Unless Ireland makes housing cheaper we will miss Brexit bounce

Britain in 2019 doesn’t feel quite like Yugoslavia did 30 years ago, but then again Yugoslavia didn’t feel like Yugoslavia until it became the former Yugoslavia. Brexit is pointing to the end of the UK.

The surface unity of the May-Corbyn truce is nothing but a marriage of convenience forged in desperate circumstances.

Long-term, we face something bigger than the UK leaving the EU: we face the potential Balkanisation of the United Kingdom.

A looser federation, which is the obvious implication of Tony Blair’s 1990s’ devolution initiatives, constitutes the minimum expected disruption.

One of the less extreme outcomes is that Scotland ends up like Quebec, a semi-autonomous province, but that mightn’t go far enough for the SNP, particularly if, post Brexit, the EU’s full membership is on the table.

Meanwhile, the Belfast Agreement will hold, with all its attendant demographic implications.

Political leadership

Constitutional rupture can happen peacefully, as in the Czech and Slovak divorce, or it can end in chaos as in Yugoslavia or Ireland 100 years ago. Brexit has been the slow part.

The quick part, the next phase, will depend on the quality of political leadership, and right now there is not much of that on display, except perhaps in Scotland.

History might conclude that the EU was the very thing that kept the early 21st-century UK together in the face of the various nationalist pressures.

Whatever the blueprint, the coming years will be turbulent politically in what we now call the UK.

There will be lots of soul-searching, and it could lead to the peaceful rearrangement of Britain’s nations, at a pace set by an indignant English nationalist faction that could emerge out of the Tory split – another likely outcome of Brexit.

So what about us?

Unneighbourly as it may be to declare, this presents a unique, once-in-a-generation, opportunity for the Irish economy because turbulent countries, such as the former UK, will scare capital and talent away.

Capital moves like water, following the path of least resistance. Talent comes to where it is most welcome.

Brexit throws up barriers to both. A Corbyn government would penalise capital; a Brexiteer Tory one would deter foreign talent.

Where is this capital and talent that wants access to the EU going to go?

Act of aggression

Ireland is set to benefit enormously because, economically, Ireland is a modern, tolerant cog in the globalised world, profiting from the flow of capital, knowledge and talent. Brexit is an act of aggression against this global system.

Ireland, as a fully paid-up member of the EU, is plugged in to the global via multinationals with their peripatetic workforce and its door is open to the business, knowledge and talent that is set to flow in here.

If that door does not stay open, that talent and business will go elsewhere, and the Brexit dividend for Ireland will be lost. It’s really that simple and that urgent. If Ireland is too expensive, knowledge will go somewhere else.

One thing that makes Ireland unattractive is expensive land; it sets the high price for everything else. We urgently need to fix the feudal grip that expensive land and housing have on our economy and society.

Inflated land and property prices are – by a country mile – the biggest threat to Irish prosperity. In the modern world, land (unless it is farmed) is the least productive economic resource.

Its price should be falling relative to wages. Wages are the return to workers. As we educate people and their productivity rises, wages should rise relative to land prices, because land creates nothing.

People and knowledge combined create everything.

Artificially expensive

Therefore, in a modern society, land should be cheap compared with other economic resources; but in Ireland it is made artificially expensive because it is not taxed properly.

Instead, it is supported by restrictive planning laws and it is used by the banking system as collateral, giving land a ridiculously inflated value.

This feeds into rents and house prices, driving them both up to silly levels in a country that still enjoys the lowest population density in western Europe.

Expensive housing, land and rent in Ireland constitute a manufactured heist inflicted on workers by landowners.

It is fabricated by the intersection of planning, finance, political expediency and vested interests.


On a human level, this crisis plays out at one extreme where you have homelessness, and at the other, where working people pay up to 60 per cent of their income on rent.

This is abnormal in an international context.

It is important to appreciate how far out of whack is Ireland on the property/land front.

In the US, the Federal Housing Association and other public bodies have long deemed housing expenditures that exceeds 30 per cent of household income as an indicator of an affordability problem.

Ten per cent of people renting in Dublin are paying twice that. We are way out of line.

And, of course, the surplus is skimmed off by a landowning class that does nothing but sit back and take the rent.

This is feudalism; but more egregiously it is legislatively-enforced feudalism. Feudalism is the antithesis of the modern economy.

Now let’s go back to the Brexit dividend and the likely flow of capital, talent and knowledge in to Ireland. If we let landowners rather than skilled workers snaffle the coming Brexit dividend, we will miss this enormous opportunity.

Highly successful trading countries such as Singapore figured out this land-vs-wages conundrum years ago.

