Brian Lenihan Memorial Lecture
Jim O’Callaghan TD
University of Cambridge
15 September 2022
Preliminary
Brian Lenihan was appointed Ireland’s Minister for Finance on 7 May 2008. At the time he assumed office he did not have any understanding of how politically and personally traumatic would be his tenure. When politicians assume ministerial office they generally have a broad awareness of the problems they must tackle and challenges they must face during their impending term of office. No such privilege was afforded to Brian Lenihan. Within 5 months of taking office Ireland’s banking system came close to collapse leading to a financial and banking crisis that eroded Ireland’s financial independence. Brian Lenihan was required to introduce 3 government budgets within the space of 14 months, nationalise many of Ireland’s banks and establish a statutory agency, the National Asset Management Agency (NAMA”), to purchase defaulting loans from those banks in order to provide some prospect of future viability for Ireland’s banking system. The austerity measures introduced within those budgets had a very severe impact on most Irish citizens and devastating political consequences for Lenihan and his government colleagues.
As Ireland’s political and financial crisis grew, Brian Lenihan was required to perform one of the most humiliating acts of any contemporary Irish politician when, on behalf of Ireland, he sought and received an €85 billion bailout from the European Union (EU) and the International Monetary Fund. This humiliation was not lessened by the fact that the bailout was part of the European Sovereign Debt Crisis that was then dominating the Eurozone. In an interview in April 2011 he identified the terrible role he, as Minister for Finance, had to play when travelling to Brussels to sign the bailout agreement, being on his own at Dublin airport
“and looking at the snow gradually thawing and thinking to myself, this is terrible. No Irish Minister has ever had to do this before. I had fought for two and a half years to avoid this conclusion. I believed I had fought the good fight and taken every measure possible to delay such an eventuality. And now hell was at the gates.”[1]
Brian Lenihan died 7 months after that bailout agreement. There were many tragic consequences associated with his death. One was that he never got to see the Irish economy recover in the way that it has during the past decade. The crisis that Ireland faced between 2008-2010 was alarming, and momentous decisions were made by Brian Cowen’s government that included Brian Lenihan. Many, though not all, of the decisions it made were correct and led to the Irish economic recovery. At the time there were prominent, popular and repeated calls for Ireland to default on its debts or to let its banks collapse without any state support. Counterfactual history is impossible to paint but it is certainly the case that had Ireland defaulted on its debts and let its banks collapse the economic recovery it subsequently experienced would neither have been so prompt nor successful.
In fact, one of the criticisms that could legitimately be made of decisions made by the Irish government at that time was that it underestimated the resilience of the Irish economy and the demand that would subsequently exist for property constructed during the Celtic Tiger years. One of the main political questions in the immediate aftermath of the establishment of NAMA was what would be done with the ghost estates and excessive number of housing units that had been built during the boom. Today’s housing crisis reveals that a successful Irish economy needs a constant and continuous stream of housing units, irrespective of temporary economic dips.
The challenges that faced Brian Lenihan were momentous. They were challenges that most people honestly believed would occur only once in a century. Unfortunately, in the 11 years since his death Ireland and the world faces even greater challenges that are not merely economic, but existential and threatening. Consequently, it is as much a challenge as an honour to give this year’s Brian Lenihan Memorial lecture on the topic of “Ireland’s Role in an Endangered Europe”. Although each generation considers its challenges immense, the events of 2022, dominated by Russia’s invasions of Ukraine and the consequent energy crisis that has arisen throughout Europe, reveal that the general peace that permeated Europe since the end of the second world war has come to a shuddering halt. Europe is again endangered. This paper attempts to identify the immediate challenges facing Ireland, how they should be confronted and what should be Ireland’s role in this different and endangered Europe.
[1] Interview with Brian Lenihan in “Bailout Boys Go to Dublin”, BBC Radio 4, 24 April 2011.
