The figures I've seen confirm what you've suggested about immigration (though I don't know whether they're former emigrants returning); and the levels of employment, unemployment, labour force participation, economic growth, and many other indicators show that there has been, indeed, a economic boom in Ireland. One problem, at least here in Canada, is that Ireland replaced New Zealand as the poster-country for laissez-faire economics.
I've pasted below a piece I wrote a month or so ago. The ILO report listed in the references is very comprehensive.
Todd Scarth
Canadian Centre for Policy Alternatives-Manitoba FastFacts May 25, 2000
Ireland Not the Neoliberal Miracle Some Claim
When John Bruton, Ireland¹s former Prime Minister and Minister of Finance, visited Winnipeg several weeks ago to explain his country¹s remarkable recent economic success, he emphasized one point: ³cutting taxes was not the prime driver in the fantastic pace of economic growth in Ireland, but was one of the results of the success² (Winnipeg Free Press, May 9, 2000).
One can only hope that Bruton¹s appearance will help to clear up some confusion among the many Canadian tax-cut advocates who, in brave defiance of available evidence, regularly point to Ireland as the latest laissez-faire miracle. They argue that Ireland¹s experience proves that cutting taxes leads directly to economic growth; that the ³Celtic tiger² fuelled its economic prowess by becoming a low-tax haven.
All of this is news to Bruton‹who, presumably, should know what he¹s talking about‹as it is to Vivienne Jupp, a prominent Irish businesswoman and chair of Ireland¹s Information Society Commission. Jupp visited Toronto in early May, where she said that Ireland ³is not a low-tax jurisdiction. I would never describe Ireland as a low-tax jurisdiction² (Globe and Mail, May 4, 2000).
The reality of Ireland¹s economy is complex. There has been major growth, but there is still a long way to go before that new wealth is distributed equally. And, interestingly, the roots of the country¹s success lie much more in a program of cooperation, social investment, and transfer payments, than in tax cuts or ³trickle-down² economics.
Partnerships Plan Emerald Economic Explosion
There is no doubt that Ireland¹s economy has boomed over the past decade.
>From 1993 to 1999, the economy grew annually by more than 8 percent.
Employment grew by about 25 percent between 1993 and 1998. Because of
strong growth in the labour market, especially among women, unemployment
has fallen at a more modest (though still significant) rate, from 18
percent in 1987 to less than 8 percent in 1998.
Ireland is notable not just because of its successful policies, but also because of how those policies were created: through a unique, cooperative planning effort. In 1986, with mass unemployment, falling employment levels, a fiscal crisis of the state and living standards well below the European average, Ireland was widely regarded as ³a sick man of Europe.² That was the year the social partners form the National Economic and Social Council (NESC), an advisory body of employers, trade unions, farmers and senior civil servants, came together to analyze policy issues. In 1986 they hammered out their Strategy for Development, and this formed the basis for the first of four agreements that have brought Ireland through more than a decade of negotiated economic and social governance. Since then, Ireland has developed its economic and social policy by means of social partnership between the state and major economic and social interests.
Representatives from government, employers, labour, and farmers meet periodically to bargain out agreements on the main lines of economic policy, and there is continuous, active dialogue and negotiation on implementation and short-term management.
In recent years, there has also been increased participation from community groups, representing the unemployed, the poor, volunteers, and so on, with the result being a greater emphasis on the ³social economy.²
So what did these partnerships come up with?
First, they enlisted trade union support for a radical correction of the public finances. A similar ³radical correction² occurred over the same period in Canada at the hands of Paul Martin. In Ireland, however, the government deficit was eliminated without cutting social welfare payments. The public spending cuts that did take place were not extended to transfer payments.
Income tax was reformed in a way that benefited working people. Support for tax cuts did not, however, reflect a swing to neoliberal politics, as it might have in some other countries. Rather, the tax system was made more equitable. Throughout the late 1970s and early 1980s there had been a distinct narrowing of the Irish tax base, with the result that the tax burden fell primarily on earned income, particularly the earned income of working people. When income taxes were raised in the early ¹80s, workers at average income or below experienced a huge increase in taxation, with many being driven into the top tax rate. As a result, tax reform and targeted tax reduction became a major concern to the average working family.
Social Investment
In addition to welfare and taxation, the agreement set out the general direction of government policy in a number of areas, with the broad parameters having been agreed between the social partners.
Rather than cutting taxes, the real keys to the Irish boom lie in much more progressive government measures. The Irish educational system has expanded dramatically over the past three decades, and now offers free university tuition.
This investment in education had paid off. It has increased the supply of skilled labour while reducing that of unskilled labour. A study by economists Barrett, Callan and Nolan (1997), calculated that, in the first half of the 1990s the growth in the stock of ³human capital,² achieved through education, was contributing over 0.6 percentage points to the annual national growth rate.
³The young people of Ireland are the reason for our success,² John Bruton says, ³and education is the key² (Winnipeg Free Press).
As a relatively underdeveloped region of the EU Ireland also benefited substantially from EU transfer payments. Total net transfers from the EU rose from about 5 per cent of GNP in 1986 to a peak of 7 per cent in 1991 and fell back to around 5 per cent in 1994 and 1995. This represents a substantial contribution to current income.
It is clear that the growth in EU transfers made a significant direct contribution to the development of the Irish economy at a crucial period of economic change. EU payments were used for investment in education and training, and physical infrastructure, all of which resulted in an ongoing and continuing enhancement of the economy¹s productive capacity.
The Costs of Success
There is still much to be done if the fruits of Ireland¹s success are to be fairly distributed across all sections of society. Workers have achieved real gains in their material living conditions, but rapid economic growth has coincided with an increase in inequality. The incidence of low-paid employment has increased, as has the incidence of poverty. Public expenditures on social services are low‹there is no government support for child care, and health care is suffering.
As Ireland¹s economy approaches that of its more prosperous neighbours, it should adopt a social model similar to that of the Netherlands or Denmark
Related Reading
Martin Cash. ³Progressive policies stoke Irish economy: strong school system keeps best at home.² Winnipeg Free Press, May 9, 2000, p. B-5.
Shawn McCarthy. ³Policy cited as key to Ireland¹s success: social contract made Celtic tiger roar, Irish commission chairwoman says.² Globe and Mail, May 4, 2000. p. B-4.
O¹Connell, Philip J. Astonishing Success: Economic growth and the labour market in Ireland. International Labor Organization, Employment and Training Papers 44. 1999. Available online: http://www.ilo.org/public/english/employment/strat/publ/etp44.htm
Todd Scarth Director
Canadian Centre for Policy Alternatives-MB 309-323 Portage Ave Winnipeg, MB R3B 2C1 ph: (204) 943-9962 fax: (204) 943-9978 www.policyalternatives.ca/mb
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