Today 85 per cent of the land in Singapore is owned by the government, so as to prevent land prices inflating too much and to prevent private landowners grabbing too much of the national wealth, which depends on trade not land.

DUP hour of power

When the latest iteration of the Brexit saga passes, we will see that the long-term economic implication is that many investments that used to go to the UK will come to Ireland.

Britain will be engulfed in its own identity crisis and will trade with the EU on less favourable terms.

The North will ultimately get regulatory alignment with the EU because the DUP’s hour of power will have gone. Electorally, it’s hard to see them having such disruptive sway again.

The urgency for Ireland is to fix our land-based feudalism once and for all and join the 21st-century global economy, garnering the Brexit dividend for the good of the many, not the few.

Brexit can’t save unionism. Prosperity might

Being best man is always a tricky business; being best man at a North-South Co Down marriage in July 1994, came with a whole new set of challenges.

The speech was a minefield. When you are involved in a ceremony officiated by the moderator of the Presbyterian Church in Ireland, you are alert to the cultural fault lines between the North and the South, not so much the well-signposted differences, as the disguised incendiary devices primed to go off even when you think you are on safe ground.

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The policy that saved the rich and screwed the young

Ten years ago, faced with mass bankruptcies and the very real prospect of a rerun of the Great Depression, the US Federal Reserve took the fateful decision to unveil a new policy called “quantitative easing” or QE.

This anniversary may seem unimportant but it should be commemorated because the policy of QE changed politics more profoundly than almost any other event or policy initiative in the past decade. Ironically, a policy that was supposed to protect the balance sheets of the wealthy has unleashed forces that may lead to the appropriation of those assets in the coming years.

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Ireland has a lot to lose from ‘slowbalisation’

Few societies in the world have been so positively transformed by the economic opportunities arising from globalisation as Ireland. Countries get rich from trading, and small countries get rich quicker when they can escape the limitations of their own small domestic market by trading with the rest of the world and getting their message heard beyond their borders.

The heyday of globalisation has been from 1990 to now, although things are changing with trade wars, nativism and protectionism. Countries like Ireland have a lot to lose if the world gets smaller.

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State’s fiscal incontinence is deeply worrying

In the upmarket Johannesburg suburb of Rosebank, I sip a beer. This is an affluent place full of beautifully designed – but heavily-guarded – homes. “Bunkering” is what white South Africans call it.

When you are afraid of going out, you invest in your fortified “bunker”.

This is where you entertain friends, where your kids feel safe and where you can block out some of the more threatening realities of daily life in this teeming metropolis.

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Brexit is terrible for Ireland? I don’t buy that

Seamus Mallon described the Belfast Agreement as “Sunningdale for slow learners”. In the end, Brexit is likely to be “Norway for slow learners”.

Events this week mean it’s now probable that the UK will limp out of the EU in two months with a cobbled-together, Norwegian-style deal. On the face of it, little will change materially until the final trade deal is hammered out.

Except everything has changed.

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The ‘Merc index’ shows the Irish property market madness

Few songs capture the power of branding, commercial manipulation and consumer yearning like Janis Joplin’s Mercedes Benz.

With her opening lines “Oh Lord won’t you buy me a Mercedes Benz”, Joplin sums up the “arms race” nature of modern consumerism whereby one purchase, in this case her friends buying Porsches, has to be cancelled out by her getting a Mercedes-Benz.

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Why 2018 was such a strong year for the Irish economy

This year was an exceptionally strong one for the Irish economy. In fact, 10 years after a monumental crash which destroyed the balance sheet of many hundreds of thousands of Irish people, the position a decade later is quite remarkable.

At the depth of the crisis, most of us wouldn’t have predicted that incomes would be back above their 2008 peak by 2018.

Despite obvious problems in the housing market, overall performance has been pretty good and pretty good is well, pretty good.

We humans have a tendency to undervalue the significance of pretty good. It is always easier to point out what is wrong, rather than appreciating what is right. We tend to allow some notion of “the perfect” to bully “the good”, as if good is the enemy of perfect; it is not.

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France’s unrest shows the limits of economics

Two huge rivers, the Rhone and the Soane which converge in Lyon, have been ferrying goods, people and ideas into this majestic city for centuries. The Greeks were here, so too were the Romans. The Romans made this place the capital of Gaul.

When Julius Caesar was assassinated, the recently subjugated Gauls revolted, prompting the Romans to move their city to the high ground over the rivers. From here the city flourished, close to Italy, Switzerland and Germany, absorbing ideas and people from each region.

Examples of these foreign incursions abound. The Gothic cathedral, a symbol of the power of the Catholic church, was extensively defaced by Calvinists from Geneva who took over the city briefly. The silk industry, created by Italian merchants, drove the bourgeois prosperity of the city for centuries.

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