The Irish economy, despite tentative signs of recovery, is still in a fragile state at the moment. Growth was a modest 0.7% last year, and even this looks difficult to sustain as the country officially fell back into recession in the last two quarters of 2011. The government had hoped for things to be looking much stronger by now, originally predicting growth rates of 1.3%, but the ongoing Eurozone crisis has been having a smothering effect (and, seemingly, is still no closer to resolution than it was a year ago). It was under these conditions that the Irish people voted last week in favour (by 60.3 percent) of the EU fiscal compact, crossing their collective fingers that further austerity isn’t about to stamp on the green shoots of recovery.
We’ve been focusing mostly on the big economic picture at Debating Europe, but it’s also worth considering the impact of the crisis at the local and community level. More than 99% of all European businesses are Small and Medium Enterprises (SMEs), and these have been especially hard hit by the tightening of credit and the weakening economic outlook. Last year, we looked at whether SMEs could be the key to getting Europe’s economy back on track. Now, we’d like to ask whether SMEs need a bit of extra protection before they can kick-start the economy.
Jai, for example, sent in a comment arguing that local economies needed protecting from the ravages of globalisation:
With regards to the full scope and impact of globalization on local economies… the immediate answer would be to focus more on achieving or striving to, a) protect worker’s rights and the communities that they support b) protect the local economies… I think this would still be a great topic for a debate.
We recently had the opportunity to talk to John Perry, Irish Minister for Small Business, to ask him for his views on this question. With the economy struggling, are Irish SMEs really in any position to compete internationally? We started with a comment from Rui, arguing that both SMEs and large enterprises alike need to be protected from “the competition of markets where [the] labour force are treated almost like slaves.” Is Rui right to call for greater protection for SMEs?
I don’t believe so. It’s true that in Ireland, and right across Europe, SMEs are the backbone of the economy. But when it comes to competing with foreign companies, they can compete very well. On the contrary, I think we need to promote the internationalisation of SMEs so they can tap into the potential of developing markets.
Next up, Christos made the point that “one of the greatest casualties of this crisis [has been local shops]. One by one they are closing, giving way to larger supermarket chains and multinational boutiques… Not only do small companies benefit the community feeling, [they also support] the local economy and give you more variety of goods.” Isn’t it worth protecting small businesses to preserve this diversity?
It’s a very good question. It’s important that the high streets in the town centres are diverse. The off-licence, the deli section, the speciality niche; there are things a small store can offer that a larger retailer cannot. It’s also important to get value for money, and to promote economic enterprise within communities. It’s about cutting down costs, and it’s about survival for these smaller businesses. People have got to adapt to the new market place. Our objective is to ensure variety, but we also need to cut down costs and ensure we’re effective.
What do YOU think? Do smaller businesses need protecting from the negative effects of globalisation? If governments don’t intervene to preserve variety in the high-street, will we end up with identical cloned city centres across Europe? Or is globalisation something to be welcomed as an opportunity for SMEs? Should we be encouraging small business-owners to internationalise, and start taking advantage of opportunities in the developing world? Let us know your thoughts and comments, and we’ll take them to policy-makers and experts for their reactions.