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Home Events 2007 Belfast Corporate Lunch
Remarks: Dennis Swanson
Ireland-U.S Council Lunch
Belfast October 18, 2007

Brian, I thank you for your generous introduction. I am delighted to join you all here today in Belfast on this splendid occasion. It is always a pleasure for me to participate in occasions organized by this Council.

I have been pleased and honoured to serve as a Vice President on the Council’s Board for many years. I do enjoy working with the folks in the Council on both sides of the Atlantic because the mission of this organization does resonate with me.

As Brian mentioned, my day job is at Fox Television in the United States. Fox is a part of the New York-headquartered News Corporation, which recently concluded an agreement to purchase Dow Jones & Company, publisher of America’s largest paid-circulation daily newspaper - the Wall Street Journal.

Charles Dow and Edward Jones honed their financial reporting skills and their early careers at a company started by an Irishman – John J. Kiernan who hailed from Mohill, not far from here in County Leitrim. The Kiernan News Agency, a firm that delivered handwritten news to banks and brokerage houses, was founded by this Irish emigrant who had first worked on Wall Street as a messenger boy.

In 1882, Dow and Jones set out to form their own financial reporting firm called Dow Jones & Co. The first Dow Jones Averages report appeared in 1884 and included 11 representative stocks selected by Charles Dow. The Wall Street Journal made its debut appearance in 1889. Their new enterprise, located in a basement at 15 Wall Street next door to the New York Stock Exchange, produced news bulletins that were delivered by hand to subscribers in the financial district.

Well, I don’t need to tell you that Dow Jones survived and prospered – in part because, as history tells us, they made some important strategic decisions about technology and how some of their content would be delivered to their customers. Dow Jones invested heavily in a new-fangled system of battery-powered wired delivery of information – the famous ‘ticker’ as it came to be known. John Kiernan pooh-poohed that idea and soon after sold his business which made him a ton of money, went into politics and became a State Senator in New York.

I think this is an interesting story and I tell it because I believe it contains some neat connectivity to today’s occasion. First, the links between Ireland and America are illustrated in this tale. An Irish emigrant sails from Ireland and starts at the bottom of the ladder in America. With hard work, he builds a fortune and makes a valuable contribution to society.

I am sure that you have heard similar stories about so many Irish emigrants to the United States – including ones from Northern Ireland – like Harry Ferguson from County Down of Massey-Ferguson fame, the tractor company. Or, Henry Ford whose father left Cork in 1847. Young Henry founded a business that is truly massive and global today. The forebears of Tom Watson who founded IBM left County Mayo in the 1850’s. And, so many others.

These stories, in my view are instructive because they underline some important issues that have contemporary relevance and that, with your permission, I would like to explore, however briefly, in my remarks today.

The Dow Jones story contains important business lessons; about spotting trends and about exploiting those trends in a timely and targeted manner. As I am a media guy, let me stray a little here and say that when the newsprint world was challenged by – first - wired news and then radio broadcasting, print survived amid a broad re-structuring of the media business. Then, along came television, and many predicted the death of print. As we know now, television did not kill print or radio – it merely caused another re-shaping of the media world – albeit a dramatic one.

Clearly, we are witnessing tectonic, earthquake-like tremors being sent through the business world – not just the media business – by the Internet revolution.

The important reality of modern business is “change”. The phrase “creative destruction” was introduced in 1942 by the economist Joseph Schumpeter. It is a concept that applies equally well today as when Schumpeter first described it. It is a process of transformation, he decreed, that accompanies radical innovation. In Schumpeter's vision of capitalism, innovative entry by entrepreneurs is the force that sustains long-term economic growth, even as it destroys the value of some established companies that enjoyed some degree of monopoly power.

Of course, not just technology brings change – although technological innovation has been a key driver in many of the features of today’s altered economic landscape. Product and process development, changes in the way people live their lives, personal tastes, individual choice – these are all change agents that force businesses to re-invent themselves and the products or services they offer.

If I may, I would like to introduce here the concept that regions or countries are affected just as similarly by the self-same changes that cause this “creative destruction” in the business world. Countries and regions are no different in the sense that they must shape and tailor their “products” to meet market change – and I will use the term “products” here referring to such things as labor force qualities and costs, tax and regulatory matters, the environment for business as measured by the attitude of the government to enterprise and such like.

I will venture to say that I will get no argument in this room that these are all very important items that all businesses pay attention to and carefully evaluate.

In this Council, we have been indeed familiar – and I will guess, many in this room share the familiarity – with the transformation of the economy in the Republic of Ireland. It contains many lessons that policy-makers in Northern Ireland have pondered and, I know, continue to study.

I will start by stating the obvious. And, that is that this economic metamorphosis has not occurred overnight. It has been shaped by a half-century of consistent, thought-out, strategic reform not just of the way Government does things – but of the way Government views things and thinks about solving problems.

I want to rewind the virtual videotape here to ask you to bring to mind all those Irish-American connections born of centuries of heavy emigration – the massive diaspora that spawned such detailed and constant interaction across an ocean at all levels of the society. I know that many of you will appreciate that these connections, especially with Northern Ireland, stretch back to the times even before America gained independence. More Presidents of the United States share heritage with you Ulster men and women than with any other nation on earth.

I want to offer this American perspective of the economic policies in the Republic by saying to you that I do believe that the transatlantic bridge between this island and America has played a vital role in shaping how Dublin turned to what is undoubtedly, in my view, clearly American-style economic policies.

First, it was obvious in the post-War era, that the home domestic market in the Republic of Ireland was much too tiny to sustain any worthwhile economic growth. So, a key question was how do you expand your markets?

