Call of Duty: Free

Roman Mars:
This is 99% Invisible. I’m Roman Mars.

Roman Mars:
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. It’s 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.

Kevin Caners:
And a few months ago, I went to visit.

Roman Mars:
That’s reporter Kevin Caners.

Kevin Caners:
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 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!

Kevin Caners:
Okay. And this is it? The Duty Free Shop?

Niall Maloney:
Yeah, yeah … We’re in our duty free shop here in Shannon airport.

Roman Mars:
The world’s first airport duty free shop.

Niall Maloney:
The fact that it’s the first duty-free shop, we take pride in it. It’s unique, it’s ours and it always will be ours.

Kevin Caners:
That’s Niall Maloney, 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.

Niall Maloney:
And for us as an airport, it’s also promoting Irish products. So Waterford crystal, food company, sweet shops or anything like that. It’s about trying to support local industry as well as probably the more well known brands.

Kevin Caners:
There are Guinness branded T-shirts and baseball caps, green childrens clothes covered with shamrocks, knitted sweaters, and of course… lots of whiskey.

Niall Maloney:
What I might do is I might ask Aaron here – you want to go to the whiskey bar?

Kevin Caners:
Okay.

Niall Maloney:
Aaron! I couldn’t trouble you for two minutes! Kevin here is doing a program on Duty free…

Kevin Caners:
And, naturally, I wanted to make sure I took full advantage of the situation, courtesy of 99pi…

Kevin Caners:
I was actually told by the podcast, a production, that I could buy one as a business expense.

Roman Mars:
Wait, we did what?

Kevin Caners:
So if you have any recommendations…

Aaron:
I can recommend you. Just tell me how big your budget is and I’ll help you spend it!

Kevin Caners:
Uh, well, it’s, uh, I’m not paying for it so… [laughter]

Roman Mars:
Whoa. Hold on, how much did you spend?

Kevin Caners:
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.

Roman Mars:
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.

Kevin Caners:
The Irish Free State – as it was first known – gained independence from Britain in 1922. But for a long time, independence did not equal prosperity.

Brain Callanan:
The new Irish state, it was independent, in theory, but in reality, it was still an offshoot of the British economy.

Kevin Caners:
Brain 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.
Roman Mars: 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 beside food.

Brian Callanan:
Say in the 1950s, something like 40% of the workforce, 50% of those sales would have been involved in agriculture related enterprise.

Kevin Caners:
Wow. That’s pretty late.

Brian Callanan:
That’s a late developing country.

Roman Mars:
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 colonialism – famine.

Kevin Caners:
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 in the Shannon estuary. In a country of 8 million, it killed every 8th person, and triggered a massive wave of emigration.

Brain Callanan:
They say that a million died and a million emigrated and by the 1950s, the population was only 3 million So it was a catastrophic experience.

Kevin Caners:
So these problems – the colonization, the rural poverty, the mass emigration – Brian says they didn’t just depress the country’s economy.

Brain Callanan:
Those were realities and they would have given rise to a mindset that the Irish were second class citizens and that feeling would have persisted right through right up to the 1950s and the 1960s almost a belief that the Irish could not do it as well as the British.

Roman Mars:
But in the 1930s the rest of the world quickly discovered that Ireland – and it’s west coast, in particular – had three crucial advantages. Location, location, location!

Kevin Caners:
Because it turned out western Ireland was the perfect place to land a plane.

Niall Maloney:
The real reason why Shannon is here was aircrafts had limited range.

Kevin Caners:
Niall Maloney says that in the 1930s, the very first passenger aircraft were sea-planes – big clunky aluminum things with propellers. But most long-range seaplanes only carried enough fuel to fly about 33 hundred miles.

Roman Mars:
The distance between London and New York was 34 hundred and sixty.

Niall Maloney:
So if you were flying from Europe to North America or vice versa, the challenge really was fuel. So you had to have fuel stops.

Roman Mars:
And right there, on the western edge of England was this whole other country – Ireland! It was just thaaaat much closer to the American seaboard.

Kevin Caners:
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 an Irish airport to refuel. And the location they picked for the airport was the estuary of the River Shannon.

