August 3, 2008

The era of free trade may be coming to an inglorious end

Posted in International Economy · 86 comments ·
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The world is beginning to close its borders, and what follows will be seismic.

Are we seeing the return of protectionism, narrow gauge xenophobia and the end of the cosmopolitan force that was globalisation?

Are we seeing the first of many instances where the EU and the US are unable to force their will on the rest of the world because they are no longer powerful enough? If this is so, what will these trends mean for us?

Last weekend, China and India in particular decided to play hardball with the world, forcing the abandonment of the world trade talks. For India’s ruling party, this might have been an expedient political victory ahead of an election in which its farmers will have a pivotal say; but is it in the long-term interest of a country to get rich by playing ‘‘beggar my neighbour’’ with its friends?

For the first time in a generation, efforts to expand trade and increase the flow of information have been thwarted. While no one denies that China and India – ‘‘Chindia’’ – are big enough to be heard, there is something more than just trade talks going on.

It is possible that we are witnessing the beginning of a profound structural change in the way the world runs itself? Will we see globalism replaced by nationalism, and the financial good of the many being hijacked by the narrow interests of the few?

The collapse of the World Trade Organisation (WTO) talks is a serious blow to Ireland, particularly if it is followed to its ultimate conclusion. Irish farmers might be happy, but they have the most to gain from open trade in the long-run due to the simple fact that the price of food is likely to rise over the coming years.

The world needs more trade, not less. China and India, in particular, need trade if these pair of giants are to pull their billions of people out of poverty. It is a simple economic fact that no country ever got rich without trade. Trade is the cornerstone of modern economics and is based on the straightforward concept of comparative advantage.

According to this basic idea, it is smarter to concentrate on the things you are good at, become productive in producing this stuff and use the earnings you get from it to buy the stuff you can’t produce.

Furthermore, being open to trade exposes countries and companies to competition from abroad and new techniques, which must be copied and bettered at home if your goods are to sell. It is a discipline that tends to lead to best practice.

If you doubt this just examine the experiment that was East and West Germany. One people, one culture, two systems, one definitive result.

History is littered with examples of how countries thrived when trade was free – not just economically, but socially as well. Traditionally, when people can trade, they are free to mix, exchange ideas and technology. In the past, countries that embraced free trade also tended to be the most liberal, with the best social and human rights records.

However, history teaches us that there are moments of profound change where the people reject free trade and all that goes with it, usually for some utopian and undeliverable vision. This can lead to monumental social change. Could the world now be at such a tipping point?

One hundred years ago, a best-selling book in Europe was a tome called Degeneration, written by a Hungarian intellectual called Max Nordau. Nordau, who shot to fame as an author, went on to be a vociferous Zionist and one of the driving forces behind moves to create the state of Israel. Degeneration was translated into numerous languages, because the central idea in the book struck a chord all over Europe.

The thesis was simple: Nordau argued that open trade and the dominance of economics and finance in political discourse had led to a corruption of European nations. He contended that European elites were now degenerate.

They had become cosmopolitan and divorced from the people, from the soil and from everything that made European countries unique.

His central message was that these cosmopolitans had betrayed the ordinary people with their preening narcissism in art and literature, their internationalism in politics, their alliances and affectations and their willingness to exploit the people’s labour in order to create a deracinated elite.

Nordau’s solution was to call for a regeneration of the people from the bottom up. He suggested that patriotism could replace internationalism and that the people could be purified of this degeneration by going back to basics, moving away from free trade and the free movement of people, returning to the soil and self-sufficiency.

Nordau was the spiritual king of the many nationalist movements springing up in Europe at the time. His DNA can be seen in the politics of Eamon De Valera, Arthur Griffin and Michael Collins. Unfortunately – and ironically given his subsequent Zionism- his fingerprints are all over Nazism too.

What makes Nordau interesting in the context of the failed WTO talks, is that his message started with trade. Under the cloak of standing up for the little guy against some ephemeral elite, Nordau tapped into a discontent that was real.

The elite had become removed from the people, they seemed to swan around telling the masses what was good for them and their income had exploded to being multiples of the average worker.

These are many disturbing similarities between now and the turn of the 19th century. Many of the same arguments are resonant today, beginning with the argument here against Lisbon. It amounted to a coalition of rejectionism rather than a coherent political worldview.

Similarly, our farmers are driven by a narrow perspective on trade. They are possibly unaware that their stance on this crucial issue might put their best friends and neighbours out of work. It is easy to reject. It is much more difficult to construct.

The rejection of the WTO, although remote, is part of a rejectionist trend. Who knows, it might be positive. But a constructive alternative hasn’t yet been articulated. Like the vacuum Nordau left at the beginning of this century, God knows what might fill it.


  1. David, you are spot on in this article. The Irish farmers have shown themselves to be utterly selfish in their outlook ; par for the course really. It puts into perspective our Taoiseach’s pathetic attempt to appease them in the recent Lisbon saga ; instead, he should have told them where to go, and that they were no more important than any other interest group. And as for the recent cozying up between the IFA and Mr Sarkozy ; all one can do is laugh. It really is a muppet show. Narrow-mindedness reigns regrettably!

  2. ImNotAnEconomistBut...

    “Will we see globalism replaced by nationalism, and the financial good of the many being hijacked by the narrow interests of the few?”

    Since when has this *not* been the case? Globalisation in theory is about actual free trade, but in practise is essentially re-colonisation under a different guise, with the same European colonial powers and the US taking the lead and reaping the benefits. A visit to Shanghai and a walk down the Bund will reveal to anyone the massive gaps between those who have benefitted for China’s prodigious grown and the peasents from the countryside who form an unending stream of beggars on that famous promenade. 26% India’s population still lives in poverty, according to Indian Govt statistics and 40 percent of the population of Bombay, regarded as India’s most modern city, have no access to clean water, this in a booming economy. Ireland is also not immune from this. Its well understood that economic prosperity has come at a social cost (www.cori.ie/images/pdf/papers/NICVA_Conf_Belfast_080405.pdf). That Ireland has not seen the social disparity on the scale if India and China is largely due to the relatively equitable (if not mobile) wealth distribution that existed prior our economic miracle.

