I am delighted to be here with you all again today at the IMI Management Conference.
Enterprise and Innovation Europe and Ireland
The theme of your Conference - "Enterprise and Innovation" - is, as always, well chosen. Indeed, it echoes a major theme of the Spring Economic Council which I chaired last month, as President of the European Council. As we stated in the Council's Conclusions, competitiveness, innovation and the promotion of an entrepreneurial culture are defining conditions for growth. Enterprise and Innovation are essential to reinvigorating the European economy as a whole and are especially important for small nations trying to compete globally, often in niche markets. In fact, for the average Irish enterprise, operating in a globalised economy, enterprise has to mean innovation, to a very large degree.
What is our starting Base?
We all recognise that, in terms of pursuing higher growth, we are starting from a good base relative to our European or OECD counterparts. And things in Ireland are definitely looking up. The statistics tell the story:
- the annual rate of inflation fell to 1.3% in March, the lowest for almost 5 years;
- our GNP was 3.3% higher in 2003 compared to the previous year and accelerated to 5.5% in the last Quarter;
- employment grew by 1.8% last year, despite the difficult global economic environment, while unemployment was kept to a comparatively low rate of 4.7% ; and
- the end-March Exchequer returns indicate that we are on course to meet our public finance targets for 2004.
As the ESRI pointed out in their Spring Economic Commentary, our strong employment performance is particularly impressive in a situation where, last year, labour force participation averaged over 60% of the adult population the highest level ever recorded.
And in terms of growth, employment, income per head and adherence to the Stability and Growth Pact, we compare very favourably with the rest of the EU.
Looking ahead, the ESRI has forecast that real GNP would grow at rates of 3.3% and 4.4%, respectively, in 2004 and 2005.
Another good omen is the outcome of the Small Firms Association's 10th National Employment Survey. That showed that the mindset of small business for 2004 is firmly fixed on investment and expansion, with projected new jobs up to over 36, 000 compared to less than half that last year.
All of this is, needless to say, very positive and we should take encouragement from it. But complacency, as always, is the number one enemy.
What are the Challenges?
Economic growth in the medium term will reflect many
factors, some of which are outside our control, such as a sustained international recovery and the absence of unfavourable currency shocks.
Secondly, the 11,000 drop in industrial employment last year, and the difficulties evidently being experienced by some high tech companies, are clearly cause for concern - both in themselves and because they illustrate the need to increase productivity right across the economy. The ongoing restructuring within some sectors of the economy will continue to need careful management and planning.
And thirdly, there is the very obvious point that economic growth won't happen unless we work in every sector to make it happen.
We just have to face it: As a country, we are never going to win the Lotto. We will never be able to sit back and let our earnings take care of us. We will just have to keep on working on our weaknesses and playing to our strengths, repositioning, competing to win, innovating, developing new and better products and services, creating value, making the right choices.
There are, of course, many factors that contribute to national competitiveness. We have to manage the public finances carefully, so as to maximise the return on our investment in human and physical capital. We need to rectify Ireland's infrastructural deficit. We have to equip our people to win a share in the marketplace of ideas, through investment in education, training and research. We need to ensure the right regulatory environment for business. We have to keep our non-labour costs under control.
We are working on all of these, as is evident, most obviously, from the enormous investment we are making in our roads, public transport, housing, energy system, hospitals, schools and universities, broadband, science, research and the environment.
What new things are we doing?
In January this year I launched the Governments White Paper, Regulating Better, and, together with the Minister for Finance, have strongly advocated the reform agenda at EU level where much of our regulation originates. We will be working to improve the quality of law making and reduce, wherever possible, the burden of regulation on business. We are also strengthening competition policy and tackling areas in the domestic economy where costs and practices are unreasonable.
Through the work of the Enterprise Strategy Group, chaired by Eoin ODriscoll, we are scanning the domestic and international scene with a view to reframing our industrial policy. I have also established a Forum on the Workplace of the Future to look at how new models of work practices can enhance competitiveness and working lives, and what the best models are for making this happen.
These are just a sample of the efforts underway by Government to identify new ways to exploit competitive advantage, and to help us up our game nationally. These are just some of our efforts at innovation.
The Increasing Global Challenge
On 1st May I will have the honour, as President of the European Council, to preside at the ceremony welcoming the ten new member States into the European Union. This marks a major milestone in the development of the Union. It represents the achievement of a goal which these countries, many of them relatively recently freed from decades of repression, have strained to achieve.
Major change creates some uncertainty. At home, some have worried about the increased competition which our new partners represent. Some economic activity and investment has clearly moved in an easterly direction. Some increased pressure in terms of cost competition is being felt right across Europe.
On the other hand, however, the increase in the Unions population strengthens the internal market. The dynamism of these new member countries, with their potential for high growth, will benefit us all, not least as new markets for our products and services.
In short, by successfully managing this change we can all benefit from enlargement.
Nevertheless, I recognise that many are apprehensive about the effects on them of these changes. This is compounded by concern at the competitive challenge represented by India and China, as they develop economic muscle to match their demographic strength. The reality is, of course, that competition always carries an edge. Through the process of competition, productivity is increased and the overall pattern of trade can leave everyone better off. This requires, however, that appropriate measures are in place to support those who have the biggest changes to make, and to respond with solidarity to those who may suffer dislocation in the process.
Should we resist globalisation?
Some people have reacted to the changes unfolding around us by seeking to retreat into isolation. For them, globalisation is a threat, conjuring up a vision of chaos and suffering. When mixed with ideology and the politics of hate, such concern can erupt in violence, in defiance of the norms of a democratic and open society.
