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A new world is emerging

Posted on November 18, 2016 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

What a year it has been so far.   The phrase used by the exiting Margaret Thatcher in 1990, ‘It’s a funny old world’, springs to mind in considering the fall-out from a referendum in the UK and a presidential election in the USA. However, the matter is far from funny. The immediate causes and impacts will be debated for years. The elections of Margaret Thatcher in 1979 and Ronald Reagan in 1980 were emblematic of a counter-revolution that began to undo the Post-War consensus in which Scandinavian social democracy, British Welfare Statism and continental corporatism could co-exist with capitalism.  The impacts of this counter-revolution entailed a dismantling or diminution in labour rights, de-regulation, privitisation and a related growth in economic inequality.

1990 was the definitive point at which history, it was claimed, had ended with the decisive triumph of a global liberal economic order. The sudden, largely peaceful and dramatic implosion of the disastrous 20th century ‘socialist’ experiment removed any remaining concerns in Europe and beyond that a radical counter-revolution was risky.  No more need to assuage the populations of Western Europe, so it was thought. The weak and conciliatory response of the political centre-left only further copper fastened the drift to the right.  Traditional working class support for the centre left would be eroded over the coming two decades and dangerous forces unleashed on both sides of the Atlantic that had no significant traction since the 1930s.

Ireland experienced many of these immediate impacts as what could be compared to a radioactive cloud crossing the seas.

But, how do we interpret the recent political events in the USA and UK?

To an extent, they follow from the failure, on the one side, of ‘progressive’ liberal or social forces to convince sufficient numbers of voters that the Post-War consensus was still working or effective in countering the onward march of neo-liberalism and regressive nationalism.  At the same time, these recent developments, when seen in context, augur badly for the future of a social and economic policy based on equality, respect of human rights including those who, for whatever, reason migrate from one country to another and the importance of a progressive internationalism. Somehow, large and influential societies such as the UK and the USA seem to have become harsher places – less tolerant, less caring and less internationally orientated in a positive sense. One might even say ‘nasty societies’. However, the ‘New Deal’ was born in the USA and not in Europe. The UK National Health Service and modern British welfare state was not born in the EU but in the Post-War Beveridge settlement implemented by Old Labour. (The generation that grew up with the NHS mainly voted for Brexit whereas their grand-children mainly voted to remain.)

Could the same processes be at work here in Ireland? The immediate sense is that ‘this could never happen here’ or ‘Ireland is different’.  Really?  How deep is the commitment to the European Union consolidation project when specific national interests are at stake? How prepared is the Republic of Ireland for further political, fiscal, monetary, social and, yes, military integration?  My sense is that Ireland would die for 12.5% and sacrifice anything on the table of low corporate tax. We saw that in the course of the ‘Troika adjustment’. It was a case of ‘you can have everything from cutting spending and pay to social welfare and the national minimum wage but you can’t touch 12.5%’. 12.5 is the magic number. It is a case of ‘I vow to thee my country 12.5%’. And today, we have the spectacle of a country traumatised by the social impacts of austerity appealing €13 billion in tax that the European Commission says should have been collected (and at least €1 billion of which could have been used to pay for broadband for businesses in Longford and some social housing in Dublin and the replacement of direct provision in Mosney and a proper public mental health service for everyone in need of it.)  If the very survival of the economy, jobs and living standards can be cited as reasons to roll over and defend the indefensible then we need to seriously rethink our approach to economic policy and strategy if only because national reputation counts.

The writing is on the wall for the existing model of over-reliance on foreign direct investment and US foreign direct investment at that. The EU has been seen as a huge success for the Republic of Ireland and for Northern Ireland. Employment in the Republic doubled in the space of 20 years up to 2007, living standards especially in the Republic surged forward and new realities undreamt of emerged. Inward migration was, generally, seen as a positive. The EU played an important supporting and indirect role in the ‘Peace process’ and associated community activities.

Even today explicit and visible expressions of racism or mistrust towards immigrants though far from insignificant and growing in recent times, are confined and limited in a way that would be the envy of other countries. To date, no far-right political movement has emerged here. But none of this means that it could not happen here in the future.  The new world that is emerging is one where the unthinkable becomes thinkable and the impossible becomes not impossible (but arguably improbable).

