and still function without a beat, or even in another jurisdiction. Then you’ve others on the high street, in retail and they just need people to be in the central business district.

“But it’s actually up to the state collectively to ensure that childcare, housing provision, transportation networks are provided. And I think that’s where this social dialogue will really help the government deliver some of the things that we’re now seeing.”

Danny McCoy

So on that spectrum, you generally find there are some core aspects to business in terms of the value proposition, which is a reward for their efforts to make sure that the policy is actually in tune to their needs and if there are costs, that they’re justified. So some of the things that we’ve identified as being crosscutting has really been what we would call the future of work, which is collectivism coming back.

Collectivism has many forms. Some of that can be traditional left. Some is coming now from an unexpected right-wing into our society, something we hadn’t anticipated and didn’t have to experience before because we didn’t have an industrial base back in the middle of the last century when Europe had to deal with collectivism, right-wing collectivism. But that’s something that’s out there right now. And you’ll see it in some of the beef disputes of last year and so on. If you don’t have a representative body on which to make a negotiation with, you get anarchy. And even the government then can’t help that. That kind of passed off, overtaken by events.

The other one is just people’s lifestyles. So things like housing, infrastructure, planning, sustainability, an individual employer can’t deliver on those, it can try and help. But it’s actually up to the state collectively to ensure that childcare, housing provision, transportation networks are provided. And I think that’s where this social dialogue will really help the government deliver some of the things that we’re now seeing.

IK: Well, the Tánaiste said last week that he hopes one of his key things, I was talking about bringing in some sort of policy in relation to sick pay. But I think he wants to reopen that dialogue between employers and unions, because it has been quiet.

DM: Yeah. So look, those old enough, and thankfully, there’s a lot of listeners who won’t even know what we’re talking about here, to know what social partnership was about from the late 1980s, basically had a central plank to it, which was, a centralised wage bargain in turn for taxes to be moderated and have industrial peace. In other words, to give a core.

“The future of social dialogue, if there is to be one, will have a centralised social wage dimension, which will be a more logical place to attract the myriad of things that are coming at employers right now. Be those who leave or sick pay or other type of issues.”

Danny McCoy

What that was actually dealing with were individuals. Individuals in the 1980s had no guarantee of even having a job in Ireland. So social partnership was actually, in my view, for the individual back in the 80s and 90s. Now, I would argue it’s about collective issues and in exaggeration, it’s very hard with Covid. But going back to the start of the year, individuals could get well rewarded. There was good jobs here. They could stay here. They could build a future. They had an idea of good incomes, good lifestyles, things they were rationed from were housing, child care, education, health and so on, things that are kind of collective goods and need to be provided by the state.

So the future of social dialogue, if there is to be one, will have a centralised social wage dimension, which will be a more logical place to attract the myriad of things that are coming at employers right now. Be those who leave or sick pay or other types of issues. And so we’ll see this come through in a commission of taxation and social welfare, employers’ and employees’ PRSI will be the beachhead where these discussions will take place.

IK: I’m interested in your point on collectivism and just a related point around that. But, it goes back to your point about the size of the state being too small for what we have. And it’s often struck me with the next generation of people coming through. I’m really interested in when they get mobilized. So what we saw in relation to the gay rights marriage referendum and then the referendum on the Eighth Amendment to the Constitution, really driven by a younger cohort of people coming through. We saw them coming back via boat and plane to campaign and to do that.

As of now, they haven’t got exercised really in the economic issues and the political issues to the point of  housing, we saw a little bit of in the in the recent election, but housing, they’re not talking about the fact that they’re locked out of their pensions, that society isn’t working for them. I just think there’s possibly going to be a really big issue brewing in that area.

DM: I agree with you. And I think those frustrations are probably best summed up in standard of living versus quality of life. Standard of living in terms of stuff that we have, people have lots of stuff and can do lots of stuff. And so at one level, they have a very, very high standard of living. But then if they’re having to get up early in the morning and have the tensions of care and so on, and just the jockeying that takes place in all kinds of corporate life, they may feel that the quality of life is not as good.

“I’m stunned that there isn’t more outcry about the branding of our universities, because that’s what it is, it’s a brand and a perception internationally.”

Danny McCoy

And they certainly prospectively, to your point about pensions and so on and being beside your grandparents and all of that kind of social infrastructure, are starting to feel that actually, quality of life may not be as good as the previous generation. And that dichotomy between standard of living, disguising a quality of life issue and some of the quality of life issues I think, are collective good and I think that, Irish, Indigenous Irish and new Irish all actually have the same problems when it comes to what might be, they don’t have to be provided by the state and they can be privatised, can be public private partnerships. This is not to say the state has to be huge in Ireland, but I think it actually has gone down to a level that’s actually quite low. 

