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Friday, December 09, 2011

Remember That Irish Economic Collapse?

   Remember the coverage it got on our state media? Remember all the statist politicians who were so very smug that Ireland's low corporation tax, light government regulation economy had hit the buffers?

  I blogged previously on how Jack McConnell, when asked why, having so often promised to make growing the economy his "first priority|" had not done so, when Ireland had proven 7% annual growth achievable said "3 years ago that would have been a difficult question to answer" but Ireland's recession no longer made it difficult.

   In fact Ireland's collapse was nothing to do with the economic basics. It was because they (A) were stuck in the Euro, which in the good times led to lots of rich Germans deciding it was a good investment and (B) the Irish government making a very silly 100% guarantee of their banks so that when they collapsed the ordinary Irish had to pay off the rich Germans and being in the Euro were unable to devalue as normal countries (including us) do and had to accept lots of German bureaucrats vetoing anything their government wants to do.

   Well despite the collapse (a collapse to a GDP still higher than ours, though they started at 60% of our per capita GNP) and despite an enormous drain from the debt they accepted the basics are still good and growth is still there. Albeit not as high as it used to be but still far better than ours.
There are signs of improvement. Compared with the previous year, exports are up 5.4 per cent for the first nine months of 2011, fuelled by gains from Pfizer, Intel, SAP and other multinational companies that were drawn to Ireland in the 1990s and 2000s by its low taxes, well-educated English-speaking workforce and access to the European market.

New information technology companies like LinkedIn and Facebook have recently arrived.

Prospects for local technology companies are improving, too. Brian Farrell founded Tethras with a partner three years ago to develop mobile applications for smartphones.

He now has 16 employees and hopes to double his workforce in the next 18 months.

Gross domestic product grew 1.2 per cent in the second quarter from a year earlier, compared with a decline of 0.4 per cent for all of 2010 and seven per cent in 2009.
  Strangely enough the state controlled British broadcast media has been far less enthusiastic about reporting this evidence of free market success.

  Proof that economic freedom always works. There has been excuse after excuse by British politicians for not learning the lesson - Ireland's boom will end soon; they are just playing catch up and will stop when they get to our GNP; yes it would have worked had we started back then when they did but it won't now (Wendy Alexander|).

    For balance I should point out that the Irish government have downgraded their forecasts of growth, though still to better than ours, on the basis that the Euro's problems are not being solved. Britain did downgrade our growth forecasts, following a fall in "growth" but unlike their's our current lower forecasts are predicated on the Euro troubles being solved. Believe whoever you think more competent.

   This is not to say Ireland are doing everything perfectly. They should quit the Euro, let the currency fall and thereby inflate away the debt.

Economic Freedom + Cheap Energy = Economic Growth

   They have a serious problem that they are one of the very few developed countries with a worse GNP to electricity ratio than us (7.75 as against 6.14) because they are even more anti-nuclear than Britain and pouring money into windmills. If they do nothing this will get worse, if only because some of it comes from Hunterston in Scotland and not only is Scotland going to be short soon but Hunterston was due to close this year and cannot have its life extended by political fiat forever.  In the circumstances we are not in a position to enjoy schadenfreude over that.

   However if they could achieve 7% growth for years before entangling them selves in the Euro our politicians have no excuse for not doi8ng the same. And if they were seriously held back by an an energy policy (or more properly anti-energy policy) similar to ours they could change it and achieve even higher growth at any time.

   So could we.

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