Sometimes it is good to look back at history in order to look forward. Since long before the Apple judgment, I have been trying to figure out what could be the economic model for Ireland in a globalised world of free trade, large-scale movements of people and free capital flows. The Apple judgment simply brings the issue to the fore. It focuses the mind.
In addition, although not always appreciated, there is a strong link between Ireland’s position in this trading world and the strike at Dublin Bus, which I will examine in time.
But let’s kick off this week with a bit of history in the ancient coastal city of Ayas just north of another ancient place, the devastated city of Aleppo. Marco Polo stayed in Ayas and mentioned it glowingly in his travels. Have you ever heard of it?
It was the Ireland of the 13th century. It was a remarkable trading entity and its strategy in a world of trade between east and west is the key to understanding what might be Ireland’s next geopolitical move.
Ayas was the capital city of the Armenian kingdom of Cilicia. These were exiled Armenians who had been kicked out of their Armenian homeland years before. Although Armenia seems far away in a long forgotten part of the globe, it was once the centre of the world. The one problem with being at the hub of things is that people tend to invade you.
These Armenian refugees settled in this Mediterranean part of what is now Turkey, just north of Syria. Once safe, they had to figure out what they were going to do for a living and how they would provide an income for their populations.
Obviously, as subjects of a tiny city, they couldn’t live off their own produce. They had to trade and, as they hadn’t much to sell, they had to attract other people’s produce into the city and trade that material with someone who wanted it.
So the Armenians of Ayas set themselves up as the key port that would be the entry point and warehouse for Italian merchants coming from Genoa and Venice in the west and the Mongol empire in the east. Far from being the rapists and pillagers of myth, the Mongols were highly sophisticated commercial traders. Once they had viciously conquered territory, they set about holding the territory via commerce*.
This is why Genghis Khan’s empire lasted for centuries. Everyone had a stake, Mongols and conquered alike. Unlike other empires, the Mongols were tolerant of other religions and most interestingly they knew how to play the international tax game.
The Armenians of Ayas knew they had to play all sides off against each other, but they also knew that the taxes charged at other big ports on the eastern Mediterranean were exorbitant.
So the Armenians working with the Mongols kept taxes and levies for exports passing through their ports low – never exceeding 3-5 per cent.
In contrast, sources at the time indicated that in the great port of Alexandria taxes could be as high as 30 per cent and never below 10 per cent. In business, margin is everything and so the Italian merchants who were buying exotic produce from the east invested heavily in low-tax Ayas.
When we in western Europe think of 1300AD, we think of the Dark Ages, but in the east this was a bright period of hectic learning and commerce. This world was trading, selling, buying and moving all sorts of goods, from peppers and spices, to silks, Tartar cloth and dyes. Everything was on the move and low-tax Ayas was the centre of trade.
By keeping its taxes lower than the more acquisitive and much more powerful Alexandria, tiny Ayas flourished. The Venetians and Genovese set up little free trade zones within the city of Ayas from where they traded with the Mongols and others and the city became immensely wealthy in the process.
The Italians brought their money and knowhow to Ayas. The Mongols brought exotic goods from all over the east to trade with the Italians. In return, the Armenians kept their taxes low, which diverted Italian and Mongol trade through the city, throwing off enough cash to make the city a thriving metropolis on the Mediterranean.
It was a fulcrum of activity. All sorts of people and companies settled there, attracted by low taxes and access to the great markets of both east and west. Certainty about the ease of trade and the city’s reasonably tolerant attitude towards religions, minorities and foreigners made this place a hive of activity and immigration.
Obviously, neighbouring cities and regions became jealous of Ayas, particularly the Malmuks in Egypt, who were furious at the Armenians’ mercantile success and the fact that trade was being diverted to Ayas from Alexandria. However, the city stood its ground, kept its taxes low, did deals with Crusaders as well as Mongols and became the flourishing centre that Marco Polo writes so glowingly about.
