Politics operates on a swinging pendulum, in line with swings in public sentiment. The US has seen, in the span of two years, large wins by the left-of-centre Democratic party only to see the political winds blow fiercely back in favour of the Republicans in the more recent mid-term Congressional elections. Often the second seismic swing can be viewed as a backlash against the first – just as the inevitable third swing could be seen as a reaction to the second, and so on. And often the swings are less extreme, and the pendulum has less room to manoeuvre, than portrayed by a media desperate for dramatic story lines – throughout the back-and-forth of party politics, the US in essence has remained recognisably on the right-hand side of the global political spectrum.

The same logic applies on a global scale, too. In the aftermath of the financial crisis, it appeared that the pendulum swung away from globalisation and Western-style capitalism towards increased protectionism and a more Keynesian approach to economics. The perception of power shifted from the private sector to the public one; from companies to governments; and from investors to host countries. “The state is back,” declared one panellist at the World Association of Investment Promotion Agencies annual conference in Argentina this spring. This has been a frequent declaration post-crisis, and not without some justification.


But the pendulum can only swing so far in the direction of statism in most countries, for the simple reason that the private sector is what generates the tax revenue to pay for public-sector programmes. More government leaders are likely to realise this than their rhetoric suggests. Likewise, while many host countries, especially in the developing world, seek to redress imbalances in their relationships with foreign investors – and there was clear need for a reset in several cases – there is no getting around the fact they sorely need, and will continue to need, foreign capital and will be reluctant to push investors too far lest they push them away entirely.

Ireland has most spectacularly found itself getting hit from both sides. From one direction, some fellow EU members insist that the country could stave off future cash crises by raising corporate tax rates (arguably a red – or green, rather – herring, as the Irish tax advantage has long vexed higher-tax western European rivals, who have now spotted an opportunity to make this the real issue and sense a shift in power back their way); from the other, the business community and economic developers argue that wiping away a key competitive advantage at a time when capital is most needed would be disastrous. So far, Ireland has resisted pressure to move leftward on taxes. The only question is whether it can maintain this position long enough to wait for the inevitable swing back in favour of its now unfashionable economic model.

Courtney Fingar is the editor of fDi Magazine

Email: Courtney.Fingar@FT.com