New roots for the Irish miracle?

by on February 28, 2008 at 6:35 am in Data Source | Permalink

By the turn of the century [2000], according to some reckonings, 70 percent of Irish manufactured exports were by US-owned firms…

This was, of course, encouraged by tax breaks and a form of industrial policy.  But part of this process was a shift away from English investment:

Between 1960 and 1970 British-owned companies represented 22 percent of new industrial enterprises in Ireland.  But by 1980 they accounted for less than 2 percent.  Significantly, the proportion of exports to Britain from Ireland halved between 1956 and 1981.

In other words, Ireland found a more complementary economic partner, namely the United States.  The Irish economic miracle is in part the American economic miracle.

That is from the often interesting Luck & the Irish: A Brief History of Change from 1970, by R.F. Foster.  Here is a previous MR post on the Irish economic miracle.

greatzamfir February 28, 2008 at 6:58 am

I thought this was the standard view? The whole low corporate tax was pretty much meant to encourage American firms to put their European base in English-speaking Ireland.

Kieran February 28, 2008 at 11:44 am

The whole low corporate tax was pretty much meant to encourage American firms to put their European base in English-speaking Ireland.

This is right. If you look at your click-through license for software from Microsoft or whomever, you’ll find that the company is defined for purposes of the license as located in Dublin. A measurable chunk of Irish GDP is tax revenues from Microsoft alone.

There’s also the broader question of why this growth didn’t happen at least a generation earlier. This is more a question of politics than economics. Tom Garvin’s Preventing the Future argues that the interlocking interests and ideological views of small farmers, the church, and the old Civil War political class combined to stop a strong education system from becoming established when it was needed.

guy in the veal calf office February 28, 2008 at 2:44 pm

encouraged by tax breaks and a form of industrial policy

What is the definition of “industrial policy?” I wouldn’t think that a broad and neutral reduction of the tax rate and regulatory framework would count. What China is doing in manipulating tax rates to, first favor low-grade manufacturing, and then disfavor it while favoring R&D is more like industrial policy in the sense that it explicitly favors certain industries and tries to promote and discourage industries.

happyjuggler0 February 28, 2008 at 3:15 pm

Here is a link for the Forbes Misery Index, which is basically a summing up of the tax rates (as opposed to taxes received as a % of GDP, which can be a lousy measure of how punitive taxes are) of a bunch of various taxes. Ireland is on the lower end of the scale, especially compared to other European countries.

So even by the metric of overall tax rates (instead of merely corporate tax rates) Ireland is lower tax than virtually all of “old Europe”.

M. Hodak February 28, 2008 at 10:39 pm

And, the people are so hospitable. Not Canadian nice, perhaps, but much nicer than the average Euro.

David Heigham February 29, 2008 at 11:11 am

Kieran is close in looking for the roots of the Irish miracle. It was not luck, but it certainly was thoroughly Irish. To quote from an unpublished comment of mine:

“The fourth institutionalisation of a focus for the future that I met is in Ireland. ….. this informal network has, and has had for over 30 years, the higher Irish Civil Service as its core. That, and its success in modernising Ireland, makes it particularly interesting for me. When I first encountered it – in the early stages of modernisation when they were concentrating on reforming education – I was entranced to find that it was largely conducted as a running conversation on Irish rules. (To do 5 hours business, talk about something else for the first four; the business is then done in the following half hour.) The conversation simply enlarges when something has to be done – for example, when I first saw how the system worked, the relevant ecclesiastics were drawn in to ensure that as individual bishops who blocked educational reform retired, they were replaced by priests who would help the process. Because everyone important knows and simultaneously does not know what is going on, the issue of legitimation scarcely arises.”

Once the educational foundation had been laid, the conversation that manages Ireland went on to other topics. The politicians were made to understand that they could get away with a good deal of personal corruption, but not pork barrel waste of scarce resources. A consistent strategy was operated of getting the most out of European policies by being helpful friends with everyone when a Brussels deal was being done, and picking up useful crumbs from all the resulting agreements. Politicians were educated in the need to cut headline corporate tax rates (overall burdens are a different matter) to attract overseas corporations. And so it continues on a host of different matters relevant to the future of the country.

Ireland April 17, 2009 at 7:00 am

Ireland has been one of the hardest hit countries in the downturn of the world economy. It is said that when Ireland gained its independence, the Irish Republic emerged as a country behind the curve, but over the next 50 years they become the richest nations of Europe. The Celtic Tiger boomed for years until recently, as the Anglo Irish Bank was nationalized amid fears of a collapse. But because of this recession Irish many turned to cab driving to sustain the needs of its people. They never granted any no fax cash advance as well as short-term loan. Radical budgets cuts appear in the prospect, as there may not be a large enough short-term loan for Ireland to keep things as they were. Just imagine how many countries suffers from this economic downturn, well I guess we should act a little fast now before it’s too late. So can we hope for miracle? Nah, I suggest let’s act now let the government know our sufferings and let’s try to pray for blessings for all our sakes.

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