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Ireland-death of the celtic tiger

Friday 12 March, 2010

I attended this event hosted by the Chicago Council on Global Affairs IRELAND’S ECONOMY AND THE DEATH OF THE CELTIC TIGER featuring Fintan O’Toole.  Here’s what he had to say:

Why does Eire matter?  It’s a fitting example of the current status of globalization & its sustainability.  Globalization a very complex phenomenon that is often grossly oversimplified.  Between 1995 & 2002 Ireland benefited greatly from global free trade & became the most globalized economy according to AT Kearney & Foreign Policy magazine.  There were many external effects which led to Ireland’s boom:

  • the weakening role of the catholic church, (which essentially outsourced morality)
  • a baby boom in the 1970’s led to demographic changes which resulted in a younger work force & more women working
  • investment in education was significant
  • social partnership led to less free markets
  • Ireland’s vicious cycle of mass immigration weakened its economy in the past, but when immigrants returned to Ireland, it had a positive effect.

The problems started popping up when they started to believe the hype themselves.  While lower taxes & fewer regulations added to growth, it was not sustainable.  It crowded out capacity to understand what was happening to society.  The lack of political tension created a transformation that either all had changed, or not.  5 things did not change:

  1. town hall political culture-machine politics expanded, which led to fewer choices
  2. perils of intimacy in a small society-financial corruption with impunity made decision-makers think standards no longer applied to themselves & that they were the kings of the universe
  3. unknown knowns-tax frauds were known, but ignored, which led to an incredible property boom while common sense became inert
  4. understanding of wealth-the assumption was that technology + management leads to wealth, but they returned to feudalism & invested heavily in land/property
  5. aspirations-they still wanted to become doctors & lawyers, but ignored passive recipients

Ultimately Ireland failed to engage in globalization successfully, which created a property bubble.  The political state failed to create real long term development.

Q&A

  • thought leaders did not address technology-there were disconnects & massive self-delusion, ex. Ireland sold off its national telecom carrier, but it’s level of broadband penetration still needs lots of investment
  • with the implementation of the Euro, Eire lost control of its own monetary policy, which deprived them of a potential economic tool, but they’re still better off being in the Euro-zone than outside of it
  • re: fiscal austerity, Irish politicians are surprised citizens are not more upset about budget cuts, etc. even if they are not sustainable.  It is anti-Keynesian to cut spending in a recession, which could become deflationary & lead to unemployment & social resistance, but the feeling is it must be done.  Government is still investing in banks that will never lend again.  It’s difficult for the people to sustain sacrifice if there is not justice.
  • Ireland’s 2 political parties are essentially 2 slightly different flavors of Christian democrats, who rarely disagree.  A new dialogue must start from the ground up.
  • The Irish are smart enough not to repudiate their debts.  They’re embedded in the global economy & recognize the consequences could be catastrophic if they did.
  • Lack of accountability is key, but a danger of a single ruling party.  At the business level, the question is “did leaders know what was going on or not?”  Were the duplicit or complicit?
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One comment

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