    The assumption that wealth generation is linked to prosperity is only true if there is a accompanying robust social policy, which in this era of ‘Globalisation’ is directly at odds with the Washington Consensus, and the policies of the IMF which formalise it.

    “In the past, countries that embraced free trade also tended to be the most liberal, with the best social and human rights records.”

    Compared to what? The colonial powers have appalling human rights records, certainly the worst in the world. If you are talking about economically emergent former colonies, well just look at what free trade has done to Africa, and what it did to south and central America. Ireland is also not immune from this. Its well understood that economic prosperity has come at a social cost (www.cori.ie/images/pdf/papers/NICVA_Conf_Belfast_080405.pdf)

    David, your a nice guy, i really like your work, but I think perhaps you have cocked-up here. Your central thesis is about the abandonment of a practise that has never really existed.

  3. Longlivetherepublics

    Free trade is only fair trade when all the participating nations are evenly matched in terms of competition. The German economist,Fredrich List, who had a profound influence on the development of the American System of Economy, promoted the concept that developing nations require protectionism in order to be allowed a buffer to develop their productive potential to a level of efficiency which was competive with respect to the already developed and established economies. Only then was it considered reasonable to expect the newly developed economy to relax their protectionism and engage in trade competively. List in fact defined the wealth of a nation in terms of its productive potential and not in terms of its foreign currency reserves or its trade balance.China is a perfect example of a nation which has followed this protectionist model in order to establish a sound ,robust and strong economy before embarking on the path to free trade.The greatest promoters of free trade the ,Bristish Empire and/or the globalists of today were and are aware of this principle which explains why nationalism leaves such a bad taste in their fat gobs because the really don’t want to see genuine economic development in third world nations,such as the African nations, as these nations are viewed simply as providers of raw materials to be consumed by the elitist globalists. if you want proof of this read Henry Kissinger’s National Security Study memerandum 200 which he wrote in 1974. In the report Kissinger
    argues the use of political instability, warfare and disease as the primary weapons to be deployed against national economic development.

  4. Philip

    If we take the case of Chinas’ protectionist model, we can see that there were beneficiaries here as well on the part of large European and US companies who merrily outsourced – hollowing out large areas of their own indigneous countries. We can see the evidence in Ireland – a mere pimple in this global exercise where manufacturing has all but dissappeared.

    I am not pretending to have any answers on this, but it strikes me that the rich make as much hay out of protectionist as open trade models. Had China let it’s currency rise sooner, I feel their slower rise would have benefitted all. Africa etc are being damaged by existing protectionist nonsense in Europe under the guise of nearly impossible to attain regulatory standards etc.

    I think open trade needs to be genuinely open. Protectionism should be met with equal levels of protectionism – This was never done in China & India becasue it did not serve the Western elite’s interest. And ditto for Africa and Brazil were Europe and US need to be more accomodating.

    The fact is that the game is rigged – opened or closed. Globalist Elites are pulling the strings to suit themselves.

  5. Trex

    As they say Resistance is futile in this case. Emerging economies will account for more than 50% of Worlds GDP and that changes everything , including the rules of Global trading. This debate is all about the change of the World order , trade is just one of the subjects . Prepare yourselves more of these kinds of squaring up to the old masters of the world. I would say next on the agenda is UN , and the reformation of United Nations Security council .These are not comfortable times as western powers concerned. All they can do is to negotiate the best deal they can and live with it for a while until the next negotiations.Yes globalization benefited mostly the capitalists and gave them more return for their buck , But lets not underestimate the millions if peasants it lifted out of poverty and created a middle class. it is not a cure for extreme poverty but gives an option all these peasants of the developing world.They have far more younger population than the developed countries so it is no surprise all the new investments and jobs going to the east. EU is an old dog with a couple of tricks , it will be wiped out by the ride of globalisation as it has created a regional economic zone with many walls erected around it.Walls will come down soon even if we like it or not.

  6. Aidan

    It is funny that india and china caused the collapse of WTO yet they were the countries that beneffited most from it. This may well backfire on them. If protectionism returns they will be hit hard, china and india are still very dependant on western investment and technology, they are still at the stage of copying western technology but doing it more cheaply, they still havnt taken the reins themselves, free trade also requires a stable world order in that countries depend on other countries supplying them with goods they no longer produce at home. It is dangerous to become over dependant on it, some commentators are saying that america and europe are becoming weaker because they are deindustrialising, surely it is better for western countries that this process be halted, maybe after a long period of free trade protectionism may now be necessary, china and to a lesser extent india only want to chose certain aspects of westernism, western societies are free and open theirs are not, they refuse to properly police intellectual property rights, therfore western technology should be closed off until they do

  7. Aidan

    It is funny that india and china caused the collapse of WTO yet they were the countries that beneffited most from it. This may well backfire on them. If protectionism returns they will be hit hard, china and india are still very dependant on western investment and technology, they are still at the stage of copying western technology but doing it more cheaply, they still havnt taken the reins themselves, free trade also requires a stable world order in that countries depend on other countries supplying them with goods they no longer produce at home. It is dangerous to become over dependant on it, some commentators are saying that america and europe are becoming weaker because they are deindustrialising, surely it is better for western countries that this process be halted, maybe after a long period of free trade protectionism may now be necessary, china and to a lesser extent india only want to chose certain aspects of westernism, western societies are free and open theirs are not, they refuse to properly police intellectual property rights, therfore western technology should be closed off until they do

  8. Deco

    Free trade is a bit of a hard concept to measure in exact terms. The Chinese devaluing setting an artificially low peg to the dollar is a prime example. Another example is the agricultural production of Brazil, where quality standards are often non-existent.

