Ireland has joined an elite group of economic achievers, empowered by a stable political and business background. It may seem a bit difficult for a country that called the IMF just over a decade ago.
But the economy has consistently been one of the best performers in Europe before, during and after Covid. Politically and culturally, however, we are struggling to come to terms with the fact that another economic catastrophe may not be around the corner.
Inasmuch as we sit at the top table of wealth creation, there’s still a feeling that we’ve snuck in, don’t really belong, and need to devour as much free food as possible before it’s discovered.
Wealth building in Ireland is nothing new. But the emergence of a significant number of wealthy professionals, entrepreneurs and investors is. Other countries have been concerned with economic wealth and intergenerational wealth for centuries.
Our state is a relatively new state with less than 30 years of serious wealth creation capacity. We cannot take it for granted. Likewise, we must stop looking over our shoulder and assuming the next disaster is months away.
Other countries seem more adept at planning for the long term, with a degree of confidence and clarity about what they want to achieve. Our painful history has meant that we are the best at surviving, but not always the best at thriving.
Crises bring out the best in us, but good times often reveal the worst – short-term thinking, a mix of hubris and insecurity, negativity and greed. A country that embodies the opposite approach to our short-term thinking is Switzerland.
Today, the two countries are like polar opposites in the way they are run. Nevertheless, we are both relatively small European nations. Ireland has 5.2 million inhabitants. Switzerland has 8.6 million. Switzerland is just over half the size of Ireland but has the second highest GDP per capita in the world.
Switzerland did not become wealthy from natural resources such as oil or gold, but instead built part of its economy on banking for the world’s wealthy, including despots. Much of Ireland’s new wealth has been built on the development of an attractive tax system for newer 21st century companies.
Think of Switzerland and you might picture pocket knives, chocolate, cuckoo clocks and banking secrecy. However, the economy is based on the export of chemicals and pharmaceuticals, mechanical and electrical engineering, commodity trading and financial services. Then there are watches and tourism and companies like Nestle and Novartis.
The simple truth is when you go to Switzerland you see that everything is planned for the long term. Yes, in a way they have more money than they know how to handle, but how they spend and invest is where Ireland could learn a lot.
The Alpine country took a middle ground with the Covid restrictions – few full lockdowns, but no free-for-all either. Its long-term investments in its healthcare system meant it never feared running out of hospital capacity. At the start of Covid, Switzerland had a public debt of just 25 percent of its GDP. The Swiss have a very strong sense of economic nationalism, which means they buy Swiss first.
They have invested heavily in public transport and are not afraid to shoulder the cost of unprofitable but socially beneficial rural transport networks.
Even the way they tax citizens is interesting. The Swiss have a reputation as a tax haven for the wealthy (from Charlie Chaplin to Freddie Mercury), and overall income tax rates for the Swiss are not as out of whack as elsewhere. But people pay local taxes to their community, it’s like a community tax.
Then they pay taxes to their canton, which is more of a canton or a province, and then there’s a national or federal tax.
If you pay local taxes to your city or immediate area, you can see how the money is being spent. In Ireland it’s like everything goes into a national tax pot, making it difficult to see what you’re getting for your money.
One of the challenges of a developed economy is that it requires long-term planning. This means adapting housing construction to population growth.
The continued population growth that Ireland is experiencing requires tough choices and actual compliance with the rules as they are put in place to achieve broader social goals.
In Switzerland they like to follow the rules and have very strict housing controls over who can build what and where. New one-off apartments are rare. Homeownership rates are lower, but tenant rights are much stronger. Real estate prices are expensive but stable and not really booming and busting.
In Ireland local politicians have torn up decent guidelines from professional planners and we end up with economically costly rural band development. This makes basic services in rural areas more expensive.
Swiss companies and the state are investing in their own future. In Ireland we spend around 4.5 billion euros on research and development every year. In Switzerland it is 23 billion euros.
The second largest exporter is mechanical engineering and the metal industry. It employs 500,000 people around the world, but 99 percent of its companies are SMEs. It is not based on a small number of large corporations. This can only succeed if companies invest in themselves with appropriate government support.
Unlike Ireland, the Swiss are not big food exporters. Farming is heavily subsidized by the state, but farmers can only receive direct payments if they grant public access, protect the landscape, and preserve the environment by planting fruit trees or other native species. The public can see what their farm subsidies are paying for.
Switzerland may have had the ultimate secrecy in international banking, but taxpayers can see exactly where their money is going.
Ireland has made tremendous economic strides since I left college during an emigration crisis in the 1980s. But what has worked for us so far will not be enough for the future.
https://www.independent.ie/opinion/comment/following-the-swiss-model-would-give-us-belief-to-punch-above-our-economic-weight-41924404.html If we follow the Swiss model, we would think we would outperform our economic weight