Tag Archives: brexit

How to strangle an export industry 

Brexit , now that is is really happening, is going to cause a major strain on this country. In that context, and accepting that we don’t want to steal their boots while the body is still warm, it beehooves Ireland to take every opportunity presented to take business from the UK.

Much of the discussion on gains to be made has concentrated on the financial services area. There is a natural synergy here – a lot of back and middle office activity in London needs to move, to keep within the Eurozone, and Dublin has a fair amount of attractions to these activities. In addition,  there should be some potential for agribusiness to take up now UK based activities exporting to the EU. Much of the existing cross border trade comes from the agrifoods area. While nobody wants to destabilise the North, the reality is that the days of exporting material for further processing in the north then reimporting for another stage, these are gone. Agribusiness to the UK will also take a hit – upwards of a billion euro is at stake here. However, the UK also exports a lot of agrifood to the EU – 73% of its exports go to the EU. With even the softest barriers these will decline, and that represents an an opportunity for Irish agribusiness.

To its credit the Government and the state are aware of these issues and work is ongoing to mitigate the effects.

Behind all this however we have a sector which has evidenced potential for significant post Brexit export growth where the state, far from encouraging it is in fact strangling it.  This is the higher education sector.  Every non –Irish student who comes to study is an export. Exports of  educational services from Ireland represent a potentially enormous market. In the UK some 400k students per annum enter to study, many in the area of English language but as many for longerterm degree and diploma studies. Ireland has approximately 12,500 students from outside the EEA in its institutes of technology and universities.  Some 32,500 are in areas such as English language or private colleges.  This is a large body of exports.  It is responsible for approx. 1.75b in value added per annum

Two strangulations exist. First, we have a dreadful reputation in the English language school area.  Despite this the department of education and skills has yet to fully implement its own recommendations and to put in place a statutory framework around quality in the area. It remains essentially self regulating, and we know that that is a system which ultimately fails.  Until these schools are regulated we cannot grow them in confidence.

Taking the state related bodies an even more bizzare issue hobbles these. In the financial crisis a regulation known as the Employment Control Framework was put in place on all universities and Institutes of technology.  This in effect had a dual effect – it controlled overall numbers of staff and also controlled the distribution of staff (academic and professional) as between grades.  The ECF, as it was known, was implemented for the 2011-2014 period. Yet, as we come towards the middle of 2017, it is still being implemented.  It is being implemented due to the lack of the Department of Educatin and Skills , again, agreeing a new framework with the universities. As a consequence, universities and institutes of technology cannot grow other than by non exchequer funds. Willy nilly, in the absence of a serious commitment by the Department of Education and Skills (perhaps it should be renamed the Department of Primary and some Secondary Education) as to a stable financial system for higher education, the sector has moved decisively from state to non state funding.  This is most evident in the university sector. Thus my own institution, TCD, in 2015-6 , obtained 138m from the state ( HEA block grant, free fees waivers and state research funds awarded) , 38% of total income . TCD is probably on track to have 25-30% of its income from the state in the medium term, based on the trajectory of the last number of years.  UCD in 2015 obtained just over 30% of its income from the state.  Over the last decade state funding has declined by 25% while numbes of students have gone up by 25%. But the state remains , via the HEA, which provides less then 15% of income, the arbiter of not just staff numbers but staff deployment. 

This strangles any opportunity post Brexit to grow. More students need more resources, and dismay some as it might, higher education is a environment where staff, costly staff, are needed. But if staff cannot be hired, then the system cannot grow.  Exports are choked off.   This makes no sense. 

Published as a column in the Irish examiner

Irexit – Irish Exit from the EU

Has there ever been an uglier portmanteau word? Or a frankly more , lets be plain, dumb, idea, than this? The latest of the Grey Guard to hitch a brown dwarf to the dray is Bruce Arnold, following on the lead of Kevin Myers and Gay Byrne .

Those that support Irexit seem, on reading, to be one of two types. Older, middle class men of a conservative mein or older middle class men of a hard left Trot inspired mein.  One is reactionary in search of a non existent past the other a Leninist seeking chaos to energise a new world order.  The left dont matter, factional fractured and fissoning as they are. But the right may, as there is a tide.

There seems to be some sort of perception in the Grey Guard of Irexit that we are still uniquely and haplessly dependent on the UK.  They should think again.