    There will never be Free Trade, even when tariffs are removed, because the mercantilist mentality in political entities, will determine other barriers. Call a spade a spade here. The EU has been let down once again with an Anglo negotiator who seems driven to weaken continental European economies for ideological preponderance !!!

  9. bryan

    “A visit to Shanghai and a walk down the Bund will reveal to anyone the massive gaps between those who have benefitted for China’s prodigious grown and the peasents from the countryside who form an unending stream of beggars on that famous promenade. ”

    This is the nonsense of a mini-global elite entrenched in their no doubt over-protected jobs, or perennial tenured academic lifestyle, spouting perennial student nonsense. The per-capita GDP in China has increased by 10,000% since reforms, and wages are growing at more than 10% a year. Those beggars are probably much richer than 1978 and have not been caused by China’s capitalist boom, they are, in fact hoping to join a middleclass only made possible by capitalism. What made them poor was communism. China would be the richest country in the world by now had its growth increased from 1945 at its modern level.

    That doesnt make me an apologist for globalization. The sum total of the all the goods in the world may be increasing – it clearly is – but most of the consumption of these goods are in developing countries. Which means the poor, working and even middle classes in “rich” countries are getting poorer ( which is the case – inflation is higher than wage inflation so we can buy less every year). Most of this inflation is caused by excess Chinese demand.

    Unless the “globalists” can convince me that the cost of China getting richer is not me getting poorer then I would wish their be some protectionism. China is engaging in protectionism by pegging it’s currency and has unfair advantages if environmental contraints are applies to Western companies and not to it.

    So a fairer globalization would curtail China’s growth.

  10. bryan

    “with the same European colonial powers”

    And give over the tired European colonial horsecrap. It doesn’t even work for corporations, my bank is Chinese for instance. The nineteenth century is over and it is time that the tired reciters of sanctimonious pseudo-socialist claptrap realized it. There is no European colonial power. If the EU ever got an army together it would lose a war with Liberia.

  11. paulatimus

    I hope you’re not suggesting in the final paragraph of your article that we’re about to repeat the 20th century?? Are conditions aligning to support a large fascist movement taking root?

  12. Malcolm McClure

    David: You certainly have a talent for generating nationalistic vituperation.
    Several of your respondents above don’t seem able to consider the benefits of free trade without beating the drums of anti-colonialism and anti-globalization. Put simply, the alternative to Free Trade is WAR. This is why central Europeans have persisted in the expansion of the EEC despite every attempt by ultra-nationalists to derail the process.
    Perhaps Ireland thinks that since it has espoused Neutral positions in previous conflicts, it can remain aloof from this choice between invidious alternatives. World war is not unthinkable, and if it were to happen, it would take not just the couple of decades post WW II, but several centuries to restore some semblance of order.
    Free trade benefits coastal cities in every economy to the detriment of ‘peasants’ in the hinterland. Thus China was always a balancing act between the wealth of the trading coastal strip and the poverty of the productive interior. Same for America and most other maritime countries.
    In Ireland it is no coincidence that the major cities are Dublin, Belfast, Cork, Derry and and Galway rather than Athlone, Kilkenny or Omagh.
    The problem with Free trade is that it squeezes the actual producers. Thus Lidl, Aldi and Tesco can sqeeze the producers of milk and every other commodity, using the threat of alternative sources overseas. Free trade can only work if there is effective protection for the little people who actually do most of the actual WORK.

  13. Garry

    I think anyone who says free trade is coming to an end is looking very far into the future.
    Basically, trade is in hardware and software, stuff that must be physically shipped from one country or another (food, equipment, metals etc) or stuff that can be electronically transferred, (software, finance etc). Were quite different from 100 years ago, a lot of trade is now “software” and is much more difficult to stop even if the will is there to stop it.

    Maybe what were seeing is a decline of global institutions, WTO, UN, G8, World Bank etc. This could be for any number of reasons, some ideas
    Simply the institutions are not doing their job properly and deserve to fail.
    Or the US, while still the superpower, has its ‘best before’ date stamped and negotiations are now much more complex as others demand their say.
    Or it could be the laws of diminishing returns where changing the system further will not really benefit anyone enough.
    Or were moving to a resource constrained world where nations or blocks are much more concerned with resource security than trade.

    A decline of global institutions is worrying as, for the first time in our history, were facing challenges (climate/energy) that require a global response.

    A couple of other comments on the article.
    First, the farming organizations don’t give a toss how many friends or neighbors they put out of work.
    Second, its good to see you acknowledge that the argument against Lisbon “amounted to a coalition of rejectionism rather than a coherent political worldview.” And given that its “easy to reject”, and “much more difficult to construct” maybe we can hope for some balance/constructive critism in future articles where Ireland should position itself on the EU?

  14. Longlivetherepublics

    To quote William Mckinly in regard to his opinion on free trade,
    “free trade cheapens the product by cheapening the producer but protectionism cheapens the product by elevating the producer”

  15. b

    Brilliant!

    If free trade ends we can develop Dublin port into a super mega city.

    Those boats and containers were an eyesore anyway. Instead of operating from 9-5 the port can be a 24 hour credit fuelled apartment heaven.

    Now all we have to do is to get rid of the multinationals and rely on the HSE and the State to employ us.

    By 2020 we will have increased the number of quangos from 800 to 8000 so there will be jobs and sweets for everyone!!!!

  16. Observer

    The fact that Ireland rejected the Lisbon Treaty proves that now, Globalisation from what some have predicted for years is probably going to start Crashing and Burning.

    Amy Chua is certainly a writer who is predicting an accurate picture for the future.

    Thanks for showing us what is really Happening David, hopefully we can find a good substitute before things get nasty.