The Defence Challenge
When Ireland joined the European Economic Community (EEC) in 1973 the Iron Curtain divided millions of Eastern Europeans from their Western European counterparts. That curtain cruelly confined the people of East Germany, Poland, Czechoslovakia, Hungary, Yugoslavia, Romania, Albania and Bulgaria from the rest of Europe. This confinement, combined with the submergence within the Soviet Union of the independence of Estonia, Latvia and Lithuania in the immediate aftermath of the second world war, made the political division of Europe look irreversible. There are many and varied reasons for the collapse of the Soviet Union and its oppressive dominance over neighbouring independent countries but one was unquestionably the establishment of the EEC and its subsequent transformation of the politics of Europe.
At the time of Ireland’s joinder of the EEC in 1973 most of Eastern Europe was militarily part of the Warsaw Pact, whilst the western part was largely under the military control of the North Atlantic Treaty Organisation (NATO).[1] Military tension in 1970’s Europe centred on the borders between Warsaw Pact and NATO countries. In the immediate aftermath of the collapse of communism and the Soviet Union, Iron Curtain countries rapidly moved to extricate themselves from the overbearing and dominant shadow of the Soviet sphere of influence. Nationalist governments in former soviet entities or Warsaw Pact countries decided that the best form of protection from centuries of overbearing Russian influence required a rapid joinder of NATO. East Germany, as a part of unified Germany, joined NATO in 1990 and 9 years later it was joined by Poland, Hungary and the Czech Republic. By 2009 Albania, Croatia, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia, all similarly decided that their safest defence option was to join NATO.
Today the military map of Europe has changed unrecognisably since the 1970s. All of EU with the exception of Ireland, Malta, Cyprus and Austria will soon be part of NATO[2]. The military influence of the Soviet Union has collapsed and its successor in title, the army of the Russian Federation, does not equal the relative military strength of the former Soviet Union. However, it is not when countries are at their strongest that they are most threatening. Recent history teaches us that a country’s vulnerability rather than its military strength is what makes it dangerous.[3] On this analysis it is probably the insecurities of the Russian Federation and its leadership, rather than any inherent and consistent strength, that has propelled its act of aggression against Ukraine.
The war in Ukraine is a product of that insecurity and is an aggressive and reactionary response by Russia to the understandable desire of Ukraine to protect itself from an unpredictable and insecure Russia. The war, however, should not cause Europeans into believing that there is a likelihood of Russia invading or openly launching military acts of aggression against NATO countries. Nonetheless, countries outside of NATO, particularly those within the Russian sphere of influence such as Sweden and Finland, have legitimate reasons to fear for their protection. It is in this context that the question of Ireland’s military neutrality has been recently discussed.
Although the question of Ireland’s neutrality was raised by senior Irish politicians and commentators in the aftermath of the invasion of Ukraine, there is no actual or active political consideration being given to Ireland changing its policy of military neutrality. Any debate about Ireland’s military neutrality in light of the increasing enlargement of NATO in Europe needs to take into account two factors. First, Ireland’s military neutrality has historically served the interests of the country and its people well as a political policy.[4] Second, the joinder of NATO by former Warsaw Pact countries or those countries in the immediate vicinity of Russia was a perfectly understandable and necessary response by those countries to the threats and occupations by Russia under the Tzars, Soviet communists or plutocrats who imposed their political control on the Russian people during the past 300 years.
Notwithstanding the apparent isolation of Ireland, soon to be one of only 4 EU countries outside of NATO, there is no strong public desire in Ireland to join NATO notwithstanding any threat that may arise from that isolation. Part of the reason why Irish people would not wish to abandon their country’s neutrality is because Article 29.2 of Bunreacht na hÉireann affirms Ireland’s adherence to the principle of the pacific settlement of international disputes by international arbitration or judicial determination. Bunreacht na hÉireann also acknowledges that Ireland accepts the generally recognised principles of international law as its rule of conduct in its relations with other States and, consequently, acknowledges the right of all States to defend themselves from acts of aggression.
