What Works: Success in Stressful Times. Hamish McRae

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СКАЧАТЬ somewhere we used to go for a drink after lectures. Trinity still occupies its thirty-five prime acres at the very centre of the city. You still walk through the front gate from the bustle of a capital city to the calm Georgian front square. But the streets around it are smart and stylish instead of, well, pretty drab. And despite recession they are filled with a multitude of different languages as well as different accents, for what has been the fastest-growing economy of the European Union has also been the fastest-growing job market.⁷ During the boom years the young of Europe came not just to spend money; they came to earn it.

      Just south of the centre of Dublin, in Ballsbridge, the contrast between the old and the new is even sharper. A genteel suburb of late nineteenth-century villas has become the new hot location for offices, hotels, bars and apartments. Dublin is the fourth-most expensive city in Europe in which to rent, behind only London’s West End, Moscow and Paris, and is in the global top ten for office rents.⁸ Further south, stretching round Dublin Bay, are the rich suburbs, but alongside the older and grander houses are vast tracts of new suburbia. The expanding population of the Dublin area, at 1.6 million in the 2006 census,⁹ looks set to reach two million by 2021, making it the fastest-growing conurbation in Europe.

      Ireland became a magnet for Europe’s ambitious youth. When the European Union was enlarged to include a new wave of entrants from Eastern Europe in 2004, only three member states fully opened their labour markets to this new workforce: Sweden, the UK and Ireland. In absolute numbers the largest wave of migrants went to Britain; unsurprisingly, since it too had a strong job market. But proportionately Ireland took more than anywhere else.¹⁰ The Dublin streets are full of young people again, and this time it is not only the Irish themselves but throngs of French, Germans, Scandinavians-and now Poles, Czechs and Hungarians too. Even in the 1960s Dublin had a different, almost continental feel to it, but now that feeling is immediately evident even to the weekend visitor.

      I find this thrilling. Ahead of the recession Dubliners complained that people no longer seem to have time to talk to each other, though their felicity with language remains as extraordinary as ever. They fretted about the new immigrants, though they seemed to me to be pretty well behaved-a lot better than we were as students. They say that Dublin has changed and, of course, they are right. But a city that immigrants have flocked to is bound to be culturally different to one from which emigrants leave. People are voting with their feet for the new Dublin, the new Ireland. Success may bring problems but it is a sight better than failure, and Ireland has had too much of that.

      We will come to how much ground has been lost during the recession in a moment. First, we focus on how the transformation happened. How in the space of less than ten years did the poorest member of the European Union become almost the richest? The story intrigues much of the rest of Europe-obviously those two other Celtic nations of Scotland and Wales but also the new EU members to the east: the Baltic states, Poland, the Czech Republic, Slovakia and so on. Anyone who knows anything about the Irish boom is bombarded with questions: what can we learn and how can we do it too?

      The short answer is that Ireland was almost uniquely placed to benefit from the burst of globalization that took place through the 1990s, following the end of the Cold War. Its success was built on openness to the world market. But it had been held back by political errors, which saddled Ireland with high taxation and other restrictions. Once Ireland got its policies right, it was like a coiled spring, ready to uncurl. So it was a classic case of sensitivity to the needs of the market but also radical (and quite brave) decisions by a group of politicians with a mission. They realized that Ireland did not have to be an economic failure and that it was intolerable it should continue to be one.

      The market element to the story runs like this. By the late 1980s there were at least six forces helping to give Ireland’s economy a tail-wind. They were:

       The European Single Market, which from 1987 onwards encouraged foreign investors, particularly American ones, to choose Ireland as a base from which to manufacture for Europe.¹¹

       The associated massive increase in global capital flows, which Ireland was able to tap into.

       Favourable demographics, for in the 1980s half of Ireland’s population were under the age of twenty-five;¹² that many were unemployed further increased the potential labour supply.

       The strong investment in education (at all levels) going back many years, but with a change of emphasis in the 1980s to encourage more maths, science and business studies.¹³

       EU structural and regional funds,¹⁴ which Ireland spent well on infrastructure, especially roads-even if most Dubliners would say these initiatives did not move nearly fast enough.

       Political stability, which has ensured that ever since 1957 the country has encouraged outsiders to invest in Ireland.

      So the potential was there. It just needed the right policies. Here, Ireland had been unfortunate. Following its political independence from the UK, it had adhered to a policy of economic independence that ran right through to the 1960s. One key element to this was protectionism.

      To give just one example, in the 1950s and 1960s nearly all the cars in Ireland were assembled there. Kits were imported in CKD (completely knocked down) form. The cars were made first on the original production lines in the UK, France, Germany or wherever, then taken to bits and packed into crates to be reassembled, painted and trimmed in Ireland. The rare imported vehicles suffered a large duty to protect the local industry. But there was no rational reason for the industry to exist at all. The quality was worse even than the same cars assembled in the UK-quite an achievement-and they cost more. Eventually, but not until the end of the 1970s, the industry was swept away.

      From the 1970s onwards, after entry to the European Economic Community in 1973, the principal flaw in Irish economic policy was financial ill-discipline. Public spending rose, budget deficits soared, then tax rates were increased to try to curb the deficits … and the result was stagnation. There was a short-lived property boom at the end of the 1970s but that was followed by a slump in the early 1980s. By 1987, Ireland’s unemployment had risen to 17.5 per cent and its GDP per head was only two-thirds that of Britain’s, producing a vicious circle wherein public funds were pre-empted to pay social welfare and interest on the debt. Emigration eased the pain but many educated young people left.¹⁵ The following year The Economist magazine dubbed its survey of Ireland ‘The Poorest of the Rich’.

      Then came the miracle. Just nine years later the magazine returned with another survey, and the title said it all: ‘Europe’s Shining Light’.

      So what changed?

      It started with politics. Ireland, like the UK in 1979, had hit an economic wall. The country’s political leadership knew it could not carry on with high-tax and high-spending policies. There was a real threat it would have to go to the International Monetary Fund for a loan to bail it out, as the UK had done in 1976. But by the middle 1980s change was in the air. In 1985 a pro-business, low-tax party called the Progressive Democrats¹⁶ had been formed and that helped create the momentum for change. It was started by Desmond O’Malley and Mary Harney to try to break the mould of the two major parties, Fianna Fáil and Fine Gael. Along with Fine Gael they also provided a constructive approach СКАЧАТЬ