Insights from Martin Wolf, Chief Economics Commentator of the Financial Times

Sean Doherty
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On: 9 May 2017
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The world is currently in a “zone of fragility” according to a leading economics commentator. What will this mean for Europe, for Ireland and for business?

An audience of CEOs found out when Three Ireland invited the Financial Times’ Martin Wolf to share his insights.

When the Chief Economics Commentator of the Financial Times talks, it pays to listen. Martin Wolf came to talk at the Three offices in Dublin and his insights into global economic politics, Trump, Brexit and social media – and how they can affect the Irish economy – held his audience, including me, enthralled.

He began with a description of the overall global situation as “a zone of fragility”, where numerous, previously unthinkable possibilities have opened up and anything can happen. Whereas Germany and Switzerland are probably outside this zone, previously stable countries like the US, Italy and France face an unpredictable economic and political future. (Martin was speaking before the result of the French Presidential election was known.)

While the Europe we live in was effectively created by the United States after World War II through the Marshall Plan for economic aid, and subsequently by the birth of the EEC in the late 50’s, we are now entering a new geopolitical and economic era. There is an end to US dominance, and the Chinese economy is emerging as the major influencing factor in Europe.

Globalisation – Good or Bad?

Martin sees the world as becoming uncomfortable with globalisation. After all, together with this period of technological change, it has been associated with deteriorating prospects, only very slow improvements in living standards, and a divergence in the perception of individual success and progress.

At the same time, a long period of “economic malaise” followed by the refugee crisis has left many people angry. A large proportion of the US and UK populations, for example, were unhappy with what they saw happening and the perceived inequality, and as a result fundamental and stable relationships in politics and business have come under question.

The Trump Card

The audience was also interested to hear Martin’s thoughts on Trump. His view is that Trump’s lack of belief in open trade and his exclusive focus on America, were the basis of his election success. However, not only do we not know what he is going to do, but we’re also not sure that he knows. His policies and actions often seem to be dictated by the last person he talked to, and there is a war being fought over his soul. On one side lie the traditional Republicans, and on the other the forthright, bigoted backers in his administration. With the more respectable side currently winning this battle his ambitions may become a little more limited and less revolutionary than promised on the campaign trail.

Martin outlined what he sees as the most plausible outcome: Trump will be contained and the issues on which he won the election will be postponed – though not necessarily resolved. His trade policy may involve moderately “splashy” populist announcements, such as not importing steel from China, but there will be no serious fundamental change.

Meanwhile, his modest tax cuts focusing on corporations may have a detrimental impact on Ireland. But as most investment in Ireland has a longer lifespan than a presidential term, there will be no knee-jerk Irish reaction. Ultimately, Martin sees Trump emerging as a very successful conman, making the people who voted for him unhappy. This may encourage the Republicans to replace him in the future with someone even more extreme.

Brexit Benefits?

Describing the EU as Britain’s only rational political future, Martin feels there is a strong likelihood the ramifications of Brexit will be contained. A large Conservative majority in the election will give Theresa May the flexibility to reach a deal with the EU: probably remaining in a Customs union and continuing to enjoy current free trade agreements. The optimistic view is that a cautious Prime Minister backed by an equally cautions team will feel able to ignore the “crazies” and contain any revolutionary upsurge.

As economic growth leads to less rage, Martin believes that by the early 2020s this “spasm” will disappear.

However, Brexit will lead to around 20% of financial institutions leaving the UK: a huge portion of the economy and a sizeable shift in any country’s fortunes should they acquire even a small part of this business. Could this be Ireland, and will Ireland benefit from Brexit? Martin thinks so – but believes there will be competition. If Scotland does break away from the Union and join the EU, Edinburgh could become a viable alternative to London and a financial powerhouse. This is obviously a challenge for Ireland.

Social Media, Stability and Money

Working for a news organisation, Martin understands the current global technology revolution and the challenges it is creating. Knowledge wants to be free and in today’s world the price of information can be zero – but it is expensive to produce. At the same time, the world’s largest publishers (Google and Facebook) have no editorial responsibility to ensure the accuracy of the information they disseminate.

This presents two major challenges. Firstly, how do you make money out of generating valuable information? Secondly, how do you ensure information is true if no-one is willing to pay for it and no-one is paid for investigating it? This is a particularly pertinent question in the United States and is not helping to create stability in this era of fragility.

Having taken an in-depth look as the issues facing us all, how did Martin summarise the situation?

He described us as living in a very interesting world, at a time of constant change which is provoking uncertainty and revolutionary upheaval. It is no longer the Western-dominated world we have been used to. If organisations and businesses are to survive, they need to learn to adapt to rapidly changing circumstances and environments at very short notice.

Martin Wolf certainly provided me with plenty of food for thought, I hope this blog has done the same for you.

 

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