Friday, August 31, 2012

Restricted Growth

Is it game over for the developed world - including Ireland? Robert Gordon has written a fascinating paper about the six headwinds confronting the United States and why the United States will likely return to the (very) long run norm of next to zero growth over the rest of the century. His six headwinds include:

  1. A reversal of the demographic dividend (increasing participation in the workforce driven especially by female participation will give way to falling participation due to an ageing population).
  2. A plateau in educational attainment in terms of participation in higher education.
  3. Rising inequality, dragging down median real income growth even if overall incomes rise.
  4. The combination of globalisation with information and communications technologies, the factor-price equalisation theory.
  5. Energy and the environment, pushing up costs to further industrialisation and the price of production.
  6. Household and government debt, and the great de-leveraging that follows.
Five of these six headwinds apply to Ireland - only the reversal of the demographic dividend is not affecting us right now, but we're simply a decade or two behind the United States in that regard.

Of course, the developing world still have some way to go: the three 'industrial revolutions' Gordon describes still have to be experienced by billions of the world's people. So they will enjoy a certain amount of catch up in the decades ahead (subject to more global headwinds, such as 5 above). 

Not everyone agrees with Gordon, of course, with some expecting a fourth 'industrial revolution' in the years and decades ahead brought about by Artificial Intelligence (AI), robotics, and new breakthrough energy sources. Still others think we need to lose our fixation with growth altogether, adjusting our attitudes to a more 'grown up' outlook about what's feasible in a finite world. An idea which suffers from 'first mover disadvantages' unfortunately.

All of which is very interesting except for the fact that many of the problems we face in Ireland can only be solved by growth (and rather more than the 0.2% per annum extrapolated in Gordon's chart above). Take just one problem: debt. The chart below - from a chirpy little study entitled The Continued Economic Decline of the West - should help make it clear:

It's going to be a long time before we can shrink our debt hydra to more manageable sizes. 

There's another reason why Ireland desperately needs growth: demographics. When that headwind finally reaches us we'll need a very big nest egg to see us through. But the nest egg will only get bigger if the economy grows. Irish pension funds have experienced an average annual return growth rate of -2.1% over the past five years, though a healthier 7.7% over the past 20 years. But is the past 20 years a good guide to the next 20 years? Gordon would suggest they are not as the benefits of the first three industrial revolutions have already been fed through the economy.

We shall see. No doubt there will be opportunities to raise Ireland's long run productivity (and hence economic growth rate - ceteris paribus): the coming revolution in education is just one example. But there are no easy options, and they will all require tough decisions by our political leaders - and that's one headwind we will be buffeted by for some time to come.

Friday, August 24, 2012

Our Patriot Unborn

Is sport the last bastion of patriotism, the last remaining arena in which we can cheer on 'our own' against 'the others'? The 2012 Olympics certainly provided us with opportunities to cheer on Ireland's athletes - and most of us did. In Britain there have even been suggestions that Team GB's (well-earned) success has given the British the right to put 'Great' back in their country's name.

But outside of sport there is little talk of patriotism. The Taoiseach's recent speech at Beal na mBlath is an example of how far politicians - and not just Irish ones - have moved away from talk of patriotism. The Taoiseach's speech reads more like that of a business leader than a national leader - full of talk about excellence, reforms and targets. These things matter, of course, but the anaemic language of contemporary political discourse is a far cry from that of our founding fathers.