It is also worth emphasising that Ireland has never been and never will be a military power. The Irish Defence Forces have a long and distinguished international record in the area of peacekeeping and support for humanitarian intervention. However, in the absence of any immediate and pressing threat, Irish people do not want to see a vast increase in the amount of their limited resources being devoted to expenditure on offensive military weapons. That is not to say that there is no desire to see greater spending on Ireland’s Defence Forces that have been seriously underfunded during the past decade, but this should not be misinterpreted as a desire for Ireland to become a serious military power. This issue is of real societal importance as any country seeking to secure membership of NATO would be required to spend 2% of its GDP on defence.[5]
The answer to the legitimate question of what Ireland’s response to an invasion by a threatening military power would be is that Ireland would, in all likelihood, be required to defend itself on its own with its current defence forces. To some, that may appear to be an inadequate response to a serious risk; but it is a risk that most Irish people are prepared to carry, mainly because they view as improbable the likelihood of such an event. Notwithstanding the limited military resources at its disposal, history reveals that Ireland and other independent countries are difficult to suppress and control without widespread domestic support.
Ireland’s role in this endangered Europe should centre on the fact that it is a respected European country that has not been, never will be and does not want to be a global military power. It also has the advantage of being a European country that comes with no legacy of empire. That is a considerable advantage in a world where there is growing recognition that the empires of the 18th, 19th and 20th centuries caused havoc and destruction throughout many parts of the world and should bear some responsibility for the many weaknesses evident in independent, post-colonial states. The invasion of Ukraine by Russia was dictated as much by past interactions between those two countries as it was by their recent political disputes. Ireland has been remarkably successful as an example of a post-colonial independent state and how it can establish a strong economy and exert political influence without the necessity of military power. It is in this context that Ireland’s neutrality can be used as an advantage in its relations with other countries. As a country that is constitutionally devoted to peace and friendly cooperation amongst nations, and which adheres to the principles of the pacific settlement of international disputes, Ireland should play a central role in the political defence of the autonomy of independent countries. In its response to the invasion of Ukraine by the Russian Federation, Ireland has emphasised these principles by forcefully condemning and using its political, non-military, influence to oppose and condemn that invasion.
[1] The European Members of NATO in 1973 were Belgium, Denmark, France, Greece, Iceland, Italy, Luxembourg, Netherlands, Norway, Portugal, Turkey, United Kingdom and West Germany.
[2] On 18 May 2022 Finland and Sweden formally applied to join NATO.
[3] In Danger Zone, The Coming Conflict with China, Hal Brands and Michael Beckley, W. W. Norton & Company (2022) the authors contend that the most treacherous stage in the life cycle of a rising power is at the point where it is strong enough to disrupt aggressively the existing order but is losing confidence that time is on its side.
[4] Under the Free State Constitution Article 49 provided that the Irish Free State shall not be committed to active participation in any war without the assent of the Oireachtas. Subsequently, under the Statute of Westminster in 1931 the United Kingdom renounced the right to legislate for the Irish Free State. This policy of military neutrality continued during the Second World War although, in practice, the Irish government did provide support and preferential treatment to the allies.
[5] At present, Ireland spends approximately 0.3% of GDP on defence and the Irish Defence Forces have a budget of €1.1 billion.
The Energy Challenge
The biggest threat Ireland faces as a result of the Russian invasion of Ukraine is the consequent shortage of gas that has arisen and the accompanying rise in the cost of energy. Ireland is in a particularly precarious position because of its dependence upon the importation of gas via the United Kingdom (UK), the current limited availability of renewable energy, the declining amount of gas being extracted from the Corrib gas field and the absence of any Liquefied Natural Gas (LNG) storage facilities in Ireland. More than 70% of Ireland’s energy is imported. All its oil is imported and three quarters of the natural gas used comes from the United Kingdom which, in turn, sources most of it from the North Sea and Norway. Inevitably, the current closure of the Russian gas pipeline as a result of Gazprom, the Russian energy supplier, stopping gas flow via the Nord Stream 1 pipeline, is transforming energy supply in Europe and will place great demand on Norwegian and British Gas.[1]
Two issues now face Ireland. First, the prospect of not having enough energy resources to meet our domestic and business demands. That is a long term issue that will not be resolved until Ireland establishes a renewable energy sector that will meet all of its domestic energy needs. That will not be achieved for at least another 30 years. Second, the extraordinary surge in the price of electricity, heating and motor fuel which has arisen recently as a result of the diminishing supplies. That is a short term issue that requires an immediate response from the Irish government in its forthcoming budget.