One detects an amplification in ‘soft Eurospecticism’ from certain quarters of the media and commentariat in the Republic. For now, it is focussed on national sovereignty and the alleged evils of Brussels-imposed norms on corporate taxation.  It also finds expression in the uber-liberal doctrine that Ireland belongs to the Anglo-American world along with its rediscovered ideology of small states and ‘free’ enterprises – that is freed from social constraints and checks and balances. The intrusion of an aggressive type of home-grown nationalism from Britain may very well find echoes on this island – not so much over immigration although the ugly head of racism could be raised – but over the identification of the EU with all things bad.  History never fails to throw up examples of systems and empires that implode from within or without because they fail to deliver ‘peace, bread and land’ to a critical mass of its inhabitants. There is no guarantee that the European Union will, itself, survive in the long-run given the extreme tensions that are tending to pull apart the chords of global market interconnection. It is clear that social commentators and political actors have greatly under-estimated, in a wider global context, the power, attraction and influence of nationalism and even religion which is sometimes conflated with nationalism as well as post-colonial cultural and social identities.  Identities and loyalties do matter even in a post-modern society.

The European Union will never be the same again if the UK leaves (which one assumes it will).  And, Ireland will never be the same again.  Were there to be a period of significant readjustment involving large scale redundancies, growing regional imbalance, constitutional uncertainty aggravated by questions over hard borders and further nasty economic and fiscal shocks down the road how would voters and citizens respond? Nobody, in 1912, could have predicted the face of Europe in 1922. In Ireland, a dramatic shift in the political landscape with the demise of moderate nationalism could not have been imagined in 1912. Yet, these transformations were triggered by catastrophic world events outside the imagination span of Presidents, Kings, Czars and Kaisers in 1912.

Looking towards 2017 and beyond we have no clear idea of how Europe, the USA and the rest of world will look like in 2027.  It is reasonable to assume that it will be hotter especially if the limited and under-ambitious climate change targets are further undermined by the new politics in the USA. It is reasonable to assume that the ‘business cycle’ will not have disappeared. In plain English, there will be further recessions or significant slowdowns as sure as night follows day. It is reasonable to assume that the pressure of millions escaping war, terror, droughts, famines and persecution will not abate but increase further. Populist and far-right forces can build all the hard borders, walls and controls that that they like but when millions of people are desperate enough to spend days on flimsy boats in rough seas or locked up in transit containers then that is what they will do. Quite simply they have nothing to lose just as the millions of Europeans including many Irish had nothing to lose in the course of the 18th and 19th century in making the hazardous journey to the new world.

The Greek crisis of 2012-2015 showed that the new Euro currency membership zone is not irreversible. The impending voluntary exit of a member state with 65 million inhabitants shows that the existing EU is not irreversible. The rise of aggressive and beggar-thy-neighbour nationalisms shows that free trade, peace and parliamentary democracy and free speech are not to be taken for granted anywhere. The triumph of inter-governmentalism and the copper-fastening of the fiscal rules shows that ‘social Europe’ is not inevitable.  The volatility in political sentiment in almost every advanced economy and Western society shows that nothing can be assumed or taken for granted.  The speed at which the ‘Great Moderation’ of consistent growth, low interest rates and ‘full’ employment came crashing down in 2008 in a matter of weeks shows that extreme events in the business cycle were not removed from history and there is no law that they can only happen once every 70 years or so.  The evidence of very strange seasonal and climatic conditions is consistent with the undeniable scientific evidence that the planet is changing due to human behaviour.

To conclude on a positive and practical note.

Recently, journalist Fintan O’Toole in an Opinion piece (Ireland must join the fight for decency) threw out a challenge for the EU to stay relevant and to stay in existence:

it [the EU] has to declare a new compact with five basic components:

  • fierce resistance to Trump’s attack on the Paris climate change accord;
  • a massive EU programme of public investment in infrastructure and sustainable energy, with priority for disadvantaged communities;
  • a disavowal of the disastrous austerity mentality and removal of the excessive and ideologically-driven fiscal rules;
  • a radical programme of democratisation; and
  • a common goal of directing all policy towards the steady reduction of social and economic inequalities.”

Indeed.

I would only add that people must believe that:

  • There is still time.
  • Power is everywhere
  • Hope is vital
  • Change is possible

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