  17. ImNotAnEconomstBut...

    Bryan, economics is as far as i can tell at least 50% black magic and kung-fu, and the rest is opinion. And opinions are like arseholes: everybody’s got one. I’m only interested in the facts, I’d appreciate it if you could explain to me in more lucid tones why my opinions are a load of old donkey cock, which I’m happy to accept as I am here to learn. It doesn’t help to chastise anyone to questions Globalisation as a Trotskyite pinko academic. Globalisation is a crock and looks likely becoming a risk rather than an advantage to Ireland. Genuine Free Trade is something entirely different.

    This doesn’t make me an apologist for communism or totalitarianism, since that, as you quite rightly say, is what made those beggars poor in the first place as it killed innovation (but in 1978 at least they didn’t have to beg…). China and India can continue to get rich as producer nations as there is an almost endless supply of cheap labour for manufacturing and low-level services that we are more than happy to outsource to them. Ireland no longer has that particular advantage but the Irish still have this peculiar habit of putting all their money in houses and German cars. There needs to be a cultural shift towards innovation to take full advantage of its current position, including reform of the education system, taxation and the welfare state, to maximise individual opportunity at a sustainable cost. Ireland, as I see it, with such a tiny population cannot afford to have the economics and consequent class divides of India and China, that allow small elites to hoover-up valueable and limited capital and resources (the good news is that unlike India and China, Ireland does not (yet) have entrenched elites that keep half the population impoverished. Free Trade for them means losing their grip on those resources and that capital). You need smart people with ideas and you need risk takers with capital. Ireland has about 50% of this equation already, but will be in trouble if it continues to look at GDP as the only metric of significance. What about venture capital investment, patents, IP licences, even University rankings?

    It might mean too that Ireland needs to wean itself off its multi-national habit, whose business decisions made (quite rightly) on the basis of their global, not local performance. Whats to stop Microsoft, Dell and Intel from selling off their profitable Irish operations to far less cash-rich and foresighted operators?

    Globalisation made Ireland rich. What Ireland needs now is genuine Free Trade of the like that has never existed before, in ideas as well as capital, in order to sustain its current prosperity which, like it or not, might, (o horror of horrors) mean policies that are strongly coupled to relative social harmony.

  18. B

    Cheap credit made us rich. The multinationals were and excuse to lend to Paddy.

  19. MK

    Hi David,

    You are correct in stating that trade is the key to economic enhancement and the usage of each area/region/city/country’s advantage where they sell what they are good at and buy what they need. However, when large regions are under control, it is possible for one to not require the trade of another. However, “No country is an island” applies in terms of trade, not even ours, as De Valera found out.

    In terms of the WTO, it was the extension of the types of goods and services that could be traded that was up for discussion. It is not as if previous WTO rounds and agreements are no longer in operation. They are. The world continues to rotate. Ironically, we in Ireland and the EU are the elite in Nordau’s scenario. It is the poorer nations of the earth which are having to suffer.

    You mention that the West v East Germany is an example of comparing trade and not trade. This is not a good example because there was trade intra-Comecon. Everyone in East Germany had a job, but everyone in West Germany didn’t. And the West German model was very poor and picking up when asked to support East Germany. Also, West Germany employed a quasi-xenophic system of near-slave-like sources of cheap labour with Turkish people. The East did not. An analogy, just because the pyramids look nice, it doesnt mean it is the best way of building a headstone! Slave labour is a great system – well, except for the slaves!

    > Farmers have the most to gain from open trade in the long-run due to the simple fact that the price of food is likely to rise over the coming years

    Open market food prices may rise in the long-term, but they will be and will remain below the real priced EU-supported levels that we have today in the EU. This is a golden era for EU food producers (apart from fishermen/women) as it is semi-protected (I wont mention anything about brazillian beef!).

    The world will continue to operate in a controlled-trade environment, and will not opt for a pure capitalist system and market free for all (I laugh at Americans when they say their country operates in this manner), as that really does lead to wars!

    MK

  20. Sherman

    I’m not an economist but said ‘A visit to Shanghai and a walk down the Bund will reveal to anyone the massive gaps between those who have benefitted for China’s prodigious grown and the peasents from the countryside who form an unending stream of beggars on that famous promenade. 26% India’s population still lives in poverty, according to Indian Govt statistics and 40 percent of the population of Bombay, regarded as India’s most modern city, have no access to clean water, this in a booming economy’.

    Well isn’t this more to do with Chinese & Indian domestic policy than the effects of globalisation. I think it is more accurate to say that globalisation has brought wealth to both countries but those countries have not redistributed the funds equitably. How a country distributes their income is a matter of their own individual social policy and reflects their history, institutions, and political choices. I think it is a bit disingenuous to pin rural Chinese poverty on globalisation.

    Globalisation does imply an influential relationship between the investor and the host country, and some are determined to believe that this influence is negative and unwelcome. I suspect that one of their real fears is that globalisation means the erosion of their culture and unique viewpoint, yet they are uncomfortable in the modern pc world to come off as too nationalist.
    Finally, a direct response to McWilliam’s article – To take the trade talks issue and the Lisbon vote and spin it into the end of globalisation is indeed thought-provoking, but also highly absurd. He is of course clever to play on people’s rather reactionary ideas about globalisation. Many of us work for foreign companies. The real issue here is that we are nervous that these companies will not stay and provide us with the job stability we need. This creates a tension that is often blown up into a resentment against the whole system (globalisation) that brought us the much-needed job in the first place.

  21. Philip

    Someone referred to Amy Chua and her thoughts on how elites form and how the western tendency to export of sense of openess and “free” trade to other countries can and has led to some of the worst atrocities and political/ economic imbalances in the last decade or so. Eliteism divides societies and failure to recognise it and stem it before it becomes transgenerational will lead to uprising or at best a general lack of cooperation.

    There is no real “FREE” trade for the reasons well articulated above – and attempts to enforce it (which actually makes the whole thing oxymoronic) just leads to bother and maybe war. One might add that there is perhaps sufficient free trade as it stands at the moment. As a very amateur observer, I feel the level of cooperation at a global level has simply dropped away. The failure of the DOHA round is just a symptom of this.

