Celtic Tiger Roars Timely Message
In this year of the mighty Asian dragon, the tiny Celtic Tiger - as Ireland now calls itself - is roaring within the global economic jungle.
In six decades, Ireland has leaped from an impoverished Third World economy to a First World nation with a per capita income surpassing Britain's and expected, by 2002, to exceed the European Union average.
Is it because the Irish government got out of the way over the past thirty years, letting the free market rip, or was it farsighted public development policies that created the immense economic growth?
A recent conference in Galway, sponsored by the John Templeton Foundation through its Freedom Project, explored the connections in Ireland among laissez-faire economics, political liberty, economic growth, and social factors such as equality, culture, and morality.
The answer, according to Robert Kuttner in the July 10 issue of Businessweek Online, is complex. Kuttner said that, in the 1960's, the inward protectionist policies shifted to an outward focus and a massive investment in Ireland's young workforce.
A commitment to world-class education - beginning with universal secondary schooling, then community colleges and finally hot technical training - has resulted in Ireland now ranking second among advanced countries in the share of national income devoted to public education.
At the same time, the government enticed foreign capital investment by dumping its protectionist tariffs, offering the largest corporate tax concessions in Europe and moving away from restrictive British monetary control - enjoying the EU's monetary system and regional economic development funding - which reached 6 per cent of the Irish GDP.
A third government policy rounded out its new direction - social partnership with trade unions and rewarding wage restraint.
These policies took time to gestate, demonstrating the true grit courage to put the long term good of their nation ahead of short term personal political gain. The Irish economy lumbered along until the 1990's, when the well-educated, technically trained, English speaking workforce offered the tax-light new multinational businesses the best European ratio of skills to wages.
The package was irresistible to American technology companies - cornering an estimated 60 per cent of European sales in packaged Irish software.
Helped by the EU monetary system and macroeconomic convergence, the Irish interest rates dropped to near-German levels.
The freeing of market forces, the injection of foreign capital, the impressive tax breaks clearly opened up the economy. The massive investment in education and public infrastructures added the necessary internal ingredients for a fast growth economy.
EU membership offered both free-trade advantages as well as interventionist governance.
Kuttner's conclusion seems beyond the grasp of our policy makers: that while free markets invite the necessary economic dynamism, they can flourish only on a foundation of social investment and inventive governance.
Business News 13 July 2000
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