Take one, for instance, the universities’ rankings. I’m stunned that there isn’t more outcry about the branding of our universities, because that’s what it is, it’s a brand and a perception internationally. So if our highest ranked university, Trinity, as it happens in this case, is around 160 odd or whatever on a metric, that can be up to 15 to 16 UK universities ahead in towns that wouldn’t have anything better than say, our capital city, than Dublin. Stunning. And so if you think of our revealed preference around education as a society, here’s a thought experiment kind of just to get in there. If the ratio is 28 to one, student to teacher, which doesn’t sound too far out of the facts, why not go for 14 to one? Well, in that sentence, I’ve doubled the amount of teachers, right? But actually, for a rich society, 14 to one, we seem to have a revealed preference for the Oxbridge tutorial system.

We like one to one. It’s called ‘grinds’ and Irish people have been doing grinds when they didn’t have money. And now that they have money by revealed preference, why are they putting up with such lousy ratios in the educational front as one, for instance?

IK: But the issue around universities, it’s an interesting tangent. Is the problem that we have too many of them?

DM: No, I wouldn’t have thought so. When you look at the scale of the population, one of the issues is that you can stratify them. But what you have to do, you’ve got to give them a way to do it. In a previous life, I lectured in Oxford, University College London before coming back to Ireland in 1996. Their system there was quite interesting and showed to reverse the decline in the perception of British universities, because Thatcher wanted to basically teach them a lesson, so she tried to devalue their currency by making every polytechnic university in one foul go, is they basically had tournament’s, research assessment exercises. So if you wanted to get a five star, you had to put every member of the staff room up, so you couldn’t have a Father Jack type character from Father Ted in the corner. It was up to everyone else to get rid of that character because it dragged down what they would attract. So you got this internal tension, then you had relativities to other departments.

“So this is transubstantiation, the idea of going from tangible to intangible. But they get it. people get in their lives, they know what the cloud is. They know that a mobile phone is very different to what they were experiencing 10 or 15 years ago. And we are just as a society, the beneficiaries of the fact that people are prepared to pay to go to a restaurant that could be just selling a ball of steam that comes out because it’s in vogue.”

Danny McCoy

You also took a cap off the professor salary. So we allowed meritocracy to come there. So if you got €5 million as a medical professor, then you had power. You could go to the other university or you got the slice you wanted, then others came to be the professor. And so the dynamic became one that was kind of self-fulfilling. If you tried to spread it all, which I think is the core of your point, is you’ll get average and you’ll get lower than average.

And I think we were in a good place for a while before the financial crisis with the PRLTI, and universities were going very well. But it’s one of the legacies of the last 10 years with the controlled framework on employment and so on.

IK: There has been a decade of complete underinvestment in education. And Stephen Kinsella, one of our writers, he was previously on the board of the HGA. It’s been highlighting this again and again, the lack. And we’re coming to the pinch point, I think, after ten years of underinvestment, that we’re now seeing the consequences of it.

DM: Yeah absolutely. And you see this kind of public private affluence versus squalor. To use the words of Galbraith, people recoil from any kind of squalor. But if you just think about our defence forces as an example. This is such a wealthy society in charge of so many assets, given that investment flow that we talked about, our capacity to actually defend it, in terms of security, in terms of physical security or cybersecurity is probably best exemplified in the Brexit fisheries debate. We can’t even get our Navy to get out on boats, yet if you go to any of the marinas, you’ll see the private affluence in terms of the scale of the cruise and the quality of the boats out there.

Danny McCoy says his job is a ” a bit like the weather. The economy has been changing so much over the last number of years, it’s never boring.” Pic: Bryan Meade

So we have the resources, but we’re channelling them in absolutely the wrong way. We’re like a family that’s won the lottery. Two types of families, one who have the good sense to make future generations better off by their good fortune now or the others, they have a great time for half a generation and plenty of regret after.

IK: Why is that, is it something in us?

DM: No, I think that’s just a function, We’re nouveau riche as a society, we always think to cry the poor mouth, we find it very difficult to find ourselves, bar Luxembourg, the richest part of the European Union right now. And we also found oil and the new oil we found, this is our model of substance that we talk about in Ibec, the substance is this intangible assets, the brands, the copyrights, the patents and so on, in the corporate balance sheets.

