Le Tigre celtique en question

L'Irlande contemporaine : économie, État, société

Catherine Maignant (dir.)

Éditeur : Presses universitaires de Caen

Année d'édition : 2007

Date de mise en ligne : 20 décembre 2012

Collection : Littérature et civilisation irlandaises

ISBN électronique : 9782841334612

http://books.openedition.org

Référence électronique :

MAIGNANT, Catherine (dir.). Le Tigre celtique en question : L'Irlande contemporaine : économie, État, société. Nouvelle édition [en ligne]. Caen : Presses universitaires de Caen, 2007 (généré le 09 novembre 2013). Disponible sur Internet : <http://books.openedition.org/puc/621>. ISBN : 9782841334612.

Édition imprimée :

ISBN : 9782841332441

Nombre de pages : 195

© Presses universitaires de Caen, 2007

Conditions d’utilisation :
http://www.openedition.org/6540

Cet ouvrage propose un bilan de la réussite économique de l’Irlande à partir des années quatre-vingt-dix. Le Tigre celtique en question se présente sous la forme de regards croisés sur les transformations radicales dont le pays a fait l’expérience au cours des quinze dernières années, et analyse successivement les mutations économiques, l’évolution de la place de l’État dans l’économie et les métamorphoses que la prospérité a induites au sein de la société. Il se conclut par une réflexion sur les représentations que l’Irlande d’aujourd’hui propose d’elle-même, à l’issue d’un processus qui l’a rendue étrangère à ce qu’elle était il y a encore vingt ans.

Sommaire

Avant-propos

Catherine Maignant

Managing Globalization: Ireland’s experience in attracting foreign investment

John Bradley

Before the storm

During the storm

After the storm

Reflecting on the experience

Ireland in the European Union: the implications for Ireland of the Political Development of the Union

Margaret Mary Malone

The Political Development of the EU: Implications for Ireland

Beyond Agenda 2000 – A Future European Defence Policy and Irish Neutrality

L’Irlande et l’Union économique et monétaire

Christophe Gillissen

L’indépendance

Les fonds structurels

La politique sociale européenne

Quel lien, en Europe occidentale, entre prospérité et mondialisation ?

Philippe Brillet

Les pays plus riches que l’Irlande

Les pays moins riches que l’Irlande

Le rôle de l’État dans l’économie irlandaise à l’ère de la mondialisation

Vanessa Boullet

D’un rôle keynésien et de la gestion de la demande

Une stratégie plus collaborationniste

Économie irlandaise et mondialisation

Anne Groutel

L’économie irlandaise : Tigre celtique ou colosse aux pieds d’argile ?

L’État irlandais et le processus de mondialisation de l’économie irlandaise : maître ou valet ?

L’Irlande à l’heure des choix stratégiques dans un contexte socio-économique instable

Marie-Claire Considère-Charon

Les fondements et limites de la croissance irlandaise

Vers une stratégie des décideurs irlandais ?

The “Celtic Tiger”: Economic Modernization and its Social and Political Ramifications in Ireland

William Crotty

A History of Economic Change

Irish Economic Growth over Time

Social Change in a more Pluralistic Society

Refugees in Ireland: a Case of Social Closure

Michel Peillon

The other within

Discourses and practices about the Other

Citizens and others

A refusal of pluralism?

La politique d’immigration en Irlande

Catherine Piola

L’Irlande du Tigre celtique est-elle post-moderne ?

Catherine Maignant

Post-modernité ou modernité aiguë ?

Aspects de la modernité radicale :

Débat intellectuel, homogénéisation idéologique et construction de l’avenir du Tigre

