Ship of Fools (20 page)

And, fortunately, the government had the vehicle with which to achieve its goals: the state telecommunications company Eircom, which owned the telephone infrastructure. Or rather, it used to have. For in one of the most breathtaking follies of the Celtic Tiger era, the government had flogged off Eircom precisely at the time when it was setting its goals of making Ireland a world-leading information society. For purely ideological reasons, the state sold off its controlling majority stake in Eircom in 1999 for €4.1 billion. Hence the small, scarcely noticed caveat after the announcement in 2002 that Ireland would be one of the ten most connected societies in the world: ‘The state's role in this area is confined to provision of seed capital.' Ireland's IT miracle was to be a purely private affair. The market would miraculously provide the cheap, universal service that was a key goal of national strategy.

The privatisation of Eircom was a fiasco almost from the start. It was an attempt to whip up the fervour for ‘popular capitalism' that Margaret Thatcher had generated in the UK in the 1980s. It worked: 575,000 people bought shares in the initial public offering. Two and a half years later, almost all of them had lost 30 per cent of their investment when the
company was sold off to American venture capitalists (the Valentia consortium) and taken off the stock exchange.

This was just the prelude to a long-running farce as Eircom was passed around among global venture capitalists like a joint at a student party. Each one inhaled the assets before passing it on. Having been taken off the market in 2001 by the Valentia consortium, it floated again in 2004, and was then acquired by Australian bank Babcock Brown in 2006. At each stage, Eircom was loaded with the debt borrowed in order to acquire it - it had debts of €3.4 billion at the end of 2008. In 2009, Eircom was up for sale again, this time to a Singapore-based consortium, setting up its fifth change of ownership in under ten years. In this game of pass-the-parcel, the only object has been to squeeze as much short-term profit out of the company as possible. Long-term investment of the kind needed to create a world-class IT infrastructure has been the last thing on anyone's mind.

This whole process was very good for a small number of people. It didn't take long for popular capitalism to revert to the good old-fashioned unpopular variety. The members of the Valentia consortium who swooped on Eircom in 2001 made fortunes without doing much beyond loading it with debt. Tony O'Reilly made a clear profit of €35 million; the George Soros Fund raked in €177 million and Providence Equity made €443 million. The employee share ownership trust, which had leveraged trade union power into an astonishingly lucrative deal for its members, made €177 million. In total, on this one change of ownership alone, there were profits of nearly a billion euro. This was money that should have been invested in creating the promised broadband infrastructure.

Needless to say, with the main player in the Irish fixed-line
telecommunications market too busy servicing the needs of global venture capitalists, Ireland did not become one of the top ten countries in this field in 2005. Or in any year thereafter. It became instead a place where most people were deeply grateful for a 1 Mb connection and a third of the country had no access to broadband at all.

As of December 2008, Ireland was twenty-first of thirty OECD countries for the number of broadband subscribers per 100 inhabitants, twenty-fifth for the geographical penetration of broadband services and thirty-first of thirty-five for the average advertised download speed. The fastest speed available from the main operator (Eircom) was the fourth slowest in the OECD - over twelve times slower than in France or Finland. As for the goal of being the first country in Europe to have widely available 5 Mbps broadband, the reality is that Ireland may well be the last.

This failure had its roots in ideologically induced stupidity. The €4.1 billion it would have cost the state to directly provide a 5 Mbps service for most of the country was less than the €6 billion that the National Pension Reserve Fund, into which the money from the sale of Eircom was put, lost on international stock exchanges in 2008. But it was more important to pursue the delusion that the market would provide vital national infrastructure than to actually achieve a crucial transformation.

Beyond this idiocy, however, there was a larger question of cultural change. Could Ireland, which had an abundance of creativity in the arts, develop a similarly strong technological imagination? Could the kind of leading-edge technological know-how that had been imported with transnational corporations become an organic aspect of Irish culture? The key to this obviously lay in education. But the government had better
things to spend its technology budgets on, like useless e-voting machines and prestige IT projects that couldn't even crunch the fabulous numbers of euros they were costing.

Some of this stuff was very simple: giving kids access to computers in schools, for example. There is one computer for every nine pupils in Irish primary schools and one for every seven in secondary schools; the leading countries have a ratio of one to three or four. Even this makes things look better than they are. A third of the stock of computers in primary schools, and a fifth at post-primary level, is more than six years old and ‘not capable of running much modern software'. Most schools at every level don't have a sufficient budget to maintain the computers and digital equipment they do have, so much of it is out of order much of the time.

In England, two-thirds of primary schools and almost all secondary schools use interactive whiteboards in the classroom; the figures in Ireland are 5 per cent and 2 per cent respectively. Fewer than a third of Irish primary teachers, and a quarter of secondary teachers, rate their own ability to use IT in the classroom as ‘intermediate' or above. Department of Education inspectors saw IT being used in just 22 per cent of lessons in primary schools and rated the use of IT in the classroom as ‘competent or optimal' in just a quarter of cases.

Not surprisingly, the levels of accomplishment in computer skills are quite low. The inspectors noted that ‘many fifth-class students in primary schools do not have the competence to complete basic tasks on the computer. While most students reported being able to perform many of the most basic computer tasks, such as turning a computer on and off and opening or saving a file, more than 30 per cent reported that they were not able to print a document or to go on the internet by themselves. Almost half reported not
being able to create a document by themselves.' Eighty-eight per cent did not know how to send an attachment with an email. And even after five years of post-primary education, most students were found to need help with tasks like moving files or sending e-mails.

