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Celtic tiger roars timely message

In this year of the mighty Asian dragon, the tiny Celtic Tiger is roaring within the global economic jungle.

In six decades, Ireland has leaped from an impoverished Third World economy to a First World nation with a per capita income surpassing Britain’s and expected by 2002 to exceed the European Union average.

Is it because the Irish Govern-ment got out of the way over the past 30 years, letting the free market rip, or was it a result of farsighted public development policies that created the immense economic growth?

A recent conference in Galway, sponsored by the John Templeton Foundation, explored the connections in Ireland among laissez-faire economics, political liberty, economic growth and social factors such as equality, cultureand morality.

The answer, according to Robert Kuttner in the July 10 issue of Businessweek Online, is complex.

Kuttner said that, in the 1960s, the inward protectionist policies shifted to an outward focus and a massive investment in Ireland’s young workforce.

A commitment to world-class education has resulted in Ireland now ranking second among advanced countries in the share of national income devoted to public education.

At the same time, the government enticed foreign capital investment by dumping protectionist tariffs, offering the largest corporate tax concessions in Europe and moving away from restrictive British monetary control – enjoying the EU’s monetary system and regional economic development funding – which reached 6 per cent of the Irish GDP.

A third government policy rounded out its new direction – social partnership with trade unions and rewarding wage restraint.

These policies took time to gestate, demonstrating true-grit courage to put the long-term good ahead of short-term

personal political gain.

The Irish economy lumbered along until the 1990s, when an educated, technically trained, English-speaking workforce offered tax-light new multinationals the best European ratio of skills to wages.

The package was irresistible to American technology companies – cornering an estimated 60 per cent of European sales in packaged Irish software.

Helped by the EU monetary system and macroeconomic convergence, Irish interest rates dropped to near-German levels.

The freeing of market forces, the injection of foreign capital and the impressive tax breaks clearly opened up the economy.

Massive investment in education and public infrastructures added necessary ingredients for a fast-growth economy.

EU membership offered both free trade advantages and interventionist governance.

Kuttner’s conclusion seems beyond the grasp of our policy-makers: that while free markets invite the necessary economic dynamism, they flourish only on a foundation of social investment and inventive governance.

l Ann Macbeth is a futurist and principal of Annimac Consultants.

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