And they are such a driver of global wealth now and Ireland is just an outlier, mainly as a result of the obesity work on..

IK: Yes, you talk about that, I agree in terms of, the resource that’s there and the IP, but that’s a point that Pascal Donoghue has made, that level of wealth has also created a disconnect. Before you knew what wealth was, let’s call it capital. You knew what capital was, capital was the factories, it was the roads. It was machines. Now, you can’t see it. I was going to say it’s not tangible, but clearly it’s not tangible, they’re intangible assets, but it creates, and I think this is some of the point you’re getting to, but it’s a bit of civil annoyance, where people keep on hearing about this wealth but they can’t see it and they don’t feel it.

DM: Isn’t it ironic for a traditionally Catholic country that you can’t do transubstantiation?

So this is transubstantiation, the idea of going from tangible to intangible. But they get it. people get in their lives, they know what the cloud is. They know that a mobile phone is very different to what they were experiencing 10 or 15 years ago. And we are just as a society, the beneficiaries of the fact that people are prepared to pay to go to a restaurant that could be just selling a ball of steam that comes out,  because it’s in vogue.

“As an economist, I thought 2020 was going to be a record year, not quite as big as 2015, but I thought it could be in the 15 per cent territory.”

Danny McCoy

So people are willing to pay for experiences which by their nature are intangible. So there is a disconnect, I agree. People like to say, oh I can’t see it, therefore it can’t be happening. But no small part of the surge in the disposable income of Irish households in the last six years has begun because of intangible assets. And the surge has been huge, whereby now, Irish households are nearly 50 per cent more disposable income than their UK equivalent.

IK: You’re an economist by trade. You were previously the chief economist before you became what’s now known as the CEO. I think it was a director general when you started?

DM: It was.

IK: It was yeah. What’s your outlook? If we take Covid aside, I know it’s a difficult thing to do, but I’m talking about the next 10, 15,  20 years 

DM: So look, there’s noise and signals, right? So Brexit is a signal, by the way, going back to that economic order, Covid is noise. It really is noise. It’s a horrible situation we find ourselves in, but it will pass. And I hate the word new normal, but the signal is pretty clear right now. The next five to 10 years for Ireland is an upward trajectory from that investment that has gone in. We’re the ones that can kill it. Features like not getting the central business district back up and running in the next six to eight months will mean critical decision makers won’t want to come here, live here, and then the capital balance sheet potentially goes out with them, our new investments, but the signal is pretty good for the next ten years.

“The economy has been changing so much over the last number of years, it’s never boring. It’s either down, up, up, down.”

Danny McCoy

There will be noise. As an economist, I thought 2020 was going to be a record year, not quite as big as 2015, but I thought it could be in the 15 per cent territory. At the start of the year, most economists were talking about six or seven per cent. I still think I was right because the quarter to – that’s the K shape – the quarter 2 numbers shows that manufacturing in Ireland is actually up 18 per cent year on year.

Some of that momentum is COVID, but some of it is just from the previous investments that these great medtech, biopharma, tech companies have made. And one of the things we know from economics is there’s increasing returns to scale and the scale is in Ireland and there’s increasing returns to that. And that’s likely to go on for another half generation.

IK: It’s a completely left field question, but I’m interested, I think an awful lot of our listeners will be as well, it’s a question of governance, actually. Ibec, long before the FAI, Ibec had both a president and an independent chairman. How does that work? You’ve a chairman as well, chairman and a president

DM: Yeah, it’s not long before the FAI as it happens, it’s probably something in the last five years. Go back to what I said earlier, the chair is for Ibec the business itself with the corporate governance of running 240 people, €31 million turnover.

The president is the chair of the ownership structure, the shareholders, to give the guide across all of the businesses. The president goes through every year, at this point, the chair is the more stable relent of tenure.

IK: And who do you have to report to, in addition to your members of course?

DM: Chairman, very clearly it’s the chairman, in terms of the CEO role, in terms of actually being the voice of the business, it’s to the president as representing the members, so that’s the dichotomy there.

IK: And do you enjoy it?

DM: Immensely, because it’s a bit like the weather. The economy has been changing so much over the last number of years, it’s never boring. It’s either down, up, up, down, and it’s amplified.

IK: Well let’s hope you’re right about the cloud and the noise and hopefully the economy will keep on going on that upward trajectory. Danny McCoy, thank you very much for joining me here today.

DM: Thank you Ian.

*****

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