This was their economic strategy. Now the local Ayas economy had an international trading platform off which to operate.
The money generated by the traders – the multinational companies of their time – paid for the municipal services in the city. The rubbish collection and urban lighting system were second to none, and of course the local tradesmen benefited from the demand that the new investors created. So cobblers, innkeepers, blacksmiths and the like were in clover.
Everyone benefited from trade, low taxes and the flow of goods.
Ayas should be our model. It was the Ireland of its time, an attractive place for foreign investment attracting capital and opprobrium in equal measure.
The key to the city’s success was to play all these competing sides – the Italians, the Mongols – the Malmuks and obviously keep the local Armenians happy.
The trade created the economic cycle for the city and as trade ebbed and flowed, the economic cycle would ebb and flow. When the city was jammed with merchants, prices would go up. The local people would push prices up a notch or two as local unemployment fell and things started to boom. Rents would rise and ultimately wages for workers in the port, the hotels, the city’s municipal services too.
Ultimately, the lads who lit the fires which kept the city streets bright at night, the local policemen and the lads who carried and transported stuff around the alleyways and streets got pay rises to reflect the vibrant economy.
Wage demands are the sign of a successful economy. Typically, workers only strike when they feel that they have a good chance of success, when they feel that they are being left behind by the rising cost of living around them. Typically, wage demands lag the economic cycle by a number of years and then they come all at once.
So expect more wage increases after years of wage moderation. It’s a sign of success. However, the big picture is to remain the Ayas of the 21st century. If we forget that we are goosed. If you think big, the little things look after themselves.
* If you want to learn more about the history of the east and trading, read The Silk Roads by Peter Frankopan
David, you may think that globalisation is going to save the world but so far it has been a dismal failure. Just producing more and more stuff at the cheapest price possible is not the answer.
As I read this article, another penny dropped. The issue regarding Ireland’s low Corporate Tax rate has been represented by the EC as “Low tax = Bad”. Ireland and Apple (et al) are evil being the narrative. In reality Low taxes are Bad for Bureaucracies, Civil Servant and Politicians and Good for the rest of us. I appreciate that there is a balance but for Officialdom that balance point is way too high and is leading to gross inefficiency and over interference in our lives and not for our good but for theirs (for they are the true elite, after… Read more »
Why don’t we just follow the example of Hong Kong from the 50’s until now? It may take a year or two of adjustment, but the rewards would be immense.
The Dublin Bus workers are more likely to listen to a trade union politician, on the make, and be short termist. At least the union officials have that inclination.
A bus strike might result in uber and car-pooling. It will definitely cause more teleworking. And it will cause people to start driving. Or to get themselves ready for driving.
If I was Minister Ross, I would take a broad view on this, and threaten to bring in tax incentives for carpooling initiatives. And to get ready for DART extensions to locations like Leixlip, Lucan South, etc… And perhaps the DART-Underground. A DART link to Leixlip is far better economic sense than a DART to Balbriggan. Think of better cycling options in the built up area in the city centre. In other words, build alternatives into the system. The bus strike is led by trade union politicians who whole career is based on extractive ability from the rest of society.… Read more »
Don’t subscribe to this.
“The city was increasingly oppressed by the Mamluks and fell definitively into their hands in 1347”. looks like the Mamluks didn’t appreciate their low tax environment.
Taxes pay for schools, hospital, roads, etc. When are in the race to the bottom, robbing taxes from UK, US, etc. Do you think they will tolerate this indefinitely?
Take the $13billion and raise corporation tax to 15%, otherwise we are enablers of large multinational tax avoidance.
As far as generous benefit to all goes, can we expect of today’s transnational predators as much compunction as a Mongol?
Evidence says otherwise and we need the tax money a lot more than those guys do.
Greetings from the terribly poor state of New Mexico, whose governor is a puppet of the Kochs.