What has happened? Frenchman Pierre Mannet sets out a fascinating analysis in an article in City Journal simply entitled City, Empire, Church, Nation. Starting with the formation of the first democracies in ancient Greece and ending with the ongoing tragedy in the European Union, he describes the current state of European political discourse thus:
Political speech has become increasingly removed from any essential relation to a possible action. The notion of a political program, reduced to that of “promises,” has been discredited. The explicit or implicit conviction that one has no choice has become widespread: what will be done will be determined by circumstances beyond our control. Political speech no longer aims to prepare a possible action but tries simply to cover conscientiously the range of political speech. Everyone, or almost everyone, admits that the final meeting between action and speech will be no more than a meeting of independent causal chains. 
The divorce between action and speech helps explain the new role of political correctness. Because speech is no longer tied to a possible and plausible action against which we might measure it, many take speech as seriously as if it were itself an action and consider speech they do not like equivalent to the worst possible action. Offending forms of speech are tracked down and labeled, in the language of pathologists, “phobias.” The progress of freedom in the West once consisted of measuring speech by the standard of visible actions; political correctness consists of measuring speech by the standard of invisible intentions.
Mannet believes that the European elite's onslaught against the nation state does not bode well for our future:
Europe produced modernity—and for a long time, Europe was the master and possessor of modernity, putting it to the almost exclusive service of its own power. But this transformative project was inherently destined for humanity as a whole. Today, Bacon and Descartes rule in Shanghai and Bangalore at least as much as in London and Paris. Europe finds itself militarily, politically, and spiritually disarmed in a world that it has armed with the means of modern civilization. Soon it will be wholly incapable of defending itself. It has already been incapable of speaking up for itself for a long time, since it confuses itself with a humanity on the path to pacification and unification. 
By renouncing the political form that was its own and by which it had attempted, with some success, to resolve the European problem, Europe has deprived itself of the means of association in which its life had found the richest meaning, diffracted in a multiplicity of national languages that rivaled one another in strength and in grace. What will come next?
Mannet isn't the only one vexed by the strange 'self-hatred' that appears to motivate Europe's national elites. Dutchman Thierry Baudet also sees a deliberate attempt to subvert the nation state - and national identity - but one that is is failing before our eyes:

We are stuck – stuck, that is, between past and future, between tomorrow’s unaccountable super-EU and yesterday’s ‘we’. As Baudet puts it, ‘the present, supranational “in between” concept of European integration with an EU that is stuck somewhere halfway between a federation and mere intergovernmental cooperation, is unsustainable’. Something must give. We must find a way to resist those who presume to act on our behalf. In the process we must rediscover what it means to be an individual today and what it means to be a ‘we’. Just as it is necessary to defend the family and our personal lives from state interference, so we must also defend our nations from interference by those who do not represent us. 
The problem, of course, is that we lack the shared language to talk of 'we' in the 21st century. And our politicians are even more lacking. The European project as currently constructed and envisaged will inevitably fail and the resulting vacuum will be filled by the bad - think Anders Behring Breivik - as well as the good. Generations to come will wonder at how we Europeans systematically set about undermining the very thing - patriotism: love of country - that enabled Europe to shape the rest of the world in its image in the first place. Their task - to reinvent the nation state for the coming challenges of the 21st century - will be greater even than that which faced Collins and the other founders of our state ninety years ago.

I don't envy Our Patriot Unborn.

Wednesday, August 15, 2012

Count No Man Happy Until the End Is Known

My father passed away last month, following a short illness. He was 82. He lived an independent life, loved by his children and grandchildren.

I would also say he lived a happy life. Not in the fleeting, clappy-happy sense that seems to be the modern understanding of the word, but in the Classical sense, best articulated by the philosopher Solon in his famous exchange with King Croesus.

The king demanded to know if he was the happiest man alive (not least because of his power and wealth), but Solon answered that he did not know - could not know - until he saw how life would end for Croesus: his good fortune might well give way to tragedy. Instead, Solon told Croesus of those he had known, ordinary people, who had lived a full life - raising their children, succeeding in the world, loving and being loved in turn - before they died. These were the people Solon judged to be happy. Croesus was not impressed: though according to the historian Herodotus he finally understood when he was taken prisoner by King Cyrus after a disastrous war with Persia.

My father, with my mother, gave my sisters, my brother and me life and love - worth vastly more than the fortunes of Croesus. And now he has gone to a well earned rest, after a well lived life.

In the end he was happy.

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