Since 1992 especially we have grown much less dependent on the UK.  An Ireland that left the EU would perforce HAVE to take whatever trade it could get with the UK, itself liable to be exposed cruelly to the rigor of global competition as it has to take whatever trade it can get from the globe. Whatever has been written about the folly of Brexit, the same an order or more of magnitude could be said about the lunatic folly that an Irexit would see. Those that advocate such will, bluntly, be dead if and when their views came to pass, or else see autarkial North Korea as a paradisical state to emulate.

distribution of importsScreenshot 2017-03-05 18.08.14

 

Screenshot 2017-03-08 12.37.43

 

Below I try to fisk the comments of Bruce.

 

NO document presented to the Irish people in respect of our membership of the EU has greater current importance than Brexit: UK-Ireland Relations.

Apart that is from the treaties themselves which define the how and what of the EU and the manner of leaving thereof

It originated with the British House of Lords, a committee of which published it, rather eccentrically, in Dublin on December 12 last year,

Who on earth cares where it was published?

obviously aimed at a well-informed Irish audience. It put three issues before Irish readers: the urgent need for a bilateral deal between the two countries; the maintenance of a Common Travel Area within these islands; the finding of a solution to the continued existence of a border between Northern Ireland and the Republic, a situation that could become a barrier to progress between Britain and the Republic.

As an Englishman who has worked in Irish journalism, and at the heart of Irish political affairs in Dublin for the past half-century, I greet the document with great relief and total endorsement. However, I have many misgivings about how it will turn out.

The weight of British purpose is well thought out and logical, fitting in with the decision already made to break off EU membership.

So, having decided to set themselves on fire, and run off a cliff holding an anchor, the document notes the burny feeling, opines on gravity, and reminds us of the nature of falling bodies.

Irish purpose, however, reflects uncertainty over what to do, and a wish to have it both ways. In short, there is a failure of leadership.

Hang on. Wanting to have it both ways, cake and eat it, is a direct play from the Clown Prince of Brexit, Bo of Jo. Its in fact a genius step to try to hoist him with his own petard. Pity that he will deny any such petard, is too flabby and damp to be hoist and so on but..

The document has been widely misunderstood in Irish policy-making circles. As is often the case, when faced with a direct and indisputable truth, Irish political leaders take action – if they do – when it can no longer be ducked.

Yes. We have a lot of experience in that. But there is a great value in retaining the option to wait.

The manner in which the Irish Government, State and people worked their way out of the disaster of 2008 was eventually managed with Europe’s help, but the price we paid was heavy. The lack of leadership, the low levels of control and the bringing in of EU watchdogs should never have happened. It would never have happened if Ireland had stayed out of the euro as the UK did. The decisions made by the Irish Government in the years leading up to the crash of 2008 could be described as giving policy-making a bad name.

I mean, its not like we EVER had a crisis before the Euro. We never for example had a recession in the 1980s as bad as that of the 1930′s ; we never managed a massive land bubble in the 1970s; we never managed to run the economy into the dust in the 1950s, and so on. No it was all the fault of those nasty foreigners MAKING us take their filthy money and FORCING us to buy houses from ourself. Damn their foreign hides

The Irish Government is giving every impression of making a mistake of a similar magnitude in how it proposes to deal with Brexit. The House of Lords Report on the consequences of Brexit for UK/ Irish relations, which was published in Dublin, is, I understand, the first such British Parliamentary White Paper ever to have been published outside the United Kingdom.

Is it just me or is there a slight sense of “look, begob, we’re so important the Brits are even publishing stuff here. Now for ya”

Nevertheless, the anchor man on RTE’s 6pm news the day it was published suggested to one of the peers who prepared the report that it was directed at the British Government.

I have looked at the report clip. Its here. Bryan Dobson didn’t interview Michael Jay. Jay speaks from 0:46 in the clip, and was speaking to Diane Connor. So, maybe I missed that byplay between Lord Jay and Bryan Dobson but….

Why would the House of Lords publish a report in Dublin directed at the British Government? Brexit: UK-Ireland Relations was not so aimed. For all the attention it got here, however, it might as well have been. To say that the Irish establishment, at the time this document landed among them, was running away from the truth as far as the EU was concerned is something of an understatement. They have been doing so for years but are now running out of time and road.

The document’s fundamental purpose was to focus the minds of our political leaders, and of the Irish Government, on two key national problems: the land border with Northern Ireland and the Common Travel Area (CTA) within these islands as a whole. And it did just that.

This is at best a partial reading and at worst a misreading. The report is  some 75 pages long. The summary states as below its aims and purpose. I have numbered them. All five elements. Interestingly Bruce doesnt note or notice the very first one they comment on , Economics, which takes up 13 out of the 50 “analytical” pages.

