September 28, 2006

Ireland Update: “From One of the Poorest to One of the Richest”

Filed under: Economy,Taxes & Government — Tom @ 2:10 pm

National Review writer Reuven Brenner observes, and asks why (HT NixGuy):

How did Ireland go from being among the poorest places in Western Europe to one of the richest? How did it attract the headquarters of 1,000 international companies? How did it come to rank, by some measures, among the EU’s top 15 original members? With per capita GDP estimated at $37,800 (U.S.), Ireland is now tops in Western Europe.

….. where has the talent been flowing in Europe? To Ireland: Over roughly a decade, more than 400,000 newcomers have moved there, an addition of 10 percent to the Irish population.

Here’s what Ireland did — or had to do — to attract this wave of talent and ambition to its shores.

To begin, the obvious: In 1986, Ireland slashed spending in areas such as health expenditures, education, agricultural spending, roads and housing, and the military, while abolishing agencies such as the National Social Services Board, the Health Education Bureau, and regional development organizations. By 1993, government non-interest spending declined to 41 percent of GNP, down from a high of 55 percent of GNP in 1985. Subsequently, it significantly lowered corporate tax rates to 12.5 percent, at a time when the lowest corporate rates in Europe were 30 percent and U.S. rates stood at 35 percent. Since 2004, Ireland also has offered a 20 percent tax credit on research and development.

But the true miracle came when, due to these policy changes, Ireland attracted capital and pools of ambitious young people from around the globe. By now, Ireland has one of the youngest populations in the Western world.

Between 1995 and 2000, 250,000 people migrated to Ireland (about half of Irish ancestry), which had in 1996 a population of only 3.6 million. Ireland later allowed, along with Britain and Sweden, unrestricted migration to its labor markets from the 10 countries which joined the EU in 2004. Since then the number of people of Irish origin migrating to Ireland has diminished. However, more than 130,000 Poles now live there and, according to recent reports, 10,000 Eastern Europeans arrive every month, on average. A young Polish immigrant to Ireland was recently quoted saying, “If you have ambition in Poland, you come to Ireland.”

Not only Poles, but Danes, Iranians, Swedes, Chinese, and Nigerians have come to Ireland, filling both low- and high-skilled jobs. Google’s European headquarters, located in Ireland, employs 800 people. Seventy percent aren’t Irish, and these workers speak 37 languages. According to reports, the company plans to hire another 600 university-educated people, mostly from abroad.

….. Fiscal and regulatory changes are a necessary part of the prosperity equation, but they make up the easier part. The harder part is to attract and retain talent. Ireland succeeded not only because of its fiscal changes, but because the country embodies the Western tradition of openness to many tribes.

With this in mind, Western countries should keep their borders open to the movement of those hard-working “vital few.” This policy may not only bring enhanced riches to the West, but also turn out to be its best weapon against the dictatorial, close-minded, backward-looking governments from which talent would escape.

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