So brexit will, or possibly wont, happen. And if it happens we might or might not see a significant change in how the UK interacts with the remaining EU that is if there is a UK and it has not splintered. But what will it really mean for Ireland? And how should we interrogate the issues? A purely economic lens wont really work. We need to look beyond politics, beyond economics.
Much of the probable fallout is by now reasonably well known. The ESRI, the IEA and the various accounting and legal consultancies have produced detailed discussion documents on the fallout. To recap…
Post brexit we are likely to see a devalued sterling, and certainly will see a more volatile sterling, compare to the Euro. We are going to see a disruption to the UK labour market if Brexit is to mean anything and if May is to avoid being eaten alive by the euro skeptics that still exist in the Tory party. A Brexite’d UK is likely to become a stronger competitor on FDI than it is as present, as those pesky labour and environmental safeguards are scrapped, allowing polluting and exploitative firms free reign. And we are probably going to see dislocation to the all Ireland energy market, not good news in an already hyper expensive energy market here. None of these are particularly good news for us.
However, what I wanted to do here was to think on some of the issues that have not perhaps had as much play. The devil of Brexit will be in the detail. I want to take a slightly different lens through which to examine our possible future.
In all the discussions around the economic and business fallout from Brexit we rarely see commentators noting one crucial fact. Well known to students, practical and academic, of international business is that culture beats strategy. Initially used to describe organizational settings it is now becoming evident that this works at national levels also. Culture is a protean word, one that can mean many things. We are not talking here about what is often called high culture – opera and art- but about the preferred way of doing things. Its much more about what biscuit you like than what Brecht play. In this regard we need to think hard about our place post brexit (assuming, as noted, that it ever happens). International business scholars have for decades been finessing research on how to measure aspects of national culture, and this allows us some possibility of benchmarking. These studies show that national cultural differences are powerful explicators of cross border trade and investment.
Of course we cannot reduce something as sprawling as national culture to a number without losing a lot of nuance, but the reduction throws some concepts into stark relief. Two main measures of national colure are the Hofstede measures and the measures from the world Value Survey. Neither make for easy or comfortable prognostication for Ireland post Brexit.
The World Value survey examines a host of attitudes and norms, but can be collapsed into two main axes. One is Traditional vs Rational, in essence a measure of religiosity/superstition/belief in control of ones own destiny. The other is survival vs Self Expresion, a measure of individuality, of how able one is to follow a star and not have to struggle for mere survival. The collapse of the complex data, via statistical methods, to two axes allows us to look at the world map of culture. And we stick out like a sore thumb. Look at the countries that make up the EU – then look at us. From a cultural perspective it would make sense to swap China for us. We are the lowest in Traditional-Secular.
On the Hofstede measures we are quite far away from the European norms. These measures look at how flat a society we are, how we deal with ambiguity, how long term is our orientation etc. We are closer by a fair degree to the UK than to any other EU nation. In fact, we are closer to New Zealand, the USA and Australia, in culture terms, than even to the UK. What this means is that a situation wherein we are dealing with other EU countries on our own runs a risk, perhaps a certainty, of greater friction than heretofore. The UK and ourselves ran on broadly parallel tracks in terms of how we thought and how we acted and how we interacted. Disengaged and halfhearted as they might have been the UK was too big to ignore. We on the other hand… We will find the councils of power chillier and the strictures of the EU more chafing than ever before.Using the 6 hofstede measures we can define a measure of cultural distance between two countries i and j as
The graph below shows both the distance between Ireland and other EU members and the contribution of each element of culture.
What this means in practice is hard to fathom clearly. But we can be sure of some things. One is that we will have to adjust our way of doing business as a nation. Looking at two elements – toleration for uncertainty and long-term vs short-term orientation, we are very far from the FrancoGerman axis. These countries value predictability and place much greater emphasis on the long over the short-term compared to us. We also place less emphasis on restraint. So when it comes to things like the existence of the Euro and its many many failings, these nations will “keep calm and carry on” while we have a greater, perhaps justified or perhaps not, tendency to flap and fuster. This is not about the rights and wrongs of things – it is about how we do business. The UK was more or less like us, with a higher, almost germanic, degree, of preference for avoiding chaos. So we can expect greater pressure for a more rules based approach compared to the preference for discretion. This will impact on all sorts of things – from the application of directives to the future direction of migration policy we will find a more pragmatic but also more rules bound Europe.