In this report, we therefore draw attention to:

(1) the serious economic implications of Brexit for Ireland, North and South;

(2) the consequences for the Irish land border of potential restrictions to the free movement of goods and people;

(3) the implications for the Common Travel Area (CTA) and for the special status of UK and Irish citizens in each other’s countries, including the right of people born in Northern Ireland to Irish (and therefore EU) citizenship;

(4) the potential impact on political stability in Northern Ireland;

(5) and the challenge to the institutional structure for North-South cooperation on the island of Ireland, and East-West relations between the UK and Ireland, established under the Belfast/Good Friday Agreement.

The CTA is important for the British Government and people, but it is vital for their Irish counterparts. This is the principal reason why the House of Lords took the extraordinary step of publishing its report in Dublin. And we should be grateful for that, and for the main message: that there has to be a bilateral deal between the UK and Ireland to protect the interests of both States, but particularly Ireland, following Brexit.

It cannot be something imposed by, or agreed with, the other 26 member states of the EU. In a rather scatter-brained way, wringing its hands for pity’s sake and for help, the Irish Government is going round Europe trying to drum up support for a complicated ‘Ireland Only’ arrangement.

The aim of this, ludicrous in its impossibility, is to keep us within the 27 remaining countries while at the same time allowing for the bilateral deal – an act of faith in Britain – with the vital trading implications. Within this conundrum are the far deeper ties between Britain and Ireland that will inevitably focus on the land border between Northern Ireland and the Republic.

Ian Paisley Jnr grasped this nettle firmly and unequivocally in the Brexit debate in the House of Commons. Needless to say, Sinn Fein ran away from this challenge and it is still running. They cannot face the emotional slap in the face represented by a bi-lateral deal. Sinn Fein has, until recently, always opposed the surrender of Irish sovereignty to the EU. Now, at the very moment Brexit has provided an opportunity to restore that sovereignty by following the UK out of the EU, Sinn Fein has joined the political parties in the Republic that have sold their souls to the EU and for whom there is no way back. Irexit is a decision that would, moreover, hasten the re-unification of Ireland that the IRA’s campaign has otherwise been put back by generations.

See, this irritates me. There is a deep, and for someone of Bruce’s experience, inexcusable confusion here – that the Common Travel Area is somehow the total of “cross border” activity. The CTA is perhaps the least significant element of the “vital trading relations”. We have vital relations with countries with whom we DONT have a CTA. So it cannot be the sole and totemic element.  Indeed, in the very next paragraph Bruce notes this. The mask slips in the last paragraph where he talks of “selling their souls to the EU”.  This is quite extraordinary.

The more positive side of this debate is not altogether clear. David Davis, the Secretary of State for Britain Exiting the EU, claims that London, Belfast and Dublin want the open border maintained. However, the UK leaving the Customs Union will not support that wish. In that regard, John Bruton, a former Taoiseach, told the House of Lords Inquiry that the Republic would have to fulfill its EU obligations.

A set of statements of fact.

The issue should be hotly debated in the Northern Ireland elections. As one friend put it to me, “Britain and Ireland are separate, Ireland is not part of Britain, Britain is not part of Ireland. Yet in practical terms there is very little between the two: it seems a very sensible arrangement.” He added: “Last year witnessed year-long celebrations of the 1916 Rising here at home, while at the same time the Irish Government found itself going around European capitals begging for the right of people to be able to travel from Donegal to Derry without a passport.”

Hang on, the CTA is something you liked three paragraphs ago?

As an Englishman permanently part of Irish journalism and comment, I found it hard to understand how citizens wishing to commemorate 1916 for the right reasons (not guns and glory but political freedom) were unable to see that EU membership has almost brought us back to where we were in 1916.

So : we are under threat of conscription, facing massive trade disruption from a war, under emergency legislation, with laws prorogued, and the center of the capital in ruins? I missed that

I confess there were times when I thought that the 1916 commemorations were in fact a cynical attempt by the Irish State to disguise the betrayal of sovereignty by Ireland since 1972. And I had lived through, and written about, all the occasions of that series of betrayals.

The House of Lords members brought to Ireland the elegant and detailed explanation of how the history of our more recent past has become a guidebook for our futures in unpicking the loose and questionable commitments to the EU. That explanation currently binds us in unwelcome fetters. We need to see and understand that and take action on it.

Loose? And how can an explanation bind us in fetters? Maybe that which it is explaining can…

Brexit: UK-Ireland Relations is the first paper of its kind.