Brain Callanan:
And if you wanted to fly from New York to London, you flew New York to Newfoundland, stopped. Then you flew Newdfoundland to Shannon for 9 hours, stopped here. Then you flew on to South Hampton and you took the train into London.

Roman Mars:
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.

Kevin Caners:
But there was one tiny problem early on with this whole arrangement … at least for the Irish. And it had to do with the airport’s restaurant and food services.

Brian Callanan:
Because the Irish prime minister and minister for transport noticed that the food was managed by British airways.

Roman Mars:
Not exactly who you want serving the meals at your country’s largest airport, when you’ve only just finished kicking the British OUT.

Brain Callanan:
And so the message was given to the minister for transport. Can you find an Irishman to take this over?

Kevin Caners:
And the name that the ministry came up with was a 26 year old hospitality worker named Brendan O’Regan.

Roman Mars:
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.

Cian O’Carroll:
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.

Kevin Caners:
Cian O’Carroll is the co-author of a biography about Brendan O’Regan. He also worked under him at Shannon, and he says O’Regan 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 brought back with him an obsession with high standards and perfect execution.

Cian O’Carroll:
So he tapped into the pursuit of excellence in everything, you know…

Roman Mars:
But from the beginning, O’Regan understood bringing high standards to Shannon’s food services wasn’t just gonna be about serving nice meals.

Brendan O’Regan:
We were being written off as the vanishing Irish.

Kevin Caners:
This is a recording of O’Regan, from an oral history interview in 2004, explaining how most foreigners still thought of the Irish in the 1940s.

Brendan O’Regan:
They’ve got their freedom, but they’re not able to use it. The’re immigrants to England and to the USA…

Interviewer:
I suppose we hadn’t had the chance to prove ourselves.

Brendan O’Regan:
No, no. … but in those days crossing the Atlantic was a big event and big people were doing it.

Roman Mars:
But these big people? Remember, they were just stopping over at Shannon. They weren’t disembarking to see anything else.

Brendan O’Regan:
So the staff there came to recognize that the stream of passengers passing through, the only impression they would get about Ireland was what they got at Shannon.

Cian O’Carroll:
So the thing about standards was very important. That we’re Irish, but we could do things as well or better than anywhere else.

Kevin Caners:
So from the moment O’Regan took over the restaurant at Shannon from the British, he started adding all these little touches. He improved the decor. He dressed the waitstaff in nice suits. And one day, when he saw the head chef carrying out an unadorned plate of food, he chided him for its lack of “eye appeal.”

Brendan O’Regan:
And I said, “Chef, it has no eye appeal.” And he looked around desperately for something to give it eye appeal.

Roman Mars:
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.

Brendan O’Regan:
And the following day, he came into my office with coffee in a glass and white cream on top of this and said, “How’s that for eye appeal?” And I said, “What’s that?”

Roman Mars:
And what it was, was, the first ever Irish Coffee.

Brendan O’Regan:
And we offered it to people at the entrance to the restaurant. Of course, it became famous then.

Kevin Caners:
By the mid-1940s, everyone agreed the food at Shannon was better in almost every way than it had been under the British. As one rave review put it, “No better window dressing for Ireland could be designed than the impression of a passengers’ probably one Irish meal.” And for up to 100,000 passengers a month, that one Irish meal was delicious.

Brain Callanan:
So people like Brendan Regan would have been very important in starting to give the new assurance to Ireland that we can do it. That our quality can be just as good as anybody else.

Roman Mars:
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.

Kevin Caners:
In 1950, O’Regan was traveling back to Shannon from the US by ship. And on this ship there was this little shop.

Brendan O’Regan:
And I saw the shop, which was selling duty free goods.

Kevin Caners:
Because the ship was in international waters, it was selling items without paying any government taxes, and passing those savings along to passengers.

Brendan O’Regan:
And my brain said to me, “Well, if they can do it, when you’re crossing the sea in a boat. you surely should be able to do it on your land for the first time.”

Roman Mars:
O’Regan realized that – in a way – all 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 had not yet arrived at their final destination.

