99% Invisible - 477- Call of Duty: Free

Episode Date: February 16, 2022

On the west coast of Ireland, on the banks of an estuary dividing county Limerick from county Clare, lies a small town called Shannon. But Shannon is not a quaint fishing village or farming community. Its industry is its airport. And Shannon Airport is big. It handles up to 1.7 million passengers and 20,000 flights a year, most of them from other countries. It looks like a cosmopolitan international airport, but it has a unique claim to fame: the world's first airport duty-free store.Today, the store has what you would expect -- designer perfumes, jewelry and various fine foods, with a lot of local (in this case Irish) products in particular. But like the area around the airport, the shop started out small, with a local boy from the area who would go on to change the world of tax-free commerce in and beyond Shannon.Call of Duty: Free

This is 99 per se invisible. I'm Roman Mars. On the west coast of Ireland, on the banks of an estuary dividing county Limerick from County Claire, lies a small town called Shannon. But Shannon is not a quaint fishing village or a farming community. Its industry is its airport, and Shannon Airport is big. It handles up to 1.7 million passengers and 20,000 flights a year. Most of them from other countries.

And a few months ago, I went to visit. That's reporter Kevin Canner's. When you arrive at the airport, you're greeted by a modern looking building that's sleek and black. And when you enter through the sliding doors and step into the check-in area, you find yourself in a bright grand atrium with wooden furnishings and tall ceilings. It's a style that you might call international terminal chic. Everything attests to a certain kind of reassuring cosmopolitan competence. But my reason for entering the terminal wasn't to catch a flight to

Mallorca or Warsaw or to pick up a friend. It was to visit its duty free shop. Okay, and this is it? The 2D free shop? Yeah, we're in our 2D free shop here in China Airport. The world's first airport 2D free shop. The fact is the first 2D free shop. We take pride in it. It's unique, it's ours, and it always will be ours. That's now Molloni, the airport operation and commercial director, showing me around. The shop is what you'd expect from a duty free,

stocked with designer perfumes, jewelry, and various fine foods. And for us as in the airport, it's also what promoting Irish products. So water crystals, you know, food company or sweet shop brands and all that. It's about actually trying to support local industry as well as probably the more well-known brands. There are Guinness branded t-shirts and baseball caps, green children's clothes covered with shamrocks, knitted sweaters, and of course lots of whiskey. What I might do is I might ask Alan here, gonna talk about a whiskey bag? I could, Alan, I couldn't talk to you for two minutes.

I kept me here a few minutes pro, I'm quite juicy free yet. And naturally, I wanted to make sure I took full advantage of the situation, courtesy of 99PI. I was actually told by the podcast production that I could buy one as a business expense. Wait, we did what? So if you have any recommendations. I can recommend you just tell me how big your budget is and I'll help you spend it. Well, I'm not paying for it, so...

Whoa, whoa, whoa, how much did you spend? It's not important. What's important is the reason I came here. Because it turns out that this first-ever airport duty free is the brainchild of a remarkable person, a local boy from right near Shannon, who would go on to change both Ireland and the world in some really unexpected ways, not just by hawking cheap booze, but by helping revolutionize how entire countries think about the idea of selling and buying things. Tax-free Before the airport arrived, there wasn't much in Shannon. There wasn't even a town called Shannon for anything to be in. just some swampy marshland alongside

the estuary of the river Shannon. But if the region wasn't exactly a center of commerce and industry, the same could be said for much of Ireland. The Irish restate, as it was first known, gained independence from Britain in 1922. But for a long time, independence did not equal prosperity. The New Irish state, it was independence in theory, but in reality it was still a naft shoes of the British economy. Brian Callanan is the author of Ireland's Shannon Story.

And Brian says that after independence, the Irish economy was still reeling from centuries of colonization, during which Ireland had one job to produce cattle and crops for Britain. Any native Irish industry had been actively discouraged by the British to prevent competition. So well into the 20th century, when much of the rest of Europe was busy urbanizing and industrializing, Ireland was still a mostly agrarian country that exported little, besides food. Say in the 1950s, something like 40% of the world's 50% of those shares would have been involved in agriculture, were raised enterprise. Wow, that's pretty late.

That's a late developing country. But Ireland had a second problem keeping it from looking more like its European neighbors. There just weren't that many Irish people around. Thanks to another legacy of colonization, famine. The great Irish famine of the 1840s was set in motion by a potato blight. But British economic policies made it far worse, decimating communities like those found around the Shannon estuary. In a country of 8 million, it killed every 8th person and triggered a massive wave of

emigration. every eighth person and triggered a massive wave of immigration. They say that a million died and made an emigrator and by the 1950s the population was only three million so it was a catastrophic experience. So these problems, the colonization, the rural poverty, the mass emigration, Brian says they did more than just to press the country's economy. Those were realities, and they would have given rise to a mindset that the Irish-Torsten class citizens, and that field would have persisted

right through, right up to the 1950s and 1960s. Almost a belief that the Irish could not do it as well as the British. But in the 1930s, the rest of the world quickly discovered that Ireland and its west coast in particular had three crucial advantages, location, location, location. Because Western Ireland, it turned out, was the perfect place to land a plane. The real reason why Shannon is here was aircraft had limited range. Now Maloney says that in the 1930s, the very first passenger aircraft were sea planes, big clunky aluminum things with propellers. But most long-range sea planes only cared enough fuel to fly about 3,300 miles.