Although the growth of renewables as a source of Ireland’s energy is increasing, the necessary transition to a carbon neutral economy cannot occur in the medium term without reliable access to the natural gas needed to fuel our ongoing energy requirements. Ireland does not have such access. This energy issue requires a mature and coherent political response in Ireland; but that response will be difficult unless Ireland’s political system faces up to the fact that, to date, some of its energy policies have been dictated by political convenience and a failure to face the reality of what is required as it transitions to a net zero economy. For instance, Ireland has banned exploration for gas because of its legitimate and well-intentioned concern about the devastating impact fossil fuels are having upon the environment. However, it continues to import gas and other fossil fuels from other countries yet is happy to present itself in the virtuous position of being a country that does not explore for gas. That may have been a virtue Ireland’s political system could enjoy prior to the cessation of Russian gas exports into Europe, but it is no longer sustainable until it has full renewable capacity. Consequently, it would be environmentally and politically more sensible and honest for Ireland during its transition to net zero to extract gas that exists off its west coast rather than importing it from foreign countries.
Ireland’s legislative commitment to be carbon neutral by 2050 is a commendable and achievable goal[2]. However, it cannot ignore that this goal can only be achieved if, in the interim, it avails of transition fuels such as gas whilst expanding the necessary infrastructure for renewable energy. This may be politically uncomfortable but failure to appreciate it will mean that the transition to a carbon neutral economy will not occur and will not secure public support. Therefore, Ireland needs to review its prohibition on gas exploration off its west coast. It also needs to extend any licences for gas exploration that exist at present. The Corrib gas field was launched in 2016 and will cease probably by the end of this decade but there is a strong likelihood of other gas fields in its vicinity. These can only be availed of if government permits or extends exploration licences. The failure to permit or extend licences for gas exploration, a relatively clean and permitted transition fuel, off our west coast whilst at the same time importing gas (or indeed electricity generated through nuclear energy) from other jurisdictions is a type of political hypocrisy that elevates political virtue above political reality.
The threat caused by rising prices and potential energy blackouts is more immediate. It needs to be recognised that this is an issue that could generate a very negative public response and indeed, as has been suggested by the European Commissioner for Climate Action Frans Timmermans, a threat of unrest in Europe this winter if energy costs and supply become unattainable.[3] Timmermans stated:
“If our society descends into very, very strong conflict and strife because there is no energy, we’re certainly not going to make our climate goals. We’re certainly not going to get where we need to get if the lack of energy leads to strong disruption in our societies, and we need to make sure people are not in the cold in the coming winter. We need to make sure we keep our industry, as much as possible, functioning because the one thing that could help Putin is divisions in our society.”
This energy crisis also poses a serious threat to Ireland’s economy, as was apparent in August 2022 when an amber alert was issued on the electricity market for 2 days in a row[3]. The single electricity market operator stated that the reason for the amber alert was because of “a generation shortfall in Ireland”. The success and reputation of the Irish economy as an open vibrant economy that attracts inward investment will be severely damaged if Ireland cannot commit to providing energy supply. It is a cornerstone of Ireland’s economic policy that corporations are welcome here and that the necessary supply of an educated workforce and reliable energy will be available. This will be completely undermined if there are power outages or, as was suggested by the Commission for Regulation of Utilities (CRU) on 8 August 2022, there is the imposition of “peak tariffs” on large industrial users of electricity to pressure companies to reduce usage when supply is tight. Obviously, all domestic supply must be prioritised but it will be extraordinarily damaging to Ireland’s successful economic model, and the vast tax receipts it gets from corporation tax, if it is no longer able to provide continuous and affordable energy to corporate customers.
