Local Businesses Help Refresh Irish Economy After Global Recession
JUDY WOODRUFF: And to the economy of another European nation, Ireland.
Good times turned sour during the worldwide financial crisis. But now there are signs of a turnaround driven by locally grown businesses.
Ray Suarez reports from Dublin.
RAY SUAREZ: For 15 years, Western Europe had few economies like Ireland's. From the early '90s to 2008, the economy grew at breakneck speed.
When the global recession hit, the bubble burst. The Celtic Tiger was declawed. Unemployment shot up. Countless for-sale and for-rent signs sprouted even on Dublin's most desirable streets. Construction projects just stopped. The workers were sent home, the carcasses of buildings left to sit for years, maybe never to be finished.
Talk to the Irish today about what happened, and you get a mixture of wonder, sadness, and regret.
GARETH OWEN, Ireland: It was a little bit unsustainable. Maybe we were living in kind of cuckoo land a little bit.
RAY SUAREZ: From a working mother.
NICOLE HOLLEY, Ireland: I only go out and buy something when I really need it, instead of seeing something and impulse buying. Don't do that anymore.
RAY SUAREZ: From a trade union leader.
DAVID BEGG, Irish Congress of Trade Unions: We have had an incredibly severe retrenchment of the Irish economy over the last five years or so, such that we have lost just short of a fifth of our total economic size.
RAY SUAREZ: From an accountant.
CARROLL TURNDOWN, Ireland: A lot of the kids have emigrated now. We have lost a lot of highly skilled young people, and that's as a result of the downturn.
RAY SUAREZ: And from a high-tech executive.
KARL FLANNERY, Storm Technology LTD: And people were becoming -- or felt they were much wealthier than they were in reality. So there was a lot of investment in property particularly in the Irish economy. And I think now, when we look back on that, we look at -- that looks like a huge waste of money, which it was.
RAY SUAREZ: Hundreds of thousands of jobs gone. New, now-empty office buildings became quiet monuments to the banking frenzy. There have been tax hikes and public service cutbacks as the government struggled to live within its means as its revenue severely contracted.
Suddenly, with all that slack demand in the economy, wages were falling, but so were rents. And if you could get a panicky bank to write you a loan, money was cheaper to borrow. So rather than wait for the return of jobs that might never come back, thousands of Irish are starting their own businesses.
The pace of new business creation is starting to pick up again in Ireland, with 14,000 new companies registered last year and a similar pace set so far this year. Job creation is strongest in the first five years of a new enterprise.
You can't smell the good things coming from Brother Hubbard's ovens, as the cafe prepares for breakfast. You will just have to be satisfied with the sights and sounds of a new business.
Partners Garrett Fitzgerald and James Boland sank about $100,000 dollars into a labor of love.
GARRETT FITZGERALD, Cafe Owner: I realized a number of years ago that life isn't a rehearsal, and you need to get on with it. And this desire was always within me. I was really keen to have my own business. It was something that I had always dreamt of.
The emphasis here is on fresh, high-quality Irish ingredients. Remember, a business like this isn't only a seller. It's a buyer, too, spinning off business to other small firms, like the software writer who developed the program for using the iPad as a cash register and has since spun that off into it’s own new business.
The partners hope to move up to seven days, and add dinner, now that breakfast and lunch is really working, meaning more hours and more company in the kitchen for Marta Gutierrez, who came to Ireland from Spain.
MARTA GUTIERREZ, Employee: Recently, it's improved quite a lot, I think. I think, two years ago maybe, or a year-and-a-half ago, people would be more scared of spending.
RAY SUAREZ: What businesses are going to make it in the new Ireland? It has a small domestic market, a little more than four million people, many now too frightened to spend. Irish businesses have a lot of experience selling overseas. And now the cost of doing business is lower than during the boom years.
Fergal O'Brien is an economist with the Irish employers organization.
FERGAL O'BRIEN, Irish Business and Employers Confederation: One of the things which Ireland would have experienced in the years prior to the crisis was, we became very expensive. We became an expensive country in which to do business. And what we saw when the global crisis hit us in 2008 was the flexibility in the economy came to the fore and that we started to get our cost base right.
So Ireland is actually now a much more attractive location in which to do business than it was prior to the crisis.
RAY SUAREZ: The country's universities have gotten a lot of credit for helping set off the boom years in the first place. Building on the strong tech and research base, University College Dublin has established a new business incubator in an 18th century manor house on the campus.
Ciara Leonard is the program manager for innovation and says NovaUCD brings together all the ingredients for successful startups.
CIARA LEONARD, University of College Dublin: First of all, the talent pool, people understand, and they have better sense by of what talent exists here, very strong networks, particularly in the high-tech community, and a very strong network of investors as well that are linked with that, both angels and venture capitalists. And also I would think very important is the government support for startups in Ireland.
RAY SUAREZ: Abhinav Chugh came from India to work for a multinational company, and stayed to launch his own companies, like VideoCrisp, an online tool for making promotional videos.
ABHINAV CHUGH, VideoCrisp: You could be a sales guy. You could be a marketing person. You could be a dentist. If you have a website, you have a need of a video. So, video is becoming pretty much like, a decade ago, businesses were saying that you need to have a Web site. Otherwise, you will be invisible. That's exactly what is happening to videos.
