Thursday, July 7, 2016


July 4, 2016

Brand Britain is ours for the taking

Posted in Sunday Business Post · 192 comments · Share 
Ireland has just been given one of its luckiest breaks. Britain has handed us, on a plate, the opportunity to be the Anglo-American world’s investment location of choice. Maybe we don’t realise it yet. Ireland is now perfectly positioned to be a globalised, English-speaking, free-trading area, which could attract limitless international capital that will transform the country and the society.
To understand this, let’s take a step back. It is all about a shift in the nature of national power.
We are now in a world of soft power as opposed to hard power. The power that countries exert on the world is no longer the hard power of the military and the flag. Hard power is enforced, not coaxed; it is the power of exclusion not inclusion; it is the power of the 19th century and it is the strength of the traditional bully. Those days are over.
Today the power that makes a country strong is soft power. It is the power of persuasion; the power of branding; the power which allows a country to coax others into doing its bidding without them even knowing.
The Nordics are exemplars at this game. It is a deep psychological power that is deployed by culture, image and national tone – and once exerted, it is cemented, not by force, but by international law.
By voting for Brexit, the British have elected for hard power in a world of soft power. They may not see it but the English have profoundly diminished their attractiveness. They have lost goodwill.
For years, Britain, in the eyes of the world, was the coolest place on earth. They had the best music, the best fashion, the best street movements, the best raves, the best comedy, the best youth culture and, despite themselves, the most exciting food innovators.
Their literature wasn’t too shoddy and the small island also managed to have the sixth biggest economy in the world. Its language was spoken everywhere and, in the BBC, it set the standards in global broadcasting.
It had even managed to have the best, richest football league despite its shambolic national team. Indeed, the desperate performances of the national team became part of their ironic self-deprecating disposition, which made it the favourite country for European graduates who wanted to emigrate.
In London, England had Europe’s New York. And, in its embrace of the free market, it made itself a magnet for global capital.
This was old Britain, the master of the brand, the genius country that managed to paper over the cracks with clever marketing, agile advertising and fashionable presentation.
It had just about managed to replace the dying hard power of empire with the soft cosmopolitan power of the 21st century. Last Friday week, it blew it.
The new Britain that will present itself for the next generation to the world will be a nasty, flag-waving, petty, imperial England in a post-imperial world.
Britain will now involve itself in a very public period of wrangling with the EU where enemies will be created and where the ability of the British to enhance their standing in the world via diplomacy will decrease.
This shift from team player to cantankerous foe will impact profoundly on Britain’s ability to attract foreign capital. Remember: Britain received over one third of all direct foreign investment into the EU. The figure last year was €35 billion.
This global capital will not stop looking for a home, it will just look for a new home. This new home will be one that feels, smells and acts like the Old Britain.
It is one that speaks English, has a common law system, doesn’t make it hard to invest and doesn’t prevent foreign skilled labour from living in its cities.
It will be a country where taxes on capital are low, which doesn’t get into public scrapes with its neighbours and which has free access to 500 million rich customers.
It is a country where gay people can live in equality, where foreigners aren’t discriminated against and where the arts, culture, music and sport are encouraged.
That country can be Ireland.
We are the obvious candidate to best profit from England’s self-inflicted misery. We are in the same part of the world, speak the same language and to all intents and purposes, for the vast majority of humans, are quasi-British. Yet we are a safe harbour in all this chaos with free, unfettered access to Europe.
The economic model for Ireland should be the prosperous city states such as Venice in the 15th and 16th centuries or the Hanseatic cities of Lubeck, Danzig or Konigsberg in the medieval Baltic. These states combined free trade with clever political alliances to become magnets for foreign capital.
These cities played the big powers against each other, retaining just enough sovereignty to plot their own course but never insisting on so much autonomy that their independence might threaten others.
Ireland is in that position right now.
Britain will leave the EU. Many people, particularly those on the remain side in Britain, have been trying to convince themselves that some magic formula will be conjured up to avoid triggering Article 50. This will not happen.
My friends in Britain who voted Remain have been deluding themselves that there can be some form of words, some legal circumstances which might be invoked to avoid the inevitable.
Many others who voted Leave as a protest voice and are now suffering from what could be described as “buyer’s remorse” have been trying to convince themselves that there will be a second ballot. There won’t be. They are out.
Britain will eventually get a Norwegian-style deal with some local control on immigration but the damage to “Brand Britain” is done. It won’t recover for a decade. Its economy will recover from a temporary, cyclical wobble, but it won’t be the same.
Luckily for us, most of our indigenous exports to Britain are food and the Brits will not stop eating. Nor will they stop holidaying abroad and they will still come here in huge numbers. However, the rest of the world will look on them differently.
Where the world once saw flexibility, it will now see rigidity; where there was irony, there is now dogma; where there was self-deprecation, there is self-regard; where there was tolerance, there is now exclusion; and where there was once liberalism, there is now brittleness; where there was moderation, there is now excess. Goodwill is lost.
The Tories don’t realise that modern free-market capitalism is part of a suite of beliefs that go with openness, tolerance, creativity, enquiry and debate. Once you go for dogma, you close so many more doors than you open.
Ireland is now in a brilliant position to economically and financially benefit from the evisceration of Brand Britain; let’s seize the chance.