The distance between London and New York was 3,400 and 60. So if you were flying from Europe to North America, our vice versa, the challenge really was fuel, so you had to have fuel, stuff. And right there on the western edge of England was this whole other country, Ireland, which was just that much closer to the American seaboard. So in 1935, the governments of the US, the UK, Canada, and the new Irish Free State agreed that all transatlantic commercial aircraft would be required to land at a Irish airport to refuel, and the location they picked for the airport was the estuary of the River Shannon.

And if you want to fly from New York to London, you flew in New York to Newfoundland, and you stopped, then you flew in Newfoundland to Shannon for nine hours, you stopped here, and then you flew on to Southampton, and you took the train into London. The airport at Shannon was an instant success. After all, they had a captive audience. In 1945, the now fully sovereign Republic of Ireland opened a concrete runway on the other side of the estuary. And within just two years, the airport was handling up to 100,000 passengers a month.

But there was one tiny problem early on with this whole arrangement, at least for the Irish. And it had to do with the airports restaurant and food services. Because the Irish Prime Minister and Minister of Transport noticed the food was managed by British Airways. Not exactly who you want serving the meals at your country's largest airport when you've only just finished kicking the British out. And so the message was given to the Minister of Transport. Can you find a Irishman to take this over? And the name that the ministry came up with was a 26-year-old hospitality worker named Brendan O'Regan. Brendan O'Regan was born in the nearby village of

Six Mile Bridge. A town so small, it was simply named for a bridge six miles from Limerick. But O'Regan's birthplace was the only unremarkable thing about him. I don't think I've encountered anyone in my life who was as charismatic and as compelling as he was. He just had this persuasive ability to get things done. Keen O'Karel is the co-author of a biography about Brendan O'Rigan. He also worked under O'Rigan at Shannon.

And he says that O'Rigan might have been a local boy, but he was also a dashing cosmopolitan. The son of a hotelier, he had trained at hotels in Switzerland and Germany, and he had brought back with him an obsession with high standards and perfect execution. So he tapped into the prosocial excellence in everything, you know? But from the beginning, Oregan understood bringing high standards to Shannon's food services wasn't just going to be about serving nice meals. We were being written off as the vanishing Irish. This is a recording of a regan taking from an oral history interview in 2004, explaining how most

foreigners still thought of the Irish in the 1930s. I've got the reason, but I'm not able to use it. They're immigrants to England and to the USA. Suppose we hadn't had the chance to prove ourselves. No. No. But if those days crossing the Atlantic was a big event and big people were doing it. And these big people remember, they're just stopping over at Shannon.

They weren't disembarking to see anything else. So the staff there came to recognize that the stream of passengers passing through, that the only impression they would get of Ireland was what they got to the channel. So the thing about standards was very important. This weird Irish, what we could do things as well are better than anywhere else. So from the moment Oregan took over the restaurant at Shannon from the British, he started adding all these little touches. He improved the decor.

He dressed the wait staff in nice suits. And one day, when he saw the head chef carrying out an anador and played a food, he chided him for its lack of eye appeal. And I said, Chef, there's no IAPO. And he looked around desperately for something to give it IAPO. And apparently the head chef could sense a challenge because he quickly took the opportunity to invent a new kind of alcoholic beverage for arriving passengers. And the following day, I came into my office with coffee in a glass and white cream on

top of his and said, how is that for IAP? What's that? And what that was was the first ever Irish coffee. And we offered it to people, the entrance to the restaurant. It was of course, we'd be getting famous then. By the mid-1940s, everyone agreed the food at Chanin was better in almost every way than it had been under the British. As one rave you put it, no better window dressing for Ireland could be designed than

the impression of a passenger's probably one Irish meal. And for up to 100,000 passengers a month, that one Irish meal was delicious. So if people like Benjamin Regan would have been very important in starting to give the new assurance to Ireland, the way we can do it, that our quality can be just as good as anybody else. Now, for most people, setting up a wildly successful restaurant at 26, burnishing your country's international reputation and helping invent the Irish coffee would be a fine enough legacy. But it turned out, Brendan O'Regan was just getting

started. In 1950, O'Regan was traveling back to Shannon from the US by ship, and on the ship there was this little shop. And when I saw the shop, I was selling jewellery free goods. Because the ship was in international waters, it was selling items without paying any government taxes and passing those savings along to passengers. Because the ship was in international waters, it was selling items without paying any government taxes, and passing those savings along to passengers. And my man said to me,

well, if they can do it, when you're crossing the sea in a bush, you surely should be able to do it when you land for the first time. Auregan realized that in a way, all of these transiting passengers in Shannon were essentially in a no-man's land, somewhat akin to international waters. They had left their starting port, but they had not yet arrived at their final destination.

