Economic problems, International Economics

The Republic of Ireland has had colossal economic problems for many years.

On the other hand, in the last two decade, the nation has experienced a thriving economy and has become a globalization success story. Globalization refers to the international exchange or sharing of labour force, production, ideas, products, knowledge, products and services across borders.

The 1990's and 2000's were the commencement of extraordinary amendment in economic advancement. The turn around for the commonwealth resulted in a decision to replace agricultural focus to services and high-technology industries in addition to trade and investment.

 With the assistance of the seeds of prosperity from Europe, economically sound infrastructure projects; technical research and development and education projects lead to an increase in economic growth.

Between the years 1993 and 1998, employment rates boosted by 25% and there were substantial improvements in economic growth and development. From January to June of 2010, Ireland's GDP grew by 6.7%, more than 2 fold of Europe's average. This lead to the nickname "Celtic Tiger"

As a result, the Gross Domestic Product (GDP) per capita in 2008 ranked Ireland as one of the wealthiest nations in the Organisation for Economic Co-operation and Development (OECD) averaging 7.4% in 1990's and 5.5% between 2000 and 2007 in addition to becoming 5th in the European Unions top 27 economies.

As a result, of the "Global Financial Crisis" though, the up-serge in growth trends has dwindled and real estate has slackened.

The cause was the United States' "slow down" which had affected its trade partnership of 20.52%, with Ireland, the nations real estate had therefore deteriorated.

Mismanagement and internal conflict of the running of the commonwealth caused detrimental effects to the economy and the life styles of the common people. Poverty resulted in the breakdown of the Celtic Tiger. The ownership of businesses was by majority state and limited trade to only England did not assist with the country's well being.

The civil and political era was named "The Troubles" was caused by the burden of increasing unemployment to static 18% of the working population. Due to an increase in unemployment, economic growth, increasing inflation, high public debt and mass emigration, the country was destined for catastrophe. In 1987, the GDP per capita was 63% of the usual trade with England.

Policies -:

The turn-around for the poverty stricken country was the implementation of fiscal policy,

The arm of government policy which influences the economy through the budget by changes in tax and welfare payments and government spending.. In the beginning of the late 1980's, successive Irish governments pursued the vital spending cuts and tax relief needed to reactivate the nation. In 1987, fiscal-policy reforms started to be encouraged and therefore similar policies developed.

With the penetration of more money into the economy and a reduction of tax stimulated, money circulated the economy, and caused a multiplier affect, which created the regeneration of the economy.   With 10% corporate tax for manufacturing and selected services also provided an opportunity for more businesses to start up and employ staff, increase their knowledge and skill in a career as well as technology. With this tax, capital gains reduced form 40% to 20% (especially for real estate) at the end of 1997. Personal rates were altered to 42% with other personal tax provisions also implemented.

As economic growth increased, the decision to finance new tax cuts created a virtuous cycle. In addition, the reduction of the standard and top rate of tax of 6 percentage points each year since 1997 results in 35% of all income earners out side the tax net.

Ireland's low corporate tax rate of 12.5% became an interest to the settlement of powerhouse firms like Google, Yahoo and Microsoft for their European headquarters.

With efficient regulatory structure, quality of staff and low tax rates, these companies offered a large percentage of employment opportunities; increasing Gross Domestic Production, financial flows, technical advances and diffusion, in addition to an increase in consumption, decreasing inflation, technical efficiency, and increasing production.

With Ireland's economic growth averaging 9.5% from 1995-2000, living standards (measured by GDP per capital "purchasing power party adjusted") have increased on average 5.8% per year since 1990, highlighting convergence on the living standards in high-income economies.

In 2007, Ireland had the 10th highest GDP per capital in the world. This has lead to substantial improvements in Irelands level of economic development, with the Human Development Index increasing from 0.840 in 1980 to 0.965 in 2007.

Since 2008, the GFC crisis, combined with the bursting of the "Domestic property bubble" has had a disastrous effect on the Irish economy. Ireland was the first country in the European Union to officially enter recession with a contraction of 2.3% in 2008.

The European central bank has projected GDP to decline by 7.8% in 2007 to an average of 12% over 2009. Household consumption is estimated to shrink by 7.2% over 2009 while investment is expected to contract by an enormous 34.9%.

Despite benefiting from globalisation, Irelands recent experience has highlighted the drawback of greater exposure to the International Business Cycle.

Ireland has pursued an export led development strategy of trade liberalization similar to the newly industrialised countries of East Asia. Ireland's has also benefited from its favorable geographical position between Europe and the United States. In the 1980's, Exports of goods and services increased from 46% of the GDP to 83% of the GDP in 2008. Over the 1990's, the annual growth in exports averaged 15.7%.

During the "Globalization Era" Ireland developed a modern "Knowledge economy" specializing in services and high-tech manufacturing industries.

The implementation of a range of strategic industry policies caused a shift in industry structure away from lower value added primary and agricultural production such as computing, software and pharmaceuticals. For example, the provision of subsidies by Irish public sector organizations (such as the Industrial Development Agency) encouraged high profile software companies such as Dell, Intel and Microsoft to locate in the operations of Ireland.

Between 1990's and 2000's, the average annual growth rate in industrial production was equal to 7.5%. On the other hand, between 2000 and 2007 agricultural production declined by an average of 4.3% per year. Industries now comprise 35% of Ireland's GDP and services equal 63%.

Specialization in high value added exports has helped Ireland achieve an impressive trade performance with large trade surpluses since the 1980's. In 2008, the balance of goods and services was equal to 10.1% of the GDP. Despite the downturn in the global economy, exports have remained robust, with the ECB forecasting a small 2.7, percent decline in 2009.

Ireland joined the European Economic Community (forerunner to the EU) in 1973. Ireland's membership within the EU trade bloc has provided Ireland with access to lucrative export markets in high-income economies in Western Europe.

The EU accounts foe 62% of Irelands merchandise exports. Irish farmers have also benefited from the subsidies provided by the EU's Common Agricultural Policy. This has had an effect of disproportionately favoring Irish farmers relative to other international produces. However, this is at odds with recent structural trends in the Irish economy, as well as efforts through the "Doha Round" of the World Trade Organization negotiations to reduce global agricultural protection.

In the past, Ireland economic development has also been bolstered by the European structural funds, an EU aid and assistance program aimed at fostering regional development, employment and structural change in economies with a GDP per capita below 75% of the EU's average. Between the late 1970's and early 1990's annual transfers from the EU ere equivalent to between 4 and 7% of Ireland's GDP. A 2002 report by the European Commission found that the Structural Funds created 213,000 jobs in Ireland during 1994-1999.

Posted Date: 2/23/2013 2:41:22 AM | Location : United States

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