Last week I rang the opening bell on a new chapter in the Irish Stock Exchange’s history as part of Euronext, a family of European exchanges that is the fifth-biggest in the world.
Membership of Euronext will open up access to new capital and investors for Irish companies seeking to raise debt and equity in order to expand their business. Equally, Euronext will benefit from Dublin’s leading global position for listings of debt and funds.
The Irish Stock Exchange’s decision to lay claim to a European future emphasised once more to me how this country’s political and economic destiny lies at the heart of Europe.
Our decision to join what is now the EU in 1973 bolstered our independence by sharing aspects of our sovereignty with our European allies and enabled us to chart a wider course for our country. Membership of the EU has modernised our economy, society and politics and delivered lasting peace and prosperity.
However, when the UK leaves in March 2019, the EU will lose its second-largest member and we will lose our closest ally on many issues including tax and trade.
For all the vital focus on our future relationship with the UK after Brexit, there is an equally compelling need to prioritise our future economic policy relationships within the EU.
Ireland has great skill in building ‘alliances of interest’ that revolve around shared positions on key issues like the Common Agricultural Policy. The Taoiseach and Tánaiste have demonstrated the value of this approach as they deepen many relationships in the post Brexit European Union. We must do the same on economic policy.
This in turn compels us to reflect on the salient features of our own social and economic model. In this, Ireland has long proved a puzzle to political scientists.
We are often categorised, alongside other Anglo-Saxon countries, as a liberal-market economy, where coordination between firms and their financiers, employees, suppliers, and customers is broadly managed through market mechanisms.
This is contrasted with coordinated market economies, mainly in Northern Europe, which rely on formal institutions to regulate the market and coordinate the interaction of firms and firm relations with suppliers, customers, employees, and financiers.
In reality we are a hybrid given that liberal features of our model like our flexible labour market and support for private enterprise go hand in hand with high spending on social protection, the enduring role of the state in public enterprise and social investment and strong labour market institutions.
In recent weeks I co-authored a paper on EMU reform with a number of the EU states with whom we share common values – Denmark, Sweden, Finland, Lithuania, Latvia, Estonia and the Netherlands. We argued in particular that reform of EMU should focus on completion of the banking union, resilient national finances and maintaining public support for new initiatives.
This alliance absolutely does not preclude other states. It is just an articulation of a common outlook on the benefits of trade and open economies by a group of small and medium sized member states. This is will be a theme of my discussions when I visit the new German Finance Minister Olaf Scholz in the coming weeks.
We have much in common with these small, liberal and open states. Like Ireland they combine a dynamic economy with high levels of social cohesion. Some have dubbed our northern alliance “the new Hanseatic League”.
Their economies combine the efficiency of the market with a focus on social justice. The advantages of the market economy, such as innovation and technological progress, are combined with strong institutions and social objectives such as a high employment rate and strong social insurance.
In his book, ‘Lost in Translation’, former ICTU General Secretary David Begg compared Ireland’s economic performance with that of three other members of our northern alliance – Denmark, Finland and the Netherlands. He found that our propensity to suffer economic shocks and resilience to withstand them was far out of line with our comparator countries.
In seeking to explain our failings, the clear impression he gains is the sense ‘that we had arrived’ when Ireland qualified for Euro membership; we replaced a strategic approach to national development with drift and the ultimate result was national bankruptcy.
In particular, we failed to assimilate the need for the constant discipline required by membership of a currency union. Begg concludes, “Perhaps the intellectual lesson for Ireland lies in the constancy of approach of the comparator countries.”
In a similar vein, the work of Michael O’Sullivan of Credit Suisse has long drawn attention to the strength of these and other small states on the basis of the quality of their institutions and ‘intangible infrastructure’ – which he defines as the factors that develop human capability and permit the easy and efficient growth of business activity – their ability to thrive in a globalised world, their ability to produce sustainable and lower volatility macroeconomic output and their level of human development.
My view is that a continued transition towards the strong and resilient mixed economy that has proven such a durable model for our northern allies offers the best option for long-run sustainability and resilience to future shocks. In particular, I am struck by the central importance of a constancy of approach – the intellectual clarity needed to decide on the appropriate economic and social model and the political commitment and consensus required to stick with it across political and economic cycles.
Indeed, this transition has been underway for some time now, but we have been slow to recognise it and debate its implications. This Government and its predecessor have pursued central elements of this approach since 2011 – budgetary responsibility, active labour market policies and a broadening of the tax base.
However, the edifice remains incomplete. The Taoiseach has laid out the agenda for the next phase of our social and economic development. It requires a reinvigorated focus on a number of key areas, including institutional reform in education and health; enhancing social insurance to deliver greater economic security through the merger of USC and PRSI; industrial rebalancing with a renewed focus on improving the productivity of domestic enterprise; and an active land management policy where land is planned and developed in a coordinated manner in the public interest through the proposed National Regeneration and Development Agency.
Our activity across all of these areas will continue to be underpinned by a tax policy that rewards work, a long-term investment in productive social and economic infrastructure under the Ireland 2040 National Development Plan. As Minister for Finance I will also maintain relentless focus on keeping our national finances steady and secure.
We must mind what we have all achieved while always conscious that a recovering economy is not the same as a healed society. The number of children without a home in our country is a constant remind reminder of this challenge.
In a few short years we will celebrate the centenary of our independence. For the past century we searched for our place in the world and a viable social and economic model for our country. In coming of age as a nation in the century to come, it is clear to me that we have much in common with our ‘friends in the north’.