Given all of this, it is hardly mysterious that Ireland failed completely to create a culture in which science and technology are really valued. Just 16 per cent of students took higher level mathematics in the Leaving Certificate in 2009, just 10 per cent sat higher level chemistry and just 8 per cent attempted higher level physics. Interest in maths seems to have actually declined during the high-tech boom years. In 1992, when the higher level syllabus was introduced, it was expected that 20 to 25 per cent of students would take the exam. In 2001, the figure was 18 per cent. By 2009, it was 16 per cent. In 2005, the Department of Education's chief examiner complained of ‘a noticeable slippage, over a short period of time, in both the quality of work and the capacity of candidates to engage with problems that were not of a routine nature'. If maths is the language of the twenty-first century knowledge economy, the Irish were becoming steadily less articulate.

This was not some kind of genetic quirk. Ireland was perfectly capable of producing world-class mathematics graduates and of turning maths-based technologies into world-class companies. One of them, Havok, spun out of a Trinity College Dublin campus company and later bought by Intel for $100 million, is probably the global leader in the application of physics to video games and movies, powering the effects in everything from
Halo
and
Guitar Hero
to
The Matrix
and
Charlie and the Chocolate Factory
. But the appalling state of broadband development and the small
numbers of maths graduates made it difficult for such companies to remain in Ireland. Havok's managing director David O'Meara warned in April 2009 that ‘the Irish education system is at best only average by Western standards and is not producing the calibre of graduate we want in quality and quantity . . . You would think that the development centre for the next generation of Havok's software would be in Dublin. But 10 years into the company's history and we are looking at other major development centres, where we have operations, in Munich and San Francisco.'

 

Behind this disastrous failure to create a sustainable and indigenous high-tech culture were two big questions. What do you want to be? And what do you do with your money? Weirdly, the answer to both questions was to be found, not in the globalised Ireland of the Celtic Tiger years but in the nineteenth century. The profound conservatism of Irish society meant that in crucial ways fundamental attitudes had remained frozen throughout a period of apparently total change. Because Ireland had ‘imported' its development rather than going through a complete process of democratic modernisation, impulses from another era continued to have a shaping influence on Irish society.

The answer to the question ‘what do I want to be?' was largely the same as it was for the educated and aspirant Catholic middle-class in the nineteenth century - a doctor or a lawyer. (It is true, of course, that the old version might also have included a priest or a nun and the new one might have included a pharmacist, a vet or a media star.) The prestige of the higher professions - and the financial rewards attached to them - remained glitteringly intact. Their lustre completely outshone science, maths or technology.

This was clear from the relative difficulty of gaining a university place in these fields. Under the Irish system, the number of points acquired from Leaving Certificate results that were required to gain entry to a particular course gave a brutally frank measure of how much certain kinds of knowledge mattered. The picture was sobering - medicine and law matter an awful lot, science hardly at all. In 2009, for example, the number of points required to study electronic engineering at the largest university, University College Dublin, was 350. Computer science was 370. General science was 385. Law was 470. Medicine was the equivalent of 580.

The lack of interest in computing was stunning. There was a drop of 70 per cent in applications for computing degrees between 2001 and 2003. The numbers graduating in computing applications from Dublin City University, for example, dropped from 224 in 2005 to just 74 in 2008. Many science and technology courses struggled to fill their places. As a result, more than half of postgraduate places in computer-related courses were filled by students from outside Ireland. Software companies in Ireland were similarly unable to fill the jobs they had on offer - half of new recruits were hired from abroad.

Some of this had to do with gender - young women, who increasingly dominated entry to third-level education, were particularly reluctant to think about careers in IT. And some of it had to do with class. The Irish professional classes were extremely efficient at reproducing themselves. In 2008-9, almost half of medical students and over one-third of law students in Irish universities came from professional family backgrounds. While higher professionals (doctors, solicitors, barristers, engineers, pharmacists, etc.) account for just 5 per cent of the Irish population, their children account for close
to one-third of students on courses oriented towards the professions: 32 per cent of first years in medicine, 27 per cent in veterinary medicine, 23 per cent in law and 19 per cent in pharmacy. (By contrast, not a single student entering university courses in pharmacy or medicine in 2008-9 came from an unskilled manual background.) As the chief executive of the Higher Education Authority put it, ‘The socioeconomic profile on these courses has changed very little over the past decade.' There was, in fact, a conservative cycle that proved much more powerful than the surface changes in the Irish economy: the professionals dominated the university system and they wanted their children to be professionals. Family cultures, many of them formed with the rise of the Catholic middle-class in the nineteenth century, remained substantially intact.

The other nineteenth-century impulse was land. What do you do with your money? You put it in property. Most of the wealth generated by the Celtic Tiger was new money. But when it came to spending it, there was a very old formula: bricks, mortar (or at the higher end, steel and concrete) and the land they stand on.

When Bertie Ahern said that the developers and builders who gathered in the party tent at the Galway races to pay homage (and cash) to Fianna Fáil were Ireland's wealth creators, he summed up the underlying belief that real money was made by real men by putting up real buildings. Whatever lip service was paid to the notions of innovation and the knowledge economy, these quirks never had any visceral grasp on the governing mind. All the signals that were sent out, not least through tax breaks, were that property was the proper place for money.

Between 2000 and 2008, Irish venture capital firms invested
€1.2 billion in Irish small and medium enterprises. A great deal of this was in high-tech companies, though only around a third of it was in start-up or young enterprises. To put this €1.2 billion in context, it is exactly the same as the sum spent by Irish investors buying properties in London in the first six months of 2008, a period when property investment was in sharp decline. Irish individuals and companies made €41 billion in capital gains from investments in land, property and equities in the three years between 2004 and 2007. In a slightly longer period (between 2001 and 2006) Irish people invested €41 billion in commercial property at home and abroad. In 2006 and 2007 alone, the Irish invested almost €20 billion in foreign property.