So, O'Regan reached out to his government connections and pitched them a new idea. A government-owned operation that, just like with the restaurant, he would run in exchange for a fixed salary and a percentage of the profits. The government passed a special legislation applying purely to the airport terminal building where goods could be sold free of duty to passengers in transit. Which is how, in 1950, in a move that has to go down as one of the most pivotal moments in airport retail history, O'Reagan opened up the world's first airport-based duty-free shop. Located in a small space at the entrance to the main lounge,

passengers had no choice but to walk right through it. And that began the first shop, and I said, we'll begin with Irish whiskey. So people came into the lounge, and one of the early things they saw was hundreds of bottles of frisky, per se. Which in addition to being on brand was also kind of genius. Alcohol was portable, non-perishable, and normally heavily taxed.

So a bottle of your favorite whiskey that would have cost one and a half Irish pounds. At a recon store, only cost you half a pound. It was a savings of two thirds. Because it was at an airport, this would be most passengers only chance to shop there. So rather than buying just a single bottle, it actually made more sense to just go ahead and buy an even dozen. The shop soon expanded into a second area and moved way beyond just offering alcohol. So what sort of things were being sold? All kinds of Irish products, Nishidjumpers and caps.

The M. Skelly worked there in the 1950s, only a few years after it opened. And then the best of Europe, so we had watches and clocks and in jewelry and then souvenirs of Ireland and all the descriptions. Here in the internationally famous duty-free shop, transit passengers from all over the world enjoy shopping in this unusual and exciting place, a sort of fairy land into which they wonder as soon as they leave their planes

during refueling stops. Fishing gear, large artworks, even chandeliers. The duty-free shop at Shannon was like a Black Friday sale. If Black Friday happened 365 days a year and could only be found in an Irish airport. As it was sometimes said, Shannon was an airport built around a shop. By the mid-1950s, the Judy free shop at Shannon was also a huge source of jobs. Hino Karel says that in a nation with mostly small businesses, this one store and this one airport was actually one of Ireland's largest employers. It was an extraordinary arrangement really. It was a one man company, but they had about

a thousand people employed. So it was a whole industry. For six years Shannon was the only airport duty free shop in the world, but the model spread quickly from there. People from other airports came along fast to see what he was doing. He told him how to do it and they all took off and opened up in Paris and in London and everywhere else. And he was happy to tell them how to do it. Oh he was, yeah, he gave everybody free advice. Some people from Shannon, like Liam, actually went abroad and helped set up duty free shops and other airports, including in the Soviet Union.

I set up duty free in Moscow, and then we went up to St. Petersburg, or Leningrad, and then we decided to have one and a Russian-finished border, a duty free up there. or Leningrad, and then we decided to have one on the Russian finish border. A duty free up there. Within a few decades, duty free became a thing that just exists, practically in every airport in the world, from Abu Dhabi to Bangkok. Even now, these shops are based on the same basic model that was pioneered by Brennan O'Rigan and Shannon.

But then in the late 1950s, a leap in aviation technology threatened to undermine everything that O'Regan and his team at Shannon had built. The jet age is now here. The first American commercial jet capable of economical transatlantic service. Jet passenger aircraft were faster, lighter, and critically could fly much further without having to stop for fuel, meaning airports like Shannon weren't needed anymore.

New York, to London. In the same time that it takes you to go and see a baseball double head-up, six and a half magic hours. Flight range, the very thing that created the airport, was about to render it obsolete. Without passengers, an airport cannot survive. it has no functions, and Shannon has had a great passenger problem in recent years. Starting in 1958, the same year Boeing's first mass-produced passenger jet went into service, passenger traffic at Shannon began to plummet. And I got to say, of all the tape I listened to of Brennan Oregan, this was the one moment

in the whole saga, when looking back, he sounds genuinely rattled. There was a continuous word being passed on. We're going to lose this. I mean, they're going to overflare us, for sure they're going to overflare. But Brennan Oregan, whose initials, B-O-R, were sometimes said to stand for Bashan Ricardless, wasn't about to give up. Because I was thinking in terms of finding a way of stopping a Tarosan people from being redundant.

So if O'Rig is word of the time, was the aircraft dropped there and they won't come down, let's reach up and drag them down. In the idea O'Rigan and his team came came up with would take the concept of duty-free and apply it to way more than just a few stores at an airport. O'Rigen had seen something similar to the duty-free shop in Panama called a free port. A small area near the canal where ships could load and unload goods without paying customs. So why not create something similar to a free port near Shannon, not aimed at attracting consumers, but something else Ireland desperately needed. Industry.