The success of the Irish economic model in attracting foreign investment has been replicated in other countries that have joined the EU. Ireland has been an economic role model for those countries and should continue to be an example of how a country with limited natural resources can build a strong knowledge based economy. The risk that Ireland faces, however, is that the Irish economic model will be damaged if businesses can no longer be assured that they will have their energy needs met. Any such failure would inflict tremendous damage on Ireland’s economic reputation and would, according to former government Minister Pat Rabbitte, constitute a “dereliction of duty”. In recent commentary that echoed the challenges faced by Brian Lenihan during the financial crisis he stated:
“The parties in power, Fianna Fáil and the Greens, at the time of the financial crash were almost destroyed at the time of the subsequent election. The parties that went in to pick up the pieces, Fine Gael and Labour, were similarly devastated. Those responsible for the dereliction of duty at the Central Bank and Financial Regulator escaped almost scot free. One wonders in the case of energy whether the Commission for Regulation of Utilities was similarly asleep at the wheel. At a minimum the Commission should be required by the relevant Dáil Committee to explain what steps (if any) it had recommended to government to provide against energy supply now being in such a precarious position.”[5]
Irish political debate frequently ignores the realities of Ireland’s vulnerability when it comes to the provision of energy. It also fails to expedite developments that are central to the necessary expansion of our renewable energy sector. Repeatedly, the Irish political system refers to the great opportunities that exist for wind energy offshore on the west coast but notwithstanding these utterances development has been far too slow.
It can also not be ignored that as Ireland approaches this precarious winter it is enormously dependent upon receiving gas via the UK. When the UK was a member of the EU it was obliged to give Ireland proportionate access to gas supplies but that no longer applies since Brexit. Although Prime Minister Truss is only in office 9 days, if she intends to provoke a further dispute with the EU on the Irish protocol attached to the Withdrawal Agreement, the fanaticism associated with Brexit in certain sections of her party may result, at some stage, in the new Prime Minister being urged to use gas supply to Ireland as a negotiating mechanism in its ongoing dispute with the EU. It is this deteriorating political relationship between Ireland and the United Kingdom that is the third significant challenge that faces Ireland.
[1] At the end of August 2022 the Russian Energy supplier, Gazprom, completely halted the flow of gas through Nord Stream 1, a decision probably prompted by the decision of G7 countries to impose a price cap on Russian oil and gas.
[2] The Climate Action and Low Carbon Development (Amendment) Act 2021 provides for a national climate objective, which commits to pursue and achieve no later than 2050, the transition to a climate resilient, biodiversity-rich, environmentally-sustainable and climate-neutral economy.
[3] Risk of Conflict and Strife in Europe over energy crisis, EU Deputy warns. The Guardian 8 July 2022.
[4] Eirgrid, the company that develops and operates Ireland’s national electricity grid, issued an amber system alert to the electricity market on 9 and 10 August 2022 due to low wind, limited electricity imports and forced outages at a number of generators.
[5] Questions for the Utilities Commission as energy crisis was waiting to happen. Pat Rabbitte. Sunday Business Post, 18 June 2022.
