Rundale

Patrick Brodie

Most reading this will know the headline figures: 23% of Ireland’s electricity goes to data centres, a world outlier. This essay argues that this extreme situation is a product of the Irish state’s FDI-led industrial policy and its dependency on US economic and geopolitical interests. 

By developing an industrial policy based on attracting multinational investment – ‘industrialisation by invitation’ – the Irish state has conditioned a development regime  dependent on, and characterised by, US foreign direct investment (FDI). Data centres have become emblematic of how FDI constrains Ireland’s  environmental, infrastructural, and social futures, and for this reason they have become a key site of democratic contestation in the struggle over the future of Ireland’s economic development.

Dependent Development and FDI

The 26 county state offers a case study of what J.K. Jacobsen called ‘dependent development.’ Ireland’s economic model is premised on facilitating multinational investment, mostly from the US, and managing the ecological and infrastructural contradictions of its operations. Historically, Ireland has provided a low-tax base to access the European Union’s single market, while receiving limited developmental benefits in the form of tax revenue, jobs creation, and ‘spillover’ economic activity.

It is important to remember that this was not a natural progression, without tension and compromise. It represents an evolving developmental gamble first forged by a ‘postcolonial’ state navigating its semi-peripheral position in a changing global order.

Ireland has never been alone in navigating this subordinate position. Dependency theory, a Marxist school of development thinking from the ‘Third World,’ was similarly concerned with the pathways towards industrialisation available to newly independent nation-states. From this perspective, the dependency of domestic markets on capital owned by metropolitan (colonial) powers constrained ‘postcolonial’ development trajectories. The key insight of dependency theory was that the imperialist structure of the world-system – whereby value is drained from the periphery to the core, even after formal decolonisation – limited the capacity of nominally independent nation-states to develop domestic industries and de-link from the domination of the colonial metropole.

Ireland, similar to other states in the dependency trap, has adapted its financial, infrastructural, and ecological governance towards attracting multinational capital, ostensibly with the aim of directing economic inputs towards social and public goods. In this sense, multinational FDI has become, ideologically and materially, the closely guarded core of its economic system: ‘FDI nationalism.’

However, the economic and tax regime built around this strategy encourages pass-through investment in tech and financial services – leaving behind limited developmental multipliers, in the form of domestic innovation and spin-off companies, for example – as well as a reckless state reliance on foreign tax revenue. In 2024, 29% of Ireland’s exchequer was corporation tax, 13% of which came from just 3 US multinationals (Apple, Microsoft, and Eli Lilly), and 11% from just the two tech giants.

With the much-heralded ‘return’ of industrial policy in the US and western Europe, there has been a resurgence of interest in the concept of dependency. From Farrell and Newman’s analysis of ‘weaponised interdependence,’ to fears around Europe’s resource and infrastructural dependency, to pearl-clutching about Europe’s technological sovereignty and competitive capacity, analyses of dependency proliferate in mainstream (liberal) economic debates. 

Yet, what we witness today is not a suddenly weaponised ‘interdependence,’ but the structural imbalances of a capitalist world-system premised on unequal exchange, whereby core states (the US and its most powerful junior partners) dominate the peripheries by siphoning value from them, utilising semi-peripheries and international institutions to maintain these relationships.

Lacking in materialist analysis, mainstream accounts of dependency offer ‘solutions’ that fail to grapple with underlying material realities. For example, in Europe ‘digital sovereignty’ will in fact rest upon a US AI stack for the foreseeable future, with ambitions to ‘autonomy’ amounting to little more than the role of junior partner within US’ AI dominance. Thus, liberal accounts of dependency fail to address the macro-economic and supply chain-scale characteristics of US monopoly capital.