Conclusion

Catherine Maignant

Bibliographie sélective

Avant-propos

Catherine Maignant

1Catherine Maignant L’Irlande du xxie siècle ne correspond plus guère à l’image bucolique que le passé nous a léguée. Embrassant avec enthousiasme les idéaux de la mondialisation, elle a habilement utilisé les chances que l’Europe lui offrait pour se développer de manière spectaculaire et devenir un modèle de réussite économique. Dans les années quatre-vingt-dix, le « Tigre celtique » a fait une entrée remarquée sur la scène internationale. Si, dès la fin des années cinquante, l’Irlande était, sous l’impulsion de Lemass et Whitaker, revenue sur les choix isolationnistes, autarciques et étroitement nationalistes de l’ère De Valera, le pays a accompli au cours des dix ou quinze dernières années sa mutation vers le «  tout économique » avec les conséquences de tous ordres que cela suppose. L’Irlande des années vingt et trente avait fondé son identité sur une revendication de spécificité. L’uniformisation impliquée par le processus de globalisation a abouti à des transformations profondes qui dépassent très largement le strict domaine économique. La société tout entière s’est ainsi trouvée précipitée dans un univers fort éloigné de celui qui lui avait donné naissance et que d’aucuns qualifient de « post-moderne ». Que l’on reconnaisse ou non la pertinence de ce terme, force est de constater que la modernisation induite par les choix économiques et politiques a eu pour effet un questionnement, voire une refonte identitaire comparable, dans ses principes comme dans ses expressions, à celle qu’ont connue les autres sociétés avancées depuis les années soixante. Aujourd’hui pourtant, la spirale vertigineuse du succès ne paraît plus entraîner l’Irlande avec autant de force. À l’époque du ralentissement, en 2002-2003, on chuchotait que le pays serait entré dans la période de l’après Tigre celtique, que dans tous les cas la prospérité serait – comme certains commentateurs le suggéraient depuis longtemps – fragile à l’extrême. Au printemps 2007, la situation semble stabilisée et les excellents résultats de 2006 confirment la relance visible dès 2005. Des questions demeurent toutefois, d’autant que l’Irlande est en train de perdre le statut finalement privilégié qui était le sien dans le cadre de l’Union économique et monétaire. Initialement hostile au traité de Nice, elle a finalement donné son accord référendaire à l’élargissement de l’Union européenne à de nouveaux membres, acceptant ainsi de se rallier aux vœux de la majorité, au risque de voir son influence diluée et d’être rapidement contrainte de contribuer au développement des nouveaux États membres périphériques. Peut-être se trouve-t-elle donc au seuil d’une nouvelle phase de son histoire où elle risque de se trouver confrontée à des difficultés, à ce jour seulement esquissées. Il nous a paru intéressant, en cette phase de transition, de tenter de dresser un bilan de cette forme d’âge d’or que fut, et qu’est clairement encore, l’ère du Tigre celtique. Le présent ouvrage se compose ainsi d’une série d’articles, rédigés entre 1999 et 20061, qui portent témoignage des succès et des échecs des années fastes mais aussi des interrogations que l’aventure économique irlandaise a suscitées en Irlande comme à l’étranger. Il pose, par ailleurs, en filigrane la question centrale de la construction d’une nouvelle réalité sociale et politique en Irlande sur la base de convergences avec un modèle international standardisé, individualiste et libéral. Il recherche enfin les éventuelles divergences par rapport à ce schéma. Si l’Irlande a perdu son âme des temps romantiques, elle n’a peut-être pas oublié le goût de cultiver une certaine différence.

Notes

1 La date initiale de rédaction est portée à la fin de chaque article. Le directeur de publication a toutefois actualisé les données à chaque fois que cela lui semblait pertinent.

Managing Globalization: Ireland’s experience in attracting foreign investment

John Bradley

1Résumé: L’article de John Bradley rappelle les grandes lignes de l’histoire économique de l’Irlande depuis les années trente. Il analyse dans un premier temps l’échec de la politique protectionniste initialement engagée par le gouvernement Fianna Fáil de 1932. Il se penche ensuite sur les changements amorcés à partir de la fin des années cinquante, qui firent entrer l’Irlande dans une modernité économique fondée sur l’ouverture de l’économie et la suppression des barrières douanières. La réussite de ces dernières années est enfin envisagée comme la conséquence à long terme de la stratégie d’ouverture lancée par Lemass et Whitaker.

2 Abstract: John Bradley’s paper surveys the economic history of Ireland since the 1930s. Its author first analyses the failure of the protectionist policy initiated by the Fianna Fáil government in 1932. He then argues that the modern economic age dawned for Ireland in the late 1950s, when the economy opened and tariff barriers were removed. The present economic boom is finally interpreted as the long term effect of the strategy of openness initiated by Lemass and Whitaker.

3The rapid recovery and growth of the main economies of Western Europe after an initial period of post-war reconstruction, cruelly exposed the poor performance of the Irish economy. The decision taken by the incoming Fianna Fáil government of 1932 to attempt to build an Irish industrial base behind protective tariff barriers that had been initiated in the early 1930s was continued well beyond its sell-by date into the post-World War II era. While industrial output grew fairly rapidly in the early years of protection, demand for labour fell well short of what would have been needed to keep pace with the high natural increase in the population and growth in the labour force.

