Thursday, July 21, 2016

Our Nostalgic Future

I had the great pleasure of speaking again at the MacGill Summer School earlier this week. It's a wonderful event, quite unique in my experience, and well worth the trip to the Glenties if you ever feel the need for some intellectual stimulation in stunning surroundings. I spoke at the session on the Curse of Short-Term Thinking in Irish politics, text of my contribution below:


Nostalgic for the Future

The Nostalgia Gap

It’s always a pleasure to be back in Donegal, though as it happens I was here just two weeks ago on holiday a little further north in Dunfanaghy! My wife and I like hillwalking, and this time we discovered a new walk along the route of the old railway line between Creeslough and Falcarragh, skirting the shore of Lough Agher under the shadow of Muckish Mountain. A beautiful walk, like so many others in this county.

Of course, the people who built the Donegal railway network back in the 19th century probably weren’t thinking of hillwalkers at the time, nor indeed were the people who closed it in the early 20th century. Yet both took decisions that had long-term consequences, even if the decisions themselves were motivated by more short-term considerations. ‘twas ever thus, you might say.

But to be fair to those who closed the railways, it might have been asking too much to expect them to imagine and plan for a future in which walking has become Ireland’s favourite leisure time activity. Back then, walking was something to be avoided, which is why they built the roads and railways in the first place!

So perhaps we set the bar too high when we curse the short-termism of our politicians, investors, planners and other decision makers in Ireland. Or perhaps the ‘problem’ is less one of short-termism and instead one of imagination, or rather: the lack of it.

I want to suggest in this short paper that the only way to avoid the curse of short-termism is to change the way we think about the future. I would go further and suggest we can only do so by changing how we think about the past. Richard Kearney recently observed that:
History is more than what has taken place and cannot be changed; it equally involves potential futures still dormant in the past.
I like that idea of ‘potential futures’ waiting to be unearthed as we respond to the challenges of the present in preparation for the future. It suggests we don’t have to do it all on our own: our ancestors have our back!

But which ancestors? It struck me recently that one source of our collective short-termism is a lack of meaningful, purposeful connection to the past. And not just in Ireland. The American writer Yuval Levin thinks one reason for the growing polarisation and short-termism he sees in the United States is one of ‘conflicting nostalgias’. Those on the American left look back nostalgically to the era of Kennedy and Johnson in the 1960s, while those on the right look back nostalgically to the era of Reagan and the 1980s. As a result there is no longer a shared sense of the past as a guide to the future.

Mind you, I think we have an even bigger problem here in Ireland. We don’t have ‘conflicting nostalgias’ in our political discourse, instead we don’t have any nostalgia for our past whatsoever! It seems to me that none of our political parties – unlike most parties in the rest of the developed world – claims any meaningful connection to ‘the best of our past’. So they/we are cut off from a history full of ‘potential futures’ that we could draw on to guide our decision-making today.

If we don’t know where we are coming from then we don’t know where we are going. So it’s no wonder we make decisions based on short term thinking and near term extrapolation. Our lack of nostalgia is holding us back from a better future.

The Five Ds

But we’re here to talk about the future, not the past. So what are the major issues facing our country in the coming decades? And can we find resources in our past to guide us in our long-term planning for the future? There are five issues or themes that keep recurring in our work at Amárach with Irish businesses and government agencies. I call them the ‘5 Ds’, for reasons that will become clear, and they are as follows.

Take the first of the 5Ds, namely debt. This is a pressing issue right now, and one that won’t be resolved in just a few years or even in the lifetime of a government or two. We currently have one of the highest levels of personal debt in Europe and that legacy of debt will shape consumer and business behaviour, as well as our domestic growth prospects, for decades to come. We are not unique in this regard: most of the developed world is witnessing unprecedented levels of private and public debt, with levels rising constantly since the onset of the economic crisis back in 2008.
Debt must be repaid – or forgiven – before debtors are free to redirect their spending from loan repayments to shopping, saving and investment. But more than half of Irish adults say that debt repayment is still their number one financial priority, suggesting that consumer spending – a key driver of the Irish domestic economy – will grow slowly and fitfully in the next 5-15 years until debt exposure is reduced. And who can blame them? Remember: debt is a fact, wealth is an opinion.

Nevertheless, our debt burden is being slowly reducing, so perhaps this is a problem that will resolve itself over time? Perhaps, but there is a complicating factor, namely our second ‘D’ – deflation. In the past, the recent past at that, inflation was a big driver of economic growth and rising standards of living. It wasn’t explained that way at the time, but inflation – within reason – is everyone’s friend: it allows businesses to grow their revenues through price increases, consumers to increase their incomes through pay increases, and it allows governments to increase their tax take on the back of higher business revenues and consumer incomes. But what happens when general prices remain flat or start falling, as is happening in many developed countries at the moment? It becomes difficult, if not impossible for businesses to raise prices – indeed price cuts become the norm – while pay increases remain low or maybe non-existent and zero-hour contracts are pervasive. Meanwhile governments are forced to look elsewhere for sources of taxation. Even worse, fixed debts have to repaid out of flat or even falling revenues or incomes, exacerbating the downward pressure of debt on economic growth.