In 1959, Oregan made another pitch to his connections in the Irish government. In this time, he got permission to put a fence around an area right beside the airport, cross the fence, and you'd be subjected to normal import taxes. But stay inside the fence, explain Sqenocarole, and you were officially inside the Shannon

Industrial Free Zone. A place where companies could fly in parts, assemble them in factories, sapped with Irish workers, and then fly out finished products, tax-free. So the industrial free zone was a variation on the team of the Junction Free Shop. The only difference was that raw materials

could be brought in and processed and then exported with the absolute minimum of any customs formalities. Today customs free zones can be controversial, something we will be getting to. But back then, Oregan's idea wasn't controversial, so much as experimental. In the 1950s, the economic miracle of the duty free shop still didn't expand much beyond the airport.

Ireland remained a poor, largely agricultural country. And the government's approach for years had been steeped taxes on imports. It was a way to protect what little industry Ireland did have, hoping it would eventually make stuff the rest of the world wanted. The government was ready to try something new, but Oregans industrial free zone in which any company from any country could come and make anything to be sent anywhere. Well, that was seen by many as a kind of weird long shot. And there was a lot of cynicism about it, really, like, would the industries come, would it be viable,

would it work? But I felt if we didn't start with something we would never start. So we took a risk. In the ultimate, if you build it, they will come approach with no committed clients. Oregans team started to erect empty factory buildings in the zone, ready for occupancy, and used them to convince companies to set up shop. And once one or two companies came, it then provides an example for other companies. And starting really from the 1960s to everyone's surprise really, the industrial estate was developing quite well. At first, it was mostly smaller American companies that came. For them, Shannon was a convenient foothold into Europe.

They were followed by big multinationals, like GE, to beers, and a young Japanese firm called Sony. But there were also companies with more specialized products. This is a corner of the Ripon Piano Factory at Shannon Airport, Crown to Claire, turning out something like 3,000 pianos a year. By the mid-60s, freight coming in and out of the free zone accounted for the majority of Shannon's flights.

Once again, the airport and the surrounding area was booming. In a very few years, over 2,000 jobs have been created, producing a wide range of products for firms whose headquarters are in countries as far apart as Holland and Japan. And flowing from the increased employment, there are great economic benefits to the whole hinterland of Shannon. After years of stagnation, Ireland's economy was beginning to grow and industrialize, and Shannon had a not insignificant part to play in that transformation. In fact, by the middle 1960s, something like 25% of Irish industrial exports were coming out of the Sharnan industrial zone. It was also in the 1960s that Ireland's centuries-long trend of immigration finally started to reverse.

Many Irish immigrants and their descendants were now moving back to Ireland, and one of the places they were moving to was Shannon. So to see the returning immigrants coming back in the 1960s was a new thing, and Shannon was one of the leaders of that. But remember, the airport and its industrial zone were in the middle of nowhere. There was no place to live called Shannon, and all those returning workers needed accommodations. That was actually one of Keen O'Krell's main jobs, getting everyone housed. There were 137 apartments built, but there was nothing else.

So all of the industrialists there would be complaining about the lack of facilities. Such as what sort of facilities? They complained, say, about where do they buy their groceries, and the schools weren't there, and there was no library in the place, and there wasn't even a resident doctor. And thereafter we were building a town, and of course there hadn't been built a town in Ireland since the day in the South I think as far as we go. And Oregon isn't joking there. The village of Shannon was Ireland's first new town in hundreds of years.

Now again, you would think, setting up a wild, successful restaurant, branching your country's reputation, helping invent Irish coffee, jumpstarting the economy, attracting back emigrants and founding your nation's first new town in centuries would be a good place for Brendan O'Rigan to stop. But no, he wasn't done. In many ways, Shannon's industrial free zone anticipated the low tax, free market, global economy of the 1980s. But at the time, O'Rigan viewed the entire Shannon experiment in explicitly anti-colonial terms. Because I could see that our poverty had come from the fact that Britain had stopped as really from industrializing. And Eriegen became convinced that the best way

for other developing countries to fight colonialism was capitalism. I taught particularly in third-worlder situations was a requirement of every country to help those that were down. So I was very involved in the idea that the Shannon zone should be duplicated all over the world on a big scale. Starting in the mid-1960s, Oregan began spreading the gospel of industrial free zones as a path toward economic independence. In 1966, after consulting closely with Oregan, the Taiwanese government opened their first free zone at Gaushan Harbor. And in 1972, with UN funding, Shannin began offering multi-week training courses where foreign officials could learn how to set up their own zones, now called special economic zones or S.E.Z.s, based largely on