The UK Challenge
Ireland will always be a friend of the UK but that friendship has experienced significant problems since Brexit. It is not that long ago that Ireland had excellent political relationships with the UK. The relationships between John Major and Albert Reynolds or Tony Blair and Bertie Ahern were partnerships that could not have been better. Each politician understood the political issues intimately; appreciated the vulnerabilities and sensitivities of all sides; compromised to facilitate others, and always kept at the forefront of their minds the primary political objective of their relationships. That inter-government relationship reached its zenith with the Good Friday Agreement in 1998. It continued very strongly until the financial crash and the immediate recovery notwithstanding changes of governments on both sides of the Irish sea. Unfortunately, in the years after the financial crash focus was taken off that relationship and the absence of any consideration for the consequences of Brexit on Ireland during the referendum debate was emblematic of that lack of attention. Although there were many occasions during the years of violence in Northern Ireland when Anglo Irish relations were damaged, after each occasion efforts were quickly made to remediate that damage. In contrast, Brexit has had a devastating impact on Anglo Irish political relations since 2016 and, unfortunately, the corresponding efforts to rectify the relationship have been lost in the UK’s ongoing politics of Brexit. Unfortunately, notwithstanding the exemplary efforts of Irish and British diplomats to ameliorate this damage, the politics of Brexit mean that improving Anglo Irish relations has not been a political objective of recent British governments.
The greatest challenge facing Ireland in its current relationship with the UK is trying to convince the UK government of the damage that it is causing to Northern Ireland and east/west relations as a result of its inconsistencies and ultimatums on the Irish protocol. Unfortunately, the government of Prime Minister Boris Johnson was prepared to sacrifice any relationship or political achievement in order to get its own way on Brexit. If new Prime Minister Liz Truss proceeds with the same policy as her predecessor or indeed with an even harder Brexitology, then it seems certain that the relationship between Ireland the UK will not improve until there is a British government that acknowledges and accepts the Withdrawal Agreement which it executed when it left the EU.
As a friend, Ireland probably needs to be more forthright with the UK about the direction it has taken in recent years even though there has been an understandable desire on the part of Irish governments and politicians to avoid involvement in the internal UK politics of Brexit. However, the impact of Brexit on Northern Ireland politics and the Good Friday Agreement can no longer be understated or downplayed. Those who now condemn the Northern Ireland Protocol were silent during the Referendum as to the potential negative consequences of Brexit on the North/South relationships and economies. Obviously, no political interest in Ireland wants to see trade barriers between East/West, particularly those involving trade within the UK between Northern Ireland and Great Britain. However, that is a consequence of Brexit and the decisions made by the UK government and parliament to leave the single market and customs union. The only coherent way for the Northern Ireland Protocol issue to be resolved is for the UK to re-join the single market and customs union. Not only would this be beneficial for Northern Ireland, but it would also recognise the perhaps unpalatable fact that the UK has suffered economically as a result of its departure from the single market and customs union.
The Office of Budget Responsibility in the UK in May 2022 unambiguously informed the UK government of the current and future economic consequences of Brexit.[1] It stated that the new trading relationship between the UK and EU that came into effect on 1 January 2021 will reduce long-run productivity by 4% relative to remaining in the EU. It also recorded that both exports and imports will be around 15% lower in the long run than if the UK had remained in the EU. Finally, it concluded that the new trade deals with non-EU countries will not have a material impact, and any effect will be gradual because the deals concluded to date either replicate or roll over deals that the UK already benefited from as an EU member state.
In that interim period, however, there is the danger that Anglo Irish relationships could regress even more as the UK isolates itself further within Europe. In doing so, however, the UK is not just damaging its own relationship with Ireland and the EU but undermining the one relationship to which it is unquestionably committed and which it describes as its special relationship, namely that with the United States of America (US). The cooling in the relationship between the current US administration and recent UK governments is a real challenge for Ireland since Ireland benefits when there is strong agreement between the UK and US on issues affecting the island of Ireland. This challenge provides Ireland with an opportunity, and indeed a responsibility, to augment its role as a bridge between the US and Europe.
[1] Brexit analysis – Office for Budget Responsibility (obr.uk)
The US Challenge
The dominance of the EU on the European continent means that the US government and US corporations must focus on the EU when they wish to engage with Europe. The UK, when a member of the EU, was the main point of contact. That access to the EU and its single market, through the UK, has evaporated since Brexit. As the only English-speaking country left within the EU, Ireland has an invaluable opportunity to increase its role in facilitating EU/US cooperation and continuing to attract inward US investment. Increasingly, the world is becoming compartmentalised into large economic blocks.[1] The departure of the UK from the EU therefore provides extraordinary opportunities for Ireland to enhance its role as a country that attracts US multinational companies seeking access to the EU’s single market. As an English speaking, common law jurisdiction with an independent judiciary and a highly educated workforce, Ireland’s opportunities have been enhanced by Brexit and these can be advanced further provided Ireland does not reverse its open economy approach.