The answer was simple enough – Free Trade. Starting with the important Anglo-Irish Free Trade Agreement in 1965, the Republic’s biggest customer market – Britain – would now be open without quotas or tariffs or duties. Next, was the entry into Europe in 1973 – perhaps the biggest economic change to hit this island in a thousand years. Now, the largest consumer market in the world was open to Irish-based corporations. Thus, the first part of the key to transforming a national economy was put in place – access to markets.

The other components, such as an educated workforce, were addressed as part of a broad program of investment in education. Other matters, such as capital and training grants, technological and physical infrastructure, planning permits and Government approvals processes, were handled with varying degrees of success by the Dublin Government.

But, by far the most significant development was the development of a corporate tax deal that made presentations from Ireland’s Industrial Development Authority essential agenda items in America’s corporate boardrooms.

It started with an Export Sales Relief deal of zero tax on profits from export sales. This was not yesterday or the day before. That began in 1957, which, although I remember the year very well, is nonetheless, a long time ago. This tax break was clearly aimed at encouraging American companies to locate manufacturing facilities in the Republic.

This deal was amended and tweaked once or twice following entry into the European Union and is now the maximum tax rate of 12.5% on corporate profits. With depreciation allowances, the effective rate of tax is reduced in many cases to near zero.

I recount this brief history of the tax deal to illustrate the point that the corporate tax breaks have followed a clear pattern of policy-making in this area that has been sustained over a considerable period of time. It is evidence of a long-standing philosophical disposition toward encouraging enterprise and business.

Capital goes where capital is welcomed. The warmer the welcome, the better. That welcome must be expressed in the language of capital – which is profit. In the past five decades, the Republic of Ireland developed a policy of welcoming capital from overseas, especially from America. The policy has worked because American capital invested in Ireland, according to the U.S. Department of Commerce, earns the highest rate of return in Europe or elsewhere.

We know that one in every three industrial workers in the Republic takes a paycheck from a U.S. firm. The lion's share of Ireland's output, exports and economic value-added is generated by companies headquartered in America. The value of American industrial capital on the ground in Ireland today is about $60 billion, invested by over 600 separate corporations. That is a significant amount of wealth-generating potential. It is especially important when you consider, for example, that the Republic’s total national debt stands at a mere $45 billion.

I suggest that the principal hallmarks of the key elements of Ireland’s economic strategy have their roots clearly in America. Rather than choose the post-War European economic motif of the heavy-handed Socialist model which became fashionable in Europe for so long after the War – the Republic of Ireland chose differently. An economic model characterized by pro-business policies, more like the U.S. Free Enterprise standard, was put in place.

The economic boom down South resulting from these policies has been clearly aided by the growth of indigenous enterprise which, unsurprisingly, is a neat by-product of a pro-business environment for private enterprise.

There some excellent examples that I know you are all familiar with: these include companies such as

  • Ryanair, which has become Europe’s biggest airline on the back of a simple premise of being the low-cost provider of airline seats.
  • Another example, perhaps, is Elan Corporation which, despite its ups and downs during recent years, is a world leader in its drug-delivery pharmaceutical category.
  • Allied to this is the robust performance of older-established companies that have built solid overseas businesses such as CRH, Smurfit, Kerry Group, the IAWS, Bank of Ireland and many others.

Now, what is the relevance of this for Northern Ireland? I will venture to suggest that in almost every category, Northern Ireland’s punchlist of the items required to spark an economic boom can have checkmarks ticked against them:

  • The educational system in Northern Ireland is outstanding;
  • For the most part, the physical infrastructure here has been in better shape than down south;
  • Northern Ireland enjoys the same access to lucrative consumer markets in Europe;
  • The Government here in Belfast is clearly dedicated to economic development through the private sector;
  • It is equally clear that the new Executive is committed to reducing the proportion of economic activity accounted for by government spending in the province;
  • Clearly, political stability – another important ingredient – has returned with the magnificent success you all have achieved through the Peace Process here.

So, the 800-pound gorilla that is missing from this party is the tax deal. Since the Northern Ireland Executive has been put in place, this Council has joined others in asking the Government in London to figure a way to harmonize Northern Ireland’s corporation profits tax rate downwards to match the prevailing rate in the Republic.

With your permission, I would like to quote a passage from a submission sent from New York by the Council to Sir David Varney in London, who has been given the job of looking at this matter by the British Prime Minister:

And I Quote “This Council, which represents businesses throughout the United States and in both parts of Ireland, has consistently championed the idea that incentives to encourage enterprise work far better than Government spending plans to spur economic growth and prosperity. We strongly support the concept that cutting the corporate profits tax rate in Northern Ireland will allow the people of Northern Ireland the opportunity to compete economically on a level playing field with their fellow islanders in Ireland. Further, we believe that if the British Government agrees to this change it will spur expanded economic prosperity that will result in greatly-increased Government tax revenues across the board in Northern Ireland.” Unquote

A key driving principle of that young enterprise founded by Dow and Jones was borrowed from the Irish emigrant I mentioned earlier, John Kiernan. It was “Free peoples, Free Markets”. It is an interesting guiding principle and the broad sentiment it expresses is one that this Council has favoured and espoused since its founding.

We believe that the essential concepts enshrined in the American Constitution, which borrowed heavily from contemporary 18th century European ideas about freedom, ring true today more than ever before in human history. These concepts of personal liberty, freedom of choice, limited government, freedom of religion, individual responsibility, free speech: these are now common bonds that we share and enjoy.

I know that the transatlantic connection and economic relations between Northern Ireland and America are vital and important in the economic success that you have achieved and the more-rapid growth you seek.

I will conclude by assuring you of this Council’s continuing interest in helping and assisting this process wherever and whenever we can. We are delighted to encourage those closer business bonds and commercial connections that clearly benefit the people of both countries.

I want to thank you for your kind attention today. I hope that we get to meet at another Council event soon. Thank you very much.

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