Title: The Intersection of Politics and Economics: A Look Ahead at the US and Ireland
Many moons ago when I studied economics in college, the subject was called ‘political economy’, but has since reverted to ‘economics’, which is where I think it still is today.
The political economy title was very apt, as the more we see, the more we should realise just how much of an impact politics has on economic outcomes.
Back in the days when I naively believed that it was possible to forecast the economic future, I conveniently blamed political developments for my failures.
These days, I no longer believe it is remotely possible to forecast the future given my increased understanding that economics is a social science driven by often-times irrational human behaviour, rather than a more precise physical science. That’s because politics is key.
Political developments and actions have profound economic and social effects as shown by events such as Brexit, the Russian invasion of Ukraine, the election of Donald Trump, and the increased nationalistic and more authoritarian approach being taken in China.
On the political front, the coming year promises to be incredibly interesting, particularly in the US, but also in Ireland.
The American election season effectively got underway last week, with the hosting of the first Republican Party primary debate ahead of the election in November next year.
The absence of Mr Trump amid the overwhelming support he is receiving from Republican voters, as well as the legal quagmire he faces, all add up to a fascinating election year.
Notwithstanding the enormity of the legal charges he faces at a state level in Georgia, the odds would seem to favour Donald Trump running again against Joe Biden next year.
Meanwhile, ‘Bidenomics’ probably doesn’t attract the attention it deserves.
His so-called place-based industrial strategy and interventionism is a very interesting experiment.
On the other hand, his attitude towards China is not that different from the Trumpian playbook.
In turn, the US economy is still performing quite strongly, with the labour market particularly buoyant. Alas, Mr Biden is not getting much credit — or at least that is what the polling seems to suggest.
Meanwhile, Ireland must have a general election by February 2025 and, for the incumbent government, the economic news seems to get better and better.
Last week it was the labour market showing record high employment at 2.64m people.
The labour force participation rate reached a record high share of 74.2%, with the female employment rate also at a record high of 70.5%, and the the long-term unemployment rate at only 1.2%.
Despite this stellar labour market performance, the Government parties are not very popular.
Much of the debate we hear, at least in the poisonous social media bubble, is that Ireland is some sort of dystopian hellhole.
The reality is that Ireland is not a dystopian hellhole, at least relative to many countries around the world.
However, the failure of government to address crime and to solve the long-standing housing crisis, despite a lot of verbiage, is an Achilles’ heel.
The housing plight facing young people is the real issue, but the Government seems incapable of addressing in any meaningful way a problem that has been obvious for a long time.
Irish politics promises to be absolutely fascinating over the coming year, and there can be no certainty about the nature of the political mess we might end up with in 2025.
We need to remain ever mindful of the very quick impact bad politics can have on economic prosperity.