Stephen Kinsella, Economist/Journalist at MISS

A Brief Report on the Melbourne Irish Studies Seminar paper by Stephen, Kinsella ‘The Strength of the Weak: Ireland in the World’

by Bob Glass

Thomas Kinsella. Photo from Limerick Leader.

Stephen Kinsella, Associate Professor of Economics , and columnistwith Ireland’s Sunday Business Post, gave a lively and challenging address to the Melbourne Irish Studies Seminar  at Newman College on 28 August. His thesis, supported by lots of information from the IMF data base covering 192 countries, is that Small Open Economies (such as Ireland) have been mostly defined historically in terms of ‘what they are not’ (ie not the UK or the USA), which has frequently led to unhelpful policy prescriptions about what they can actually do to exploit their distinctive economic strengths .

Kinsella argues that the IMF data, analysed comparatively, shows that there are many successful small economies in the world (think Hong Kong, Singapore and Switzerland), but the traditional economic literature on economic growth and development have largely ignored them, despite their special qualities being first highlighted by British economist

E.A. G. Robinson in 1960. As adumbrated the same year by Simon Kuznets, after he had done the hard yards assembling comparative historic data on national economic performance since the mid nineteenth century, these characteristics are

  • A concentrated economic structure with a limited number of industries;
  • Limited domestic markets;
  • Heavy dependence on foreign trade; and
  • A homogeneous ruling class.

Kinsella argues that Ireland’s economic history since the formation of the Republic in 1922 reflects the problem of small open economies, reinforced by the practice of focusing, using the comparative and illuminating approach pioneered by Joe Lee in his book Ireland 1913-1985. This approach shows that after pursuing economic ‘autarky’ up until 1960s, Ireland progressively opened its economy to the world, benefiting ‘more than anyone else’ from the growth in world trade, and from its membership of the European Union – 89% of Irish people believe, correctly in Kinsella’s view, that the EU is a great idea. Also important in this context is the fact that, as Kinsella put it, Irish politics has been ‘deeply pragmatic’ and ‘ideas resistant’, meaning that after the collapse of the Celtic Tiger in 2007, the neo-liberal economic propagandists, whose economic theorising underpinned the excesses of that Tiger, have lost much of their influence on Irish public policy.

A new generation of economists world-wide, including Kinsella, however, have developed a new approach to measuring economic performance which focuses less on ‘output measures’ such as GDP and more on economic capability and Ireland is at the top of the word league table on this measure.  (Economic capability, for example, focuses as much on administrative and political competence, as it does on the level of private and/or public investment). Such capability will be central to Ireland’s ability to deal with the consequences of Brexit, whatever these ultimately are. Brexit, Kinsella argues, is ‘the last gasp of a dying colonial power’, which has forced Ireland to imagine what life within the EU might look like without the UK, and hence to realise how fragile its position is in an economic world increasingly characterised by the free flow of capital across the world. Here Ireland’s pragmatism may be central to future success. Already Irish policy makers have taken two initiatives, consistent with the idea of small open economies doing it their own way, which give grounds for hope:

  1. They have expanded the diplomatic corps to build issue by issue coalitions with relevant groups of European nations; and
  2. They have tried to improve Ireland’s fiscal health by focusing on capital expenditure.

Rather than the traditional approach of encouraging the Irish diaspora to ‘bring their money back’ to Ireland, these policy makers have sought to build new alliances with other nations to increase investment in Ireland.

Kinsella’s was explicit about the fact that his talk to MISS was the first time he had aired publicly the ideas which would be the foundation of the book he hopes to have published in 2019. Some of his ideas – e.g., on the links between the openness of the society to trade and migration and its economic performance have been articulated in an Australian context by George Melagonenis in his 2016  book Australia’s Second Chance. Given the scope and quality of Kinsella’s presentation to MISS, his book will be at the top of my ‘must read’ list in 2019.

Robert E. Glass

Bob is trained in Economics.