Monday, November 22, 2010
That word again:
In light of Ireland's troubles, Tom Friedman is getting a lot of much-deserved ridicule for writing this
There is a huge debate roiling in Europe today over which economic model to follow: the Franco-German shorter-workweek-six-weeks’-vacation-never-fire-anyone-but-high-unemployment social model or the less protected but more innovative, high-employment Anglo-Saxon model preferred by Britain, Ireland and Eastern Europe. It is obvious to me that the Irish-British model is the way of the future, and the only question is when Germany and France will face reality: either they become Ireland or they become museums. That is their real choice over the next few years – it’s either the leprechaun way or the Louvre.
Because I am convinced of that, I am also convinced that the German and French political systems will experience real shocks in the coming years as both nations are asked to work harder and embrace either more outsourcing or more young Muslim and Eastern European immigrants to remain competitive.
As an Irish public relations executive in Dublin remarked to me: “How would you like to be the French leader who tells the French people they have to follow Ireland?” Or even worse, Tony Blair!
Yes, there's the pean to Free Trade (work harder or outsource or increase immigration). Yes, there's the foolish derision of the European system as exemplified by Germany and France. But there's also this:
... the less protected but more innovative, high-employment Anglo-Saxon model ..."
"innovative" and "innovation" are words that Friedman constantly uses. "Innovation" will save the U.S. from whatever-the-economic-threat-of-the-day-is. But Friedman never says what it is. It's a largely meaningless word when he uses it.
It does have meaning in some instances. A mathematical proof could be said to be innovative if it uses a new technique or one from a related field of study. A workshop that figures out how to assemble something quicker using existing equipment but in a novel way, can be said to be innovative. But to hand-wave and state that the Anglo-Saxon model is "innovative", absent any context, is an empty way of establishing superiority, without any proof.
"But to hand-wave and state that the Anglo-Saxon model is 'innovative', absent any context, is an empty way of establishing superiority, without any proof."
But it _was_ extremely innovative: innovating new financial products in order to extract ever more rent from the "real" economy.
Much of the credit for the late economic "success" of Ireland was attributed to its well educated populace. Yes, Ireland had long had good education for its citizens. But despite that, Ireland did not achieve such "success" until much later than many nations that lacked such excellent education. The pride of the Celtic Tiger resulted, it was said, because its populace had been so well educated; finally, the world was discovering how really, really smart the Irish were. But this "success" turned out to be a bubble, such that once again many are leaving Ireland to find work elsewhere. A moral to the story is that if things are going well, don't get too smug about it. (And this moral is not limited to Ireland.)
Ireland also made themselves very accessible to foreign high tech manufacturing. The one that sticks out in my mind was when IBM started manufacturing hardware in Ireland. Foreign manufacturing comes and goes though, and IBM's Dublin manufacturing plant is closing, the jobs moving to China. That's a small example -- only 190 jobs, but sort of exemplifies the tenuous nature of relying on foreign industry to prop up your economy.
Ireland provided tax breaks to attract such manufacturing. In turn, Ireland received tax and other financial breaks from the EU. Without such attractions, why stay there?
And now we await the EU's rein on Spain. (By the way, the Celts of Ireland originally came from Spain. Coincidence?)