Data Centres and Cloud Monopolies

Data centres represent an extreme version of FDI dependency, one heavily concentrated in US monopoly tech investment. The big 3 US cloud monopolies (Amazon, Google, and Microsoft) control 65% of global cloud market share, with that number reaching 70% in Europe. The Magnificent 7 US tech stocks are some of the most concentrated monopolies in the history of capitalism. The AI infrastructure boom has ascended faster than previous high imperial infrastructure booms (and busts – e.g. canals and railways).

Any activity in the AI market, and any policies written to accommodate AI growth, functionally act to direct economic capacity into these monopoly concentrations – US state-backed cartels, as Lenin would refer to them, which feed on smaller enterprises and the wider economic system within which they are the primary economic and infrastructural powers.

Ireland got in on the ground floor of the cloud boom in the late-2000s to mid-2010s, just as the tech giants were consolidating their monopolies in computer services. However, due to the otherwise stagnant economic environment at the time, this outsourced model did not lead to the co-location of socially useful development during the 2010s. Indeed, data centres represent a largely unsophisticated, automated, and outsourced part of the tech supply chain; effectively managing electricity and heat to provide computational services, with minimal on-site staff and very few developmental spillovers after their construction.

At the same time, Ireland’s economic system and public finances became increasingly dependent on a narrowing number of US multinationals. These statistics speak to both the function of Ireland as a dependent state as well as the distortion of the state’s economic and political system through US FDI. In 2023, 69% of inward FDI was controlled by US parent companies, with just 25 firms accounting for 65%. FDI stock reached 255% of GDP by the end of 2023: four times the EU average. Cloud services accounted for €272 billion in exports in 2024, with 94% of that accounted for by foreign-owned firms.

75% of Ireland’s corporation tax receipts come from US multinationals – tech and pharmaceutical companies account for 90% of this revenue. For comparison, in 2014, Ireland’s corporation tax receipts accounted for 11% of the exchequer, which is today the OECD average. Tax reforms in 2015 led to a ‘bumper year,’ which has become the norm. In 2024, Microsoft reported €7mil in profits per person employed in Ireland – 13x its global average. The company reports nearly 40% of its global profits in Ireland. [All statistics taken from these two recent reports].

Despite its centrality to the state’s public finances, the Irish Fiscal Advisory Council has advised successive governments to be cautious when committing corporation tax receipts to long-term public services. In fact, they argue that spending should be focused on ‘water, energy and transport infrastructure’ to ‘support existing employers but also improve Ireland’s ability to attract new investment.’ With tax receipts so precarious, they likewise argue that private infrastructure investment should be actively sought.

In this same period, however, data centres have become central to Ireland’s AI-led industrial policy. The state has done gymnastics to justify their continued growth, including spending over €100,000 on a KPMG report which exaggerated their economic benefits. Given that data centres already used 5% of Ireland’s electricity in 2015 it is unsurprising that state bodies have been acknowledging for years that Ireland’s energy futures are heavily influenced by expected data centre growth. It stands to reason, then, that data centres have become such an important site of contestation in debates about the direction of industrial policy and the state’s democratic mandate to provide socially-beneficial economic development. For this, we look to Ireland’s position between the US and Europe.

AI-Led Industrial Policy

National and supranational blocs are globally competing for position in the industrial capabilities and supply chains around AI, increasing market interventions to secure competitive position in the shifting world system. AI represents a confluence of digital and energy infrastructures, implicating ‘green’ and ‘digital’ ambitions promised by the EU twin transition framework, which heralds digitalisation and decarbonisation as the core aims of European industrial growth.

Ilias Alami diagnoses the ‘AI arms race’ through the lens of ‘imperial state capitalism’: the increasing, direct intervention of powerful capitalist states in markets to secure competitive capacity by privileging strategic firms within particular earmarked industries (e.g. AI, energy). In this industrial policy paradigm, the allocation of resources for green/digital transition are dictated by the imperatives of tech and AI monopolies, given their concentration.

