Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

Lessons to Learn From Ireland's Economy

Written by johnleemk on 10:19:26 am Apr 11, 2007.

The Irish economic miracle is one that doesn't seem to be known very well. Quietly, and without much of the world noticing, this country, along with a few others like Estonia, has crept out of nowhere and onto the global economic stage.

I didn't hear of how well Ireland has done economically until maybe 2004 or 2005, on Wikipedia (of course) where its economy was compared to that of the Asian Tigers — except that it even outperformed countries like Malaysia. Then after that, I began seeing accolades for Ireland in business magazines like Fortune, but to date, still not many people seem to know about how well Ireland has done for itself.

This is a bit of a shame, because there are a number of lessons to be learnt from how the government of Ireland has managed its economy and society. I was recently reminded of these lessons when I stumbled across a few references to the Irish economy in Thomas Friedman's The World is Flat.

One lesson, which I believe was emphasised by Fortune in its coverage of the Irish economy, is that you cannot create rising living standards for all your people when your overall population is growing wildly out of control. As Friedman puts it, Ireland was the sick man of Europe until the early 1990s — and a main contributing factor was their incredible population growth rate.

The Republic of Ireland has always been staunchly Roman Catholic (just a reminder, in case anyone forgot why the Irish Republicans and the Protestants in Northern Ireland have been at each other's throats for decades, if not centuries). And of course, one of the sillier things the Catholic Church has tried to do is to prevent families from employing any form of birth control — something not heeded by many Catholics in developed countries, but a directive unfortunately followed by many in developing ones.

The result was that Ireland's population simply kept growing and growing, without an end in sight. The Irish government recognised that this was a problem, and in the 1960s and 1970s legalised many forms of contraception. The reproduction rate slowed to a manageable rate, but the gains from this policy naturally took a generation to manifest.

Another policy that took time to bear fruit was Ireland's policy of free education for all. When Irish youth got a proper education, rather than being relegated to the same low-skilled occupations their forefathers had filled, they naturally gained access to greater opportunities.

Just as importantly, the Irish government also began implementing policies that made it one of the most open economies in Europe. The tax rates are relatively low, there is significant freedom of entry and exit in any industry (and you don't need to wade through mountains of paperwork to hire or fire, as you do in France or Germany), and multinationals have been free to come in and invest in the Irish economy. These policies have been instrumental in the success of the Irish economy — because despite their spectacular lack of natural resources, the Irish have somehow gone from backwater to developed state in a couple of generations.

One thing that has especially struck me is how the Irish did not bitch and whinge about the entry of multinationals to the Irish economy. Most other developing countries would have developed strong anti-globalisation movements, with people denouncing the "economic colonialism" of the global economy. And yet, the Irish have staunchly moved forward, without much wistful regret at the involvement of multinationals in their economy.

Friedman attributes this acceptance of the global economy to the near-failure of the Irish economy in the 1970s. I don't know how true this is, but the "why" is not as important as the lesson to be imparted: in the global economy, beggars can't be choosers. Provided you have a decent government willing to enforce the rule of law (rather than the rule of convenience for its cronies), you should not fear the involvement of multinationals in your economy.

The protectionists always find some spurious argument to use, though. One that I am confident they will bring up is that the Irish did not have a particular need to fear multinational corporations because of their white and European heritage.

This simplistic answer easily overlooks the fact that the Irish have been at loggerheads with the Anglo-Saxons in England for centuries (many of them have never forgiven Britain for Oliver Cromwell's invasion, rape and pillage of Ireland), and that the Hibernian culture does not exactly have much in common with Anglo-Saxon culture. The Irish may look white, but they have about as much in common with the stereotypically Anglo-Saxon West as, say, a Latin American country like Brazil.

The Irish economic miracle provides many important lessons that developing countries looking to reform themselves ought to take note of. Controlling the birth rate, improving the skills of the work force, and liberalising the economy were all important policies that made Ireland the economic power it is today — and I'll eat my cap if such policies are unnecessary for any other country that wants to be a force in the global economy.

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Infernal Ramblings is a Malaysian website focusing on current events and sociopolitical issues. Its articles run the gamut from economics to society to education.

Infernal Ramblings is run by John Lee. For more, see the About section. If you have any questions or comments, do drop him a line.

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