Kevin Caners:
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.

Brian Callanan:
And the government passed a special legislation applying purely to the airport terminal building where goods were sold free of duty to passengers in transit.

Roman Mars:
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’Regan 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.

Brendan O’Regan:
That became the first shop and I said, we will begin with Irish whiskey. So people would come into the lounge and see hundreds of bottles of whiskey for sale.

Roman Mars:
Which in addition to being on brand, was also kinda genius. Alcohol was portable, non-perishable and – normally – heavily taxed.

Kevin Caners:
So a bottle of your favorite whiskey that would have cost 1.5 pound back in the day, at O’Regan’s store, only cost you half a pound. It was a savings of 2/3rds.

Roman Mars:
And 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.

Kevin Caners:
The shop soon expanded into a second area, and moved way beyond just offering alcohol.

Kevin Caners:
And so what sort of things were being sold?

Liam Skelly:
All kinds of Irish products niche, jumpers, and, uh, caps.

Kevin Caners:
Liam Skelly worked there in the 1950s, only a few years after it opened.

Liam Skelly:
And, and then the best of Europe, so we had watches and clocks and jewelry, and then souvenirs of Ireland of all descriptions.

DUTY FREE SHOP AD:
[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 WANDER AS SOON AS THEY LEAVE THEIR PLANES DURING REFUELING STOPS.]

Kevin Caners:
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.

Roman Mars:
As it was sometimes said, Shannon was an airpot built around a shop.

Kevin Caners:
By the mid-1950s, the duty free shop at Shannon was also a huge source of jobs. Cian O’Carroll says that in a nation with mostly small businesses, this one store in this one airport was actually one of Ireland’s largest employers.

Cian O’Carroll:
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.

Roman Mars:
For six years, Shannon was the only airport duty free shop in the world. But the model spread quickly from there.

Liam Skelly:
People from other airports came along fast to see what he was doing and he told them how to do it. And they all took off and opened up in Paris and in London, everywhere else.

Kevin Caners:
And he was happy to tell them how to do it?

Liam Skelly:
Oh, he was. Yeah. He gave everybody free advice.

Kevin Caners:
Some people from Shannon, like Liam, actually went abroad and helped set up Duty Free shops in other airports, including in the Soviet Union

Liam Skelly:
I set up a duty free in Moscow and then we went up to St. Petersburg or Leningrad. And then we decided to have one on the Russian Finnish border, a duty free up there.

Kevin Caners:
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 Brendan O’Regan in Shannon.

Roman Mars:
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.

ARCHIVAL TAPE:
[THE JET AGE IS NOW HERE, THE FIRST AMERICAN COMMERCIAL JET CAPABLE OF ECONOMICAL TRANSATLANTIC SERVICE.]

Roman Mars:
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.

ARCHIVAL TAPE:
[NEW YORK TO LONDON, IN THE SAME TIME IT TAKES YOU TO SEE A BASEBALL DOUBLE HEADER – SIX AND HALF MAGIC HOURS.]

Roman Mars:
Flight range – the very thing that created the airport – was about to render it obsolete.

ARCHIVAL TAPE:
[WITHOUT PASSENGERS AN AIRPORT CANNOT SURVIVE. IT HAS NO FUNCTIONS. AND SHANNON HAS HAD A GREAT PASSENGER PROBLEM IN RECENT YEARS.]

Kevin Caners:
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 gotta say, of all the tape I listened to of Brendan O’Regan, this was the one moment in the whole saga when, looking back, he sounds genuinely rattled.

Brendan O’Regan:
There was a continuous word being passed on. We were going to lose this. I mean, they’re going to overfly us for sure. They’re going to overfly.

Kevin Caners:
But Bredan O’Regan – whose initials BOR were sometimes said to stand for “Bash on Regardless” – wasn’t about to give up.

Brendan O’Regan:
Because I was thinking in terms of finding a way of stopping 1000 people being redundant.

Brian Callanan:
So O’Regan’s word at the time was the aircraft are up there and they won’t come down, let’s reach up and drag them down.

Roman Mars:
And the idea O’Regan and his team came up with, would take the concept of duty free and apply it to way more than just a few stores at an airport.