4Policy-makers in Ireland recognised and acknowledged these failures and attempted to address them to the best of their ability. Dramatic new policy initiatives were taken and implemented. That these initiatives eventually led to a step-change in performance during the 1960s is also well known. By the year 1970, net outward migration had ceased and for the first time since the Famine, reversed in direction for the following eight years (fig. 1). However, it was to resume again in 1980, and in the year 1989 outward migration peaked at about 45,000. Today, birth rates have largely converged to lower European norms, annual net inward migration is running at over 20,000, and the economy is operating at near full capacity.

Fig. 1 – Half a century of migration in Ireland

5When economists re-visit and re-examine the failures of the 1950s, their perspective is rather different from that of historians, writers, psychologists and others who seek to understand how individuals and groups experience drastic times. We must tread carefully here, for even if economists regard the 1950s as merely a transitional period–a time when Ireland’s external economic environment changed and adaptation to that change was very slow in coming–nevertheless the depths of the failures have left semi-permanent scars on the lives of individuals and on society at large. I well recall the game we used to play as young children, passing the time counting the cottages through Roscommon and Mayo that were boarded up and abandoned, as my father drove down to Westport to visit his elderly parents. Coming back–usually at night when the depressing countryside was hidden from view–we delighted in greeting the first double-decker bus near Maynooth as we returned to civilisation and security.

6Why should the 1950s continue to be of relevance to economists? Do we not now inhabit a brave new world characterised by globalisation and high technology? Have we not carved out a prosperous niche by dint of our home-spun cunning and intelligence? The explanation goes deep into how policy-makers plan and implement long-term strategies. In the hurly-burly of daily life, one can live with a certain amount of lack of co-ordination; one can switch direction many times and experiment; one can even be inconsistent. Tactical policy mistakes and errors can usually be detected before too much damage is done, and revised policies implemented in a game of trial and error. However, this is only the case when the strategic thrust of policy has been set correctly. Getting the medium-term strategy right is vital mainly because change is difficult and errors are costly. When strategy is wrong, retribution usually follows. This is as relevant today as it was in the 1950s, for Ireland as for any other country or region.

7We first examine the strategic setting for Irish economic policy that was implemented in the early 1930s. The simple, unqualified and dogged embrace of protection by Irish policy-makers had appeared to offer exactly what the country needed at that time, and was in tune with an unfolding political and economic drama being played out in the rest of the world. We are uniquely privileged to have an evaluation of that policy, written at the very time of its design and implementation, by the greatest economist of the 20th century–John Maynard Keynes. We know from Robert Skidelsky’s biography that when Keynes spoke, the world listened, even if–as in the case of post-war America–it did not always obey1 But why were Keynes’s nuanced insights of 1933 neglected by his Irish policy-making contemporaries, who woke up too late in the 1950s to the peril of their position?

8During the 1950s, economic failure forced a re-think of policy fundamentals and eventually appeared to produce a well-thought out alternative: trade liberalisation and access to foreign capital. The central document in this period was Economic Development, a report that motivated and justified a complete change in policy direction.2 With the benefit of hindsight, it is of interest to examine the extent to which the policy programmes that derived from Economic Development foresaw correctly the shape of the new and improved performance that would emerge during the 1960s.

9We conclude by examining what we can learn from the process that led to the seismic shift in policy that took place during the 1950s. Professor Lee, in his magisterial Ireland 1912-1985, has brooded on the causes of failure and reached fairly damning verdicts concerning the role played by contemporary economists and policy makers3 Today, perhaps we need to beware of hubris, and ask ourselves whether such errors could be repeated.

Before the storm

10The seeds of The Lost Decade were sown in 1932. The Cumann na nGaedheal governments of 1922 to 1932 had largely followed UK policy norms: a fixed link with sterling and free trade. Given the dominance of the UK as a destination for Ireland’s mainly agricultural exports, few seriously challenged the link with sterling at that time. However, the efforts to restore the certainties of the pre-World War I economy–based on free trade and the gold standard–had collapsed by the early 1930s, and the world moved into depression and fragmentation.

