THE IRISH SAVE CIVILIZATION...AGAIN?:

The Celtic tiger leaps ahead again (ALLISTER HEATH, 8 Feb 2004, The Scotsman)

Economists are predicting that Irish GDP will grow by a healthy 3.8% this year, far more than is expected for the UK, Germany, Spain, Italy or France. The European Commission believes that Ireland is on course to return to a growth rate of around 5% by 2005-2006.

If this is Ireland’s new cruising speed, it would mean that it is capable of growing more than three percentage points faster than the Euro-zone and at twice the speed of the UK, no mean feat for an economy which is now one of the richest in Europe.

Ireland embarked on its successful journey from economic disaster zone to European tiger in the mid-1980s. The public finances were in a state of near-terminal crisis at the time. The sheer necessity of economic survival forced the government of Charles Haughey to turn his back on the misguided socialist and Keynesian policies of the previous decades. Public spending was slashed across the board in 1987 and 1988, the primary deficit eliminated and government debt brought back under control by the end of the decade.

Today, according to the Heritage Foundation’s 2004 index, the Irish economy is the fifth freest in the world. As the latest estimates from the Organisation for Economic Co-operation and Development reveal, Ireland’s tax burden has been dramatically reduced, collapsing from 35% of GDP in 1985 to a mere 28% in 2002. During the same time, by contrast, the tax burden for the whole of the EU increased from 38.5% of GDP to 40.5%.

Company taxes in particular have been slashed in Ireland: the standard rate of corporation tax for large companies has plummeted from 32% in 1998 to 12.5% in 2003, with four points lopped off marginal rates every single year except last year, when they were cut by 3.5 points. [...]

Lower taxes, falling national debt levels and freer trade were just what the Irish patient needed. Its trade and current accounts were hauled into surplus, while unemployment collapsed from a 1980s peak of 17% to 3.8% by 2001; it remains at around 4.4% today. Even more remarkably, the labour market transformation took place despite a historic change in Irish migration: for the first time, immigrants started to outnumber emigrants.

Between 1990 and 1995, the Irish economy grew by 5.1% a year on average; from 1996 to 2000 growth reached 9.7% a year. In 2001, GDP grew by 6.2% and in 2002 by 6.9%, before slowing to just 1.75% last year because of the global downturn.

Despite all the evidence to show that Ireland’s rebound was caused by its dramatic move towards a smaller government and lower taxes, many commentators continue to maintain that EU subsidies were the key to the Irish renaissance.

Of course, the most important factor is that, like the U.S., Ireland is less secular than the rest of the West, Living with a superpower (The Economist, Jan 2nd 2003):

The university [of Michigan] has been sending out hundreds of questions for the past 25 years (it now covers 78 countries with 85% of the world's population). Its distinctive feature is the way it organises the replies. It arranges them in two broad categories. The first it calls traditional values; the second, values of self-expression.

The [World Values] survey defines “traditional values” as those of religion, family and country. Traditionalists say religion is important in their lives. They have a strong sense of national pride, think children should be taught to obey and that the first duty of a child is to make his or her parents proud. They say abortion, euthanasia, divorce and suicide are never justifiable. At the other end of this spectrum are “secular-rational” values: they emphasise the opposite qualities.

The other category looks at “quality of life” attributes. At one end of this spectrum are the values people hold when the struggle for survival is uppermost: they say that economic and physical security are more important than self-expression. People who cannot take food or safety for granted tend to dislike foreigners, homosexuals and people with AIDS. They are wary of any form of political activity, even signing a petition. And they think men make better political leaders than women. “Self-expression” values are the opposite.

Obviously, these ideas overlap. The difference between the two is actually rooted in an academic theory of development (not that it matters). The notion is that industrialisation turns traditional societies into secular-rational ones, while post-industrial development brings about a shift towards values of self-expression.

The usefulness of dividing the broad subject of “values” in this way can be seen by plotting countries on a chart whose axes are the two spectrums. The chart alongside shows how the countries group: as you would expect, poor countries, with low self-expression and high levels of traditionalism, are at the bottom left, richer Europeans to the top right.

But America's position is odd. On the quality-of-life axis, it is like Europe: a little more “self-expressive” than Catholic countries, such as France and Italy, a little less so than Protestant ones such as Holland or Sweden. This is more than a matter of individual preference. The “quality of life” axis is the one most closely associated with political and economic freedoms. So Mr Bush is right when he claims that Americans and European share common values of democracy and freedom and that these have broad implications because, at root, alliances are built on such common interests.

But now look at America's position on the traditional-secular axis. It is far more traditional than any west European country except Ireland. It is more traditional than any place at all in central or Eastern Europe. America is near the bottom-right corner of the chart, a strange mix of tradition and self-expression.

Posted by Orrin Judd at February 9, 2004 8:50 PM