Startupland: Ireland Climbing out of Recession One Chip at a Time
Trams on Dublin's new light rail system stop for passengers. Photos by Ray Suarez/PBS NewsHour.
There's no oil. The domestic market is small, and scared. Overseas customers who once made you rich are now in economic crisis. After a housing bubble was blown up for a decade, it popped, and left behind wreckage it will take a long time to clean up. There are plenty of people figuring out the best way to fix the Irish economy, looking at the post-Celtic Tiger world from the bottom-up and from the top-down.
I've just spent the week talking to business people, leaders and ordinary Irish about what went wrong, and what needs to go right, right now. There is a remarkable level of agreement about what's ailing Ireland. Unemployment almost twice that of the United States is a drag on domestic demand. Massive debts left behind by the real estate meltdown, and the cost of bailing out the banks that underwrote the massive overbuilding is not a short-term project. Prices got too high, it is widely agreed, and no longer resembled sustainable value in the Irish economy.
Still, it is striking to see modern glass and steel office buildings put up since my last visit to Dublin a decade ago, standing empty. In some of the toniest neighborhoods south of the River Liffey, blocks of small office buildings sprout too many For Sale and To Let signs to comprehend. Where did everybody go? To cheaper digs, or out of business all together?
Economies are such interconnected machines. Big things can't happen in isolation. The government has no choice but to prop up failing banks that were once pillars of the Irish economy. The meltdown in the economy forces hundreds of thousands onto the unemployment rolls just as government costs are going up, tax receipts are going down, and the bank debt is slowly getting digested. To keep the books in closer balance the governments at various levels have had to raise taxes and cut government services. It's a stringent dose of medicine for an already heavily burdened people to swallow.
Unemployment is dropping, though not nearly fast enough for the workers' tastes or for the government's revenue needs. Wages have risen slowly, if at all -- in line with inflation. When I did back-to-back interviews with the heads of the equivalent organizations to the U.S. Chamber of Commerce and the AFL-CIO, I was reminded how different the same economic landscape can look in different eyes. Fergal O'Brien, an economist with the IBEC, talked about the ways living through the collapse had strengthened Ireland as a competitor. "If you look at Ireland versus Germany for example, we gained 25 percent against Germany in unit labor costs since the global recession began. And a lot of that isn't wages, it's efficiency and productivity," he said. "Ireland is now a much more attractive place to do business than it was before the crisis."
David Begg, general secretary of the Irish Congress of Trade Unions, noted that "at the peak of the boom we had 2 million people working in the labor market. We've lost 365,000 jobs. The construction sector was particularly hard hit. The effect has been horrendous in that area particularly."
Begg told me a much higher share of the Irish workforce is unionized than in the United States, some 38 percent, and unless employers work with unions to smooth out wage demands in the coming years, a young and fragile recovery could be slowed by runaway wage demands from people who have seen declining standards of living for many of the last five years.
Irish potatoes trundle down a conveyor belt in a chips factory in Dublin.
One of the real pleasures of this reporting trip was meeting people who had started a wide variety of small enterprises. I began Thursday amid farm fields outside Dublin, watching washed potatoes drop from a bin onto a conveyor belt to begin the journey to become potato chips.
The Keogh family has been farming potatoes for generations. In the go-go Celtic Tiger years, Irish households started to move away from potatoes, eating more pasta and rice. A more sophisticated palate was a consequence of more affluence, as were time demands that left more working women convinced potatoes took too long to prepare. Unwilling to watch their business fade, the Keoghs took their potatoes and turned them into chips, turning an "inconvenience food" into a convenience food, if a not-so-healthy one.
Fourteen workers efficiently moved from process to process, taking less-than-beautiful potatoes out of the production line, stirring sliced spuds in the frantically bubbling kettle of safflower oil, loading freshly filled bags into waiting boxes and onto pallets for shipments. Keogh's has created 14 full-time jobs and found export markets around the world, including high-end American grocer Dean and DeLuca. If you come across the Roast Beef and Stout flavor, give it a try. I was skeptical. One of the Keogh's popped open a bag, and the chip tasted of beef broth, wasn't greasy or overly salty.
Demand is strong. The flavors are popular. The bottleneck now is the automated bagging line. If the second kettle was opened to meet new orders there wouldn't be enough packaging capacity to smoothly get the product into the trucks to head out from the Irish countryside to supermarkets in Europe, Asia and North America.
No less ambitious in his way is Garrett Fitzgerald. He and his partner James Boland have a success on their hands, Brother Hubbard's café, opened for breakfast and lunch near Dublin's law courts. Fitzgerald took advantage of the Irish government's leave policies for civil servants, went to cooking school and then to kitchens in Australia before coming home to create his dream.
The place is getting rave reviews from the Dublin papers and from visitor's guides for foreign tourists. From the beginning, Fitzgerald and Boland wanted to stress Irish ingredients and Irish suppliers. They took it to a degree that symbolizes their vision. Said Fitzgerald, "If you look around the café, we could have gone to Ikea and opened up the place in two weeks. Instead we got two young designers, custom designed and hand built everything here from native Irish ash.
"When you look at our cheeses, our meats, everything's Irish. I felt it was very important that we use local Irish suppliers. Now we have a close relationship with them ... that's good for them ... and it's good for us." And a reminder of the way a small business like Bother Hubbard's is knit into a web of commerce.
As the breakfast rush begins, a barista quickly and smoothly brews coffee drinks using beans direct from the supplier. The cashier rings up sales on an iPad, using software designed at the request of Bother Hubbard's. The software designer, a friend, has gone on to launch a startup for marketing iPad-as-register applications to other businesses.
The café has also created 14 jobs. It opened as a lunch place. It added breakfast at the beginning of 2013, and took on more staff to meet the additional business. Now on the drawing board, a light evening menu, and a seventh day of operation. At first, said Fitzgerald, they plan to cover the added shifts with existing staff. If the new opening hours are a success, more workers will join the payroll. He doesn't want to hire, only to fire. "When you hire someone you're responsible for them. The way we've approached adding on staff, we've put in more of the effort ourselves until we're sure there's an opportunity there."
Artisanal foods. Business software. Vintage clothing. Cloud-based video production. Delicious scones. Irish businesses are chipping away at a mountain of losses since 2008. There are still massive problems to be solved, like the tremendous number of underwater mortgages. The country appears to be making slow progress on what all the stakeholders agree will be a long road back.
Watch for Ray Suarez's broadcast report on Monday's PBS NewsHour. View more of our World coverage.