the Shannon model. Brian Kellenen taught many of these courses. And how many countries do you think passed through here? Oh, I was there roughly 20 or 30, I think. Columbia, Sri Lanka, Egypt, Indonesia, Mexico, Nigeria, Ghana. But there's one visit in particular that has since taken on almost folkloric status. In 1980, a Chinese delegation led by future President Zhang Zemin embarked on a 40-day world tour of various special economic zones, and at the end of that trip, they came to study

with Brian at Shannon, where they were taken to the top of a local landmark. Tully Glass Hill had a panoramic vista where they could take in the airport, the industrial state, and the town and as they stood there, Zhang Zemin reportedly said, this is our solution, we'll build a hundred of these in China. Do you mind if we just get off? I'm just curious to have a view of. Yeah. I went to the hill with Brian when I was in town, and I was actually kind of surprised. It's a tiny, unassuming hill lined with suburban houses.

Not exactly the kind of spot you'd expect to feature in the story of China's Meteor Grise. And nowadays, when you go to the top, trees mostly obscure the view. Okay, I guess we can see one building over there. Yes, we can see the industrial zone. Okay, one of the trees there is the airport. Okay, so this is where it brings it all together here. So this is like the stimulator. The Chinese movement into the prime sector. Yeah, this is a place. That same year, the Chinese government would set up not one, but four special economic zones. And the fact that it happened in the same year, I think it was not a co-efficient dental coexistence, right?

Chaoming Chen is the professor of urban sociology at Trinity College in Connecticut. And Chen says that starting in 1980, the Chinese took all of the techniques used at Shannon and began applying them at a Prometheus scale. Perhaps no one more so than what has since become the world's most famous S.E.Z. Shen Zhen. Unlike Shannon, the S.E.Z at Chen Zhen was set up right across from one of the richest cities in the world, Hong Kong. And while Shannon's Free Zone was 2.5 km2, Shen Jens was more than 300 km2. So compare that to Shen and their rise or work, there now we're talking about apples

and oranges, right? Very quickly. Nevertheless, the core idea is, the duty free, low taxes, or taxing assumptions. Although things were pretty much the same, even the fence that went around it. So Shen then obviously was part of that being for it. Soon, this standard SZ model became a major driver of the Chinese economy. By 1984, they had already opened up 14 more. How many special economic zones are there in China today? Was that like an appropriate question? Well, depending on how

you count, right? I always say, you know, easily a couple of, of fouls. Some of these zones might be only a few hundred acres. Others are the sonnest of a small province. But in one way or another, they're all S.E.Z.s, and as for the most famous S.E.Z of all. The Shenzhen S.E.Z. continued to expect to a city, and that ultimately became a mega-city with over 20 million people. Xiaoming is quick to stress that not all the credit for China's S.E.Z.s can go to Shannon. There were the examples provided by Taiwan and British Hong Kong, which also operated

as a customs free port. And the Chinese came up with lots of their own ideas. But if you doubt Shannon's role in all this, just take a look at the Chinese leadership's travel identity. In multi-bases, I thought weekly bases I would have delegated from China. Vincent Kunnan was the CEO of Shannon Development about a decade ago, and meeting with Chinese dignitaries was a surprisingly big part of his job. On a weekly basis, nearly weekly, and in the may instance, the biggest digager, of course,

was Xi Jinping. The Vice President of China Xi Jinping has arrived in Ireland for a three-day visit. Beijing Ping. In 2012, current Chinese president Xi Jinping was about to take over power, and won on a three-consonant coming out tour of sorts. And on his European leg, where did he go? Not to Brussels, not to Berlin, not to London, but Shannon. Earlier, the man who will soon take over at the helm of the world's second-largest economy landed at Shannon Airport for a stop of visit to Shannon development, which has strong

links with China. But the main point of his visit was a key ensemblism. The main point of his visit was by going to the place where it all started. Did he mention or did Brendan O'Rigan's name come up? Did he seem to know who that was? Oh yeah. Yeah, yeah, yeah. They're very conscious of the history.

On the second day of his visit, she went to Six Mile Bridge. The tiny town where Brendan O'Rigan was born. Today, according to the UN, there are nearly 5,400 S.E.S. and more than 100 countries. More than 1,000 of which were established in the last 5 years. The Shannon Industrial Zone is still around, but it's no longer special. The fence is gone, and since 2005, so too are the special tax breaks. They aren't possible anymore inside the European Union. But Shannon has still had an outsized influence on Ireland itself.

The country's taxes are some of the lowest in the EU, with a comparatively deregulated economy focused on international investment. Qualities credited with both the Celtic Tiger of the 1990s and 2000s, but also Ireland's record economic slump after the Great Recession. So, for better or worse, while Shannon moved towards the Irish model, the rest of Ireland also moved towards Shannon. Brendan O'Rigan died in 2008 at the age of 90, but his legacy goes beyond his contribution to Ireland's economic development. Listening to those oral histories,

you cut the sense that O' a Reagan's real goal was something at once simpler and more complicated. Pride. I have a great regard for the English. I married one of them. I mean, that situation where we took over from them and did best what they were doing. It was a great spiritual uplift. I continued for the Irish.

