A teachable moment

I have an op-ed piece in today’s Irish Times, available here.

6 replies on “A teachable moment”

Clear and timely reminder. The article is signed “professor of economics at Trinity College Dublin”. I wonder if it’s a typo or a sign of things to come…?

Typo! Perhaps they meant “formerly”, although I am a Visiting Research Fellow at TCD..I should also say, in case any of my Belfield colleagues are looking in, that I am Visiting Professor at UCD 🙂

This is a welcome clear-eyed piece. Indeed there is much that is teachable, but those who might benefit from the teaching are determined not to learn.

In addition, most Member States’ relationships with the EU’s institutions are transactional; the Brits are not exceptional in this regard. They never felt any need to enter in to the political and economic arrangements advanced by the founders to prevent bloody conflict in Europe; in their view it was they and the Yanks (with maybe a bit of Soviet help) who won the war that provided the basis for this happy outcome. And they have always rejected the use of the EU’s institutions to provide better governance than might be provided locally – despite having to go cap in hand to the IMF in 1976. This has always been an attraction for many voters in countries where voters struggle to find and elect politicans providing sensible governance, are prone to authoritarianism and suffer from religious repression or varying degrees of officially tolerated corruption (Portugal, Italy, Ireland, Greece, Spain and Cyprus fall in ths category) and for many voters in the former European members of COMECON. Not surprisingly, many voters in northern Europe share British disdain for this feature of the EU. The British confidence in their self-governance is not exceptional. Ireland’s reliance on the Troika between 2010 and 2013 merely highlights this point. And Ireland’s relationship with the EU is as transactional as that of the Brits; it’s simply transactional in a different but more devious and cunning manner.

However, what is particularly galling about Brexit is that it has allowed the EU to secure the support of all “sensible and serious people”, to conflate liberal democracy with the variant of rigged capitalism, pervasive rent-seeking and soft corruption it advances and authorises and to make it almost impossible to advance badly needed critiques of the ambitions and antics of the Eurocrats without giving comfort to left-wing headbangers on one side or the swivel-eyed Brexit loons on the other.

Botom line: since 1958 Ireland has been by far the fastest-growing country in Europe.

There is not the slightest sign of this changing.

“There is not the slightest sign of this changing.”

“He (Irwin Fischer) famously predicted, nine days before the crash, that stock prices had “reached what looks like a permanently high plateau.”

Doing a ‘Fischer’, are we John? May I respectfully suggest that you most carefully analyse the longitudinal data sets. Our absolute rates-of-growth/time or their statistical mean vaue/time (and the stress is firmly on the term, rates) are irrelevant. Its our relative rates-of-growth/t when compared with – (a) Mother England and our anglophone siblings; NI, WLS and SCT, and (b) the Iberians, and (c) the others. Those pictures are somewhat more chilling. You also need to have the data in respect of the cost of a trolly of necessaries for each period and for each country. And the 1970s oil shocks had a ‘positve’ effect? And our 20% monetary inflation rate in the 1970s? And those juicy high interest rates of the early 1980s? And our 52% marginal tax rate?

The question must be; – did the early years of our membership of the EU provide us with a significant economic ‘boost’? Or was it some other factor/s? Or some deeply interconnected, complex set of economic and political interactions that cannot now be disentangled from each other? This latter is more likely.

The early 1970s are the era when the FIRE economy finally started to overtake the long-existing PC economy as the dominant form of economic activity in the major western developed economies (US and UK) – with the possible exception of West Germany where manufacturing production was very dominant, and still is to this day.

Excluding IRL, the current rates-of-growth in EU states range from 0.2% to 1.8%. Global rates-of-growth (in developed economies) are estimated to be 2% or slightly above. So our aggregate 5% rate is a very Black Swan event. It needs careful analysis to elucidate and explain it. My educated guesstimate is that our actual rate-of-growth lies somewhere within the EU range. And there is an actual possibility that our real rate-of-growth could exceed that of Germany?

While agreeing that Ireland should definitely remain within the EU, regardless of how hard Brexit hits, Ireland can hardly, with a straight face, laud itself for an economic improvement that is admitted to be due, to a large extent at least, to FDI and low taxes; not to mention CAP, structural funds and regional funds.

Frankly, for once, if the EU comes gunning for Ireland’s low corporate tax rate, they would be right, albeit for the wrong reasons.
The EU does not want ‘Ireland’ to eat its lunch in relation to corporate taxes, despite all EU countries, the US and the UK, already on the inequitable path of lower corporate taxes, i,e lower taxes for the rich.
The sooner the EU genuinely, and for the right reasons, puts its foot down on low corporate tax, and corporate tax scams, everywhere in the EU, the better.

There are a few other points that I believe are subject to question.

“However, there can be no doubt that our [Ireland’s] economic performance between 1950 and 1973 – decades which in France are remembered as the Trentes Glorieuses, and in Germany as the Wirtschaftswunder – was very poor.”

Surely an argument can be made that the huge growth in EU countries from 1950-1970, was primarily the necessary replacement of essential infrastructure that had been devastated by the war. In fact, if one looks at the graph for 1954-1973, most of the countries with exceptional growth rates, had been devastated by war of one kind or another. The UK had suffered less devastation and Ireland virtually none. The question that should arise in relation to that period, is what were the components of that exceptional growth? Was ‘current’ expenditure sacrificed to provide capital investment, and were higher taxes levied, and spent, to form the basis for that exceptional growth. I suspect expenditure was biased towards capital spending, and I suspect that higher taxes meant that people, of necessity, spent much higher percentages of their income than they do today on the necessities of life.

Whatever about the arguments for and against the euro, the euro currency itself cannot be held to account for the ECB and EC, Barroso et al, putting the boot into Ireland or other EU counties during the recent crisis. The imposition of private liabilities on the public purse, was straight colonial power play, with EU institutions, and in particular the ECB, co-opted as debt collectors for private banks.
In other words, EU institutions and the ECB in particular have shown themselves to be very partisan in their roles. And it was this partisanship that rankled badly with the European body politic affected.

In relation to the UK, nobody could defend the hard Brexiteers, and in particular the decision to leave the customs union. But to characterise the UK as the “sick man of Europe” during the period 1954-1973 is stretching reality. Irish people were flocking in droves to the UK in the late 50s, and well into the 60s. Well paying student work was still available in the UK up until 1975, when there was little work in Ireland, and none of it well paid.

“But even more importantly, Brexit is making us appreciate the freedoms which we all enjoy, to study, live, work, and retire wherever we want in this wonderful continent of ours. We take those freedoms for granted, but there is nothing natural about them at all. ”

[And finally, (on a well worn topic, I admit):
Try retiring on an Irish state pension at age 67, or age 68, and ‘retiring’ to the continent. The nature of work in private industry, both in terms of pay, lack of tenure, and lack of pensions, is such that the current generation of aspirant retirees, will be lucky to keep a roof over their heads. Hopeful dreams of fruitful retirement years complemented by travel experiences, are just dreams for the vast majority of working population. Now for AIB pensioners, their pensions topped up by other unfortunates who have no pensions, that’s a different matter. They deserve it, I suppose. ]

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