Country of the Month: Ireland
According to the World Economic Forum’s criteria for judging international economic competitiveness, Canada ranks 5th in the world, up from 8th in 1996. By comparison, in 1996 Ireland ranked 26th in the world. Today it ranks 10th. The following paragraphs introduce what has been called Ireland's "economic miracle." They are taken from an article that appeared in The National Post, January 19, 2000, entitled “The Celtic Tiger" by Fred McMahon. The article is based on his book Road to Growth: How Lagging Economies Become Prosperous, which is available in PDF format on the Atlantic Institute for Market Studies site at www.aims.ca/Publications/Growth/toc.htm
The 1980s had been an awful decade, one of the worst ever for northern Europe's perennial economic loser. Until the Irish shifted course late in the decade, average per-capita growth barely averaged 1% a year. Inflation soared and real wages often fell. The government's annual deficit had reached nearly 15% of GDP, the national debt 129% of GDP.
Even worse, Ireland faced crushing unemployment. Unlike previous decades, when the unemployed simply emigrated, new social programs kept unskilled workers at home, creating a lasting problem. According to Manus O'Riordan, head of research for Ireland's largest union association, the Services Industrial Professional Union, "There are whole areas of [Dublin] where there is no culture of employment."
Ireland also suffered a serious brain drain. Rafique Mottiar, a senior economist at the Irish central bank, describes the early 1980s: "It seemed half the college graduating class went straight from graduating ceremonies to the airport for America." Soaring taxes and militant labour made Ireland a high-cost place to do business. Profits in the economy had virtually disappeared. Inflation and government debt added to the uncertainty.
Starting in October 1987, labour, business and government signed consecutive three-year agreements, all designed to reduce costs and boost profits. Healthy profits, Irish policy-makers had come to believe, provided the incentive and the means for investment -- the engine of economic growth, increased prosperity and job generation.
The labour movement, having witnessed Ireland's economic devastation, embraced wage moderation and labour peace. But, the unions wanted something in return -- something truly remarkable from the Canadian perspective. They demanded large tax cuts.
The Irish miracle marked a turn away from government intervention to beneficial spending in areas such as education. Tax cuts reduced government revenues in 1988, but by 1989 economic growth pushed revenues above pre-cut levels. Real wages have grown more rapidly since unions adopted wage moderation. Growing investment dramatically improved productivity. That allowed large wage increases, which union leaders calibrated to preserve healthy profits. In fact, even as wages have grown, unit labour costs have declined, reinforcing profits and the incentive to invest.
Ireland's new policies not only increased wealth but also slashed unemployment from nearly 20% in the mid-1980s to 5% today -- even more remarkable considering Ireland's rapidly expanding workforce, caused by a late-arriving baby boom and the recent entry of an unprecedented number of women
For more detailed information, CFEE suggests the following online sources.
Canada’s Department of Foreign Affairs and International Trade has a site http://www.dfait-maeci.gc.ca/english/geo/europe/e-irelan.htm with links to information on Ireland’s economy and Canada’s trade and investment connections.
Typing ‘Ireland economy’ into the Search window of the Main Menu of Industry Canada’s Strategis site http://strategis.ic.gc.ca/engdoc/main.html will generate a list of links to a wide variety of information. Under the heading Trade and Investments, open the Country Commercial Guides documents. The two links Ireland: Economic Trends and Ireland: Commercial Overview will be of most interest to economics students. Other links will lead to more specific information about business developments and opportunities. You can even create your own customized market reports at http://strategis.ic.gc.ca/SSG/bi18351e.html.
The CIA World Factbook site includes a profile of Ireland www.odci.gov/cia/publications/factbook/ei.html#econ with recent data and short descriptions of its economy and many other aspects.
The Federal Reserve Bank of St. Louis provides 10-year trend graphs at www.stls.frb.org/docs/publications/aiet/ireland.pdf about 8 key economic measures.
Ireland’s Central Statistics Office provides data of all kinds. A good place to start is at its Student’s Corner www.cso.ie/schools/schoolindex.html, which contains explanations and data about Ireland’s National Accounts, Inflation, Average Income and more. For more detailed and complete information, try the CSO’s Publications and Releases site at www.cso.ie/econseries/contents.html
For the most current information about the Irish Economy, check out the Irish Department of Finance site www.irlgov.ie/finance/defaultbody.htm and the Areas of Interest link in particular.
For economic commentary and analysis, search The Economic and Social Research Institute’s site at www.esri.ie/.