Book review: Lost In Transition - Ireland, Small Open Economies and European Integration

The economies of the Danes, the Dutch, and Finns remained intact during the downturn while we went into receivership. David Begg’s analysis of why should be noted by every policy maker in Ireland, writes Fergus Finlay.

David Begg

Palgrave

MacMillan, €93; Kindle, €71

WHAT would the Danes say about Irish Water? Or the Dutch, or the Finns for that matter? 

I ask because I’ve been reading David Begg’s book Lost in Transition which is a comparative study of four small open economies in the European context. 

We’re one of them, and the aforementioned Danes, Dutch, and Finns are the people who live in the other.

I suppose the first thing I have to say is that David Begg doesn’t answer that question directly. But the evidence is pretty clear from his work. 

Suppose you told a policy maker or a citizen in any of these countries that Ireland had, at considerable expense, established a national water utility to bring the management and conservation of water into the twentieth century.

Suppose you went on and told them that after a difficult birth that utility was now beginning to get to grips with its task, and beginning at least to highlight the problems that required investment, with the bones of a business plan to attract and utilise that investment. 

And then you delivered the punch-line — that there is now a political consensus that we should immediately tear Irish Water down and start all over again. Because it isn’t popular.

There would be an audible gasp from the Danes, the Dutch, and the Finns. 

Because they’re essentially kind people, they’d probably say: “Ah you Irish, you’re so delightfully quirky and full of charm”. 

(We probably shouldn’t ever tell them that along the way, we gave everyone who asked for it a €100 conservation grant, whether they’d paid their bill or not, or even whether they had the slightest intention of ever conserving a single drop of water.) 

Of course, the Danes, the Dutch, and the Finns wouldn’t have set up a national water utility the way we did in the first place. 

They all have them, they all pay for their water, and they all take the job of managing and conserving water very seriously. 

In those three countries, a start-up like Irish Water would involve an enormous amount of preparation, an enormous amount of consultation, and an enormous amount of consensus building. 

Its foundations would be very strong before it ever started work.

In David Begg’s seminal book — which really ought to be required reading for every policy maker in Ireland, not to mention every potential drafter of a programme for government, he doesn’t just compare the four economies. 

He shows how they dealt with both success and failure. 

The similarities, and the differences, are deeply instructive.

In 2001, by the time all four countries were ready for the requirements of the euro (Denmark didn’t join but the Danish kroner has remained closely allied to the euro) they had followed somewhat similar paths. 

A high degree of what can be called social democratic approaches — an emphasis on social cohesion, improving social protection models, flexible but fair labour market approaches, a central role for trade unionism through social partnership models, and (especially in Ireland’s case) the support of things like the European Social Fund and Regional Funds all underpinned a strong period of growth.

Then came the crisis in 2008. All four economies suffered, Ireland’s worst of all. 

One of the reasons we were unable to cope (and Begg makes clear it wasn’t the only one) was that we simply hadn’t managed to keep a sense of social cohesion and consensus building alive, so that it could contribute to the development of solutions.

As Begg says, “perhaps the intellectual lesson for Ireland lies in the constancy of approach of the other comparator countries. 

What emerges from the interviews conducted for this research was a sense ‘that we had arrived’ when Ireland qualified for EMU membership; a feeling that nothing more needed to be done. 

Ireland did not assimilate the need for the constant discipline required by membership of a currency union. A constant discipline is unlikely to be achieved without… embedded mechanism(s) for managing change.

There’s a chart on page 190 of the book which brilliantly captures the different stories. 

As the four economies begin to modernise in the 1987-1994 period, they are all characterised by, to put it at its simplest, a willingness within each economy for all the actors — state, workers, employers, to work together. 

Growth kicks in over the next seven years, and a variety of different approaches enable the countries to reach virtually full employment.

Then everything takes off — the Celtic tiger, similar but perhaps less spectacular growth surges in the other three countries. 

We respond to our miracle by choosing our own form of neo-liberalism — “if I have it I spend it”; “the choice is Boston or Berlin”.

Meanwhile, the other three countries are consolidating welfare reforms and preserving the core values established in more difficult times.

When the bubble burst, Finland, Denmark, and Holland are hit hard by the international crisis. But they retain their international standing (and their credit rating). Ireland goes into receivership.

How are we to avoid that happening again? What lessons should be learn, from our own experience and from the experience of others?

David Begg argues strongly that we need to do four things. 

We need institutional reform — a reinvigorated and broader form of social partnership, that isn’t just about wages and conditions but is taken seriously when it comes to social cohesion. 

We need the sort of industrial rebalancing that relies less on foreign direct investment and injects more innovation into indigenous enterprise. 

We need a sustainable tax base that is never again allowed to become totally dependent on a property bubble. 

Finally, and intriguingly, we need a land use policy (and this will require constitutional change) where land is regarded as a public good rather than a private commodity.

This is a highly challenging book. It’s based in part on a doctoral thesis, and it contains a wealth of research and well- ordered argument. 

Nobody would pretend (at least I wouldn’t) that it’s always an easy read, and there is no doubt that David Begg, by reason of his own history, is a more passionate advocate for social partnership than others might be.

At the same time, the ability of other economies (very similar in some important respects to ours) to weather storms, while we have to be taken off our capsized ships by the Troika lifeboat, is telling. 

We played the hand we were dealt by Europe differently to others — we took the money but spent it foolishly.

In the late 1980s Jacques Delors said: “The social dimension is an integral part of the European way of life. It is part of our identity”. 

The Finns, the Danes, and the Dutch never forgot that. We decided to party instead.

Ending his book, David Begg puts it slightly differently. 

“Finally, it is worthy of reflection that the one hundred years Ireland has spent pondering its relationship with Britain might have been better spent thinking about an older conflict. 

"A thousand years ago Brian Boru defeated the Viking invaders at the Battle of Clontarf.

“If the outcome had been different, Irish people might today be living in a prosperous and progressive social democracy. It is never too late to rectify a failure of public policy.”


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