And then we knew that we were as good as those who were empire-billsers. That we were as good as them. Speaking of Irish quality, back that shop in Shannon, there's still the small matter of my invoice for the whiskey. Oh yeah, that's right, how much? We've a tealing 32-year-old whiskey limited edition and that's only 2000 euro if you like some of that. Yeah, that would be great.

Can we do that? Yeah, I'll bring it around. Just kidding. I got a very sensible bottle from a nearby distillery. It was 50 euros. Alright, I suppose we can pay for that. It is after all. Duty free.

When we come back, a look at the downside and sometimes very dark side of S.E.Z.s throughout the world. After this. So I'm here with Kevin Caner, who produced that story. You just heard about Shannon. And Kevin, you know, we talked about both the spread and the success of special economic zones outside of Shannon, but I know that the impact and legacy of these SCZs is really messy. Hi, Robin. Yeah, I mean, one thing we can

say right off the bat is that there are thousands of SCZs scattered throughout the world. You know, they very drastically in size outcomes and occasionally in what exactly makes the zone special to begin with. So with that in mind, I'm going to walk you through some of the more general criticisms and big picture questions around these zones. Great. Okay, let's do it. So I'll start with one major critique, labor. In most zones, there is definitely less labor rights.

This is Patrick Nevelling. He's a political economist I spoke with, and Patrick paints a pretty bleak picture of S.E.Z.s. He says that for the companies who operate inside some special economic zones, the poor labor rates are not a flaw, but a feature. They're basically designed to kind of destroy bargaining power, collective rights,

movements of workers in developing nations and create one could say rights-free zones, where a capital can freely run riots against war-cuss rights. And this happens partly because when a new zone is being set up, the power dynamic tilts towards the businesses and corporations that the zone is trying to attract. So if a government can help entice a company to its new zone by offering less labor protections or less red tape, then some unfortunately are tempted to do just that.

So did Patrick have some examples of what he was talking about where you can find these labor issues and labor exploitation playing out? Yeah, so when it actually is from Shen Zhen, the Chinese SEC that we mentioned in the main piece, which opened in 1980, and which has really become the world's most famous SEC. I mean, you will remember the kind of images which opened in 1980 and which has really become the world's most famous S.E.Z.

I mean you will remember the kind of images of the Foxconn factory in Chenzhen where they had this netting around the dormitories and the factory buildings so that people couldn't successfully commit suicide anymore. Patrick is referring to these nets that were put up in 2010 around Foxconn factory buildings in Chenzhen after a disturbing spate of suicides. These factory workers who were in part Patrick is referring to these nets that were put up in 2010 around Foxconn factory buildings in Chenn-Gene after a disturbing spate of suicides. These factory workers who were in part producing Apple products were regularly forced to work inhumane hours for minimal pay. And Patrick says that Foxconn in Chenn-Gene is far from the only example of traveling labor practices in special economic zones. We are talking about the Marquilas, under Mexican U.S. border. We are talking about the Makila, under Mexican-US border.

We are talking about the ready-made government in St. Bangladesh. We are talking about workers assembling furniture for IKEA and India. So Patrick basically sees these S.E.Zs as places where capitalism has ran amok, where the rights of corporations are prioritized over the people who actually work and live in the area.

So did any of the more pro-SEZ interviewees that you talked to for this story, especially ones that were sort of enamored with the origin story of S.E.Z.s, did they have anything to say about this labor criticism? Yeah, so I spoke to Brian Callanon, he's one of the characters from the main piece who was involved in teaching the how to set up your own

S.E.Z. courses that were offered in Shannon to foreign officials. And he fully acknowledges that special economic zones can have downsides. Positive outcomes have been associated with good labor rights, good skills development, good linkages, but negative outcomes have been associated with poor labor rights and in some minority cases, the regulation in the zones has given less rights to workers than in the domestic society, which really problematic. Now, Brian notes that decreased labor rights were not what their SEC workshops were advocating since and Shannon the same labor rights applied in the zone as in the rest of Ireland. But for some SECs, that's not always the case.

And in some countries, labor laws are poor to begin with, which leaves a room for corporations to come in, set up shop in a low wage, low tax environment, and offer very little spill-off benefits to the local economy. So how does a country avoid getting stuck in these low wage, little return to local economy type of SEC. Well, to avoid this trap, Brian sees a big role for local government in helping to manage the

zone and make sure that the zone is fulfilling its purpose of actually helping the wider economy. So for him, these zones are not some sort of lazy fair approach where the government just puts up a fence, lowest taxes, and leaves things to the market. And in fact, in those zones that just offer low taxes and nothing else, those zones are failures in terms of a frame for impact. What the successful zones have been, I just say, a partnership between the state and the private sector, where the state provides the centers, provides the infrastructure, but lots of the states can decide who gets into the zone and who is a right to establish there.

