Few societies in the world have been so positively transformed by the economic opportunities arising from globalisation as Ireland. Countries get rich from trading, and small countries get rich quicker when they can escape the limitations of their own small domestic market by trading with the rest of the world and getting their message heard beyond their borders.
The heyday of globalisation has been from 1990 to now, although things are changing with trade wars, nativism and protectionism. Countries like Ireland have a lot to lose if the world gets smaller.
If you look at the enormous social uplift that has been achieved in Ireland since 1990 – in education, health, longevity – most of it can be put down to having new trading opportunities.
The facts are pretty stark. When we were closed off, Ireland recorded the slowest per capital income growth of any European country between 1910 and 1970. We were just about keeping up with the United Kingdom – then a country in serious decline. In the 1980s, Ireland’s lamentable performance continued, evidenced most starkly by another surge in emigration.
Then things turned around. As we opened up to the world, the economy started to tick. From having had the slowest income per capital growth in Europe from 1910 to 1970, we have delivered by far the highest growth from 1990 to now, outstripping the rest by a factor of two. Ireland’s income per head grew twice as fast as the EU average during the period of globalisation.
Economic growth in itself is not the objective of economic policy. In fact in modern economics, there is a weakness for seeing economic growth as the be-all-and-end-all. It is not; but growth is a gift that facilitates social progress.
Economic growth provides the resources to achieve other goals. Growth running twice as fast as that of your neighbours allows you to catch up in so many areas.
Economic growth has allowed life to improve dramatically in Ireland for the vast majority of people. This is probably best captured by the fact that based on the comprehensive UN Human Development Index, Ireland has surged from being the 24th most developed nation in the world in 1990 to the fourth most developed today.
This week we learned that Ireland is ranked in second place in the Good Country Index. The index of 153 countries measures what each contributes to the “common good of humanity and what it takes away, relative to its size”. A country’s placing on the list is determined by its contribution in a range of categories – science and technology, culture, international peace and security, world order, planet and climate, prosperity and equality, and health and wellbeing.
Globalisation has facilitated growth, which allowed other development objectives to be achieved, as captured in the UN Human Development Index. At the same time, it has allowed the country to develop “soft power” and project that power on to the rest of the world, as captured in this “common good” indicator. All this stems from open markets for trade, talent and capital.
The economy can’t grow unless we are selling more to more people who are prepared to pay more for it. In short, nothing happens commercially until something gets sold. Selling is the commercial spark from which so much else flows. Despite being regularly pilloried, the humble salesman is the essential alchemist that makes the modern economy tick.
If a country has stuff to sell, in a big open market, then we are half way there. This is why globalisation has been crucial for small countries such as Ireland, Denmark, Finland, Thailand, South Korea, New Zealand, Austria and the like. The salespeople of these countries are the unsung heroes.
Now globalisation is threatened not just by Brexit’s antics with the European Union and Donald Trump’s antics with China but by what the Economistmagazine last week called “slowbalisation”.
Slowbalisation suggests that the process of global integration is moving into reverse. During the heyday of 1990 to 2010, globalisation was driven by falling transport costs as oil prices fell, production of ships and planes expanded, the costs of telecoms dropped virtually to zero, tariffs were slashed and companies set up all over the world to be closer to the big new markets.
And of course immigration surged.
For example, from having had practically no immigrants to speak of in 1990, Ireland now has a higher percentage of foreign-born citizens than the UK. Last year, 54,000 new immigrants arrived in Ireland. That’s 1.14 per cent of the total population.
Brexit Britain took in 26 per cent fewer as a proportion of population. Italy took in 0.5 per cent of its population as new immigrants – less than half the Irish proportion.
Globally, since 2010, these trends towards more integration have slowed and the reaction against them, as seen in the growth of populist parties, has increased dramatically.
One in four Europeans today casts their ballot for populists of one stripe or another. Since 1998, when populist parties commanded a mere 7 per cent of votes across the continent, support for populists has surged to over 25 per cent – predominantly on the far right of the political spectrum.
Today, the number of Europeans living under governments with a populist in cabinet has increased more than 13-fold, from 12.5 million in 1998 to 170.2 million now.
This is all a threat to Ireland because we have done so well from being able to transcend the limitations of geography. Inward investment has continued significantly and, although global trade has never been more integrated, there is now a very real threat. If tariff wars resume, if China goes into reverse, if nativist urges driven by inequality translate into global protectionism, then this could all go into reverse.