11As countries were confronted by depression, there was an aversion to international economic interdependence4 Nations turned inward, fell back on their own resources, and there was a proliferation of exchange controls, tariffs, import quotas, and the like. Even in the UK–the spiritual home of free trade–the Import Duties Act of 1932 imposed tariffs on a wide range of non-Empire goods. That the incoming Fianna Fáil government was committed to a policy of protection was hardly surprising. One might speculate that if the world trading system had not been having a nervous breakdown, even the avowedly Sinn Féin policies of the new government might have not been given such a free rein.

12The driving motivation for the new policies of protection was the need to create an Irish manufacturing sector from almost a zero base. The partition of the island in 1922 had split off the one heavily industrialised region that was centred on Belfast, leaving the Free State with the modest remainder. The lurch to protection must have appalled the pro-free trade politicians of the previous administration. It is said that the invitation to Keynes to deliver the first Finlay lecture in University College Dublin (UCD) on April 19th, 1933 had been on the expectation that the speaker–a well-known advocate of the benefits of free trade–might bring an end to the madness5 We can imagine the horror of the ranks of conservative politicians and academics when Keynes declared–in the most often quoted extract from his lecture:

Ideas, knowledge, science, hospitality, travel–these are the things which should by their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.

13and concluded: “If I were an Irishman, I should find much to attract me in the economic outlook of your present government towards greater self-sufficiency”

14What is seldom quoted is what immediately followed these remarks, and heavily qualified them.

But as a practical man and as one who considers poverty and insecurity to be great evils, I should wish to be first satisfied on (some) matters. […] I should ask if Ireland is a large enough unit geographically, with sufficiently diversified natural resources, for more than a very modest measure of national self-sufficiency to be feasible without a disastrous reduction in a standard of life which is already none too high.

15Keynes went on to suggest an economic arrangement with England (sic) that resembled nothing so much as the Anglo Irish Free Trade Agreement that was concluded over thirty years later in 1965. But what is even more interesting are the reasons why Keynes had become disillusioned with free trade and international interdependence. Remember, this was the author of The Economic Consequences of the Peace, a man who, at the time of the negotiation of the Treaty of Versailles in 1919, foresaw exactly where the vindictive treatment of a fallen Germany would lead. Keynes’s Finlay lecture on April 23rd, 1933 was given one month after Adolf Hitler was appointed German Chancellor, and three weeks before the burning of books in the square of Unter den Linden in Berlin on May 10th. His worst nightmare had come to pass.

16It is little wonder that Keynes declared that:

It does not today seem obvious that a great concentration of national effort on the capture of foreign trade, that the penetration of a country’s economic structure by the resources and the influence of foreign capitalists, that a close dependence of our own economic life on the fluctuating economic policies of foreign countries are safeguards and assurances of international peace.6

17Keynes’s was the wider vision that may not have struck much resonance in a country preoccupied with its own internal problems. Keynes had abandoned the liberal economic agenda for reasons associated with the deterioration in the world political climate, but was to work diligently during and after the coming war to restore this agenda and to avoid repeating the errors of Versailles. The new Fianna Fáil government, on the other hand, had domestic objectives of industrialisation and needed to erect protective barriers to shield the infant industries. However, the policy of tariff protection that was put in place in 1933 endured through World War II (a time when access to vital imports was a more pressing problem than protection) and continued through the period of post-war recovery into the late 1950s. The relative successes of the immediate post-war period–when Ireland had captive British markets for its agricultural and food products–served to conceal the problems that the resumption of more normal conditions brought during the 1950s.

18More fundamentally, the political incorporation of Ireland into the United Kingdom between 1801 and 1922 generated forces that led to comprehensive economic and trade integration as well. The full extent of this integration after more than one hundred years of Union is illustrated in fig. 2, which shows the UK-Irish trade position from just after independence in 1922 to the year 1950. The proportion of Southern exports going to the UK showed only a very small reduction from 99 % in 1924 to 93 % by 1950.