    If I may digress slightly – I think the level of gloom/doom and possibly even the weather is getting to people right around the world. When I started work back in late 70s, there was a sense of great hope – We were going digital, technology was rocketing to new heights in all areas and sure enough, the 80s and 90s delivered. Now we are in the naughty naughties. We have tech coming out our ears and we have no idea what to do with it except store badly taken photos , watch crap movies or book cheap flights. There is no “Next Big Thing”. Telecoms, Computing, Automotive, Video, BioTech have fizzeled. There day of the blockbuster drug, the mobile megagizmo, etc has passed. Since we cannot even envisage or have a vision of what that next big thing is (i.e. landing on the moon or a mobile phone in everyone’s hand or supersonic flight for all) – we resort to the generalist aloof terms like innovation, creativity etc. things for the so called “knowledge” economy where you need to be bright and well educated etc. and that folks ultimately means elitism – cos yer blue collar shop steward looking for an inflation cancelling pay rise will find their kids will find it even more difficult to be part of this elitist club. That’s the thing about elitism – it’s even more exclusive and greedy in a time of hopelessness. So wonder not at the breakdown in WTO talks and indeed any other cooperative activities you can think of.

    We have several harsh realities – Energy, Food and Climate – none of which has a solution without a fundamental societal change. It makes it hard to see how free trade solves anything when transport becomes non-tenable (again another oxymoronic scenario in the making). Also, the need for the “free” trade of most physical items needs to be severely questioned both in terms of sustainability and its use for reducing labour costs. It is the latter that needs serious discussion – becasue unless people feel they or their children have a future while not being one of the elite, we are in deep crisis.

    It’s all about greed – nothing else.

  22. ImNotAnEconomistBut..

    Sherman: “I think it is a bit disingenuous to pin rural Chinese poverty on globalisation.”
    I agree, and I’m not saying that. Their poverty pre-existed globalisation. My point here is that while China and India can afford to operate like this, Ireland cannot.

  23. Longlivetherepublics

    Maybe McWilliams is right about dropping the Euro in favor of a soverign currency so we could supply credit to what ever level was required to facilitate trade and commerce, since one of the problems hurting the Irish economy right now is a shortage of an exchange medium i.e credit, and not a shortage of goods and services. Without sufficient credit the latent potential of the economy can’t be realized.
    Secondly to fully exploit the potential which has been built up over the decade in the civil engineering and construction sectors and before this potential dissipates through unemployment and company failures , we need to accelerate the national development plan to which our cilvil engineering and manufacturing (for what is left of it ) capability could be redeployed. In order to achieve this the government needs to heavily borrow by selling low yield bonds and through the inflationary tendency of issuing a new currency. By borrowing and making the NDP an entirely national endeavor, the parasetic effects of a public private partnership are removed, since the benefits an extended infrastructure bring can be quickly drained by the private entity in the ppp. In fact it is the ppp which is a primary reason for the high cost of doing business in Ireland. The debt incurred as a result of the accelerated NDP could be quickly redeemed by the benefits it brings provided it is done properly and not in a chaotic,wasteful, half assed fashion driven by local tribal politics. The NDP should have an emphasis on high speed rail rather than road as rail is the most efficient form of transport especially for freight, and also high speed rail transport would have the tendency to induce a cultural shift away from local politics due to the fact that people could move throughout the country quicky and cheaply. The employment created by the NDP would help restore the tax base and ease the budget problems.

    Thirdly there is no reason why Ireland cannot achieve a position of being
    energy independent. We already have the corrib gas facility currently exploited by Shell but which could be nationalized through a bond sale. Also
    proven deposits of uranium exist in Donegal and nuclear technology has come a long way since its inception in the 1950′s . Already under development in Germany, South Africa and China is the new pebble bed reactor technology in which the risk of a accident is virtually non existent.
    This technology could be brought to Ireland from these countries through
    bilateral trade agreements. it has been estimated that four nuclear power
    stations each containing four reactors could satisfy over and above Ireland’s
    energy requirements, with the surplus either being available for export or
    new industy,for example in the production of synthetic fuel. Renewables such as wind and solar are an environmentalists
    diversionary gimmick as in the case for wind energy for example being equivalent to oil priced at $200 per barrel. Such alternatives cannot be sanely considered as having any real benefit to the growth of the nation.

    And fourthly I might add the restoration of Ireland’s coastal waters to the
    control of the Irish state for the sole exploitation of the Irish people. How
    many countless billions of Euros worth of this valuable resource has been consumed on the European mainland for free.I would bet it dwarfs the 32b
    Euro’s we have received from Europe over the years, a paltry sum by comparison

    Of course if you don’t want any of this and you would prefer Ireland to become a hollowed out impoverished backwater of the global empire, then by all means support,endorse and promote free trade on the broken backs of your posterity.

  24. Malcolm McClure

    To paraphrase longlivetherepublic’s devalerish argument:– “We return to a sovereign currency, leave the EC, erect high tariff barriers, abjure free trade, ring-fence the miniscule remaining fish resources, then go cap in hand to the IMF and meekly ask for loans of several trillion dollars to build four nuclear plants and high-speed rail links to every part of the country.”
    I have seldom heard of such a ludicrous economic NDP, except perhaps in Zimbabwe.
    If there is a severe recession, Ireland has two basic choices:РIt can embrace Free Trade and model itself on Singapore, as an Entrep̫t country, that acts as a warehouse for western Europe by developing a huge container port, Рopening and repackaging containers for efficient distribution elsewhere. This is the Bantry Bay Model pioneered by Gulf Oil.
    Or it can reject Free Trade and model its economy on Castro’s Cuba exporting Bailey’s and Guiness instead of rum, and beef instead of bananas.
    De Valera already tried the second model and it didn’t work.

