The Multinationals

equal to, or greater than, domes— ticIrishindustry. (iii) FMN's bring !advanced! technology and skills which canbe passedon tolrish workers and therefore become available for the development of native-—owned industry.

(iv) The FMN's in Ireland, unlixe Third Worldcountries, don't repatriate their profits; they reinvest themhere.

(v) FMN's are more stable than domesticIrishindustry anddon't close down as easily or causeas much redundancies.

All of these arguments can only be made plausible by a selective choice of facts and misleading definitions.

FMN!'s Vs TRADITIONAL IRISH INDUSTRY?

Itis simply inappropriate to contrast the performance of tradiitional Irishindustry andFMN!'s. Much of traditional "Irish" industry was foreign-owned any way and displayed many of the limitations associated withpresent day FMN investment (i. e. very low spin offs for other industries, and very low value-added to products). Their decline only emphasises the futility of relying on foreign capital whether itbein the policy context of "import substition" or "export-led growth".

Moreover, the erosion of traditional industry was aprerequisIte for attracting FMN investment. Itiscaused, inthe main, by dismantling of protective barriers to facilitate the trading patternsof the FMN!s. So,when counting the number of jobs created by FMN's the jobslostin the traditional sector must be subtracted, not counterposed. When this is done the figures showthat despite arise of national investment to some 20% and since 1960, the average annual rate of employ— ment increase has been less than less than 1% per year.

SPIN-OFF EFFECT The claim that FMN!sestablish greater linkages (i. e. purchasing of local rawmaterialsand production which is further processedlocally) isbasedona sleight ofhand. There have been twoIDA studies of this question andbothuse definitions of ques-— tionable value. Thefirst, by McAleese, vergeson the absurd. He compares foreign with domes— tic companies but "domestic''is definedas any company which has been in Ireland five yearsor more. Accordingly, avery high percentage of ''domestic!! companies areinfactFMN'!s. Itis hardly surprising, when he compareslike withlike, that he finds very little difference between the two. His conclusion, there— fore, that foreign industry makes as muchacontribution to the economy asIrishindustry, is completely spurious.

"NEWIRISH INDUSTRY"

The second study, by O'Farrell, isabit more circumspect. He compares ''NewForeign Indus— try" with "Newltrish Industry". The latter is definedas those companies in which major decisions are made inireland. What heisreferringtohere, ashis own evidence indicates, are those subsidiaries of FMN's which are managedby Irish nationals. These may havea degree of flexibility when deciding company policy but ul timately they must conform to the strategy of the parent company. Again, it comesasno surprise that Farrell finds only marginal differences between "Irish" and foreign industry.

What these studies measureis essentially the impact of different types of FMN!'s asa whole on the Irish economy. Nonetheless, both studies do give aninsight into thisproblem. .1tbecomes clear that industry inlreland has very tenuous|links with the rest ofthe economy. Butitis only in passing thatMcAleese concedes that "linkages in Ireland are very lowby international standards''.

TECHNIQUESAND SKILLS A great deal is made of the fact that FMN's bring with them advanced production and management techniques which are then available tolrishnationals who want to setupbusiness. This argument justifies reliance on foreign investment by portray-— ing itas the first step towardsa truly independent Irish economy. The truth, however, is that most FMN!s which come tolrelandare only small fry by international comparison. Their average number of oven seas branches and emp! oyees are minute compared to the Corporations which figure in the list of the world's top 500 FMN!s. Similarly, their technology andproduction systems have avery lowrating. Itisselfdelusion to imagine that this type of FMN could provide the high level of technique and skill, necessary for would-be Irish entrepreneurs tobreak into international markets. to the FMN's.

REINVESTMENT ? like lreland. In any event, FMN's have a built-in tendency against transferring their techniques and skills. They areusually only acogina much larger-production system and their technology and skills have meaning only in the context of this overall system. Thismeansthat in the crucial area of Research and Development most IrishbasedFMN'!s are highly dependent on their parent company. Most operations, from management tomarketing, tend tobe done from outside the country. Itis only routine skills whichare utilised intireland and these can easily be suppliedby agencies such asAnCo without reference Itis saidin favour of the FMN!s that while they make considerable profits they reinvest them inIreland. Ther are anumber of mystifications involvedin this claim. Firstly, we know about the prof— its of the FMN!sonly what they choose totellus, which, to say the least, ishighly suspect. The "profits! of FMN subsidiaries are inreality accountancy conventions because sucha large proportion of them are "horizontally" integrated (i. e. they buy their rawmaterials fromthe parent company and"export!! their product toa sister company) As such, they no more make a profit than, say, the packaging department of abiscuit factory makesaprofit. But for the purpose of tax evasion in Europe and the United States, it suits the FMN Corporation to showinits accounts that the bulk of itsprofits are madeina tax-free zone ison between FMN!s and other industry has already beenreferred to. Suffice it toaddthata 12% -ate of plant closureresultingin a9% rate of unemployment in that sector isnotimpressive by any comparison.

The portrayal of the FMN!sas almost recession-proof is based on the experience of the '74-5 recession. Itis true that their aggregate exportsremained high during thisperiod. But to assume that this illustrates an inherent strengthinFMN!sis incorrect. Ahigh proportion of FMN's did actually experience a decline in exports andemployment. Their miraculous performance, therefore, isexplained not by exi sting companies excell— ing themselves but by newones, highly subsidised by the IDA, settingup. The myth of the,invincibie FMN!s crumbles before the facts. Between 1960 and 1974, atotal of 154 FMN's pulled out of Ireland; in'74 and '!75, a total of 52FMN!spulledouti.e. anincrease of 240% in the annual closure rate during the recession. The picture is made even more ‘complete by looking at the IDA's Rescue Programme. : In 1975 alone, 56firms, employing 5, 000 workers, had tobe bailed. That isto say, withouta dramatic rescue operation (at the PAYE sector's expense) 12% of jobs in the FMN sector wouldhave been wiped out in one year.

BRENDAN KELL Y Note: Above we have outlined some some of the inherent weaknesses of FMN!s. While these criticisms areimportant they are only a subordinate part of the story. The debilitating effect of foreign multi-national investment on the Irish economy goes much further. We will return tothe subjectin the next issue of SR.