No, Bruce, its not. Its not even the twenty first. Its the first YOU noticed. The ESRI has done sterling work on this issue for years.

Perhaps it is also the most important for all of us on these islands who are concerned about what Irish people see as the damage and upheaval to the lives of ordinary people in the UK and Ireland in their interaction with each other arising out of Britain’s decision to leave the EU.

Nobody is making the English, for it is the english who are doing it, leave. They have determined to do so. The best thing we can do is keep pointing out the folly and danger.

The hardening nature of how that might work, and how it will affect Irish men and women north and south of our border, is ameliorated by the care with which the White Paper tells us of the special status of UK and Irish citizens in each other’s countries, the free movement between Britain and Ireland, and the magnitude and diversity of trade between the two countries.

Though we are so different, nevertheless Irishness is part of Britishness, Britishness part of Irishness, as I see it. Our much larger neighbour – also our friend and ally – has determined on a new course and we are faced with an important choice about how we respond to this highly significant development in Irish, British and European history. A bilateral deal between the UK and Ireland presented to the other 26 Member States as the price of Ireland remaining in the EU is the only rational way Ireland can protect its vital relationship with the UK and, if we so wish, remain in the European Union.

I wouldnt play that poker game. I would imagine a large sigh of relief in Europe if we were to bluff ourselves out.

What the British are asking of us is a simple acknowledgement of the entire package of relations between Britain and Ireland, between North and South on the island of Ireland, and between East and West in the framework created by the Belfast/Good Friday Agreement.

Err. Again, Bruce, they are the ones who are leaving. Not us.

With Brexit looming Ireland needs to beef up transport links

Ireland, even without resorting to the leprechaun economics jibes, relies very heavily on exports to contribute to economic growth.  Since the 1990s net exports have typically accounted for  10-20% of GDP.  With Brexit, all of this now needs to be evaluated. Continue reading

2016 – Goodbye to all that…but 2017 may be worse

m-t-ciceroLooking back at 2016 it is hard not to think that there were tectonic shifts in the western economic and political system, even allowing for the tendency of us all to overweight recent events.  Ever since Cicero politicians have been complaining “o tempora, o mores”  and we should have a healthy suspicion of those words “this time is different” but maybe, this time is in fact different.

We have seen, in Brexit and in Trump, the rise of populism. This is populism of a particular kind however.  It is populism driven not by poverty, not by loss of a war, not by anything specific. It is populism grounded in an inchoate sense that things used to be, and could be better, populism in the rear view mirror, populism for a simpler and, in the populists memory, better time. It is populism whipped up in the most cynical terms by the most inner of elites portraying themselves as outsiders, modern Clodius’s who lead those at whom they laugh.  It’s a curious populism, for the most part a phenomenon of the west. While in the west the lower middle classes remember fondly the days of their fathers (even if theu were not alive) and their salad days of the 70s,  in the rest of the world the reality is that the majority of people have never had it so good.  The old, and the late middle aged, vote and in doing so have driven the UK off the Brexit cliff and the USA into the hands of the nomenklatura, in both cases wilfully and cheerfully.

ft_cotw124

At the root of the discontent is the differential pace of gains from globalisation. There is a fantastic graph, from the World Bank in 2012, which to a great extent explains the last 30y of the world economy. What it shows in essence is the relative winners and losers, globally,  Since the early 90s the world has undergone a dramatic change.  Concurrent with globalization relative wealth has shifted. The global middle class now is dominated not by (relative) wealthy south americans and those in the west but by them plus the enormous Chinese and to a lesser extent Afro-indian middle classes.  Crucially, this doesn’t imply, necessarily, that the 1990 middle classes have gotten poorer. They may have in some countries but in other countries they may not have. What they have become is just one part of the global middle class. At the bottom  changes have been modest but in the middle – the global earners earning  in the 30-60% of  global income distribution, these have seen enormous rises in real income, as global poverty is reduced and globalization acts as an enormous “relative to the global income distribution” redistributive mechanism.  The brexiteers and trumpeteers are mourning, at least in part, a loss of exclusivism, a loss of the world being their oyster, a loss of the ability to be the lords of economic creation.

