Ireland has the most productive economy among developed countries 03/02/2024 Market


Not far from the traffic of The Liberties, a historic workingclass area in Dublin, is the huge factory for one of Ireland's most famous brands: Guinness.

The famous beer has been produced in this factory since its inventor, Arthur Guinness, purchased the ruined building in 1759. Today, the traditional dark beer is produced in a huge complex of buildings connected by metal pipes to the rhythm of the sound of barrels transported by forklifts.

The factory, owned by multinational drinks company Diageo, seems a long way from Guinness's beginnings, but Aidan Crowe, head of beer operations, says not much has changed in the brewery's basic process. “Our core process is actually very similar to the processes Arthur Guinness would have used.”

The Brew House at St. Jame's Gate on Dublin Pier opened in 2013 and was the most efficient in the world at the time, says Crowe. The brewery currently produces 3.5 million pints per day that's 1.3 billion pints per year (one pint is 0.56 liters). Pint is the size of a beer glass, which is the most common in Ireland.

“Technology has allowed us to work much more efficiently and change the way we deal with things like cold water, steam usage, electricity usage and other things,” he says.

Crowe says more updates need to be made.

“You set goals, maybe five or 10 year goals. But when you reach these milestones, you suddenly realize that the horizon has changed,” he adds.

The advance of multinational corporations

With enormous resources, giant companies like Diageo are able to expand their ambitions. But it's not just Diageo. Ireland's economy benefits from being home to many multinational companies.

According to the Organization for Economic Cooperation and Development (OECD), Ireland is the most productive country in the world.

In economic terms, productivity is the value that a worker adds to the goods and services they produce. And some workers are better able to add value than others.

For example, despite being busy all day, the productivity of a person behind a cafe counter is limited to the amount people are willing to pay for the food and drinks they sell. But in a multinational technology company or a pharmaceutical company, employees work on higher valueadded products and services which makes them more productive by official figures.

Emma Howard, an economist at Dublin University of Technology, says Ireland is a “unique” global example as the high concentration of multinational companies helps boost productivity figures.

“If we look at our overall labor productivity, it is two and a half times higher than the European Union average,” she says. “But if we break that down into internal labor productivity and external sector productivity, there are huge differences.”

The Irish Central Bureau of Statistics measures productivity using gross value added (GVA) per worker per hour. GVA is the total product of goods and services minus production costs.

When we look at this figure we see that foreign companies are increasing Ireland's productivity.

In the second quarter of last year, the GVA of foreign companies in Ireland was €414 per worker per hour. For local companies this amount was only 55 euros.

The data also shows that foreign companies accounted for 56% of gross value added in the Irish economy in 2022.

Ireland's attractiveness to multinational companies has several reasons including low taxes, says Howard.

“If we look at the type of companies that are here Google, Microsoft, Pfizer or Meta they produce a range of very highvalue goods,” she says.

“Some of these assets may be intellectual property rather than physical assets. Some may be funneled through Ireland to take advantage of low taxes.”

Artificial numbers?

Some economists say multinational companies are distorting Ireland's economic figures.

“It seems like they're generating a lot of economic activity, but what's in it for you? [na Irlanda] it is not much. In some ways it is completely artificial,” says Stefan Gerlach, chief economist at Swiss bank EFG International and former deputy governor of the Central Bank of Ireland.

For him, the huge difference in productivity between foreign and domestic companies is not as big as the numbers suggest. “It’s a measurement problem,” he says.

Gerlach points out that gross national income (GNI) may be a more accurate way to discuss Ireland's productivity.

This data better explains how multinational companies direct the flow of revenue through their companies.

In 2023, an Irish Tax Advisory Committee document said that using GNI as a measure could bring Ireland's productivity more in line with other European countries.

Gerlach believes that using a misleading productivity measure could mislead government policy. “There is a risk that politicians will overestimate the benefits and underestimate the potential risks of a large international pool in the economy.”

Howard and Gerlach agree that Ireland's attractiveness as a business country is not just due to taxes. The fact that it is an Englishspeaking country and a member of the European Union is also an advantage. In addition, Ireland has a wellqualified workforce.

“Across all age groups, we have a higher proportion of workers with higher education than the EU average. We also have a much higher proportion of people with STEM degrees.” [ciências, tecnologia, engenharia e matemática] than other EU countries,” says Howard.

“We have a highly skilled workforce a highly skilled workforce and that impacts our productivity at work,” he adds.

Regardless of what the data shows, productivity often improves through daily interaction between employees and managers.

This has been particularly the case since the pandemic, when many more workers began working from home. Today, employees are less likely to be in the office and even in the same country.

For Robin Blandford, this is a daily challenge.

His company D4H supports emergency response teams around the world. It is housed in a 19thcentury lighthouse on Cape Howth overlooking Dublin Bay.

Blandford's goal is to motivate his people in seven countries. “To me, productivity means we’re all moving in the same direction,” says Blandford.

“That's why it's important to have good communication so that everyone understands and communicates with people as best as possible, understands the direction we are taking and how to make a decision.”

“As we spread, we urge people to become part of their community. Don’t let the workplace choose your friends,” concludes Blandford.

This text was originally published here.