Kevin Caners:
O’Regan 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.

Roman Mars:
In 1959, O’Regan made another pitch to his connections in the Irish government, and 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.

Kevin Caners:
But stay inside the fence, explains Cian O’Carroll, and you were officially inside the Shannon Industrial Free Zone – a place where companies could fly in parts, assemble them in factories staffed with Irish workers, and then fly out finished products … tax free.

Cian O’Carroll:
So the industrial free zone was a variation on the team of the Duty free shop. The only difference is raw materials could be brought in and processed, and then exported with the absolute minimum of any customs formalities.

Roman Mars:
Today, customs free zones can be controversial – something we WILL be getting to – but back then, O’Regan’s idea wasn’t controversial, so much as experimental.

Kevin Caners:
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 governments’ approach for years, had been steep 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.

Roman Mars:
The government was ready to try something new, but O’Regan’s industrial free zone – in which any company from any country could come and make anything to be sent anywhere? Well, that was still seen by many as a kind of weird long shot.

Cian O’Carroll:
And there was a lot of cynicism about it, really, like would the industries come? Would it be viable, would it work?

Brendan O’Regan:
But I felt if we didn’t start with something we would never start. So we took a risk.

Roman Mars:
In the ultimate “if you build it they will come” approach, with no commited clients, O’Regan’s team started to erect empty factory buildings in the zone — ready for occupancy – and used them to convince companies to set up shop.

Brain Callanan:
And once one or two companies came, it then provides an example for other companies.

Cian O’Carroll:
And starting from the 1960s – to everyone’s surprise, really – the industrial estate was developing quite well.

Kevin Caners:
At first, it was mostly smaller American manufacturers that came. For them, Shannon was a convenient foothold into Europe.

Roman Mars:
They were followed by big multinationals like GE, DeBeers, and a young Japanese firm called Sony. But there were also companies with more specialized products.

ARCHIVAL TAPE:
[THIS IS A CORNER OF THE REPIN PIANO FACTORY AT SHANNON AIRPORT IN COUNTY CLARE TURNING OUT SOMETHING LIKE 3000 PIANOS A YEAR.]

Kevin Caners:
By the mid sixties, 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.

ARCHIVAL TAPE:
[IN A VERY FEW YEARS, OVER 2000 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 THAT ARE GREAT ECONOMIC BENEFITS TO THE WHOLE HINTERLAND OF SHANNON.]

Kevin Caners:
After years of stagnation, Ireland’s larger economy was beginning to grow and industrialize and Shannon had a not insignificant part to play in that transformation.

Brian Callanan:
In fact, by the middle of 1960s, something like 25% of Irish industrial exports were coming out of the Shannon industrial zone.

Roman Mars:
It was also in the 1960s that Ireland’s centuries-long trend of emigration finally started to reverse. Many Irish emigrants – and their descendents – were now moving back to Ireland. And one of the places they were moving to was Shannon.

Brian Callanan:
So to see the returning emigrants coming back in the 1960s was a new thing. And Shannon was one of the leaders of that.

Kevin Caners:
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 Cian O’Carrolls main jobs – getting everyone housed.

Cian O’Carroll:
And there were 137 apartments built, but there was nothing else. So all the industrialists there would be complaining about the lack of facilities.

Kevin Caners:
Such as? What sort of facilities?

Cian O’Carroll:
They complained about things like, where do they buy their groceries? And then the schools weren’t there. There was no library there. There wasn’t even a resident doctor.

Brendan O’Regan:
And thereafter, we were building a town and of course there hadn’t been built a town in Ireland since the Danes I think as far as we know.

Kevin Caners:
And O’Regan is not joking there. The village of Shannon was Ireland’s first new town in hundreds of years.

Roman Mars:
Now again, you would think – setting up a wildly successful restaurant, burnishing your country’s reputation, helping invent irish coffee, jumpstarting the national economy, attracting back emigrants, and founding your nation’s first new town in centuries – would be a good place for Brendan O’Regan to stop … but no, he wasn’t done.