In historical terms the port of Ayas did not last long a a low tax trade port. As soon as it became prosperous it was invaded by stronger neighbours with the glint of greed in their eye. The first lesson to learn is that the trade came first. The merchants and governance of the city port were not greedy, “taxing the rich to give to the poor”. The poorer were rewarded with the trickle down effect of a prosperous middle and upper class. Then to learn, is that the minute there is economic success which equals social success somebody else… Read more »
Mongol The Mongol-founded Yuan dynasty (Chinese: ?, 1271–1368) also attempted to use paper currency. Unlike the Song dynasty, they created a unified, national system that was not backed by silver or gold. The currency issued by the Yuan was the world’s first fiat currency, known as Chao. The Yuan government attempted to prohibit all transactions in or possession of silver or gold, which had to be turned over to the government. Inflation in 1260 caused the government to replace the existing paper currency with a new one in 1287, but inflation that resulted from undisciplined printing remained a problem for… Read more »
The modern manifestation of the Khan monopoly on currency is the Federal Reserve and all the offspring central bankers around the world. The grand mother of all is the Bank of England. The Old Lady of Threadneedle Street.
No fiat money system has survive without bringing down the economy and the regime that fostered it.
I have some question relating to the theory that workers can or are in fact able to strike for higher wages. The evidence shows that typically workers don’t strike these days, and have not especially since the 1980 at least relative to historical highs of strike action. In other words the prevalence of strikes is at historically low rates. And high, medium or low wages have made no significant difference as to strike rate or number of working days lost, and neither does union density make any difference to strike rates. But I would like to know WHAT exactly the… Read more »
‘The Armenians of Ayas’: Did they have their own currency or use the currency of one of the local hegemons? Did they use the Mongol Dollar? Or the MalmEUk EUro? One can set out various fantasy scenarios but gaming geo-political seismic shifts of political tectonic plates is only possible by a Nation State or City State that has Sovereignty over it’s own tax & spend affairs. Did the ‘Armenians of Ayas’ mis-manage their trading hub for 100 years, periodically crashing & burning the entire economy, sending it’s youth into foreign exile, just to protect the ill-gotten wealth of venal, corrupt… Read more »
Sideshow Bob, . Thank u for a most helpful reply to a mind-block I had about difference “Private” Property between “Real” Property, posted on 3 Sep. 2016 at 12:02 pm to David’s article “For Dublin, the only way is up”. I would not have known about this reply only that I dared to have another glance at the penultimate article by our host where I spotted a post by u to me. Perhaps, it is best to post on current blogs at any time rather than hope that the contributors to a particular article’s blog would continue to view that… Read more »
Watched an English quiz show the other day. Well known host when talking about prize money made disparaging joke about Irish banks. – Shades of ‘economic wild west’ again. Same day Simon Coveney was on the radio talking about basically curbing power of Central bank. They have been warning against borrowing as we know, Notice he did mot say anything about funny money of vulture funds. Huge corporations paying no tax, and leprechaun economics of 25% GDP is not a good starting point for Davids vision. To be a trading center hub in the future means having good regulation. not… Read more »
2 fundamental issues are not satisfactorily explained by anyone on the internet or books as far as I have experienced thus far : 1. Why / How does . “Inflation of issue of currency” [ i.e. extra standard paper currency added to the esisting sum of the currency ] by Private Central Bank OR State’s own Central Bank [ e.g. today ? ] & / or State’s Treasury & / or Fractional Reserve Banking by the commercial Banks . cause . Inflation of Prices in the Economy / Devaluation of the power of existing Currency ? . . 2. Surely… Read more »
There is the nonsense end of the political spectrum. It consists of opportunists promising a “left” “alternative” and “real socialism”. They are opportunists peddling nonsense, who want the throw money at productivity disasters. Probably the most clueless is Ruth Coppinger who wanted the state to take over the Dell factory, and make computers, when Dell moved out. She later proposed running the Starbucks chain in Ireland as a public enterprise. Sure, some of you might laugh and say that she is such an idiot, that nobody will ever put her in a position of influence. But Coppinger got elected to… Read more »
