JIM POWER: With geopolitics to the fore it was not a great year for the global economy

2017 was a great year for the global economy. 2018 was a good year, but certainly not a great one, writes Jim Power.

THE past year will be remembered for many things, but global geopolitics will dominate the memories. Where to start is the real question, with many developments vying for pride of place.

From my perspective, the ongoing debacle that is Brexit is the stand out example of political incompetence, blind ideology and politicians acting in their own self-interest, with no consideration for what is in the greater good. 

At least that is how I would describe the UK side of the equation. The EU side did much better. It was always an imperative for the EU negotiators not to agree to anything that would undermine the basic foundations of the EU project. 

This is particularly important in the context of the ongoing rise of the extreme right across the EU, with Italy, Hungary, Austria and Poland the stand out examples of countries that are taking an increasingly strident attitude towards migration. This represents the biggest challenge facing the EU.

I have never been a particular fan of the EU and have always recognised that it is a very flawed construct. However, to date, it has pretty much succeeded in achieving what it was set up to achieve -- namely to prevent war on the European continent. I cannot for the life of me see how leaving the EU could possibly enhance the UK economy, and the only question to be answered really is how much damage it could do to the UK economy. I also believe that the EU will be damaged by the loss of the UK.

Second on the list has to be the ongoing antics of one Donald Trump. The thing that is probably most surprising about Mr Trump is that he is an example of a politician who is actually doing what he promised he would do during the heat of an election campaign. In an Irish context, such political behaviour is bizarre in the extreme.

Mr Trump has started a trade war of sorts with China; he has renegotiated the North America Free Trade Agreement (NAFTA); and he has delivered a package of pretty stringent tax cuts, which has certainly made the US economy great again in 2018, but the longer-term legacy is a different matter. 

As the year ends, he has again taken to talking about his wall and its cosmetic appearance. However, the abiding memories of Mr Trump in 2018 have got to be his activities on Twitter and the manner in which his administration has lost key people. James Comey’s book makes for a good read.

Elsewhere, the end arrived for Angela Merkel, a politician that has appeared like an eagle amongst hens in recent years. The world will be a lesser place without her. 

President Emmanuel Macron ended the year in crisis as the ‘yellow vest’ movement brought anarchy to the streets of Paris. Strangely, a few Irish politicians are seeking to jump on this particular bandwagon. Vladimir Putin is also upping the game with the Ukraine.

Over the past year, we have also seen first hand the impact that lunatic leaders with lunatic policies can have. Countries such as Brazil, Argentina, Venezuela, and Turkey are all in serious trouble.

Emerging markets in distress is something we have not heard about in a while, but it has been a theme in 2018 and will be one in 2019.

On the global economic front, it was a more challenging year, with slower growth in the UK, the eurozone and China. The US was the star performer, helped in no small way by Mr Trump’s tax cuts. 

US interest rates continued to edge back towards normality, but importantly from an Irish perspective, the European Central Bank (ECB) was totally and utterly chilled. Not alone did it maintain the zero-interest rate policy, but it pledged to keep rates at zero through to the end of the summer of 2019.

That could be pushed further out.

2018 was a very good year for Ireland and the Irish economy. The majority of the electorate who voted got its way in the controversial referendum and this was a small but welcome step in giving women the status they deserve in our society. 

Hopefully, there is more to come. The economy delivered a year of strong growth, and I suppose the stand out moment was when total employment in the economy reached the highest level on record.

Unfortunately, 2018 will be remembered for failures rather than successes. 

The two most immediate manifestations of failure relate to housing and health. It is beyond belief that for such a small country with such a small population, there is an abject failure to build enough houses, with spiralling rents and unaffordable house prices the obvious and predictable consequences. 

In relation to official housing policy, it is impossible to gauge what it actually is at this stage, there have been so many policy announcements and re-announcements. On the health side, the experience of many in the public and private health system is pretty awful and is getting worse rather than better despite all of the money that is being thrown at it.

It is difficult to understand our inability to solve these two problem areas. There are many others in Irish society also. Is it due to institutional failure or cultural failure? I have no idea.

On the political front, while Ireland does enjoy relative stability, ‘new politics’ is driving policymaking in a very populist and dangerous direction. Budget 2019 is the manifestation of this.

Hopefully, 2019 will see some progress. Maybe Waterford will win the hurling All Ireland in 2019, and get a home ground.


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