Kevin Caners:
In many ways, Shannon’s industrial free zone anticipated the low tax, free market, global economy of the 1980s. But at the time, O’Regan viewed the entire Shannon experiment in explicitly anti-colonial terms.

Brendan O’Regan:
Because I could see that our poverty had come from Britain stopping us from industrializing.

Roman Mars:
And O’Regan became convinced that the best way for other developing countries to fight colonialism was capitalism.

Brendan O’Regan:
I thought particularly in third world situations it 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.

Roman Mars:
Starting in the mid 1960s, O’Regan began spreading the gospel of industrial free zones as the path toward economic independence.

Kevin Caners:
In 1966, after consulting closely with O’Regan, the Taiwanese government opened their first free zone at Kaohsiung Harbor. And in 1972, with UN funding, Shannon began offering multi-week training courses where foreign officials could learn how to set up their own zones – now called special economic zones, or SEZs – based largely on the Shannon model. Brian Callanan taught many of these courses.

Kevin Caners:
And how many countries do you think pass through here?

Brian Callanan:
Oh, I was there roughly about 20 or 30. Columbia, Sri Lanka, Egypt, Indonesia, Mexico, Nigeria, Ghana…

Kevin Caners:
But one visit in particular has since taken on almost folkloric status.

Roman Mars:
In 1980, a Chinese delegation led by future president Jiang 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.

Kevin Caners:
Tullyglass Hill had a panoramic vista where they could take in the airport, the industrial estate and the town. And, as they stood there, Jiang Zemin reportedly said, “This is our solution. We’ll build 100 of these in China.”

Kevin Caners:
So you mind if we just get up, I’m just curious to have a view of—

Kevin Caners:
I went to the hill with Brian when I was in town. And I was actually kinda 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 meteoric rise. Nowadays, when you get to the top, trees mostly obscure the view.

Kevin Caners:
Okay, I guess we can see one building over there.

Brian Callanan:
Ahhh yes, we see the industrial zone. Fantastic. And beyond the trees, there is the airport. You can see it brings it all together. So this is what stimulated the Chinese movement into the private sector. This is the place.

Roman Mars:
That same year, the Chinese government would set up not one, but four, special economic zones.

Xiangming Chen:
The fact that it happened in the same year, was not a coincidental co-existence, right?

Kevin Caners:
Xiangming Chen is a 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 promethean scale, perhaps nowhere more so than at what has since become the world’s most famous SEZ – Shenzhen.

Roman Mars:
Unlike Shannon, the SEZ at Shenzhen 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 square km, Shenzhen’s was more than 300 square km.

Xiangming Chen:
So compare that to Shannon. Now we’re talking about apples and oranges now, right? Very quickly. Nevertheless, the core ideas of duty free, low taxes or tax exemptions.

Kevin Caners:
All those things were pretty much the same – even the fence that went around it.

Xiangming Chen:
So Shannon obviously was part of that influence.

Kevin Caners:
Soon, this standard SEZ model became a major driver of the Chinese economy, By 1984, they’d already opened up fourteen more.

Kevin Caners:
How many special economic zones are there in China today? Or is that like an appropriate question to ask

Xiangming Chen:
Well, depending on how you count, right? I would say, you know, easily, a couple of thousands.

Roman Mars:
Some of these zones might be only a few hundred acres, others are the size of small provinces. But, in one way or another, they’re all SEZs. And as for the most famous SEZ of all…

Xiangming Chen:
The Shenzhen SEZ continued to expand to a city that ultimately became a mega city, with over 20 million people.

Kevin Caners:
Xiangming is quick to stress that not all the credit for China’s SEZs 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 a lot of their own ideas.
Roman Mars: But if you doubt Shannon’s role in all of this, just take a look at the Chinese leadership’s travel itinerary.

Vincent Cunnane:
On a monthly basis, or weekly basis, I would have delegations from China.

Kevin Caners:
Vincent Cunnane was the CEO of Shannon Development about a decade ago. And meeting with Chinese dignitaries was a surprisingly big part of his job.

Kevin Caners:
On a weekly basis?

Vincent Cunnane:
Nearly weekly! And, in my instance, the biggest dignitary of course, was Xi Jingping.

