Tuesday, November 16, 2010

"This Irish Miracle"

Written in 2006, quoted by Joseph Cotterill (his added links and emboldening, too) at FT Alphaville :

Ireland is no longer on the edge of Europe but is instead an Atlantic bridge. High-tech companies such as Intel, Oracle and Apple have chosen to base their European operations there. I will be asking Google executives today why they set up in Dublin, not London… What has caused this Irish miracle, and how can we in Britain emulate it?

… in a world where cheap, rapid communication means that investment decisions are made on a global basis, capital will go wherever investment is most attractive. Ireland’s business tax rates are only 12.5 per cent, while Britain’s are becoming among the highest in the developed world.

World-class education, high rates of innovation and an attractive climate for investment: these are all elements that have helped to raise productivity in Ireland. It is not the only advanced economy to have achieved this uplift. Last week in Washington the new Chairman of the Federal Reserve, Ben Bernanke, told me about the impact that the sustained increase in productivity growth had made in generating prosperity in the US…

The new global economy poses real long-term challenges to Britain, but also real opportunities for us to prosper and succeed. In Ireland they understand this. They have freed their markets, developed the skills of their workforce, encouraged enterprise and innovation and created a dynamic economy. They have much to teach us, if only we are willing to learn.

Good job we're slow learners, or we might be in even worse economic shape, were that possible.

But what manner of man can this be, who hails the tremendous prosperity of the US and Irish economies, and obviously cannot see a cloud in the economic sky? Surely, while a talented polemicist, he should be kept well away from any influence over actual decision-making?

Er... oh. Oh dear, oh dear. Most unfortunate.

UPDATE - to be fair, the SNP's Alex Salmond, currently heading up the Provisional Government of Scotland, went one better, lauding the economies of both Iceland(c) and Ireland(r) as the template for a future independent Scottish economy. Had he got his way, it might have been the shortest independence ever and the greatest disaster for the Scottish economy since the Darien scheme - which led directly to union with England.


Brian said...

Ironically, there is an Irish term for the people who caused the problem.

Anonymous said...

The Irish did well because of the EU, they were given vast sums of money much of it paid for by the British tax payer.

They out-competed us because we subsidised them.

Then idiot bankers from RBS got in on the act and 'invested' huge sums of money that the British tax payer is now liable for.

The same is true of other EU countries also.
Mostly only Britain and Germany that are signficient net contributors, plus a few other smaller countries, and Germany has used the situation to boost its manufactoring base by 'bribing' other EU countries to buy their products.
Britain has been the loser.

Anonymous said...

While British farmers were struggling a few years ago Irish farmers were doing comparatively well.

Anonymous said...

because of EU policies.

Peter Risdon said...

So Ireland's problems stem from low corporation tax and the fact that lots of US high tech businesses moved there?

I don't think that's a sustainable argument, in which case Osborne wasn't so very wrong. It's other factors that have caused their present situation.

Laban said...

Agreed, Peter. Nowt wrong with that.

Yet Osborne failed to spot the approaching disaster. Admitttedly he's got plenty of company - including the entire Irish cabinet.

But certainly the property bubble was apparent in 2006. He (or his writer) never asked what would happen if prices started to fall.

Anonymous said...

Perhaps this is in part responsible for the "miracle". Funny the EU hasn't put a stop to the "Double Irish" but maybe that's what you get for approving the Lisbon Treaty (eventually).

Anonymous said...

Peter Risdon: well said! The Irish did many things right!

Unfortunately, they did some things wrong, like joining the Euro - which meant,Laban, that they could not raise interest rates to temper the property boom.

Osborne was broadly drawing the right lessons - for the UK, not Ireland. 1. We need to cut taxes on business -- corporation tax (at 1%?), NI reduced, etc. 2. Increase taxes on consumption, as the coalition has done. 3. Cut public expenditure, as the coalition has NOT done - it has merely reduced the rate of increase!

Laban: please consider reviewing this:


paul ilc

Mark said...

Anon 6.31pm- You are right to draw attention to the fact that tax arbitrage was always an important factor in the development of the 'Celtic Tiger' economy across the water.(Estonia's low tax regime gave a similar, if attenuated, lift to that country's brief reign as the 'Baltic Tiger'). However an anglophone education system that avoided the fads endemic elsewhere in the Anglosphere also helped the Irish, as did an intelligent, quasi-Gaullist, industrial development policy. (The latter led to the creation, virtually from scratch, of a thriving Pharma sector).

BTW Laban, a hat tip is due to your referencing of the Kevin Myers article in your previous posting about the Emerald Isle. He is an illuminating and entertaining writer, banished from these shores (in my view unjustly) during Sarah Sands' brief reign as dominatrix at the Sunday Telegraph. Check out his memoir about the Troubles- 'Watching the Door', which is a real humdinger of a book.

Anonymous said...

The success of the Irish low-tax regime only makes sense in the context of Ireland being an english speaking country in close proximity to the UK.

Most of the big companies setting up shop there were doing most of their business in the UK.

If the UK had the same tax structure the Irish advantage would have been wiped out.

If Ireland were still an English speaking country - but instead been off the shores of Italy, none of this would have happened.

dearieme said...

Now the Irish may conclude that it wasn't just their children who were getting screwed.