In the EU, the sustainability parameters of the twin transition have been superseded by an imperative to pursue ‘competitiveness’ since the 2024 ‘Draghi Report.’ The twin transition has been widely acknowledged as embedding an eco-modernist, green growth (‘win-win’) logic into the industrial geopolitics of AI. With the geopolitical race  to AI dominance, the ‘Draghi Report’ argues that the EU must secure a competitive position between the US and China. The Report argues that bolstering Europe’s competitiveness in technological, infrastructural, and energy development must supersede all other considerations embedded in economic policies, including measures established to guarantee social and ecological benefits from economic growth. 

The EU has become an increasingly active player in AI, energy, and resource markets, through a suite of industrial policies and regulatory frameworks, attempting to ‘reduce dependencies; on external actors (the US and China). Yet as European militarisation advances European industrial strategies have become increasingly dependent upon US fossil energy supplies and a US AI ‘stack.’

Under the umbrella of ‘competition’ public funding is being funneled into privileged sectors – including defence tech and surveillance – all of which depend upon data centres. Hence, data centres have become a ‘critical’ component of future infrastructural systems, protected and incentivised by broader industrial strategies at national and EU level. 

Given the strategic imperatives driving data centre development, questions of democratic governance are side-lined. The public vilification of data centre protests by Government figures and industry lobbies, in spite of popular support for data centre moratoria, indicates the state’s commitment to this association of economic and national security in these multinational infrastructures, where US FDI and European industrial policy meet. Decisions over industrial policy and geopolitical alignment are matters of importance too great for the people to have a say on.

In short, ‘FDI nationalism’ presents a highly undemocratic trajectory which identifies US tech infrastructure as an existential imperative for protecting European security. If Ireland is to maintain its privileged position in the Atlantic networks built around US tech capitalism, the state must double down on its dependency on US FDI. The adoption of European narratives around ‘competitiveness’ and ‘security’ marks a continued erosion of public interest within the economic strategies of the Irish state. 

Foreclosing Alternatives

Given the monopoly character of the AI sector, the development of AI markets in Ireland, and Eruope, further concentrates power in the hands of the US and the deepening of the ecologically unsustainable relations underpinning the current data centre landscape.

Europe’s interest in AI growth is principally about building competitive capacity amongst great powers, and economic security supersedes any climate or rights-based concerns supposedly protected by EU ‘values.’

As such, the growth of data centres is not just a matter of environmental concern. It represents the foreclosure of possible development alternatives – social, geopolitical, as well as ecological – at the behest of US state and AI giants. In short, the AI arms race encourages, what Alami refers to as, an ‘irrational use and allocation of resources, [including] energy, land and water, which are diverted in ever greater amounts to build data centres and other AI infrastructure instead of satisfying urgent human and ecological needs.’

In subscribing to the AI arms race, the government is locking the state into an increasingly undemocratic and unaccountable model of development, and indeed  climate chaos and militarism at the behest of US tech monopolies. Infrastructural development for monopoly tech is an extension and deepening of the FDI model, and this is coming at the expense of a liveable future – from direct costs (bills, fines), to infrastructure lock-in and backdoor privatisation, to the risk of AI-led financial collapse and/or job losses.

My recent report with Seán Fearon and Patrick Bresnihan shows that whilst the Irish state has socialised the costs of data centres amongst the public, this is a policy choice, not an inevitability.

In the short term, popular demands must focus on a data centre moratorium. The left should support local groups at the coalface of these undemocratic development policies, whilst helping to grow a unified national campaign to halt new data centres.

In the long term, the aim must be to re-think the FDI-led development model and its associated social and environmental ‘trade-offs.’ The planning for that needs to begin as soon as possible, especially within the horizon of reunification. Using the insights of Marxist dependency theory to re-centre socially-useful and distributive models of development offers a compass for the left in this task. 

Only then can we have a serious discussion about future models of development based upon global justice and social and ecological need, and correct the reckless, irrational, and unjust trajectory of dependency.