I spent a few days in Ireland last month, and I am here to report that Guinness is Guinness only in Ireland. I know that they serve Guinness — or what purports to be Guinness — all over the world, from faux Irish pubs in Singapore and Dubai to proper English pubs all over the UK. But it’s different in all those places. It’s just not Guinness.
It’s only in Ireland that the first sip, after the patient wait for the pint to be properly poured, is like an angel’s kiss, leaving a whisper of cream on your lips, and … well, let’s leave it at that.
Just go there and have a drink, have several drinks. Then ask the Irish Tourism Board to send my commission check to the office.
I was there on a research trip, of course, which, like living [thank you Master Murray], is thirsty work. I was trying to understand the limits of co-operation, and I thought that Ireland, which had been, perhaps, the largest beneficiary of European unification, would be a good place to start.
When the EU was first mooted in the early 1980s, Ireland’s GDP per capita was just below the EU average. Based on its development rules, the EU bestowed lavish subsidies of several stripes on Ireland, which they, of course, lapped up like Guinness, and, unsurprisingly, used very well. They also pioneered some clever tax incentives, so that when the single currency was launched in 1999, the Irish economy really took off.
For most of the last decade, Ireland was the fastest growing economy in Europe, often hitting Chindia rates of growth. By 2007, its economy had grown to where it was (but for Luxembourg), the richest country in Europe on a GDP per capita basis. The down side, of course, was that the single monetary policy behind the euro couldn’t keep the economy from overheating, which severely exacerbated the real estate bubble, particularly in Dublin. And, when the global economy collapsed in mid-2008, Ireland went down faster than most — “we would have been Iceland, if it hadn’t been for the euro,” someone said.
Overall though, there is little doubt that joining the EU has been a wonderful success for Ireland.
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Excellent, pour me another pint.
Now, while I was there, there was a lot of hoo-hah in the press — another thing, journalism in Ireland is closer to literature than anywhere else — about the Lisbon Treaty that the desperately desiccated European Commission is trying to get its membership to sign. And Ireland, which had already said “No” to the Lisbon Treaty in an earlier referendum, is being wooed again, this time with favours worthy of a leprechaun — its own permanent commissioner, veto rights on certain social rules (abortion remains unlawful in Ireland), and so on.
The betting (another favourite Irish pastime) is that the Irish will say “no” again. And, of course, there are now several other European countries saying, “Hey, what about us? We want an independent commissioner, too.”
And so it goes.
This mishmash, compounded by the troubles many newer EU entrants, like Slovakia and Slovenia, are facing with the strong euro undercutting sales against competing non-euro currencies (like the Hungarian forint), suggests that further “unification gains” will be grindingly slow. But, with the European Parliament hell bent on trying to squeeze more value out of the already squeezed-dry tube of unification, it appears that we are entering another extended period of European instability.
Unsurprisingly, all the loose talk a year or so ago about the euro as a possible replacement for the dollar has all but disappeared. As a result, it appears that the dollar will, again, have no meaningful competitor for global savings. The yen remains hostage to Japan’s enervated economy. Gold seems to get nervous when it approaches $1,000, and more importantly, was met with a wave of selling by Indians — yes, Indians — when it crossed Rs 15,500 this February. The yuan — don’t make me laugh.
So, short-term fluctuations aside, we could be moving into a period, akin to 1997-2001, when, largely as a result of no serious investment competition, the dollar just rose and rose and rose, slowly but steadily, with the DXY putting on about 30 per cent over four years. Now, I know this flies in the face of a lot of erudite and well-researched prognostications, most of which forecast that, when the smoke clears, the dollar can only decline.
Hmmm… perhaps, I need another pint of Guinness.