Noticias

APUNTES JOHN BRUTON (versión en inglés)
 

Leadership, Action and Reform:
The Secret of Ireland’s Economic Success

Presentation by Ambassador John Bruton
Former Prime Minister of Ireland

‘A Competitiveness Model for Argentina’
Organized by Construya
May 15, 2007

 

I. IRELAND THEN AND NOW

--  Ireland Not Always The Prosperous Place it is Today

--   Success Did Not Happen Overnight; Some Trial and Error Along the Way

Initial Inhibitors:

• Focus on National Political and Spiritual Goals

• Prolonged Protectionism (1932-1960)

• Foreign Investment Restrictions (1932-1960)

• Heavy Government Borrowing (1977-1987)


The Celtic Tiger Emerges: Ireland in the 1990s

In Contrast to Previous Decades Marked by High Unemployment and Emigration, Ireland becomes ‘The Celtic Tiger’

- GDP Growth at 6.6% Per Year

- Budget Deficit Becomes A Surplus

- Unemployment Falls from 16% to 4.3%

- Inflation Remains Low

- Emigration Turned to Immigration

- 2nd Highest Rate of Foreign Direct Investment Per Capita in the World

- $15,000 of US Investment in Ireland per Irish Resident
Ireland in 2007

- GNP Growth of 7 % (GDP 6%)

- Rate of Export Growth of Indigenously Owned Companies Now Exceeds That of Multinationals.

- Ireland has 2.2% of All Services Exports in the World, with only 0.3% of the World’s Population

- 19% of Irish Exports Go to the United States, whereas in 1990, 9% went to the U.S.

- House Prices have Trebled in Real Terms in the Past 10 Years

- More Than Half the 83,000 Increase in the Workforce in 2006 Came from Outside Ireland


2. HISTORIC ROOTS OF IRISH SUCCESS


Decisions Taken at Founding of State Eventually Paid Off:

- Independent Non-Partisan Civil Service (1922)

- Police and Military Independent of Politics (1924)

- Non-Partisan Industrial Development Agency (1949)

- Independent Courts System (since 19th Century)


Cultural Factors

- Cultural Connection with North America

- English as Primary Language (since 19th Century)

- Belief in Education as Bedrock of Success

Mid-Century Modernisation

Economic Liberalisation Began in the 1950s:

- Liberalisation of Foreign Direct Investment (1958)

- Free Trade with Britain (1966)

- Free Post-Primary Education (1966)

- European Union Membership (1973)

- Abolition of Exchange Controls (1980)


Political Ingredients

-Bipartisan Corporation Tax Policy in Favour of Foreign Direct Investment

• 0% from 1956 (on all exports)
• 10% from 1978 (on manufacturing and trade)
• 12.5% from 1997 (on all companies)

- Social Partnership with Trade Unions (1987)

- Dublin International Financial Services Center (1987)

- Free Third Level Education (1996)

 

Demographics

- Available Labour Force Has Doubled from 1.1 million in 1980 to 2.01 million in 2005

- 35% of Ireland’s 25-35 Year-Olds Have Third-Level Education, Above EU Average of 23%

- Young Adults in 1990s Well-Educated and IT-Literate
o In 1965, 11% of  Relevant Age Cohort Went to College
o In 2003, 57% of Relevant Age Cohort Went to College

- Proportion of Women in Paid Work up by 53% from 1994-2005

- Dependency Ratio down from 224 (1986) to 124 (2004) because
birth rate fell after 1980 but number of elderly remained relatively

Ireland in the European Union

Membership in the EU (1973) Was a Force for Positive Change.
Benefits of EU Membership Came Slowly – More Evident in the Second 15 Years of Membership Than in the First.

Main Benefits Included:

- Access to Markets (EU Now Largest Single Market in the World)

- Less Dependence On/ Better Relationship With Britain

- Infrastructural Modernisation (EU Structural Funds)

o Net EU Transfers to Ireland since 1973 was €10,000 per Irish person

-EU Competition Rules Forced Irish Businesses to Compete (e.g. Airlines)

-Budgetary Discipline (in Preparation for Euro and in Eurozone)

-Labour Mobility (Outward and Inward) Promoted New Thinking
 

3. OTHER INGREDIENTS IN IRISH SUCCESS STORY

Sound Investment Choices

- Investment in Modern Telecommunications (1973-1990) Prepared Ireland for Services Economy

- Ireland’s Size Helped Communication With, and Access to, Decision-Makers

-As an Island, World Economic Shift towards High-Value/Low-Weight Products Suited Ireland

-Industrial Development Authority Read Market Trends Well, Targeted IT, Pharmaceuticals and Financial Services.

Education

Education Has Been an Important Factor:

- Education is Compulsory for All Children of 6-15 Years

- Teachers Are Well-Paid, Full-Time

- School Inspection Reports Published on Web

- Big Growth in Regional Technical Colleges in 1970s Aided by EU, Targeted Local Skill Demands

Speedy & Inexpensive Justice

First Major Overhaul of Ireland’s Court System Since 1924 Began in 1995.

- Involvement of Judges in Reform Helped Conservative Profession to Embrace Change

- Emphasis on Case Management, Deadlines, Reduced Cost

- Use of IT Has Made Courts More Efficient, Transparent, Accessible to Public

- New Court for Commercial Disputes Has Removed Concern of Multinationals Planning to invest in Ireland

- Small Claims Can Be Filed Online, Easing Pressure on Court System.


4. THE CHALLENGES FACING IRELAND

Ireland Still Enjoys Comparative Advantages Over Many EU Countries

- A Younger and More Flexible Population

-Openness to Immigration: one in 10 people in Ireland is foreign born

-Relatively Low Pension and Other Demographic Costs


Challenges Still Confront Ireland in the Following Areas:

- Exposure to U.S. Economy

- Booming Property Market, Overextended Buyers. Three-fold Increase in House Prices over 10 Years

- Insufficient Home Grown R&D

- 17% of Students Still Drop Out of Secondary Level Education
 

5. THE FORMULA THAT WORKED FOR IRELAND

Nine Factors Made the Difference in Unlocking Ireland’s Growth

- Openness to Foreign Investment

- Simple and Low Tax Policies Encouraged This Foreign Investment

- European Union Membership Opened Market, Provided Funds and Disciplines

- Investment in Education, and, Very Good Demographics in 1990s

- An Independent Judiciary, And A Strong Tradition of A Civil Service Independent of Politics

- A Stable Political System and a Consensus Between the Parties and With Social Partners on Development Goals

- Sharing the Benefits of Growth Through a Tax System That Was Equally Applicable to All

- Making It Easy to Set Up A New Business

- Openness to Immigration