A key element that should be of concern to us here in the liberal still wealthy democratic west is this – there is no evident linkage between global wealth and democracy.  Liberal, western representative democracy in the long perspective is probably best seen as a mechanisim for the middle classes to ensure that the peasants stayed in their place, more or less, and that the upper crust didn’t loot the place bare.  Doing so, with the concomitant superstructure of rules of law and procedure, enabled and enhanced entrepreneurship  and economic growth. But other mechanisms exist.  China is one such experiment – hyper capitalistic at one level and at another deeply dirigiste to a level that would make the graduates of ENA weep in envy, it is by no means democratic.  Putin’s Russia is another – both more and less absolutist than China but a Potemkin democracy, yet (more or less) succeeding.  While I and others might like to think that in the long term these will come round, due to the same pressures as led enlightenment Europe, towards democracy,  that is not a given. Universal suffrage is a historical rarity in large states.  The self perceived squeezed middle classes of the west have tried universal suffrage democracy and plainly find it lacking.  But their woes are only starting, and with them the disillusionment will perhaps reach greater depths, opening the door for the right to rise again, if it has not already done so.

2016 also saw the arrival of a large number of automated processes and products that have the potential to eradicate swathes of previously humanised middle and lower middle class jobs.  Take some examples. In finance we see the rise of robo-advisors, to counterpart the growth of algorithmic trading. Robo advisors are programs,  virtual robots as it were, which suggest, with little human intervention, what and where to place any funds one might have.  This has the potential to wipe out a large tranche of the investment advisor and fund advisor market. In motoring we have seen astonishing growth in the penetration and acceptance of self driving autos.   Initially confined to cars this is now beginning to penetrate into the trucking business.  That has the potential to disrupt a huge employer- in the USA for instance there are 3.5m truckers, mostly independent operators.  In large stores we are now grindingly accepting of the robotic checkout. Banking is increasingly roboticised.  A 2012 paper noted a potential immiseration cycle from robotics – as they penetrate the workforce they make it harder for the younger workers to get jobs and make it less feasible and rewarding for them to invest in human capital, depressing wages for several generations.  The marginal productivity of lower skilled workers declines while that of higher skilled rises, exacerbating the income gap and social tensions.  The older and richer get richer the younger and poorer get stagnation. We are seeing this happening now through the overhang of debt and the unwillingness of the boomer generation to countenance any reduction in their welfare through the events of the GFC

27-e1458925217815

A final issue is the growth of extreme income inequality. As noted globalisation has brought about huge welfare increases in the lower reaches of the income distribution. But the biggest gains are in the 1%, the 0.1% and the 0.01%. The world has seen the rise of a plutocratic class unseen perhaps since the Tang or Roman empires.  Although not yet complete the cabinet of curiosities that Donald Trump has proposed are already wealthier than the lowest earning 50m US households. Think of that for a second. A dozen vs 100m.  50% of the global wealth is in the hands of the 1%. The top 0.01% in the USA are as wealthy as the remaining 0.99% that make up the famed 1%.  There is something wrong with this.  As my wife’s aunt said when she first saw Versailles “no wonder they riz up”.

What of Ireland? Well, we have the most unequal pre-tax pre-welfare society of the entire OECD. This includes the USA.  Perhaps for shame, or perhaps because we have a fairly vibrant democracy, we have a tax and welfare system that makes us middle ranking post distributions. But that is a function of a politics that is under strain.  We have, mercifully, been spared the extremes of the right. But the virus is there.  Left to our own devices we show all the instincts of the farther reaches of the right. We don’t, really, give much of a toss about homelessness. If we did, we would not tolerate 7000 people spending Xmas and New year in emergency accommodation (small, dingy hotel rooms). We think that there is no tax rate too low in the attraction of  any number of brass plated jobs, and be damned to the begrudugers who class us as part of the global tax scandal that is the MNC taxation mess. We don’t really give a hoot about the undocumented , unless they are Irish in the states when we mutter “shure didn’t they BUILD America” while confining our domestic undocumented to direct provision for decades. We don’t much like paying tax, but love a good service. We have no meas on higher education, really, wanting a world class system  but one that produces Lawyers and Doctors for the upper middle classes, accountants and teachers for the middle, and sure isn’t the RTC grand and cant they do computers and the like there for the rest.  We don’t want to pay for it.  We want cheap electricity but don’t want pylons, and so on. We have a system that left to its own devices produces inequality on a globally scandalous scale.

Presiding over this we have “new politics” which looks much like the old politics with a coat of paint. Painting over a damp rotten edifice makes it look good for a but, but the paint peels and reveals the reality.  Right now we have the paint beginning to peel. In a world where President Donald Trump is not a simpsons episode, where the UK has decided to go back to 1957, where a populist right wing political party is showing spectacular growth in Germany through blaming the national woes on a small but visible minority (what could possibly go wrong..), who knows what will 2017 bring.

Merry Christmas

 

 

Column in the Irish Examiner, 24 December 2016