So it's very much the state being selective on what type of companies it gets in. Brian points out that in Shannon's case, there was a pretty significant outflow of skills from the zone to local Irish companies. After working in the Shannon zone for companies like Sony or GE, workers would go on to work with Irish owned companies outside of the zone and bring those skills that they learn in the zone with them. I mean, it sounds like what Brian's talking about is an idealized SEC that sounds good if it works.

So what are the conditions that make a good SEC work? Well, despite the labor issues that we just talked about, I would say that the SEC approach is most useful in cases just like Ireland in the 1960s or China in the 1980s, where country with pretty little industrialization and a relatively close economy wants to test out a new approach in a small area. It allowed the receiving country the ability

to accept capitalism in restricted doses in selected areas, and therefore to gain benefit in those areas and to manage capitalism and structure the impact of capitalism in an organized way that possibly might maximize the benefits and minimise the costs. Because capitalism can bring suffraice of substantial costs. minimise the costs, because capitalism can bring suffraice of financial costs. Brian sees S.E.Z. as a sort of stepping stone towards industrialisation, not necessarily a final destination. For example, in China's case, if they just thrown open the floodgates to capitalism, it probably wouldn't have worked out very well, because there's no way its protected state industries would have survived a sudden onslaught of global competition,

which is actually what happened to the industry in former communist countries, like East Germany at the end of the Cold War. Yeah. But by testing out reforms in defined zones, China was able to slowly open up to a market economy, which obviously proved very successful in the case of Shen Zhen and Chen as a whole. So you have these at least economic success stories when it comes to Shannon and Chen-Chan, despite bad labor practices potentially in these places.

But are there certain SECs that just failed like from the get-go, like never really took off? Yeah, I mean, I looked into this and there are lots of stories of SECs not really working out. In Africa, especially the record of these SECs have not been great when looked at through metrics like employment and export figures. And one possibility of why that is is that most African countries didn't start creating special

economic zones until much later. So the growth and success of the zones in places like Taiwan, China, and Korea in the mid-20th century were largely driven by the incredible growth in overall global trade that occurred in the 1980s. And by the time most African zones started to be set up in the 90s, it was kind of too late. There were already so many well-established and attractive possibilities in the world where companies could set up their manufacturing options. So why choose a less established zone that's just getting going. Right. And I would imagine that because, you know, there's so many economic zones in the world that when you're competing globally, these zones kind of spark a race to the bottom in terms of taxes in these various countries. Like, many countries around the world would offer lower and lower

taxes in order to compete with each other for a company's business. Right. Brian agrees with this criticism. And as he said in our first interview, while low wages and low taxes can be an important initial instrument to attract business. If they become part of the long-term strategy, they're a disaster. Because low taxes means you're not getting the revenue from enterprises to finance your own development programs. And you're not getting revenue from enterprise to financial social services, your skill development, and your public service programs. So in the longer term, it's essential you move towards a higher level of tax and a higher level of wages.

And that means you develop into a more sustained economy and a sustained society that can pay for itself. So low wages, low taxes, they're a kickstart, but they're not part of the long-term, permanent, strata of a country and they should never be. But what's interesting is that low taxes are in a way a legacy of the Shannon-Free Zone, because when Ireland joined the European Economic community in 1973, this is the forerunner to the EU. They were no longer allowed to offer special low taxes in the Shannon zone. And Patrick, our resident SEC skeptic from earlier, says that in order to maintain the tax incentive that Ireland was known for,

the Irish government reviewed the national corporate tax rate and reduced it to the point that it was one of the lowest in the EU, which was fairly groundbreaking back in the day, and which kind of set the tone for this kind of race to the, you know, US companies having some kind of headquarters in Ireland that they set up at some point. Exactly. That's why Facebook is there. I think maybe LinkedIn is there. There's lots of different, especially kind of Silicon Valley type companies that have set up in Ireland exactly for this reason.

Okay, so that gets me wondering, like, what do Brian and Patrick see as some of the other legacies of the Shannon zone for Ireland as a whole like beyond low taxes? Well, if you ask Patrick He thinks that kind of negative attitude towards regulation and taxes that Shannon helped foster He sees those things as helping artificially fuel Ireland's so-called Celtic tagger economy and the 90s and 2000s Which famously went belly up quite dramatically during the Great Recession.

But Brian, for his part, says it's hard to make a direct cause and effect connection between the founding of the Shannon S.E.Z. and the financial crisis that happened some 50 years later. He points out that the overheated Irish economy prior to the recession was largely based on rising property prices, not trade or manufacturing. Yeah. This is definitely a case where the answer depends on who you ask.