At present, the Irish economy benefits enormously from corporation tax from large multinational technology and pharmaceutical companies, most of them based in the US.[2] The Department of Finance explained in August 2022 that Ireland’s strong exchequer revenue performance was driven by “significant increases in profitability in the multinational sector.” In fact, the rise in corporation tax has steadily increased in Ireland over the past 10 years with receipts constituting €4 billion in 2012 and rising to €15.3 billion in 2021. Those receipts could top €20 billion this year. However, 50% of the €15.3 billion in 2021 came from just 10 companies, including Apple, Google, Intel, Meta, Amazon and Pfizer. Any economic downturn in the EU or the US may impact upon these tax receipts but the multinationals in the Irish economy have, to date, been very resilient and there is no indication, as of yet, that their business models are in decline or they are considering leaving Ireland. If either of those events occur there will be a significant reduction in corporation tax receipts. It is seldom stated in Irish politics that Ireland’s public services are very dependent upon the presence, success and profitability of a small number of US multinationals. Although the retention and growth of multinationals is at present a prime political objective for Ireland, the real threat to the continued presence of the multinational sector in Ireland derives from, first, the potential change in direction of the country’s economic strategy that seeks to make Ireland attractive for inward investment and, second, the housing crisis that limits the availability of accommodation for all Irish workers.
Since Sean Lemass made the transformative decision to open up the Irish economy to foreign investment there has been continuous political support for this approach from successive Irish governments. The other government decision that transformed the Irish economy was Ireland’s entry into the EU’s single market. Consistently since then Ireland has supported an economic policy that is pro-European and pro foreign direct investment. Irish governments, operating from the centre ground, have recognised the advantages of these policies notwithstanding the presence of strong eurosceptic and anti-multinational voices in Ireland that have sought to blame these policies for social or political failings. These voices have not yet succeeded because, to date, Irish people have not voted to be governed from the extremes by those who seek to polarise Irish politics.
A significant threat facing Ireland at present is the prospect that its politics could become polarised along exceptionally divided lines as we have seen recently in the UK and the US, or consistently in Northern Ireland. Since our membership of the EU in 1973 Ireland has been governed from the centre. It has been an open market economy that has attracted multinationals and foreign workers who have been able to prosper as a result of economic policies that have been put in place by successive Irish governments. If there is a widely held belief that a future Irish government may change approach and direction to make foreign direct investment less attractive in Ireland, this may have a catastrophic effect on the multinational sector and, in particular, on the 275,000 people directly employed by multinationals in Ireland. Such investment is very dependent on and affected by government sentiment and the prospect of an anti-business government in Ireland is a real threat to the continued economic success of the country. If a political message emanates from Ireland that the multinational sector is no longer welcome or will be subjected to unpredictable tax rises, Ireland will become less attractive for them and its corporation tax take will fall, thereby preventing it from funding the public services that are at present provided.
A significant proportion of multinationals in Ireland emanate from the US and the continuation and enhancement of the political relationship between Ireland and the US is central to the economic strength and welfare of the country. In a world of uncertainty, Ireland’s security can be enhanced and protected by remaining an integral part of the EU but also by having a very close economic relationship with the US. Ireland should be the bridgehead between the US and the EU. The strengthening of the EU/US relationship is all the more important considering the rising influence in power of China and other economic centres of influence. It is apparent that, from the US’s point of view, an economic bridge between the US and a EU country is far preferable to such a bridge between the US and the UK, a country outside the European Union and without access to its single market.
