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Analysis/Comment Last Updated: Aug 23, 2010 - 8:24:15 PM

Ireland and leadership at a time of crisis
By Michael Hennigan, Founder and Editor of Finfacts
Mar 15, 2010 - 4:53:14 AM

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Taoiseach Brian Cowen launched the report of the Innovation Taskforce, in the Science Gallery, Trinity College Dublin on Thursday, March 11, 2010. Picture shows (l to r) Aisling Miller and Irene Mencke as they show the Taoiseach a DNA sample, the two students are Post Grad Science students.

At a time of crisis, people yearn for credible assurance from political leaders that multi-year dislocation, uncertainty and sacrifice will lead to better times. It could be called an expectation of inspired political leadership but in Ireland, management competence would be a welcome second best.

Sometimes, the same individual can provide political leadership while also showing incompetence on an issue or be blinded by short-term goals that result in very bad decision making. History is replete with examples of political, military and business leaders who have been both praised for leadership and damned for the lack of it. In effect both geniuses and fools. The hero is often the one who attaches himself to success and distances himself from failure. However, few are lucky to eventually escape the failure tag. US Federal Reserve chairman, Alan Greenspan, left office in early 2006 as the economic hero who steered the US economy to new heights of prosperity in turbulent times. Now he is among the guilty individuals who contributed to the greatest economic disaster since the 1930s. Why did so many buy into the opposite narrative?

A classic example of perceived leadership and the lack of it was provided by the recently deceased Alexander Haig who as Colonel Haig had become White House Chief of Staff in mid-1973 when the Watergate scandal was engulfing the Nixon presidency. By the autumn of that year, the Vice President had resigned and the next in line for the presidency, the Speaker of the House, was being treated for alcoholism. Haig was praised for the leadership he provided during those perilous times. On March 30, 1981, on the day President Reagan was shot in Washington DC, Haig, now the US Secretary of State and a retired four-star general, rushed to the White House press room and grabbing the lectern to steady his shaking hands said: "As of now, I am in control here."  A year later, Haig was fired by the affable president.

British economist John Kay who writes a weekly column for the Financial Times, has said that by describing Napoleon’s Russian campaign through the eyes of individual participants, Leo Tolstoy rejected the notion of history as the lives of great men. Of the battle of Borodino, he wrote: “It was not Napoleon who directed the course of the battle, for none of his orders was carried out and during the battle he did not know what was going on.”

Prof. Kay said the mistaken inference that events are shaped by the will of particular individuals, is routinely shared by journalists and historians. War and Peace:“The profoundest and most excellent dispositions and orders seem very bad, and every learned militarist criticises them with looks of importance, when they relate to a battle that has been lost, and the very worst dispositions and orders seem very good and serious people fill whole volumes and demonstrate their merits, when they relate to a battle that has been won.”

In another context, Prof. Kay wrote of Angela Merkel's East Germany where planners at the centre, conjuring targets from the air and marshalling stage armies of workers and resources, were distant from the realities of what was happening on the ground. "That dissonance leads to a frame of mind in which every failure is the preliminary to yet more heroic declaration."

He could have been talking about Taoiseach Brian Cowen and his Innovation Taskforce report.

Cowen formally opened the Irish Government financed Irish Innovation Center in San José, California, on Sunday and he had launched the taskforce report last Thursday, to provide evidence of action on innovation policy during his US trip for the St. Patrick's Day festivities.

The Taoiseach had established the 28-strong group, mainly comprising university presidents, senior civil servants, State enterprise agency managers and managers of multinationals last June. It was designed to support massive spending on university research to replace the defunct construction growth engine.

On becoming Taoiseach, Cowen had established a taskforce on the implementation of proposals on Irish public service reform that were made by the Paris-based Organisation for Economic Cooperation and Development (OECD) in a report in April 2008.

That particular taskforce appears to be in someplace called Limbo because aspirations are much easier to produce than pushing through long overdue reform.