Fig. 2 – Irish trade shares with the United Kingdom

19In addition to other problems, the failure of Ireland to diversify its economy away from an almost total dependence on the UK had serious consequences for its economic performance when compared to a range of other small European countries. The reluctance of the new Irish public administration to deviate too much from British policy norms has been well documented.7 It was hardly surprising that Ireland and Britain formed a particularly strong web of dependency, continuing from independence well into the 1960s. While policies and policy makers in Ireland may have been less assertive and innovative than might have been desired, in the absence of a competitive and export-oriented industrial sector there is probably very little that could have been achieved to accelerate an earlier economic decoupling from the UK. The consequences followed inexorably. In the words of Lars Mjøset: “Ireland became a free rider on Britain’s decline, while Austria and Switzerland were free riders on Germany’s economic miracle”.8

20Ireland’s relationship with Britain, which had involved a strong and enduring web of dependency prior to 1960, weakened considerably thereafter for very specific reasons.

During the storm

21Even while the war was in progress, and before it was clear that the Allies would be the victors, Keynes and others worked to ensure that post-war barriers to trade and currency exchange would not disrupt the proper functioning of the international economy as it had after World War I. Robert Skidelsky notes that Keynes used to say, ironically, that he used the calm of war to reflect on the turmoil of the coming peace! The international institutions that emerged from the Anglo-American negotiations–the IMF, the IBRD (or World Bank), and the GATT–were heavily influenced by Keynes, even if the detailed implementations carried the imprint of the immensely powerful USA. The European scene was further transformed by the European Recovery Programme (Marshall Aid) from April 1948 and the major devaluations against the dollar of September 1949. In addition, the Schuman Plan of 1950 set up the European Coal and Steel Community, and led eventually to the signing of the Treaty of Rome in March 1957. This was the international context that was to test the robustness of the inward-looking Irish policies and cruelly expose their weaknesses.

22The early part of the decade was characterised by a series of balance of payments crises that were handled in the conventional way by imposing higher taxes and cuts in expenditure to drastically reduce demand. Tentative efforts were made to run an independent lower interest rate policy, but this was soon abandoned. But these problems were simply the consequences of the uncompetitiveness of the manufacturing sector, and not the primary causes. Not only had protection failed to produce self-sufficiency–since the protected industries still needed to import materials and capital goods– but any increase in consumption also quickly ran into the sands of the balance of payments constraint. In other words, this was exactly what Keynes had warned about back in 1933! Ireland was simply too small to be a producer of goods where it had no comparative advantage.

23The Control of Manufactures Act–which had been used to prevent foreign ownership of Irish industry–was relaxed, but was not to be formally abolished until the 1960s. By 1956, the Coalition government had started to use industrial grants to attract foreign activity into Ireland, rather than merely to divert it to particularly deserving locations. Also, an export tax relief scheme–exempting profits earned from new or increased exports– was put in place.

24The disparate policy changes that evolved during the 1950s were consolidated in Economic Development and codified in the First Programme for Economic Expansion. An extraordinary and diverse range of ideas and proposals were advanced, mainly in the areas of agriculture and the agrifood sector. But with the benefit of hindsight, we can now recognise Economic Development as a transition between old and new perspectives, and not a whole-hearted embrace of a modern view of the economy. For example, we now know that the zero rate of corporation profits tax, associated with the liberalisation of trade and foreign investment as well as the freedom to repatriate profits, were absolutely central factors in a process that would inexorably lead to the decline of the indigenous manufacturing sector and the rise and eventual dominance of a new foreign-owned sector. Yet the tax initiative lies buried in Appendix 2 of Economic Development (“Measures designed to encourage investment in Irish enterprises”) on page 232 and is not mentioned in the main text.

25We also now recognise that when a mainly agricultural country attempts to modernise, the primary requirement is for the farming sector to shrink in size as a proportion of the overall economy, and for the manufacturing sector to expand and develop in a way that drives export growth through improvement in cost competitiveness. In the post-war period, this involved attracting direct investment from America. Yet the vision of Economic Development was one of agriculture-led export growth, with a continuing indigenous base.

26The crucial policy changes made in the 1950s that were brought together in the strategy of Economic Development in 1958, were a heady and novel mix of a commitment to trade liberalisation, a range of direct and indirect grant aid to private firms, and a singular incentive of zero corporation profits tax on exports. This policy mix was precisely what was needed to ride the future wave of American foreign direct investment, in contradiction to the declared policy aim of growing on the back of an expanding indigenous agri-industrial base. The right policies, but the wrong outcome!

