Strategies for Economic Success: Difference between revisions
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== '''Comparative advantage strategy''' == | == '''Comparative advantage strategy''' == | ||
</Center> The comparative advantage strategy was a "safe strategy" taken by the government of Ireland. It was primarily a continuation of what had existed before Ireland's independence from the U.K. as it used the market forces to determine where to allocate its resources. This strategy was seen as '''conservative''' as Ireland did not want to take any risks and therefore took no bold steps. The approaches of this strategy were comparative advantage and free trade. It also focused on agriculture based trade with the U.K., with investment in the U.K was twice that of the U.K's investment in Ireland. The climate and the topsoil of Ireland provided the ideal conditions for successful agriculture, and Ireland became known as "The Emerald Isle". The comparative advantage strategy gave farmers the support to cultivate crops of commercial importance such as wheat, barley, fruits and vegetables, while there was no attention given to Industrialization. At this point, 60% of Ireland's male labor force was agricultural and only 16% industrial, which "was not only acceptable but expected and appreciated" [[Source Page| [1]]]. After the the Great Depression in the 1930's, the economic weakening shocked the country. Ireland could no longer sustain its level of production and employment and thus had to desert its free trade and comparitive advantage strategy. | </Center> The comparative advantage strategy was a "safe strategy" taken by the government of Ireland. It was primarily a continuation of what had existed before Ireland's independence from the U.K. as it used the market forces to determine where to allocate its resources. This strategy was seen as '''conservative''' as Ireland did not want to take any risks and therefore took no bold steps. The approaches of this strategy were comparative advantage and free trade. It also focused on agriculture based trade with the U.K., with investment in the U.K was twice that of the U.K's investment in Ireland. The climate and the topsoil of Ireland provided the ideal conditions for successful agriculture, and Ireland became known as "The Emerald Isle". The comparative advantage strategy gave farmers the support to cultivate crops of commercial importance such as wheat, barley, fruits and vegetables, while there was no attention given to Industrialization. At this point, 60% of Ireland's male labor force was agricultural and only 16% industrial, which "was not only acceptable but expected and appreciated" [[Source Page| [1]]]. After the the Great Depression in the 1930's, the economic weakening shocked the country. Ireland could no longer sustain its level of production and employment and thus had to desert its free trade and comparitive advantage strategy. Unemployment became a major problem during this time and in an attempt to mitigate the dilemma, the U.K raised its tariffs and froze its Irish immigration. The consequences of these actions were severe. Ireland realized that the comparative advantage strategy was not bold enough; its' conservatism proved detrimental to its efforts towards economic improvement. | ||
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Revision as of 02:51, 27 April 2006
Comparative advantage strategy
The comparative advantage strategy was a "safe strategy" taken by the government of Ireland. It was primarily a continuation of what had existed before Ireland's independence from the U.K. as it used the market forces to determine where to allocate its resources. This strategy was seen as conservative as Ireland did not want to take any risks and therefore took no bold steps. The approaches of this strategy were comparative advantage and free trade. It also focused on agriculture based trade with the U.K., with investment in the U.K was twice that of the U.K's investment in Ireland. The climate and the topsoil of Ireland provided the ideal conditions for successful agriculture, and Ireland became known as "The Emerald Isle". The comparative advantage strategy gave farmers the support to cultivate crops of commercial importance such as wheat, barley, fruits and vegetables, while there was no attention given to Industrialization. At this point, 60% of Ireland's male labor force was agricultural and only 16% industrial, which "was not only acceptable but expected and appreciated" [1]. After the the Great Depression in the 1930's, the economic weakening shocked the country. Ireland could no longer sustain its level of production and employment and thus had to desert its free trade and comparitive advantage strategy. Unemployment became a major problem during this time and in an attempt to mitigate the dilemma, the U.K raised its tariffs and froze its Irish immigration. The consequences of these actions were severe. Ireland realized that the comparative advantage strategy was not bold enough; its' conservatism proved detrimental to its efforts towards economic improvement.
The Economic Autarky Strategy
A completely new strategy of national "Economic Strategy" was adopted. A major political change took place. A new political party came into power. The two new key words were "protection" and "self-sufficiency". A few step that were taken were high tarrifs and import substitution.
A political change took place. The focus now moved to self sufficiency and doemstic protection. The most easily available instrument in hand was: tariff protection. There were two problems:-Goverment was not inclined towards indulging in an abyss of state owned and run industry and there was a mjor lack in the managerical sector of the industry due to lack of enterprising culture. Table two above sums up Irelands economic achievement during 1950-1960. Table three below shows that during 1949-60 while the rest of Europe was undergoing major changes Ireland's economy was the same. Little or no changes took place. Protection became highly protected. Production methods and technology used was obsolete. Size of the firms were small. Firms were scattered in an economy which had bad road networks. Management lacked interest in export market etc.
Ireland needed a new set of ideas. Industrial Development Authority was estabilished. There was no restriction on repatriation of profit or on share ownership of domestic firms. IDA's activities from its inception in1958 to Ireland's admission into the European Economic Community in 1973 is recorded in the table below.
Table below shows a dramatic increae in the governments share of GDP frm 27.9-47.3%. They invited other countries to invest etc. It worked!