The problem with advocacy of massive spending on innovation is that Opposition politicians are afraid to tackle the academic advocates of this journey into what is likely to be a fantasyland.

Finfacts said last week, that in a system of limited accountability and powerful vested interests, where the political leaders who had embraced construction as the engine of growth, have now turned to university research as the great hope for the future, it's important the current consensus approach is questioned.

The report does not even consider the survival rate of tech start-ups which in the US is only 25% after seven years.

University research does not generally respond to a market need but the reverse.
A job scenario (a forecast would be based on some credible data) of up to 215,000 new jobs by 2020 is set out, while in 2010, the number of jobs provided by foreign-owned companies in IDA Ireland supported companies, will likely fall to the 1998 level of 118,000. 

UCD economist Colm McCarthy wrote in yesterday's Sunday Business Post: "The 132-page report is profoundly depressing, a cornucopia of buzzwords, singularly lacking in economic context, aspirational, divorced from reality - indeed, contemptuous of reality.

The Government does, believe it or not, have a macroeconomic strategy. The strategy is to stabilise the public finances, deal with the collapsed banks, regain competitiveness, deleverage.

It is grim, and will take several years to execute, but it is grounded in reality. No coherent and feasible alternative to this course of action has been argued from any quarter.

It is a tough, unexciting but unavoidable path to economic sustainability, for which office-holders can expect little thanks.

The Innovation Task Force report is an invitation to duck reality, to wallow in an escapist fantasy about an Ireland that does not exist, and cannot be summoned into existence by a task force, working group, interdepartmental committee, or Royal Commission."

SEE articles:

Finfacts: Innovation Ireland Taskforce's aspirational report; US banks / credit-card companies contribute most money for start-ups - - not venture capital companies

Sunday Business Post: Taskforce plan is a flight of pure fantasy- - Colm McCarthy

So Brian Cowen, the Minister for Finance during the high point of the property bubble, has got his fairytale marketing brochure and in years to come, we will read of public money being flushed down new sinkholes even more than was wasted during the boom on IT projects and overpriced construction projects.

Anyone wonder why a real knowledge economy like Denmark could implement a broadband system with the best coverage in the world while despite truckloads of money, we could only limp?

A start-up requiring finance wouldn't have a chance by producing a business plan replete with just aspirations and pious hopes; no SWOT (strengths, weaknesses, opportunities, threats) analysis or detail on the markets for the products and  competitors.

However, the public policy document does not meet these minimum requirements.

On managerial competence and leadership,  honesty is the best policy.

But the Irish appear to be easily fooled and besides the fairytale on enterprise policy, it was claimed last year that the establishment of the toxic property loans agency, NAMA (National Assets Management Agency) would improve credit availability.

Minister for Finance Brian Lenihan, has shown political leadership in some aspects of public finance management but incompetence in other areas.

NAMA was never likely to have an impact on credit given the severity of the recession and the inevitable change in lending practices by an enfeebled banking system. 

In the US last year, bank lending growth was the lowest since 1942.

It also now transpires that warnings given on the Irish Economy blog by several people including myself last summer about the standard of security supporting the loans- - including the probability of multiple loans being backed by the same  security -- have turned out to be correct.

Banks accepted undertakings given by the solicitors of property developers as the sole security on loans worth hundreds of millions of euro, NAMA has discovered.

Now, the loans of the ten biggest developers are reported to have problems with legal titles held by the banks on properties underpinning large-scale loans.

The working of Irish politics, which usually only responds with other than glacial speed when a crisis becomes dire, brings to mind quotes from Frenchman Alexandre Ledru-Rollin (1807-1874): “There go the people. I must follow them, for I am their leader,” and American Groucho Marx (1890-1977): “Those are my principles, and if you don't like them... well, I have others.”

Whether it is the challenge of devising an enterprise policy for a post-recession world or rescuing the banking system, a political leadership and population which can handle inconvenient truths, is the only recipe for success.

SEE: Spin cannot hide lack of new thinking on jobs - - Irish Times article, March 11, 2010, by Michael Hennigan  

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