Seeing the bigger picture: Danny McCoy
Social partnership cannot continue in its current form, IBEC Director-General Danny McCoy states as he talks through his priorities and optimism for Ireland’s economic future with Owen McQuade.
Leading a confederation of business interests is a “very challenging role”, made more so by the current climate, Danny McCoy admits – “not just the economic environment but also the damage that has been done to business reputation over the past year.”
Since the start of July, McCoy has been settling in to the role of IBEC Director- General in what have been unsettling times for Ireland’s business community. His own outlook, at this early stage, is on seeing the “bigger picture” – i.e. where Irish business fits into the international context – rather than focus overly on industrial relations which have dominated IBEC’s image for many years.
“That’s quite germane to the economic crisis but for the long term it’s really about focusing in on enterprise policy. It’s really about putting more emphasis on the business agenda than on IR,” he comments.
And major changes to social partnership are also foreseen.
“The social partnership process is at a very difficult phase. It certainly can’t continue in its existing form. It will need a new impetus. Being a new Director- General of IBEC I would hope to be a catalyst for change and would like to be helpful in that regard.”
Reputation
Actions rather than words will repair the reputation of Irish business; he downplays spin about CSR or sustainable enterprise.
The key problem, in his view, is that most people now associate business with “speculative gain” rather than the building of something sustainable.
“It’s a tangible quality – if people believe that businesses are sustaining their livelihoods, providing jobs and a context in which a community can exist,” McCoy contends.
“Very often communities define themselves by the predominant industry. That may be more traditional but you still see it in a city like Dublin that likes to see itself as a knowledge city and would identify itself with companies like Google and Facebook. Even when times were good, people often had a poor view of business at arm’s length but when asked about the business they worked in they would have a positive view.”
The Republic’s damaged international reputation is one of five crisis identified by the National Economic and Social Council, the rest being economic, social, banking and public finances. However, he sees these others “coalesce in terms of sending the signals” for the country’s reputation overseas.
With European attention focused on Ireland, there is an opportunity to repair some of the problems that have been inherent in these crises and show the solutions to a wider audience.
“I’ve been at pains to talk about the Lisbon Treaty as just a date with a decision but the day after Ireland is going to have to be trading as well. So, while a necessity, a ‘yes’ vote won’t be a panacea for restoring our international reputation,” he explains. “We’ve got to use this time now when the international community is looking at us to try and rebuild some of the credibility around our business and societal models and show that they are sustainable.”
The international community judges economic sustainability through spreads on 10-year government bonds and, at the time of interview in August, Ireland still had a risk premium at three times that of Spain.
“I use this as a metric to help rally people around. Ireland should be trying to reduce its perceived risk spread and focus on all of the building blocks that go into it which are really productive capacity of the workforce, which in turn brings in education and training, energy, innovation and technology – all the building blocks of competiveness.”
Cuts and choices
‘Re-pricing the economy’ has been a key message for IBEC in 2009. Asked whether this means cutting social welfare payments and public sector wages, McCoy is clear that hard choices must be made, especially in welfare.
“We expressed in our Budget submission back in April that we felt that part of the package to bring stability to the public finances would have to address the social welfare bill. But we were very clear at that time that any cuts should be living standard improvement i.e. less than falling prices. This is in contrast to those who are working who are clearly worse off with the taxation rises and wage adjustments taking place.”
At this year’s MacGill Summer School, he had stated that there were “no easy choices” but the restoration of competitiveness was “the better of two evils”. An Bord Snip Nua, he adds, has said that these “scales of adjustments” are needed in the economy: “It has given a menu. To govern is to choose.”
Beyond the headlines, he sees An Bord Snip Nua as having a “bigger virtue” in that it has made the quantum of money involved in public spending tangible.
“It crystallises it in people’s minds. Now whether they are the right choices or not is up to government,” he remarks. “Our own view is that we would like to see the productive capacity of the economy underpinned. But I don’t think anyone in society can be immune from this. There have got to be cuts across the board and the prioritisation is on the level of the cuts.”