in a previous writing David suggested that the country invest in Apple and other company shares as a form of sovereign wealth fund in lieu of forgone taxes. This investment would be in shares that are massively overvalued. Why not invest in shares of companies that are massively undervalued. Precious metal shares. The funds to invest can be provided by the central bank, the Irish central bank and produce currency from thin air with which to buy the shares. Switzerland and Norway have already done this and they have provided the list of companies to buy. Here is the fail… Read more »
I’ve only just started to read the book. For anyone who’d like an express overview on this topic then check-out the 3 part series on The Silk Road by the Beeb. It’s like a fiver on the iPlayer, if you can’t access the iPlayer in your region then try amazon :-)
Looking forward, the primary goal of Irish policy with regard to the EU should be based on Ireland’s main need. And that is the need to end the gradual movement towards increased control from the power centre. Basically, Ireland needs to make every move possible to weaken centralism which is no clearly the basis for weakening Irish policy. Too bad, we have a collection of spineless gobsh!tes like Enda Kenny, Micheal Martin, who doff the cap, for the EU “leaders” (really useless self-promoting opportunists) and sell Ireland out repeatedly. On the 100th anniversary of 1916, it is time to make… Read more »
Off topic, here is an excellent short talk on the future of the EU by Christopher Booker (co-author of The Great Deception).
It seems like, according to David, that the Mongols were yet another misunderstood great bunch of lads. It seems everyone in history was wise and tolerant apart from one group or relgion who shall not be named. Am I right? I was reading about Genghis Khan and his merry men a couple of weeks ago in a book about the rise of the West by Ian Morris, no slouch himself when it comes to political correctness. Young Genghis’s (as he was then not called) early life was particulary brutal and violent and it went downhill from there on. Here’s one… Read more »
This article of Davids’ seems to be written for historical entertainment and adds to my confusion as to what DMcW’s economic philosophy really is. Recently he advocated that Ireland obtains Apple’s “owed taxes” which implies Ireland should stay in Europe and renege on its tax agreements with Apple. However, he has also recently implied that Ireland should be an Atlantic nation, implying Ireland should leave the ECC, and lately he encouraged Ireland to build sixty story apartment buildings in Dublin’s docklands. Presumably, these buildings could only be owned by the 1%ers, resulting in even more Irish people trudging on the… Read more »
https://dollarvigilante.com/blog/2016/09/14/wells-fargo-banks-now-just-outright-stealing-peoples-money.html “”Centuries ago banks actually stored real money (gold) and gave their customers paper receipts which made transferring and transporting easier. Then as time went by, banks just began storing currency. Unbacked fiat paper is not money. In those days the term “bank robbery” used to mean a man with a gun would come in and steal the currency from the bank. Now, in the 21st century, the term “bank robbery” has a completely different meaning. Now, to quote the popular Russian turn of phrase, the bank robs you! What occurred in Cyprus in 2013, was the most overt form… Read more »
Get smart!! Have nothing in a bank except what is required for day to day operations. Move deposits , savings plans, safety box contents etc. Banks more and more treat your assets as theirs to do with as they wish.
“What is increasingly obvious however is that this sort of approach to financial journalism is bankrupt. There are hundreds of websites pointing out the difficulties with central banking in simple terms. And the simplest is that a small group of people ought not to be in charge of mandating the value of volume of money.”
Fraudulent practices are now the norm no matter where one looks.
“How fast could interest rates rise, and how high could they go? Pento calculates, “What’s going to happen eventually is exponentially worse than what you saw last week and this week because eventually, they (central banks) are going to have to change their monetary policies. They (central banks) are going to have to, once their 2% inflation target is achieved, they are going to have to start unwinding their balance sheets. Otherwise, there is going to be no way to drain the money supply. They’re going to have to sell assets. Front runners that are front running the bids from… Read more »
I don’t think the title of your article matches the content lol. Just kidding, mainly because I had some doubts after reading the article.