After the storm

27The Irish economy emerged from the 1950s still in a weak state, but at least was now equipped with a policy strategy that happened to be uniquely in tune with the changed times. Furthermore, Ireland was no longer alone in having difficulty in coping in a new European and international environment. American investment into Europe at that time was so dynamic and threatening that it presented the major European economies with what Jean-Jacques Servan-Schreiber characterised as The American Challenge. In his book, Servan-Schreiber wrote:

While French, German, or Italian firms are still groping around in the new open spaces provided by the Treaty of Rome, afraid to emerge from the dilapidated shelter of their old habits, American industry has gauged the terrain and is now rolling from Naples to Amsterdam with the ease and speed of Israeli tanks in the Sinai desert.9

28The best explanation for the rise of American inward investment into Europe, and eventually into Ireland, was provided by the late Raymond Vernon.10 Vernon’s main insight was to link the product life cycle with international trade and foreign direct investment. At a time when US foreign direct investment had come to dominate the post-war European economy, standard trade theory offered little by way of explanation. Vernon realised that the US home market played a dual role: it was the source of stimulus for the innovating firm as well as the preferred location for the actual development of the innovation. At the early stage of the product life cycle, producers need great freedom and flexibility to modify, improve and test new processes at a time when the preferred production technology has not yet stabilized. Also, demand for innovative products tends to be relatively insensitive to price, so there is less pressure to seek lowest cost production locations. Finally, communications between producers, suppliers and final customers must be facilitated, and argues for a home location.

29As the product matures, a certain degree of standardization takes place, and this has locational implications. The need for production flexibility declines and there is now a greater concern for lower costs. Also, demand from abroad increases. However, as long as the marginal production cost plus the transport costs of shipping from the US to the foreign market is lower than the average cost of prospective production in the market of import, there will be no pressure to invest in foreign production capacity. Markets will be served by exports from the US. But as economic and political pressures build up, eventually some production moves abroad, initially into the larger more developed economies like the UK, France, Germany, but soon even to smaller and less developed economies like Ireland. Eventually, as the product fully matures and perhaps enters a declining phase, low cost considerations become paramount, production ceases in the US, declines in other developed economies, and concentrates in low cost developing economies.

30The strong web of dependency between Ireland and the UK that had endured relatively unchanged until the late 1950s only began to weaken after the shift to foreign direct investment and export-led growth that followed the various French style Programmes for Economic Expansion in the late 1950s and during the 1960s. Fig. 3 shows the behaviour of the shares of Irish exports going to the UK, and Irish imports originating in the UK, for the period 1960-1992, after which shares tended to stabilise.

Reflecting on the experience

31The modern economic age dawned for Ireland in the late 1950s. The successes and challenges that we face today are an extraordinary reversal of the failures and problems faced by policy makers at that time. In the words of Dr Whitaker, in the late 1950s we had “plumbed the depths of hopelessness”; today we bask in the world’s admiration of our success. Then we began to take our first tentative steps out from behind stultifying barriers of tariff protection and economic and political isolation; today we have embraced the global economy to an extent that few other states have, and we are cosmopolitan citizens of the world. Then we were predominantly an agricultural economy; now, while agriculture remains important, we are a major supplier of Europe’s computers, software and pharmaceuticals and our concerns are with maintaining a leading position at the cutting edge of new technology-based manufacturing and quality services.

Fig. 3 – Southern trade with the UK: export and import shares 1960-1995

32Policy actions initiated in the 1950s launched the economy on a development path that differed radically from that pursued before and after independence. The core policy dilemma was not about whether the Irish economy should be open to trade and investment flows with the wider world economy, since Ireland–in spite of almost three decades of protection–already had a relatively open economy when compared to the other small European states in the late 1950s. Rather, the issue was the nature of this involvement and whether there was to be a break with an almost total dependence on the British market as the destination for exports of a very restricted variety of mainly agricultural products.

33The opening of the economy and the removal of tariff barriers were necessary policy changes to kick-start from stagnation. Free trade with the UK–our main trading partner–happened in the mid-1960s. This initiative of Taoiseach Seán Lemass provided a very useful opportunity of “testing the water” of outward orientation. Free trade with Europe came later when Ireland joined the then EEC in 1973. The strategic orientation of Irish economic policy-making since the 1950s has always emphasised the need to face the consequences of extreme openness, to encourage export orientation towards fast growing markets and products, and to be aligned with all European initiatives. Thus, we joined the European Monetary System in 1979, breaking a long link with sterling and its deep economic and psychological dependency. We embraced the Single Market of 1992, the Social Chapter of the Maastricht Treaty and, most recently, Economic and Monetary Union from January 1999. Perhaps this is the main legacy bequeathed to us by the prescient policy-makers of the time of Seán Lemass. The enthusiastic embrace of openness provided the strong and enduring strategic backbone of our economic planning.

