SPORTS DIRECT AND TO THE POINT

20 OPINION WEDNESDAY 8 JUNE 2016
CITYAM.COM
FORUM
EDITED BY TOM WELSH
Why Ireland only sees risks
from Britain leaving the EU
IT WOULD be nice to be able to
shrug my shoulders, sit back
and observe the current UK
debate on the country’s future
in Europe as a detached spectator.
That, I am afraid, is not an
option for Ireland.
We are too close to the UK in all
sorts of ways for us to be indifferent
about what could be in the offing
here after 23 June. We are near
neighbours and friends, and this
gives us a unique perspective on the
current EU debate in Britain.
When I look at the coming UK poll
on Europe from an Irish angle, what
I see are a multiplicity of risks that
seem to us to be all too real even if
their precise impact can be difficult
to quantify. A desire to avoid these
risks and uncertainties makes us
hope that the UK will decide to
remain in the EU.
The first risk is the threat to our
flourishing trading relationship.
Irish-UK trade has blossomed during
the 43 years our two countries have
been members together of the
European Union. Two-way trade
between us now amounts to more
than £1bn each week and it is growing.
It is impossible to be sure how a UK
exit would affect this mutually-beneficial
trade, but the implications
cannot be positive. After a UK exit,
trade between our two countries
would be regulated as part of a new
trading relationship to be
negotiated between the UK and the
EU. A reduction of 10 per cent in
trade flows back and forth across
the Irish Sea – and there are those
who think the impact could be
much greater – would certainly
damage our two economies and put
DAVID Cameron has tried to
frame the Brexit debate as
essentially about economics.
Standing with him is the
overwhelming consensus of
economists themselves, from academics
to the International
Monetary Fund (IMF). Yet their pronouncements
are not having that
much impact on the electorate if the
polls are to be believed.
There is justification for this public
scepticism. The arguments relate to
what might happen to the economy
at the aggregate, or macro, level. How
much will GDP rise or fall, how many
jobs will be lost or created, what will
happen to trade, to inflation?
At the individual level, or micro
level as economists call it, a great
deal of progress has been made in
the past 20 years or so. But at the
overall, macro level, mainstream economics
has if anything gone backwards.
Concepts such as rational
behaviour and equilibrium have
been incorporated into the thinking
many jobs at risk in both countries.
The second risk that concerns us
relates to Northern Ireland and
specifically to the border between
North and South in Ireland. Thanks
to our EU membership, there is a
single market on the island of
Ireland and customs controls, which
I am old enough to remember, are
now a thing of the past.
If the UK were to leave the EU’s single
market after a UK exit from the
EU, and that now seems to be the
desire of leading campaigners on
the Leave side, then it seems very
likely that customs controls would
need to be introduced again on the
Irish border. This would be a serious
setback to the growth of economic
ties between North and South in
Ireland and to the achievement of
their full potential in the years
ahead.
But the risk does not end there.
What if a UK exit were to generate
pressure for controls on the movement
of people across the border in
Ireland? Such a development would,
in the words of our foreign minister
Charlie Flanagan, be “a nightmare
of huge proportions”. The open border
that exists at present benefits
both parts of Ireland and both communities
in Northern Ireland. It is
part of the framework that supports
the Northern Ireland peace process.
It would be a shame to put that
open border at risk.
A related risk concerns the longstanding
tradition of free movement
between our two countries. It is
true, of course, that the Common
Travel Area predates our EU membership,
but this mutually-advantageous
regime has only ever existed
when both countries were outside
Daniel
Mulhall
No-one would
pretend that the EU
has over the years
been an essence of
perfection, but it
does have an
honourable record
the EU, or when we have both been
members. No one can say what it
might mean for free movement
when Ireland’s land and sea borders
with the UK become frontiers
between an EU member state and a
non-EU member.
A further concern of ours, and a
very important one, is the risk to
Europe stemming from a UK depar-
of macro economists, at the very
time that their micro colleagues are
challenging them.
Olivier Blanchard, until recently
chief economist at the International
Monetary Fund, has real form on the
perils of believing orthodox macro
economics. In August 2008, for example,
just three weeks before Lehman
Brothers collapsed and the worst
recession since the 1930s burst onto
the world, he published a paper
claiming that the state of macroeconomics
was “good”.
The relationship between inflation
and unemployment is a central building
block of macroeconomics.
Economists even have a special
phrase for it, the so-called “Phillips
curve”, named after the LSE-based
academic who discovered it in the
1950s. The curve in theory says: the
lower is unemployment, the higher is
inflation. This is the subject of
Blanchard’s latest offering in the
American Economic Review.