ARCHIVAL TAPE:
[THE VICE PRESIDENT OF CHINA XI JINPING HAS ARRIVED IN IRELAND FOR A THREE-DAY VISIT.]

Kevin Caners:
In 2012, current Chinese president Xi Jinping was about to take over power, and went on a three continent “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.

ARCHIVAL TAPE:
[EARLIER THE MAN WHO WILL SOON TAKE OVER AT THE HELM OF THE WORLD’S SECOND LARGEST ECONOMY LANDED AT SHANNON AIRPORT. FIRST STOP A VISIT TO SHANNON DEVELOPMENT, WHICH HAS STRONG LINKS WITH CHINA.]

Vincent Cunnane:
But the main point of his visit was again symbolism. The main point of his visit was, I’m going back to the place where it all started.

Kevin Caners:
Did he mention, or did Brendan or Reagan’s name come up? Like, did he seem to know who that was.

Vincent Cunnane:
Oh yeah. Yeah, yeah, yeah. They’re very conscious of the history.

Roman Mars:
On the second day of his visit, Xi went to Six Mile Bridge – the tiny town where Brendan O’Regan was born.

Kevin Caners:
Today according to the UN, there are nearly 5,400 SEZs, in more than 100 countries. More than 1,000 of which were established in the last five years.

Roman Mars:
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.

Kevin Caners:
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 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.

Roman Mars:
Brendan O’Regan died in 2008 at the age of 90, but his legacy goes beyond his contribution to Ireland’s economic development.

Kevin Caners:
Listening to those oral histories, you get the sense that O’Regan’s real goal was something at once simpler and more complicated – pride.

Brendan O’Regan:
I have great regard for the English. And I married one of them. I mean, that situation where we took over from them and did better than they were doing. It was a great spiritual uplift, I can tell you, for the Irish. And then we knew that we were as good as those who were empire builders. That we were as good as them.

Kevin Caners:
Speaking of Irish quality, back at that shop in Shannon. There’s still the small matter of my invoice for the whiskey.

Roman Mars:
Oh yeah, that’s right, how much?

Niall Maloney:
We have a Tealing 32 year old whiskey, limited edition. And that’s only 2000 euro, if you’d like some of that.

Kevin Caners:
Sure, that would be great. Can we do that?

Niall Maloney:
Yeah. I’ll bring it around.

Kevin Caners:
Just kidding. I got a very sensible bottle from a nearby distillery. It was 50 euros.

Roman Mars:
Alright, I suppose we can pay for that. It is after all … duty free.

[IRISH FIDDLE MUSIC]

Roman Mars:
When we come back, a look at the downside and sometimes very dark side of SEZs throughout the world. After this.

[BREAK]

Roman Mars:
So I’m here with Kevin Caners who produced that story you just heard about Shannon. And Kevin, we talked about both the spread and the success of special economic zones outside of Shannon, but I know the impact and legacy of these SEZs is really messy.

Kevin Caners:
Hi Roman. Yeah, I mean one thing we can say right off the bat is that there are thousands of SEZs scattered throughout the world. They vary dramatically 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.

Roman Mars:
Great. Okay. Let’s do it.

Kevin Caners:
So, I’ll start with one major critique — labor.

Patrick Neveling:
In most zones there is definitely less labor rights.

Kevin Caners:
This is Patrick Neveling. He’s a political economist I spoke with, and Patrick paints a pretty bleak picture of SEZs. He says that for the companies who operate inside some special economic zones, the poor labor rights are not a flaw, but a feature.

Patrick Neveling:
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 capital can freely run riots against workers’ rights.

Kevin Caners:
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.

Roman Mars:
Right.

Kevin Caners:
So, if a government can help entice a company to its new zone, by say, offering less labor protections or less red tape, then some unfortunately are attempting to do just that.

Roman Mars:
So did Patrick have some examples of what he was talking about, where you can find these labor issues and labor exploitation playing out?

Kevin Caners:
Yeah. So one actually is from Shenzhen, the Chinese SEZ that we mentioned in the main piece, which opened in 1980, and which has really become the world’s most famous SEZ.