  25. Philip

    I like the devalerish idea. Comely maidens at the crossroads etc. No exports or imports. Our own currency. No messing with Nukes or Wind or whatever. The Bogs will do. No more road development. Get back to a simple life and let’s have another Eucharistic congress as it was back in 1932. Let’s slow down and get real. It’s a mental asylum out there – all drugs, sex, foreigners, quare religions etc. And turn off RTE. Learn to look after your allotment and dig spuds and be healthy – have a few pigs and bring back the P7T and the cops on pushbikes (high Nellies). Bring back the post mistress who know all our business and family affairs. And forget about things beyond our control. We’ll become an island of saints and scholars again. and there’ll be 100s of 1000s out there hammering on our doors to get in. Oh…and ban the internet.

  26. b

    The Bogs are finished. So much for this farcical notion that Dev had about a pure Ireland. We burnt it all. Short term thinking again.

    The farmers will sell the lot of us to keep 8% of their income. To join the EU in 1973 we got rid of our fishing rights for the fat greedy pigs that we call farmers.

    Yes. I agree ban everything again. Its far easier. Dev would have banned the air if he thought it was British or Protestant.

    From actually working in the container business I can say that the best thing to do is to close the whole lot down.

    The Government don’t want the ports and they don’t want more business entering the ports. We can’t handle chilled goods at all. The cold chain is non existent and opening containers is a joke. What having an Irish superport prove? Dublin port is hardly used as it is. Its all closed at 6:30 in the evening and there are vast areas of land not being used at all there.

    Petty little cliques hold Ireland back in the port and trade sectors. Little gombeen men holding the rest of us to ransom.

    Rotterdam is the entrepot for the whole region. We are just a bit player. And besides larger TEU vessels can’t enter Dublin because the channel is too shallow, to narrow and the cranes are too low and too few.

  27. “I’d agree with you if I as able but I’m still waiting for the crumbs from your table”
    O, O David,
    I used to be a melting pot fun loving hippy. I am a sad angry man now.
    I really hope we’re seeing the return of protectionism; xenophobia was always there and most of it stems from Joe-soap worrying from day to day, and never getting anywhere, while the middle to upper-middle class through the exploitation of Joe carve a future to pass on to theirs. He can’t see the grand big picture you seem to see, he only sees his pay get less and others working for less; on which they can svrvive but he can’t.
    I think with the mad small business mania we’ve seen over the last 20 yrs. and certainly multiply in the last ten capped it. God, there was no Joe-Soap employed with any security/stability. The only options being a small business, working on a training course in that business, part-time, contract or money into the hand , working when you got the nod.
    The globalization for the third world has brought about a food world shortage; people are starving.
    No no, you can’t have this it is not acceptable. Back to the beginning.

  28. Malcolm McClure

    Interesting. ‘b’ might just have put his finger on a serious problem at the heart of the national malaise. The bloody minded docks and dockers. They had the same problem in London in the 1950s until they shifted all imports to the new container port down the Thames to Tilbury. And in Larne until Stena shifted terminals to Belfast. But Belfast Harbour Commissioners seem to have their act together to judge from the vast array of containers ranged about the place.
    Tell us more ‘b’ about how you see the docks as a bottleneck and how you would fix it?

  29. b

    Its not the dockers. There are hardly any of them. The problem is higher up.

  30. Philip

    Was there some fracas a few years ago about using a deeper and bigger port north of Balbriggan. Made a lot of sense becasue Dublin port was reaching capacity due to its inability to handle large vessels. Also, the more northerly port would have been vastly more effectve for serving north and south of the Island with clean access to the rest of the country. If memory serves, vested interests in the North (the talks etc. were clouding issues), Property development, 10K people getting cheesed off versus the 50K that could have been continuously employed with the new port etc. Never got much press and we had to put up with a big dig for the last few years and pay 12 Euro a pop for te privelidge of using this white elephant.

  31. B

    Thats a red herring to build houses where the port is now. It has zero to do with NI it has everything to do with a land grab for prime city centre real estate. The northern port was floated by the PDs so Dublin port could become some sort of new town.

    Dublin Port is NOWHERE near “full capacity”. Half of it is empty and it runs only 9-5 like some glorified office. The port tunnel that I use every single day is no white elephant. In the morning about 20 minutes after the RO-RO ferries come in you can’t put a matchpaper between the trucks in it.

    Where would these large vessels come from and where would they serve and what would they carry? I work in the business and I don’t see the bigger ships bothering their arses coming to Dublin with a few boxes. Dublin is out of the way. It takes a long time to come from the English Channel to Dublin when they could just skip it, dump the stuff in Waterford and continue to Rotterdam. The northern port is a total red herring.

  32. Malcolm McClure

    B said:— “I don’t see the bigger ships bothering their arses coming to Dublin with a few boxes. Dublin is out of the way. It takes a long time to come from the English Channel to Dublin when they could just skip it, dump the stuff in Waterford and continue to Rotterdam.”
    The key factor is that the bigger ships have a draft of 15 metres. Dublin Port has less than 8 metres of water, Waterford harbour only reaches 8 metres depth beyond Duncannon, and 15 metres off Hook Head; the approaches to Cobh and Kinsale are about 10 metres depth. Best deep water in south is Kenmare River and Bantry Bay, but west coast is too exposed for ships carrying up to 300 million dollars worth of goods.Guess it needs a major civil engineering project to build a concrete caisson bridge to deep water offshore, somewhere like Arklow?

  33. The return of protectionism, has it ever gone away……………
    You can tell the arrogance and blatant disregard – for people who have to sell their labour in the market – in the pro globalization speak.
    ”narrow gauge xenophobia”
    ”Will we see global free trade replaced by nationalism, and the financial good of the many being hijacked by the narrow interests of the few?”
    ”The world needs more trade, not less. China and India, in particular, need trade.”

