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Poor To Celtic Tiger
Ireland is the third largest island in Europe and twentieth largest in the world. Ireland had emigrants coming in 1950s and 1980s. There was a substantial growth of economy in 1990. This was the era when the country was named as "Celtic tiger" (Coined by Morgan Stanley in August 1994), as there was a economic boom in the country.
In January 1988, a survey was published in "The Economist" in which the title was 'Poorest of the Rich'. Less than ten years later the Economist published on their front page with the title 'Europe's shining light' about Ireland, They had published saying,
"Just yesterday, it seems, Ireland was one of the Europe's poorest countries. Today it is about as prosperous as the European average and getting richer all time". (The Economist, May 17, 1007, 15)
During this period it was very impressive, very high sustained growth in economy, inflation was very low, a current account balance of surplus, low unemployment ratio, budget surplus was growing and net immigration. Also during these times its per capita Gross Domestic Production exceeded that of United Kingdom's. The Irish economy, had a great impact until 2005, the reason for their growth during this period was mainly due to multi- nationals, who were looking for globalization in turn looking to bridge the gap between United States and European Union. Here, we need to consider the fact that 40 million US citizens are of Irish extraction. Let's have a brief introduction towards Ireland's Political, Economical, Social and Technological Environments,
Effects of Globalisation:
The republic of Ireland has a stable government. As the system is one parliament. The state head is elected once in seven years and can only be reelected once. People of Ireland have got used to the coalition governments since 1989.Globalisation helped Ireland to move from poor European country towards the new global economy. During this period Ireland was the second largest exporter of packaged computer software in the globe. Apart from this, there traditional exports were Guinness and Irish whiskey. Ireland had become a major player for the United States multinational companies in European Union market, giving rise to a new economy called the Euro-US economy. This reduced the communication costs between the United States and European Union markets.
The Economist's in 1987 were true, although they were harsh but they were realistic. They had a poor economy, but had gradual growth in economy which was averaged 0.2% over the five years during the time there were 3 years of negative economy growth. Unemployment was 18% and national debt of 125% of GNP. This all changed after 1987, when there was introduction of Fiscal retrenchment. The forces of changes were global rather domestic.
Brief History of Ireland's Growth towards International Market:
In order look at Ireland, how a pre-industrial country became a high-tech country an again a sudden dip in the country's growth, lets look at the brief history of the country:
1922-32 :- First decade of independence, after which the previous policies were carry forwarded. In 1927 the Irish currency was established.
1932-38:- Era of protectionism, economic war with UK. An attempt to build small scale industries which had high tariffs. A new act was introduced called " the control of manufacturers acts", which prohibited ownership of industries by foreigners.
1939-45:- Ireland remain neutral during the world war 2.
1946-57:- Ireland had a econmic downfall due to immigration from other european countries which were affected by the war.
1957:- The Act of Control of Manufacturers was removed.
1977-81:- The fail of creating balance of payments which pushed the public sector debt upto 120% in an act to create full employment in Ireland. During this periodthey joined the European Union.
1979:- As they joined the EU, the Irish pound one to one with sterling was broked in march 1979.
1981-86:- Tries at fiscal retrenchment largely not considered by the partners of the coalition govt.
1987:- Tax amnest, which helped to reduce the budget deficit.
1992:- Ireland signed the first phase of European Monetory Union at Maastricht. "Abolition of exchange control regulations".
1992-93:- Crisis on exchange rates. Devaluation of the currency(January 1993) and move towards wider exchange rate bands(115% plus or minus).
1999:- Ireland compltely under European Monetory Union.
2007-2010:- Economic downfall in the country, which was trigerred by the global economic downfall.
Liberal Irish Economy
Ireland is a small liberal economy, it had a Gross Domestic Product of about 1% of the European Union's Gross Domestic Product. After independence it had free trading relationship with United Kingdom for the first 10 years. Labourers moved freely from Ireland to United kingdom as well as United States and capital also moved freely between United Kingdom and Ireland. In 1932, the openness of the economy was sharply reduced, both in commodities and capital. Economic war with United Kingdom ensured that the commodity openness with the United Kingdom was reduced and importance was given to the small scale industries, but had high tax rates.The control of the manufactures Act was introduced in the above mentioned year, which stipulates that the Irish people should have a control of more than 51% shares in the Irish manufacturing companies. This ensured that the Foreign Direct Investment would not enter the economy of Ireland. The Act was finally removed in 1957. Ironically, there was a free movement for Irish capital to move out of the country. During 1940s and 50s the Irish capital was primarily invested in British Govt. securities.
As the removal of the Control of Manufacturers acts in 1957 signalled the beginning and welcoming of Foreign Direct Investment's in Ireland. Dr. TK Whittaker, in 1958 from the dept. of finance gave a report "Economic development" which emphasised on Foreign Direct Investment and tax reductions and other new changes moving towards free trade. Which initiated the signing of " Anglo-Irish free trade Agreement" in 1965 and Ireland joining the European Union in 1973. As Ireland joined the European Union, this ensured the reduction of links between United Kingdom and Ireland. This also streghtened by the Ireland joining the European Monetay System in 1978, this trigerred the breaking of one to one parity of Irish currency with British pound in 1979. Ireland also signed up the Maastricht Agreement in 1992 and January 1999 they fully joined the EMU.
The process of joining the European Union led towards capital movements. In 1979, the Central Bank introduced exchange control regulations, however the commitment towards the European Monetory Union led towards the removal of exchangecontrols in 1992. By now the Irish economy inclined towards free trade for commodities, labour and also capital.
Independent and liberal policies—独立自由的政策
The lack of knowledge of the importance of the liberalization of economy towards the international economy inclined towards local policy failures. The first policy failure as mentioned above was Control of manufacturers Act until 1957, which resulted in lack of foreign investment in domestic market which hampers economic growth. The second policy failure was during 1977-81, where there was emphasis towards the growth of domestic economy without considering the balance of payments. Wherein Govt. was looking more towards tax cuts and expenditure in public sectors, where govt. thought that it would lead towards full employment. This crisis was not addressed immediately as during this time there was a coalition govt. 1987 was the important year in the Ireland economic history. The new govt. committed towards fiscal retrenchment.
The importance of Europeanisation in the Irish Economy
Important dates in Ireland's path towards Europeanisation,
1973 - Ireland became a member of EEC
1978 - Ireland became a member of EMS
1979 - Due to there commitments with EMS had to break the one to one parity of there currency with the British pound.
1987 - Fiscal retrenchment
1990 - Removal of exchange control regulations.
1992 - Part of Single EU market.
1992/93 - Break down narrow band ERM of the EMS.
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