Yeah, definitely. But interestingly, the legacy of low taxes might finally be reversing. Just a couple months ago, Ireland relented and signed on to a landmark tax agreement that will see it along with countries around the world implement a higher corporate tax rate for large corporations. And Brian Callanen thinks the agreement is a step in the right direction. I don't think Ireland has anything to fear because we are a mature, advanced country with the best technology and the best skills. And a manageable tax, reasonable tax is part of our apparatus, but only one part of our apparatus now is not even most important.

So in many ways, this is why Brian sees Shannon's legacy as being a largely positive one, because it showed Ireland a path toward becoming precisely this kind of high-skilled, high-tech, industrialized, modern country that can afford to raise taxes. Well, that's interesting. It seems like that goes back to what he said about the SEC model being a stepping stone and not an end goal.

Like, you know, Ireland pulled that off with its SEC, even if perhaps like many other countries didn't. Yeah, exactly. Which is, while though he did agree with many of the critiques that I put to him about SECs, in the end, he really cautioned against making any kind of overgeneralization. I suppose the critiques I would not agree with would be the black and white ones saying that all zones are good or all zones are bad. You can't label all zones in any one way. Zone is a different depending on the way they're developing, it's depending on the conditions

in the country itself. So each zone needs to be able to look at it in its own right. Like any policy instrument, there are strengths of their weaknesses. It's not all one single picture. And one last thing I'd love to mention is that, you know, in the case of Shannon and Shenzhen, we're looking at these zones on their spread now in terms of our 21st century thoughts and beliefs about capitalism and development. But what's interesting to me is that what came through in all the interviews I heard with Brennan O'Regan and the oral archive is that he wasn't a man who was particularly ideological. Rather, what comes through is that of a practical man

thinking first in terms of saving his local region and airport and providing employment. And then later on, an approach to industrialization with these SECs that he thought would be most beneficial for alleviating poverty around the world. Here he is talking to an interviewer in the oral archive about industrialization. I feel that that's going to eventually be the thing that we remove hunger and poverty all over the world. And war will be universal with very manufacturing of some kind.

I don't know exactly how it will be, but it will be done anyway with machines. I think this globalizationist, the globalized economy will lead to that when it will, well, they're dangerous though. There are dangers that they grace. Lot of wisdom in the world that knows that it's wrong and it's trying to get it right. We'll get it right eventually. And as you can hear there, he's a pretty optimistic guy overall. I mean, he does seem optimistic, but he actually is more thoughtful about it than I would even anticipate given, you know, how successful he was at the time. Yeah. So what about Brendan O'Regan's legacy in Ireland? I mean, the people know how much he changed about their country. Like, is he some kind of household name? No, surprisingly not. Even in Shannon, the town he basically built among younger generations, he's in all that well-known.

So, for example, my friend Amanda who grew up in Shannon and first took me off to this story and the existence of the zone, she didn't know who Brennan and Reagan was. And from my time in Shannon, that seemed pretty typical. But I think for Oregan, that would have been just fine. Oregan mentioned in the oral archive that he felt far too much attention and praise went to him when so many people worked on these ideas from the restaurant and the duty free store to the Shannon free zone and were responsible for them succeeding and working. But nevertheless, it's still amazing to me how far the legacy of one person can go when the circumstances are right. Well, it's a fascinating story. Thank you so much Kevin for bringing it to us, so I appreciate it. Oh, it was my pleasure.

Thanks for having me. 99% invisible was produced this week by Kevin Caner's. Edited by Joe Rosenberg. Mixing tech production by Dara Hirsch and Martin Gonzalez. Delaney Hall is our executive producer. Kurt Colstad is the digital director. The rise of team includes Vivian Leigh, Chris Baroubaix, Christopher Johnson, Emmett Fitzgerald, Lashemadon, Jason Dillion, Sophia Klatsker, and me Roman Mars.

Music for this episode by our director of Sound Swan Rial with Sasha Shuchek and Mickey Nilligan on fiddle. You can find more of their music at SoundCloud.com slash the Sisters' Tree Daces. Special thanks to a bunch of people in Ireland and beyond who helped us with our story this week in Ocarol, Kevin Tomstone, Valerie Sweeney, Matthew Thompson, and Amanda Kang. And additional thanks to Ken who edited the Brendan O'Regan Oral Archive used in this piece and graciously let us use it. We'll have links to his biography of Oregan as well

as Brian Callanian's History of Shannon on our website. We are a part of the Stitcher and Sirius XM podcast family now headquartered six blocks north in the Pandora building. Beautiful. Uptown. Oakland, California. You can find the show and join discussions about the show on Facebook. You can tweet at me at Roman Mars and the show at 99PI org, or on Instagram and Reddit too. You can find links to other Stitcher shows I love, as well as every past episode of 99PI at 99PI dot org. This is Niner-Niner Puppy, India, clings to chair on approach to serious extreme link.

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