Don’t prop up property, ESRI warn or so goes the RTE headline. But should the government do something else other then just ignoring it. Recently Global Entrepreneurship Monitor says Ireland has third-highest level of early stage activity in EU but development to high-growth firms lags. Yet we have a high dependence on Foreign Investment  in our economy. Why?

To me the reason seems to be  housing. For the length of the boom housing has been the best investment for a person. The returns from housing out preformed that of anything else it would be silly not to invest in housing. This is certainly seems to be the attitude of many of the banks where for instant it covers 90% of Anglo Irish Bank’s loan book and 58% for AIB.

If we want more Irish companies then we need to make more capital available to start-ups companies. Most people consider renting a house as dead money, but to an economy housing is also pretty much dead. It is mainly just shuffling money around the economy. Not leading to any exports etc.

So what can the government do.  Nearly a year ago I floated the idea of reintroducing the Bank Levy.  As being lacking in idea’s I am bring it up again.

Reintroduce the bank levy of 5% but allow the banks to write off against this a portion of investment in small-to-medium size business start-ups, especially high-tech ones. I.e the point is to make the attractiveness of investing in companies as attractive as investing in mortgages. While this would be unattractive to banks as it would reduce their profitability we would not do by a lot as they are still going to invest in profitable places and will probably result in less loss then 5%.

Previously I wrote (yes I repeat myself alot) that if we are going to survive the future we need to invest in innovation and especially holding patents. In a world where China and India can match our  information economy the only thing we can do is have our own ideas and exist along with them.

With housing reducing maybe this is not as big of a thing as money will switch from mortgages anyway but still worth a look. Thoughts?