A further issue that needs to be surfaced is how we deal with the other countries post Brexit. This is of particular sensitivity when it comes to the labour market. A key plank of the Single Market is freedom of movement of labour. Much of the talk in Ireland has been around the common travel area. That is really missing the point. The CTA is not, except by convention, a common labour market. It is in fact a visa free travel area, such as Schengen (of which more later). It has not, ever, been a free movement area. Try getting into or out of a port or airport in these islands without ID. Thus it has ever been. Post Brexit the UK will need for political if no other reasons, to clamp down on the number of EU citizens working therein. The ability of the poor and dislocated of the Irish labour market to go and work unrestricted in the much larger market next door has, in my view, been the savior of the state. Imagine in the 1980s when things were much much grimmer, with a failed economy and a lowgrade civil war threatening to spill over, imagine if people had not been able to move to London or Edinburgh or Doncaster and work. Imagine what would have happened in the bleak years of the 1950s, or the 1970s The pot would have boiled over. The free labour movement has saved us time and again and has allowed a bland insouciance to build up in the elites here. They don’t need to create a working economy or society when if we don’t like what we have here we can, bluntly, feck off to England. We cannot assume that this will remain the case. There are many many more non-Irish EU migrants in the UK than Irish, seven times as many. We cannot coexist in a EU with Poland or Latvia where we have cut a special deal with the UK on OUR citizens being given special treatment for labour market movement when La Migra is shuffling off THEIR citizens to the Dover mail boat. Of course, we have no problem with hypocrisy – see our treatment of undocumented economic migrants here and compare to the ritualized handwringing outrage whenever one of our undocumented economic migrants is caught in Australia or the USA. But we don’t have to live with and depend on keeping onside states such as Nigeria. We do Poland. Poland, compared to us, is a more hierarchical, longer orientated and less individualist society. Special deals are not the norm.
This then gets us to the North. Why are we not in Schengen? We are not in Schengen because of the CTA. But the CTA and labour market freedom are not the same. If we cannot have free labour movement then do we need the CTA? If, as seems probable, the Northern Irish government seeks a hard border at the ports – the DUP in an act of political insanity having campaigned for Brexit now has to accept either a collapsed economy or a recognition that they are not special snowflakes in the eyes of Westminster. – then we can have a CTA with the north. But we need to think hard about Schengen. We need to think about the border. It is argued that we cant impose a hard land border. No reason is ever actually given. While not arguing for same, it is clear that it is not impossible, should it be desired, to actually have a strong physical border. India has built thousands of km of border fences and dikes with Bangladesh; Morocco has a several meters high sand berm on its disputed southern border; Iran has hundreds of km of border fences with Pakistan. IF it were deemed needed it could be done. There are myriads more reasons not to do it than to do it but lets not pretend that its impossible. The maintenance of an open border is dictated by politics, not geography. And politics is much more mutable than geography.
Back to Schengen. Would the EU, post Brexit, countenance a special deal (see Labour, special deals for Irish) on migration and intelligence sharing with a NON EU state? That is by no means clear. Post Brexit the EU will , save Ireland, be coterminous with Schengen. Those EU nations not in Schengen are taking steps to join it. The pressure will be on for us to join, whether that is publicly articulated or not. Of course, there is always a compromise. This week we saw something that is bound to set alight the Elysee Palace – an inversion of a French company into Ireland. Im sure that France would be amenable to allowing us to remain outside Schengen, in return for a chat on issues around corporation tax. Of course, in a hubristic hysterical display of small dog syndrome Brian Hayes has declared that he wants us all to die in a ditch to save our corporation tax. I doubt many will follow him. So, a discussion on Schengen, which morphs into a discussion on how we have managed to create an economy that is now swelling up like a puffer fish on tax based corporate restructurings that might not be a bad tradeoff. Brian Hayes can munch on the liver of the Celtic Puffer Fish while we carve out what is good.
An extended version of a column published in the Irish Independent, 25 August 2016