RAY SUAREZ: Chugh says the government's enterprise Ireland seed capital gave him the money to get started as a soft loan, and now they're helping him raise millions more to grow.
ABHINAV CHUGH: I believe Ireland today is probably the best place in the world to start a business.
RAY SUAREZ: Have you been a good deal for the Irish taxpayer?
ABHINAV CHUGH: Yes, yes, absolutely. So VideoCrisp will have 10 full-time employees in Ireland by the end of 2013 because of the funding that we are raising now.
RAY SUAREZ: At that point, Chugh will then outgrow the Nova incubator and make room for the next startup, like EnBio, a materials science company also launched from University College Dublin. This startup is pioneering new treatments for metals that won a contract for the heat shields on the European Space Agency's orbiter heading to the sun in the coming years.
Tech services company Storm Technology started by Karl Flannery during the boom years, today he is worried about a talent shortage in Ireland. He wants more emphasis on science and mathematics education for Irish kids and an open door to bright young people like Chugh from everywhere.
KARL FLANNERY: The very short-term way we're going to try and address this is change how we -- the work permits, how we issue work permits to non-nationals, or non-Irish nationals coming into the Irish economy, particularly from people outside the European Union.
So we have changed our visa regime for tech visas in Ireland, so that will help bring in people -- bring in a lot more qualified, skilled computer science people into the Irish economy.
RAY SUAREZ: But to have a healthy domestic economy, Ireland can't just create great jobs for manipulating data on microchips. There's a role for potato chips too.
The Keogh family has been growing potatoes for generations. Irish potato consumption waned during the economic boom as Irish tastes changed. The youngest generation of Keoghs looked for new markets and started a new business, gourmet potato chips, called crisps here, kettled in small batches. After 18 months, they're selling in Europe, Asia, and to high-end American grocers.
Food was singled out again and again by the experts as an export sector where Irish businesses thrive.
FERGAL O'BRIEN: Ireland has a very strong tradition in its food and drink sector. So there's a significant sense that we're going back to our strengths. We're going back to where we had heritage, where we had traditions, our people were good at.
Some of it is new technologies in terms of people owing their own businesses. Some of it is in the food and drink sector, where we have always maybe had those advantages, but they didn't seem as attractive when we were in a property bubble and when the financial sector was probably one of the big drivers of growth.
RAY SUAREZ: The Keoghs have 14 full-time employees, and will add more soon if the strong growth they have seen in recent months continues.
Before the crash, big foreign companies were creating thousands of new jobs. Now Avine McNally, director of the Small Firms Association, calls small businesses a big part of the answer to Ireland's jobs crisis.
AVINE MCNALLY, Small Firms Association: Believe it or not, about one in four say that they are going to recruit over the next nine to 12 months, so really in the year 2013, about one in four small businesses in Ireland are going to take on new employees.
The small business environment in our last difficult period, economic period, created an awful lot of jobs. And they do create an employer path at the private sector work force.
RAY SUAREZ: Maureen Smith has seen the hard times making people creative.
MAUREEN SMITH, Small Business Owner: I just think people are trying new things that will bring them into a different career. Me personally, I know a lot of people in their 30s who there is no work in what they trained and went to college for. But they have just went and done other things. And now they're looking at opening businesses in other things, not what they're trained in.
We're transporting you back in time.
RAY SUAREZ: Smith took a chance. She had a long career doing hair for movie and TV productions. Between shoots, she was hairdressing in a market stall, and figured it was time to move indoors.
She took over a lease from a closing business, recruited a bunch of friends with their own small businesses, and far from the university scene created her own small business incubator. Customers get their hair and makeup done, buy vintage clothes and vintage decor from five other vendors in her little shop, who help her cover the rent.
She's a good news story, she says, following her dream. But she worries about all the Irish who once again, as in times past, have had to leave the country to work.
MAUREEN SMITH: My son went to college. He is an electrician. And he went back to do electrical engineering. And all his class, including his boss, have left -- most of them have left the country. He's still here and he's gone into a different business totally.
RAY SUAREZ: Is the worst over?
NICOLE HOLLEY: Well, they say -- you see it on the television every day that things are getting a little bit better. But it's taking a long time, and it's taken a big toll on people's lives.
GARETH OWEN: I think that there is industry. And there are opportunities, or there will be in the years to come, but probably won't get back to those dizzying heights for quite a long time.
RAY SUAREZ: Ireland's minister for jobs, enterprise, and innovation, Richard Bruton, says government, businesses, and households are winding down the heavy debt that's burdened the economy.
The latest numbers are good, unemployment down to 14.2 percent from 15. The interest the government has to pay to borrow is dropping, now to 4.15 percent, than other troubled Eurozone countries. Bruton hopes his people see the steady improvement that will rebuild confidence.
RICHARD BRUTON, Irish Minister for Jobs, Enterprise, and Innovation: The way you rebuild that is hitting your fiscal targets, being able to borrow again at very low interest rates in the marketplace. The interest rates for businesses gradually come down as well. It builds a sense that the economy is moving again.
So, I think that's the challenge, to keep people with you, to demonstrate that we're working really hard to fix things that were broken and that the track will deliver.
RAY SUAREZ: Ireland's business community is forecasting growth well above the European average for the next 20 years. After leading the Eurozone into the bust, Ireland now wants to lead it out.
JUDY WOODRUFF: And you can read all of Ray's reports from Ireland on our World page.