The Phillips curve is not just of academic
interest. The Monetary Policy
Committee, for example, has an
inflation target, and unless its members
know what the curve looks like,
they are not going to be able to do a
very good job.
Blanchard sets out a formidable
looking mathematical model. He
then employs statistical techniques
in conjunction with the theory, in
the same way that, for example, the
UK Treasury published one with
their estimates of the trade costs of
Brexit. Blanchard claims that “the US
Phillips curve is alive”.
Up to a point, Lord Copper. For one
of Blanchard’s conclusions is that
ture from the EU. This would be an
unprecedented event, and it is difficult
to see how the Union could be
left unscathed by such a development.
No-one would pretend that the EU
has over the years been an essence of
perfection, but it does have an honourable
record. It has created a
unique partnership between
European nations, some of which
have a long history of conflict. It has
helped keep the peace in Europe for
more than 60 years. While it would
be wrong to claim that the EU
deserves all of the credit for this
achievement, it has certainly played
its part.
Europe since the 1950s has been a
region of peace and prosperity, tolerance
and respect for human rights.
The contrast between the past 60
years and the decades preceding the
emergence of the EU is stark indeed.
And while it would be unwise to predict
any repeat of the disasters of
the first half of the twentieth century,
it is true that the values the EU
has championed since its inception
are under some threat at present.
We need a strong EU to help defend
European values and our shared
interests in a troubled, changing
world. A UK departure would weaken
Europe’s capacity to act effectively
in global affairs.
I understand that voters have a
number of arguments they need to
weigh up on 23 June, but it would be
remiss of us not to draw attention to
the particular risks that we perceive
with regard to Northern Ireland and
Irish-UK relations.
£ Daniel Mulhall is Ireland’s
ambassador in London.
The poor state of macroeconomics justifies
scepticism with Brexit disaster forecasts
Paul
Ormerod
“the standard error of the residual in
the relation is large, especially in
comparison to the low level of inflation”.
Translated into English, this
simply means that his model does a
poor job of explaining what has been
going on.
This is hardly surprising. The
unemployment rate peaked in the
US at just under 10 per cent in 2010.
Since then it has halved to stand at
just under 5 per cent. But inflation is
slightly lower, at 1.1 per cent compared
to the 1.6 per cent average in
2010. The story is just the same in the
UK and Germany. Since the crisis,
unemployment has fallen sharply
and inflation has edged down. Macro
models are by far the weakest part of
economics.
£ Paul Ormerod is an economist at
Volterra Partners, a visiting professor at
the UCL Centre for Decision Making
Uncertainty, and author of Positive
Linking: How Networks can
Revolutionise the World.
DEBATE
Q: After grilling
Mike Ashley, is it
fair for MPs to
demand business
leaders account for
themselves before
Parliament?
Ioannis
Ioannou
YES
Yes, it is fair. To the extent that Parliament
acts in good will to protect the long-term
interests of society at large (as opposed to
serving short-term political objectives),
demanding transparency and
accountability from companies that have
a material impact on societal issues is a
step in the right direction. Accountability
in front of MPs, the elected
representatives of the people, generates a
strong public signal of institutional
commitment towards corporate
responsibility. Looking to the future, it
could also make companies think twice
when developing their strategy,
particularly those that fail to account for
potentially harmful societal impacts,
negative environmental externalities, or
failures to even comply with existing laws
and regulations. Importantly, however,
this type of public accountability could
help companies themselves restore trust –
but only to the extent that they are willing
to honestly and genuinely engage with
the process.
£ Ioannis Ioannou is associate professor of
strategy and entrepreneurship at London
Business School.
Tim
Worstall
NO
That Mike Ashley should explain
something to MPs is just fine: who knows,
he might even have shouted some sense
into them. That Ashley was actually being
asked to explain himself to them was not
fine. For of course, no-one expected any
explaining to be done. This was an
opportunity for MPs to get on TV while
berating people, and no more. The
original allegations were that working in a
repacking warehouse isn’t that much fun.
I’m unconvinced of the value of anyone
having to explain that to politicians.
Surely anyone capable of finding
Westminster would know that already?
There is one hope, though, which is that
one day a proper plain speaker will be
asked one of those idiot questions. When
Margaret Hodge was berating Google,
how we all longed for the “so why have
you been voting for these tax laws we
haven’t broken for 21 years then,
Margaret?”
£ Tim Worstall is senior fellow of the Adam
Smith Institute and author of Chasing
Rainbows: Economic Myths, Environmental
Facts.