    (mounting food prices in 37 poorer countries)
    I suppose the suicidal Indian – and other – farmers are just a bunch of whiners who can’t see (they’re hijacking the financial good of the many) the new world global order as clear as ye can.
    The rising world food crisis is due to globalization. You can ignore the relative poor/unemployed in the streets/cities of Dublin, London, New York but not when you follow the trail of global globalization to the starving.
    I would nearly expect from ye a Thatcher response to what I just said: ”the good Samaritan had to be in a position to give a helping hand.”
    By the goodness of giving (that good Samaritan helping hand) we are again stopping the poor farmer from producing; a catch 22.
    ………… protectionism is exactly as you say for the many, but just how many is the many on a global scale, and is that justified; is it ethical.

    When I watched Robin Hood, William Tell- the deliverance of the poor by the archetypal hero, I thought it was firmly understood how idiotic, how primitive poverty was; the ridiculed sheriff exposed for the fool …. the fool for who not only think about treating the people left in his charge (((and the important thing is “only in his charge“))) but that he could get away with it. NEVER!!!
    ———————————————————-
    PS:
    (The Sheriff of …….) Gordon Brown called for prudence and thrift in our kitchens.
    He suggested we could save up to £8 a week by making our shopping go further. It was vital to reduce ‘unnecessary demand’ for food, he said
    At a G8 summit in Japan recently, the Prime Minister and other world leaders sat down to an 18-course gastronomic extravaganza (which is focusing on the food crisis)
    The dinner, and a six-course lunch, at the summit of leading industrialized nations on the island of Hokkaido, included delicacies such as caviar, milk fed lamb, sea urchin and tuna, with champagne and wines flown in from Europe and the U.S.
    ———————————————
    PS PS:
    It’s coming from the sorrow in the street,
    the holy places where the races meet;
    from the homicidal bitchin’
    that goes down in every kitchen
    to determine who will serve and who will eat.
    From the wells of disappointment
    where the women kneel to pray
    for the grace of God in the desert here
    and the desert far away:
    Democracy is coming ……….

    Sail on, sail on
    O mighty Ship of State!
    To the Shores of Need
    Past the Reefs of Greed
    Through the Squalls of Hate
    Sail on, sail on, sail on, sail on.

    It’s coming to America first,
    the cradle of the best and of the worst.
    It’s here they got the range
    and the machinery for change
    and it’s here they got the spiritual thirst.
    It’s here the family’s broken
    and it’s here the lonely say
    that the heart has got to open
    in a fundamental way:
    Democracy is coming to the U.S.A.

  34. b

    @malcom,

    Why? We neglected the ports during the boom and our manufacturing industry flatlined. We don’t have the infrastructure to handle large ships. Even if the dock were large and deep enough one Panamax ship discharging would bring Dublin to a total standstill.

  35. Longlivetherepublics

    Freetraders are like donkeys eating a few oats from their globalist masters hands and are brainwashed into not seeing the long green grass.

  36. Philip

    b, that’s my point. Right now Dublin is under capacity and bottlenecked (contradictory but truely Irish I am sorry to say) – for reasons of underinvestment etc. I think the tunnel was too small (being chokkers at peaks just goes to show another underdimensioned mess) and anyway, most of the roads are still substandard to this day. Making sensitive equipment and shipping by road (as we have no trains) would add to unreliability with all the potholes and nuff said about our rickitty rail network. The country is very far from being “tuned” to run a 21st century economy (no matter how open or closed the global economy becomes).

    I was chatting to an Italian the other day, we were laughing at our respective looney economies. The basketcase of Europe as many would have us believe is 30 times bigger than Ireland and has an infrastructure to match. If we even had 50% of the infrastructre they had per head of population, we’d be flying.

    Airships…big huges ones – one cubic mile volume! It would make roads and ships and rail irrelevant. We have plenty of hot air to make it happen.

  37. B

    We have the trains but the drivers won’t do containers. Point blank refusal.

    We have the hot air allright but they would sink the airships because they are also full of shit!

  38. Longlivetherepublics

    Roads are a drain and rail is a gain. No matter how good the road network is it will always represent
    an over all waste as the cost of building and maintaining it will always exceed the benifit in terms of moving
    freight. The absolute most inefficient way in terms of energy and throughput of transporting goods is to use trucks. Trucks grind the roads back to gravel, use a lot of fuel to move a relatively small amount of freight and are slow, leading to bottlenecks and congestion. On the other hand electric based, high speed rail is
    currently the cheapest mode of freight transport available today.

  39. B

    Yes but we pulled the rails out and we won’t use the ones that are already there.

    The bottleneck is human.

  40. Philip

    I heard it said

    Performance = Attitude x Ability

    Probably pinched from one of those management GURU books. I think it’s very accurate and can be applied here. We have no real problems here with ability. It’s the attitude is the snag and it matters not about the rest of the world or its machinations.

  41. Garry

    I hate to argue with someone who’s well meaning but its a lot more complicated than what Paddy is saying. Food shortages have many causes

    * EU/US subsidies to farmers result in their produce being sold below cost in other countries thus undercutting local producers and damaging local production. Dumping like this is not restricted to the EU/US though they have the biggest subsidies.
    * Crisis aid has the same result and some people who know far more than me argue that its wrong to send food. I cant agree with that but I wonder why its very easy for western people to get jobs (they are paid) doing development projects in third world countries… theres plenty of smart local people capable of doing most (if not all) of the tasks.
    * Oil price increases directly translate into food price increases as key inputs fertilizer, pesticide etc etc are all made from oil.
    * Biofuels have increased food prices as we now outbid poorer countries for food to turn into fuel.
    * Population growth is highest in those countries that cant even support their existing populations. This is the major issue as when your population doubles then the need for food etc doubles.
    * Climate change/disease etc are all contributing to make marginal areas for food production even less productive.
    * Overconsumption here, a lot of perfectly good food shipped around the world to us is just binned.
    * Overconsumption ramping up in newly rich countries.
    * Speculation on commodities by traders who never even see the stuff is pushing the prices of rice/wheat/oil etc up.
    * Theres many more causes, bad local governments etc….