Patrick Neveling:
I mean, you will remember the kind of images of the Foxconn factory in Shenzhen, where they had this netting around the dormitories and the factory building, so that people couldn’t successfully commit suicide anymore.

Kevin Caners:
Patrick is referring to these nets that were put up in 2010 around Foxconn factory buildings in Shenzhen 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 Shenzhen is far from the only example of troubling labor practices in special economic zones.

Patrick Neveling:
We are talking about the Maquilas on the Mexican-US border. We are talking about the ready-made garment industry in Bangladesh. We are talking about workers assembling furniture for IKEA in India.

Kevin Caners:
So Patrick basically sees these SEZs as places where capitalism has run amok, where the rights of corporations are prioritized over the people who actually work and live in the area.

Roman Mars:
So did any of the more pro-SEZ interviewees that you talked to for this story — especially the ones that were sort of enamored with the origin story of SEZs — did they have anything to say about this labor criticism?

Kevin Caners:
Yeah, so I spoke to Brian Callanan. He’s one of the characters from the main piece, who was involved in teaching how to set up your own SEZ courses, that were offered in Shannon, to foreign officials, and he fully acknowledges that special economic zones can have downsides.

Brian Callanan:
Positive outcomes have been associated with good labor rights and good skill development and good linkages, but negative outcomes have been associated with poor labor rights, and in some minority of cases, the regulation in the zones has given less rights to workers than in the domestic society, which is really problematic.

Kevin Caners:
Now, Brian notes that decreased labor rights were not what their SEZ workshops were advocating, since in Shannon the same labor rights applied in the zone as in the rest of Ireland. But for some SEZs that’s not always the case, and in some countries, labor laws are poor to begin with, which leaves 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.

Roman Mars:
So, how does a country avoid getting stuck in this sort of low-wage, little-return to local economy type of SEZ?

Kevin Caners:
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 laissez-faire approach where the government just puts up a fence, lower taxes, and leaves things to the market.

Brian Callanan:
And in fact, in those zones that just offer low taxes and nothing else, those zones are failures in terms of very poor impact. What the successful zones have been, have been as you say, a partnership between the state and the private sector, where the state provides the centers to provide the infrastructure, but also the state can decide who gets into the zone, and who has a right to establish there. So it’s very much the state being selective on what type of companies get in.

Kevin Caners:
Brian points at 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 learned in the zone with them.

Roman Mars:
I mean, it sounds like what Brian’s talking about, is an idealized SEZ that sounds good if it works. So what are the conditions that make a good SEZ work?

Kevin Caners:
Well, despite the labor issues that we just talked about, I would say that the SEZ approach is most useful in cases just like Ireland in the 1960s, or China in the 1980s, where a country with pretty little industrialization, and a relatively closed economy wants to test out a new approach in a small area.

Brian Callanan:
It allowed the receiving country the ability to accept capitalism in restricted doses, in selected areas. And therefore it’s going to 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 minimize the costs. Because capitalism can bring some very substantial costs.

Kevin Caners:
Brian sees SEZs as a sort of stepping stone towards industrialization, not necessarily a final destination. For example, in China’s case, if they just threw 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. 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 Shenzhen, and China as a whole.

Roman Mars:
So you have these, at least economic success stories when it comes to Shannon and Shenzhen, despite bad labor practices potentially in these places. But are there certain SEZs that just failed from the get go, never really took off?

Kevin Caners:
Yeah. I mean, I looked into this, and there are lots of stories of SEZs not really working out. In Africa, especially, the record of these SEZs 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.

Roman Mars:
Right. And I would imagine that because 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. Many countries around the world would offer lower and lower taxes in order to compete with each other for a company’s business.

Kevin Caners:
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–

Brian Callanan:
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 finance your 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 strategy of a country, and they should never be.

Kevin Caners:
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 SEZ 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.

Patrick Neveling:
Which was fairly groundbreaking back in the day, and which kind of set the tone for this kind of race to the bottom of corporate taxation that we have seen in, not only in Western Europe, but across the world ever since.