34But Ireland was still not a very attractive place in which to invest in the early 1960s. It was remote and unknown, had little by way of natural resources, and had no industrial heritage. The main inducement provided to inward investors was initially a zero rate of corporation tax on exports of manufactured goods. Under pressure from the EU, this was later replaced by a low rate of 10 % on all manufacturing profits. This tax policy, combined with aggressive and sophisticated initiatives designed by the Industrial Development Agency (IDA) to attract and aid inward investors, provided the main driving force for the modernisation of the economy through export-led growth.

35However, an attractive corporation tax rate and the absence of tariffs were only a start. They would not in themselves have made Ireland a major host for high quality foreign direct investment. Other factors came together to reinforce Ireland’s success and interacted to create a virtuous circle of superior performance that replaced the previous vicious circle of decades of under performance that had culminated in the failures of the 1950s. Educational standards in the Irish work force had lagged behind the world. Policies were urgently needed to bring about a steady build-up of the quality, quantity and relevance of education and training, and this had been initiated by farseeing educational reforms starting in the 1960s. These reforms were extended by the emphasis given to scientific and technical skill formation through the use of generous EU Structural Funds from the late 1980s. Although issues of social inequality are still of concern, the general level of educational attainment in Ireland is higher than in other wealthier European states.

36On the global economic map, the lines that now matter are those defining “natural economic zones”, where the defining issue is that each such zone possesses, in one or other combination, the key ingredients for successful participation in the international economy. With falling transportation and telecommunication costs, national economies were destined to become increasingly interdependent, and in the words of former US Labour Secretary, Robert Reich:

The real economic challenge […] [of the nation] […] is to increase the potential value of what its citizens can add to the global economy, by enhancing their skills and capacities and by improving their means of linking those skills and capacities to the world market.11

37This process of global competition is organised today mainly by multinational firms and not by governments. Production tends to be modularised, with individual modules spread across the globe so as to exploit the comparative advantages of different regions. Hence, individual small nations and regions have less power to influence their destinies than in previous periods of industrialisation, other than by refocusing their economic policies on location factors, especially those which are relatively immobile between regions: the quality of labour, infrastructure and economic governance, and the efficient functioning of labour markets.

38The Irish path of economic development followed since the 1950s is not without its risks. The most dynamic part of manufacturing is almost completely foreign owned and is concentrated in a narrow range of technologies that are fast moving towards maturity. The policy initiatives that ensured Ireland had an advantageous head start in the early 1960s may not be sufficient to facilitate the inevitable switches to newer technologies since other countries and regions have been learning by watching Ireland doing. Until recently, we could rely on an abundant supply of highly trained Irish workers. But birth rates fell rapidly in the 1980s, and if growth is to continue, we may have to rely on inward migration to supply the labour.

39At various times in the life of a country or region, often when the economy is facing major new challenges or performing particularly poorly, state and regional governments and agencies carry out in depth reviews and re-evaluations of economic and business strategy. To the extent that their focus is on problems and challenges that are regarded as “strategic” rather than “tactical” in nature, such policy reviews are only carried out infrequently, and have a medium or long-term orientation.

40The ability of such reviews to improve economic and business performance depends both on the extent and quality of the review of past policies and future options as well as the extent to which any policy prescriptions are systematically implemented.

41Major socio-economic and business reviews of public policy draw from, and depend crucially upon, the existing pool of academic and applied research, and seldom if ever contribute to that pool. If a country or region faces major policy challenges, but either has an inadequate stock of research-based knowledge or fails to draw comprehensively from its available research, then policy prescriptions are very unlikely to be soundly based. A singular exception that proves this rule was the case of Economic Development, a policy review that heralded major changes in the strategic orientation of policy and led eventually to a step-change in economic performance. The stock of research and knowledge about the functioning of the economy was woefully inadequate, and the analysis and research contained in Economic Development, that initiated a subsequent series of three Programmes for Economic Expansion running into the early 1970s, actually came from within the civil service. However, initiatives were quickly put in place that led eventually to a significant...