I respect the legitimate concerns of those who fear a threat to the living standards of many people through globalisation. Unfortunately, we see too many examples around the world of dislocation, which is not followed by local economic renewal. But the reality is, it does not have to be like that. On the contrary, economic development, spread equitably around the globe, is the best and only answer for the suffering of the impoverished masses in developing countries.
What is required to achieve this potential was set out in the report of the World Commission on the Social Dimension of Globalisation. The Director General of the International Labour Organisation presented the report to me, in Dublin, some weeks ago. It was produced by an international panel of distinguished personalities from a wide range of backgrounds and emphasised that the global market economy can deliver unprecedented material progress. It can generate more productive and better jobs for all, and contribute significantly to reducing world poverty. They concluded that the problems which many have identified are not due to globalisation, but to deficiencies in its governance.
Better governance of the globalisation process is a challenge to individual states and to the international community as a whole. It requires a better focus on people, a strategy of sustainable development, fair rules governing productive and equitable markets, greater accountability and solidarity, deeper partnerships and an effective United Nations. These are all principles with which the Irish Government can identify.
Interestingly, the Report emphasises that the response to globalisation should begin at home, at the national level. It calls for good political governance; an effective State that ensures high economic growth, provides public goods and social protection and promotes gender equity; a vibrant civil society, and strong representative organisations of workers and employers to sustain fruitful social dialogue. The Report emphasises that the highest priority must be given to policies to meet the central aspiration of women and men for decent work.
An Irish Model?
I want to suggest here this morning that the Irish experience is, in this context, highly relevant to the globalisation challenge. Indeed, through our development of a social partnership model over the past eighteen years, we have engaged in an important piece of social innovation, which has facilitated and encouraged the economic innovation that has served us so well.
Our experience is already the subject of close study, not only by our new partners in Europe, but by a constant stream of delegations from around the globe.
In addition to what they may learn from our internal developments, I believe these visitors are also impressed by our strong commitment to multilateral action, especially within the framework of the United Nations, to promote peace and prosperity around the globe.
I hope that all of our visitors on May Day will recognise and respect the contribution which we have made, and will continue to make, to models for economic development on a global scale, that put men and women at the heart of economic development.
This Government believes in the social partnership process. We believe that the series of agreements we have had since 1987 have been good for employers, good for employees and good for the country as a whole.
Employers have benefited from the greatly increased levels of industrial relations peace and stability associated with the agreements. They have been able to spend more time planning and less time firefighting.
Employees, especially in the more vulnerable employments, have been able to secure a fair return for their work and have enjoyed the benefits of a wide range of workplace-related legislation and initiatives.
Employees, employers and the country as a whole have all benefited from the generation of economic growth, jobs and the resources needed for investment in our people and physical infrastructure, and in building a fairer society. Everybody benefits from the capacity for continuing change which we are seeking to build into both the private and public sectors through social partnership.
Renewal of Partnership Model
At its root, social partnership grew from a shared recognition amongst the key economic and social actors that the challenges facing Ireland could not be satisfactorily addressed by any one group acting alone. Instead they required a collective and sustained response. Today's challenges may be different in nature, but the case for a collective and disciplined response is just as strong.
Social partnership is sometimes presented by its critics as a "cosy consensus". Sadly for its practitioners, it isn't ! The social partnership process requires a major investment of time and effort; hard choices have to be faced; and strong leadership is required on all sides. It is, of course, easy to knock social partnership - although opponents often seem a little shy about disclosing their alternative!
The fact is, however, that social partnership has a track record of delivering - not perfection, which was never claimed by its proponents - but tangible results all the same. And it remains more likely to deliver positive results than any free-for-all alternative.
Sustaining Progress
This Conference takes place against the background of the start of new pay talks in relation to the second half of the Sustaining Progress agreement. This is perhaps one of our most immediate challenges. The outcome should be of real concern to all of us. Because, depending on our success in reaching an agreement and its shape, we have opportunity to move our country forwards or backwards.
Maintaining labour cost competitiveness today is as important to keeping jobs as it was to creating them in the first place. If we price ourselves out of the marketplace, we will lose jobs. There can be no doubts or argument about this.
Unfortunately, there is clear evidence that, far from maintaining labour cost competitiveness, we are losing it. It is estimated that unit labour costs rose last year by 4.3% and that they will rise by about 2.2% this year, compared to just over 2% and 1%, respectively, in the eurozone.
And even this doesn't present the full picture: as the ESRI recently pointed out, the measurement of Irish productivity performance is seriously distorted by the contribution of a limited number of high value activities.
These are the realities that should condition all of us - private and public sector employers and trade unions alike - in our approach to the pay talks. At the end of the day, jobs are the lifeblood of this nation, providing the wherewithal for investment in our people and their future.
Of course, this is not to argue in favour of a race to the bottom in terms of labour costs. Competitiveness and social cohesion go hand in hand, and it is essential that a balance is maintained between the two, for the sake of both our economy and our society. But if our labour costs continue to accelerate significantly ahead of our competitors, we risk losing the race to the top in the long run. It is a matter of getting the balance right.
The Government will therefore do everything it can in the period ahead to bring the pay talks to a successful conclusion. At the end of the day, social partnership is a process. But jobs are real. And the people will judge us - Government, employers and trade unions - by jobs lost, gained, or maintained. I hope we can all rise to the challenge over the months and years ahead.
Thank you.
ENDS