    Whats the solution?

    So far, well meaning efforts to make things better (biofuels) have actually made things worse. Another well meaning guy, Pope Benedict recently slammed “insatiable consumption” as the cause of the worlds problems. I know he was probably aiming this at us and the yanks but 1) he looks he could skip the odd dinner himself and 2) if he would start preaching sensible birth/population control policies then maybe he could actually contribute to solving the problem. Insatiable population growth leads to insatiable consumption.

  42. Brian

    David,
    You said:

    ” It is a simple economic fact that no country ever got rich without trade”

    Wrong.

    I’m beginning to worry about you since the downturn took hold – you’re not quite as spot on as you used to be, and you seem to be ‘toeing the line’ a bit more. You discuss China quite a bit in your article, and miss the glaringly obvious. The most cursory glance at history will tell you China was a fantastically rich country while all trade was banned to and from it. The western powers were drawn to ‘the riches of Cathay’ like moths to a flame, and once they got a toe hold there, China’s riches arguably declined until now. Getting them hooked on opium certainly helped.

    And now they have learned how to play the globalisation game …

    I wonder what is to come next from that ancient country, where instead of making plans in 4 year political cycles, they plan at an intergenerational length of time. They have long memories.

    Your Friedmanite colours are really showing through in this article. What happened to the maverick economic thinker we all knew and loved? Don’t be afraid to stick your head above the parapet now, of all times.

  43. Johnny Dunne

    “But a constructive alternative hasn’t yet been articulated.”

    For this to happen there should an open and honest debate on the ‘fundamentals’ of our ‘trade’. A lot of confusion over the value of ‘internationaly traded servcies’ and the agri / food sector since the WTO…

    Those in the know should call it as it is – Dublin and the other Irish ‘cargo’ ports are used for ‘imports’. Ask any haulier what’s the ratio of empty containers going out across the Sea to full ones in – 4 to 1!
    The cost of shipping a full container of ‘product’ inside the M25 within 24 hours canb be the same as from Dublin to Cork…the problem is not infrastructure and the cost of distributing product to say UK.

    We are planning to build ‘infrastrcuture’ for the ‘carraige’ of imports not exports – we need more exports !

  44. Malcolm McClure

    b said:– “We neglected the ports during the boom and our manufacturing industry flatlined. We don’t have the infrastructure to handle large ships. Even if the dock were large and deep enough one Panamax ship discharging would bring Dublin to a total standstill.”
    Taking a Suezmax or Panamax ship through the English Channel to Rotterdam is a nightmare. Thus a transshipment port in the Irish Sea shifting containers from the biggies to smaller vessels for redistribution throughout Europe makes sense. If it can cut the cost of importing goods to this country as well, then it will reduce the cost of living for us all and improve our competitive advantage. There must be a more efficient way of importing goods to Ireland than bringing everything on Roro ferrys at vast expense.

  45. Degeneration by Max Nordau, now there’s a book to read , he didn’t have much time for our own Oscar Wilde either , but he had some valid points about urbanization. !.
    We are entering a state of recession now due to many factors, external and internal the external factors such as the speculators pushing oil above the $150 mark ( though slightly lower now ) , traders gambling on the future price of cereals and the Muppet’s who we have listened to on Global warming!. We cannot blame the farmers for our current situation or their narrow minded approach to protecting their business.
    Our Corporation tax and incentives given to property developers was what created our ‘little economic miracle’,which created a false reality among the masses , banks with the talking dragons giving out loans for over inflated houses and nice fast German cars to drive on our European funded road net work.
    Trouble is here presently we have no forward thinkers as we are all too busy looking after number one a systematic result of capitalism , so we deserve to suffer for a while and see we can’t live on the ‘never never ‘ for ever.
    We are a small under populated island on the edge of the Euro zone and it’s time we put our collective heads together , a peoples revolution perhaps is going to be needed for those currently leading us really don’t care about the ordinary Irish folk who elected them , and they are right, we kick them out of power and they retire on very fat pensions so why should they care !
    Trouble is collectively we are so far up our own arses it doesn’t matter that we built a port tunnel too low , or did not develop our infrastructure or modernize our health care , or build proper schools for the next generation. We have a national broadcaster which shows us hours of wildlife programs and re runs and then pays it’s talentless crew six figure salaries and asks for a license fee from us to top up the revenue it gets from advertising every fifteen minutes.
    And now Our power suppliers are going to screw us too,. why not build those four nuclear power plants?
    Our talented sales people should be talking with the Indians and Chinese now and selling them our native products such as Guinness ( which is just Irish in name now but that’s splitting hairs ), our whiskey’s maybe even a bit of poteen . We can’t be depending on micro soft and Intel to stay here forever , so don’t be knocking the farmers yet , we may in time need what land is left to get us out of the hole we have dug here now for our selves.
    Hope you enjoyed your sun holiday too Mr Mc Williams

  46. Eric Dig

    globalisation has brought to the socail table nothing but the worst elements of the human condition, get rich on someone elses back, ive done it myself!

    and to it i bid goodbye ..

    David … you are in danger of making cases for the indefensible and boring cases at that , cmon .. degenerate…. 100 years ago,

    read GLOBAL WARMING..FOOD..OIL…INTERNET SEX

  47. B

    The powers that be wouldn’t put in a fiver for broadband into the ports.

    Nobody will stump up the cash for a shallow wannabe Rotterdam. We have no industrial hinterland to justify it and the South coast of the UK has bigger ports than we do.

    We are a bit player. Sorry, niche player.

  48. Ref Mr B….. For the size of this island our ports are big enough , it’s as you said earlier it’s the management where the problem is. Regarding Broadband , south Korea has a better net work than we have .
    With the current down turn I can see Biffo taxing those of us who do have broad band ,..we’re doomed

  49. B

    South Korea has a better network than everyone.

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