One exception, McCoy emphasises, should be the science, technology and innovation “space” where he encourages the Government to consider increasing funding in order to prioritise the smart economy. He warns against not completing the “final pieces of the jigsaw” in this area, where the private sector has already put “a lot of chips on the table”.
Global surge
Amid the accumulated pessimism of the past year, he strikes a bright and confident note for Ireland’s medium-term economic future: “I’d be very optimistic to be honest. It’s as much to do with arithmetic than anything else. I think there has been a complete overhype about what has happened globally.”
McCoy finds that the global economic turmoil is the “giving back of an irrational exuberance” and this has subsequently cut into real businesses.
For him, the most profound statistic is that the globalised workforce has quadrupled since 1980.
“There aren’t four times as many workers but those who are engaged in globalised activity [have quadrupled],” he notes. “This changes the whole global economy and has led to a surge and a move up the value chain for the world economy. The consequence of this has been a shift towards a lower interest rate environment, in the longer term. This profound shift gives a glut of money and imbalances within the gl
obal economy.”
Globalisation’s impact must be more readily recognised, both for how it has changed the economy for the better or worse in the recent past and also how it will drive forward Ireland’s prospects in the future – a ‘swirl’, in his mind, as well as a ‘surge’.
“In Ireland a lot of people misread the Celtic Tiger as something that happened independently of the world. They didn’t appreciate that globalisation was changing the parameters for everyone. Because Ireland is so open and adaptable it is going to take this wave of globalisation again,” McCoy remarks.
“It’s in a swirl and it’s going to come back with another surge. So, yes I’m optimistic about the Irish economy because I’m optimistic about the global economy. The forces that drove Ireland on are still intact.”
Going back to workforce increase, he sees the country’s big challenge as assimilating the scale of that increase which saw net increases of 100,000 per annum in the four years after the 2004 EU enlargement.
This is best seen in its historic context i.e. that the Irish workforce previously grew by 100,000 between 1967 and 1993.
McCoy strongly warns against seeing emigration as a solution again.
“The scale of this is reflected in unemployment numbers we are now seeing. The escape valve – and I mean that in a negative sense – of outward migration, which is sometimes seen as a solution, is a disaster for Ireland,” he states.
“The Irish model has benefited hugely from the availability of this increased labour supply but as significant is the creation of a bigger domestic market. If this escape valve is to lead to a decrease in the scale of the Irish population I think it will have been a monumental loss of an oil find.”
Instead, the economy must retain this human potential, something which is occurring at the moment “because there is nowhere better to go and social welfare rates are attractive”. In turn, this has led to unsustainable public finances but he insists that a larger population is good for the economy as it will increase the size of the market.
Top of his lobbying list is the Lisbon Treaty. Second – and also significantly – is getting the Government to be “reactive to enterprise” during this phase of the downturn.
“We want government to acknowledge that the preservation of enterprise, not just jobs, is significant,” he cautions. “Companies will shed jobs during downturns but what is an absolute disaster is when the whole enterprise goes. There is then no scalability once the upturn comes.”
Profile: Danny McCoy
A native of Tuam, Co Galway, Danny is married with four children and lives in Dublin. He started as a lecturer at DCU before working at the ESRI. He then moved to London to lecture at University College London before returning to work in the Central Bank. Danny returned to ESRI to edit its quarterly economic commentary until 2005 when he joined IBEC as Director of Policy. He was appointed Director General of IBEC on 1 July.
As regards interests, “I don’t have a huge amount of time, with young kids, but run a bit and try to cycle to work when I can.” An eclectic reader, he browses: “anything from a book on the pre-Raphaelites, magazines such as Hello or Magill to a book with my kids by Will Ryan about fictional MI5 agents.”
He admits to being easily bored “but the great thing about this job, it’s never boring as there is always lots happening in different sectors at different times and the task is to find the commonality.”