The other threat to this economic model, the housing crisis, plays into the hands of those who wish to polarise politics. One of the economic consequences of a failure to resolve the chronic housing shortage is that Ireland will not be as attractive a location for multinationals if their workforces are incapable of securing affordable accommodation in Ireland. The current problems in the Irish housing sector go beyond the cost of land and the price of construction. There are not enough builders and tradesmen to provide the work necessary to construct the houses that are required. It is at times like this that Ireland requires the bold thinking and innovative planning that it saw from previous generations. It has now become accepted as a political fact that the State should not itself get involved in directly contracting builders and tradespeople to construct housing. Instead, it prefers to buy directly from developers at prices set by the market. That is a mindset that needs to be revisited and changed. Ireland should get back involved in directly contracting builders from Ireland or abroad, after competitive tenders, to build houses, a practice that would increase capacity and reduce cost.[3]
If Ireland wishes to avoid a departure from the successful economic pathway down which it has travelled during the past 50 years, it needs to ensure that it continues to be governed from the centre by governments that not only support but actively encourage inward investment. Otherwise, the country’s capacity to generate continued economic growth will become threatened and the politics of rejection and extremism will grow.
[1] NAFTA; European Union, African Continental Free Trade Area, Mercosur, South Asian Free Trade Area.
[2] In August 2022 there was a surplus in the Irish economy of €5 billion. This performance arose notwithstanding a surge in inflation but was primarily driven by record corporation tax receipts which generated €9 billion for the 7 month period up to the end of July 2022. This was more than €3 billion ahead of the same period in 2021.
[3] In 2021 the average cost for a home procured by the state was €255,221 for a three bedroom house.
Ireland’s Role
Ireland’s history was viewed as a terrible burden. It should now be seen as its greatest opportunity. A country that fought for generations for independence from a neighbouring colonial power has now established itself as an important independent state on the world stage, whilst also establishing a relationship of friendship and equality with that former colonial power. As global conflicts grow, the example of reconciliation evident in Ireland should be a shining example to all troubled spots. Ireland’s reconciliation on the island and with its neighbouring island is not complete and the ongoing sectarianism within Northern Ireland is a cancer that needs to be excised by those exerting political, social and religious responsibility. But the transformation of relationships within and between the two islands during the past century is remarkable and inspiring notwithstanding the ongoing saga that is politics in Northern Ireland.
The late Queen Elizabeth’s state visit to Ireland in 2011 and, in particular, her bow to Ireland’s Republican dead at the Garden of Remembrance greatly facilitated that reconciliation. Moreover, the consistent and deliberate emphasis placed by the late Queen on seeking to reconcile legitimate grievances and understand political differences are examples of what is needed in Anglo Irish relations, rather than the megaphone diplomacy resorted to by some within the Conservative Party in their zeal to prolong the politics of Brexit. Fortunately, the new monarch, King Charles III, has displayed in his tenure as Prince of Wales a desire and ambition to ameliorate politics in Ireland and to build friendship between both jurisdictions. His frequent and low-key visits to Ireland and his understanding of the sensitivities associated with Irish politics have greatly facilitated reconciliation. The actions of the late monarch and her successor reveal that the British government has a lot to learn from the patient and considered approach of the British Royal family in its relations with Ireland.
Ireland’s role should be to show an endangered Europe that ancient conflicts and apparently intractable political problems can be resolved through negotiation and reconciliation, provided there is equality and respect. Former imperial powers now occupy a different world where tolerance for the consequences of empire and colonialism is fading. The transformation of Ireland’s relationship with the UK illustrates how a toxic imperial relationship can transition into a very close friendship of equals. This was achieved because of the maturity of certain political participants and it will withstand the immaturity and insecurity of recent politics that fears the consequences of such transitions.
That transformation, however, took time and courage. It was only possible after reconciliation and agreement within each country as to how political objectives should be pursued. It required brave politicians to make people understand the futility of violence where there is no democratic support. It required a rejection of political extremism. Ireland has succeeded as a country and in its relationships with others because it is respectful of other peoples and countries. That is an important role.
