The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
For the better part of this decade, Ireland has been held up as the shining example of how to harness the forces of globalization. It was dubbed the Celtic Tiger, rising from little more than a sad potato farm to a fiercely competitive centre for software, pharmaceuticals, and high-tech research. Now, thanks to the current global financial meltdown, the Celtic Tiger has been sedated and thrown in a cage. Its once-hot real estate sector has turned ice cold, and exports have plummeted. IrelandÕs government now forecasts the economy will shrink by more than 1.5 per cent this year with unemployment to rise. Western Canada can learn from both IrelandÕs spectacular rise over the past 20 years and its subsequent fall over the past six months. First of all, the West can take some tips from IrelandÕs economic turnaround. Back in the early 1980s, Ireland was plagued with high unemployment and a steady outflow of migration. But with a few key policy initiatives, it was able to mount a stunning comeback. Cutting taxes is credited with much of the reversal of fortune. But massive investments in public education in the 1960s, a strategy of targeting winning sectors, and aggressive pursuit of foreign direct investment did most of the heavy lifting. On top of it all, Ireland emphasized the important role that creativity plays in generating wealth. Western Canada can learn from these actions. The biggest lesson is that it is possible to re-invent an economy. Ireland didnÕt grow into the Celtic Tiger by growing bigger potatoes. It went a totally different direction, getting into the globalization game. But now IrelandÕs economy is in trouble. What happened to the Celtic Miracle? Part of it was a classic real estate bubble. Real estate prices had been on fire for the better part of a decade. With the whiff of the global market downturn, housing prices dropped steeply. Another part of the problem for Ireland is that exports have stalled. Having hitched their wagon so tightly to the US for foreign direct investment, Ireland is now suffering more than other EU countries from the American malaise. A third element has to do with the governmentÕs fiscal position. Tax revenues in Ireland are drying up quickly. After having kept taxes so low for so long, Ireland has very little fiscal room in which to maneuver. The lesson for us? Low taxes are great, but there will invariably come a time when the economy is sputtering, and a dose of tax cuts will be just what the doctor orders. If a government is busy cutting taxes during the good times, there wonÕt be room to cut taxes during the bad times. For its own good, Western Canada needs to pay attention to IrelandÕs experiences.