Roman Mars:
And this is why you hear about US companies having some kind of headquarters in Ireland, that they set up at some point.

Kevin Caners:
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.

Roman Mars:
Okay. So that gets me wondering what do Brian and Patrick see as some of the other legacies of the Shannon Zone for Ireland as a whole, beyond low taxes?

Kevin Caners:
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 Tiger economy in 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 SEZ 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.

Roman Mars:
Yeah. This is definitely a case where the answer depends on who you ask.

Kevin Caners:
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 Callanan thinks the agreement is a step in the right direction.

Brian Callanan:
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. It’s not even the most important.

Kevin Caners:
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.

Roman Mars:
Well, that’s interesting. It seems like that goes back to what he said about the SEZ model being a stepping stone, and not an end goal. Ireland pulled that off with its SEZ, even if perhaps many other countries didn’t.

Kevin Caners:
Yeah, exactly. Which is why, although he did agree with many of the critiques that I put to him about SEZs, in the end, he really cautioned against making any kind of overgeneralization.

Brian Callanan:
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. Zones are different depending on the way they’re developed, and depending on the conditions in the country itself. So each zone needs to be able to be looked at in its own right. Like any policy instrument, there are strengths, and there are weaknesses. It’s not all one single picture.

Kevin Caners:
And one last thing I’d love to mention is that, in the case of Shannon and Shenzhen, we’re looking at these zones, and they’re 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 had with Brendan O’Regan in 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 SEZs 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.

Brendan O’Regan:
I feel that that’s going to eventually be the thing that will remove hunger and poverty all over the world, and war. Will be universal wealth by manufacturing of some kind. I don’t know exactly how it will be, but it will be done anyway with machines.

Interviewer:
Do you think this globalization, this globalized economy will lead to that or are dangers there?

Brendan O’Regan:
There are dangers, but there’s a great lot of wisdom in the world, that knows that it’s wrong, and is trying to get it right. We’ll get it right, eventually.

Kevin Caners:
And as you can hear there, he’s a pretty optimistic guy, overall.

Roman Mars:
I mean, he does seem optimistic, but he actually is more thoughtful about it than I would even anticipate given how successful he was at the time. So what about Brendan O’Regan’s legacy in Ireland? I mean, do people know how much he changed about their country? Is he some kind of household name?

Kevin Caners:
No. Surprisingly not. Even in Shannon, the town he basically built, among younger generations he isn’t all that well known. So for example, my friend, Amanda, who grew up in Shannon, and first tipped me off to this story and the existence of the zone, she didn’t know who Brendan O’Regan was. And from my time in Shannon, that seemed pretty typical. But I think for O’Regan that would’ve been just fine. O’Regan 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.

Roman Mars:
Well, it’s a fascinating story. Thank you so much Kevin for bringing it to us. I appreciate it.

Kevin Caners:
Oh, it’s my pleasure. Thanks, Roman.

———

CREDITS

Roman Mars:
99% Invisible was produced this week by Kevin Caners. Edited by Joe Rosenberg. Mix and tech production by Dara Hirsch and Martín Gonzalez. Delaney Hall executive producer. Kurt Kohlstedt is our digital director. The rest of the team includes Vivian Le, Chris Berube, Christopher Johnson, Emmett FitzGerald, Lasha Madan, Jayson De Leon, Sofia Klatzker, and me, Roman Mars.

Music of this episode by our director of Sound Swan Real with Sasha Hsuczyk and Mickey Nelligan on fiddle. You can find more of their music at Soundcloud.com/TheSisterStreetAces.
Special thanks to a bunch of people in Ireland and beyond who helped us with our story this week. Ann O’Carroll, Kevin Thompstone, Valerie Sweeney, Matthew Thompson, and Amanda King. And additional thanks to Cian 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 O’Regan as well as Brian Callanan’s “History of Shannon” on our website, 99pi.org.

We are part of the Stitcher and SiriusXM podcast family, now headquartered six blocks north in the Pandora Building — in beautiful uptown Oakland, California.

You can find the show and join discussions about the show on Facebook. You can tweet me @romanmars and the show @99piorg. We’re 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.org.