July 7, 2016

Ignore all the shouting — The Brits will get their Norway-style trade deal

Posted in Irish Independent · 36 comments · Share 
Brexit changes everything. The British will leave the EU. There can be little doubt about that. How and when it happens are now matters of debate, but it will come to pass. All the legalistic talk about whether it will be politically possible for the UK to leave and whether the British Parliament must sanction this is simply the technocratic fantasy of a profoundly undemocratic elite that has been traumatised by the referendum.
Last week, this column was written from England and maintained that lots of people who voted for Brexit are not racists, nationalists or little Englanders.
Many look at the EU and see a deeply undemocratic set of institutions that appear to believe more in their own narrow interests than the fact that they are supposed to represent the people of Europe.
Indeed, the vindictive reaction of the EU Commission in the past two weeks has been revelatory.
While Brexit has undoubtedly revealed the profound lack of political leadership in both main parties in the UK, not to mention the meltdown of the top brass of the Leave campaign, it has also opened up a chasm between the EU officials and the politicians of national governments. If you doubt this, just compare the cautious stance of Enda Kenny with the much more truculent stance of his former henchman Phil Hogan, who is now a fully paid-up member of the Brussels echo chamber.
While Kenny is speaking about the various different relationships that need to be considered before the UK’s next move, Hogan is insisting that the British trigger Article 50 as soon as possible.
Of course, the main player in all this will be Germany. Germany calls the shots. Over the past five years, the pretence of a European Germany has given way to the reality of a German Europe. This is the new deal.
As a result of this, the Eurozone is Ersatz Deutschland, where the rest of the countries are little more than policy eunuchs, emasculated by German fiscal straightjackets and German creditor obsessions.
Again, if you doubt this, watch the ongoing implosion of the Italian banking system, which will dwarf even the great Irish banking crisis.
Italy wants to recapitalise its banks using government money because it fears a complete collapse of its crippled economy. Germany is saying no. As always, German decisions reflect the interest of German industry.
This is entirely understandable. It means that the interests of German carmakers that sell tens of thousands of cars to the UK every year will influence the attitude of German politicians towards the deal that Britain gets. Already Angela Merkel is urging the Commission to back off and give the British time to sort themselves out.
So because of German industrial interests, Italy, the friend with the broken banking system, will be treated harshly by Germany, while the UK, now the putative political enemy, will be treated more favourably. In short, the anti-EU Brits will get a better hearing from the Germans than the pro-EU Italians.
It is this apparent mistreatment of so-called allies that initially drove Brexit and is driving Marine Le Pen’s support in France and will determine the background noise to the Italian general election later this year. All this also puts Germany on a collision course with the EU institutions that are seeking to punish the UK for the temerity of Brexit. Germany will look to get the Brits the most access to EU market in the same way as Germany shouted loudly about Vladimir Putin’s annexation of bits of Ukraine but still took Russia’s oil and gas. This is Realpolitik – and the Commission had better get used to it.
So I suspect that after lots of shouting and roaring, the Brits will get a trade deal with the EU not unlike Norway’s. I also suspect that the free flow of labour – the sticking point preventing the UK getting a quick deal now – might change after a year of elections in Europe.
Next May, the French go to the polls. Le Pen is riding high in the polls. It will be a disaster for the EU if she wins. But even a strong second place showing by the National Front in the presidential election will cause the EU to think again about the political feasibility of free, unfettered immigration from Eastern Europe.
By the time the British get to negotiate, the EU’s central position on migration might have shifted to accommodate the political reality that millions of European voters don’t want free and open borders.
Meanwhile, the weakest man in Europe is Italy. The country’s prime minister, Matteo Renzi, knows that to win the election he has to prevent Italian banks from going bust and to do this he has to ignore Brussels and pump government money into the banks. So Italy too is going rogue.
In the next 12 months, the EU institutions will be fighting battles with major countries like France and Italy, not just with the exiting British. All this gives Ireland time to figure out our strategy.
We need to attract as much mobile capital that is holding off investing in the UK because of the uncertainty as possible. This means shouting loud and clear that Ireland is open for business.
Rather than sneer at the British for going it alone, we should cheer the opportunities that this presents as the only English-speaking country, with low capital taxes that has open, and unfettered, access to the markets of Europe.
When everyone else is losing their heads and the Europeans and British are at loggerheads, now is the time for clear thinking here within Official Ireland. That can’t be too much to ask for, surely?