But deflation, like debt, is an economic problem that can be fixed, though not easily as Japan and other economies are finding out. A complicating factor is our third D – demography. The ageing of Ireland’s population is one of the few, ‘certain’ forces shaping our future. As the numbers and share of the older population increases inexorably in the coming decades then even in the absence of debt and deflation the economic impact will be significant. While an ageing population will undoubtedly open up new opportunities for businesses and entrepreneurs to develop new products and services, the macro-economic impact of an ageing population will nevertheless be negative. The simple reason is that older people spend less than younger people, and the things they buy are different to the things that traditionally drive economic activity. As a rule, the higher the share of 30 and 40-somethings in the population the more buoyant is consumer spending as they are the age groups most likely to form families, buy houses, additional cars, spend on education etc.

Okay, we can see demographic change coming, and the economic challenges of debt and deflation are here already, so should we simply leave it to the experts to resolve? Maybe not. Our fourth D is doubt. We doubt our leaders and politicians these days, and we doubt the media and the church. We doubt all the traditional sources of authority and leadership. Most of all we distrust the experts, and not just here in Ireland: just look at Brexit – a rebellion against the experts if ever there was one. This is real problem because in the absence of leaders whom we trust then making the case for long-term change will get harder rather than easier, even as it has never been more necessary to make the case convincingly and effectively.

Our final D – disruption – raises the ante even further in terms of responding to the challenges we face and providing the leadership that is necessary. We have already seen the disruptive effect of digital technologies on retailing and on our main streets. When was the last time you bought or rented a dvd? And we are only at the beginning, with some speculating that artificial intelligence via software and machines will replace a third or more of all jobs in the coming decades. While the net effect of digital disruption will likely be positive in the long run – more winners and losers, more creation than destruction – a net positive outcome isn’t inevitable, nor will everyone be a winner. Some will just be losers as disruption replaces their jobs and the businesses employing them disappear.

So there you have it: the 5 Ds of debt, deflation, demography, doubt and disruption, all forming an unprecedented set of long-term challenges for planners in Ireland and pretty well everywhere else for that matter.

The Promise of Long-Termism

There is an old Russian saying that a pessimist is a well-informed optimist, so my apologies if you are feeling a little gloomier than before I started talking! But I don’t think it’s a case of either/or: that you have to be an optimist or a pessimist. In fact, I am something of a short-run pessimist but a long-run optimist. Let me explain. The challenges posed by the 5Ds – and by other forces and trends I haven’t elaborated on today – are in a sense, problems of success. Debt and deflation are legacies of economic growth in the past, but we still have an economy that is several orders of magnitude bigger than at the time of the railway closures here in Donegal. Similarly our ageing population is testimony to our improving health and longevity. The levels of doubt and distrust in our society also reveal an independence of thinking by a much better educated population. And we have all benefited from the digital technologies we use to stay in touch with family and friends, to work more productively and to shop for more choice and convenience.

As problems of success go they all seem manageable, and also seem considerably less threatening than the problems our ancestors faced, whether 100 years ago in 1916 or those faced by more recent generations.

But this is not to underestimate the scale of the challenges we face. For one thing, it’s going to an awful lot more difficult for companies – especially indigenous Irish SMEs like mine – to generate profits in the face of disruption and deflation, never mind the downward pressures on consumer spending driven by debt and demography. Come to think of it, it won’t be a whole lot easier for larger, foreign-owned corporates to make profits either for that matter.

So why be optimistic about the promise of the long-term? I think that one of the greatest legacies of the 1916 centenary we have witnessed this year is the permission it gives us to discover a better future, dormant in our past.

We are no longer trapped in the present as a people, afraid of the past and of our history. If, through a type of ‘anticipatory nostalgia’, we can reconnect with our previous achievements as a nation and find a new, shared purpose that focuses our collective energies and decision making on a vision of the long-term wellbeing of our country and the people who live here, then we can overcome the short-term challenges we face without falling into the trap of short-termism.

I’d go further and suggest that we need to forge a new patriotism to overcome the doubt and distrust that threaten to pull us apart in the face of a ‘winner takes all’ economic future. A future in which the cake maybe isn’t getting bigger and so a larger slice for one means a smaller slice for others.

Some of the greatest achievements by the Irish people in the past one hundred years – in politics, business, sport and the arts – were driven by a gentle yet deeply held patriotism on the part of civil servants, politicians, business, religious and community leaders among others. We need to reconnect with that shared sense of patriotism, a sense of common purpose and of belonging, one that looks ahead as well as backwards. We need a shared sense of destiny. So let us be nostalgic for the times we faced great challenges and momentous decisions together, for the times we worked towards a better future for all.

We are all of us part of the same story, the same narrative connecting the Irish people past, present and future. The path ahead isn’t clear, nor is there only one way forward, no more than is there just one, inevitable future that awaits us. I am optimistic we have the resources and skills to shape our future, and I am optimistic we can forge a sense of purpose and patriotism for the decades ahead to create a country and communities in which all our citizens can flourish. We must start by imagining the long-term future we want to create.

And you should imagine it too.

Thank you.

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