Strategies for Economic Success: Difference between revisions
| Line 25: | Line 25: | ||
== '''The industrialization by invitation '''== </center> | == '''The industrialization by invitation '''== </center> | ||
Ireland needed a whole new set of ideas and not a set of new tactics to revitalize and give a boost to its economy. The first problem was that of emmigration which was draining Ireland of its talen and its wealth. | Ireland needed a whole new set of ideas and not a set of new tactics to revitalize and give a boost to its economy. The first problem was that of emmigration which was draining Ireland of its talen and its wealth. Preventing foreign investments was a strategy that seemed to be terribly out of place. ''The national Economic and Social Report Prelude to Planning (1976) put it candidly:" If private foreign investment is needed to provide the new jobs that are required in Ireland and if it is not permitted or if it is discouraged, Irish people will still have to work with capital that is not owned by Irishmen-but they will be working with it outside Ireland rather than at home"'' | ||
Revision as of 17:06, 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
After the failure of the comparative advantage strategy, a completely new strategy was adopted, that of a national economic autarky. At the same time, Ireland saw a major political change when a new political party came into power. The focus of the autarky approach was on domestic protection and self-sufficiency. The implementation of this strategy brought about high tariffs, import substitution and a new role for the government [1]. One thing that did not change with this new strategy was that of agriculture as the driving economic force. In an attempt to spur employment, the government put more land under cultivation and hoped it would divert emigration from the farms to the cities and abroad [1].
Another step that Ireland took in alleviating the unemployment problem was to break its dependence from the U.K. Ireland realized that reliance on the U.K. to aid in the solution was in fact hindering their progress and adding to the problem. Ireland's approach to solving the unemployment situation was tariff protection. This brought about both favorable and unfavorable results. On the one hand, import-GDP ratios fell, however, on the other hand, the Irish standards of living fell too [1]. The economic autarky strategy did not bring about many improvements. Emigration, which was depriving Ireland of its talent and potential, continued to persist, totaling 503, 442 between 1936 and 1956. Also, as Table 2 indicates, the average annual growth rate reached a mere 2.15% between 1950-1960. During this time, while the rest of Europe was experiencing an economic transformation, Ireland was lagging behind with the same unsuccessful economic organization, which is indicated in Table 3 below. It was clear that Ireland was long overdue for an economic transformation of its own, however, it was going to take a lot more than a few alterations if its current strategy if Ireland wanted to see any future for it's seemingly hopeless economy.
Ireland needed a whole new set of ideas and not a set of new tactics to revitalize and give a boost to its economy. The first problem was that of emmigration which was draining Ireland of its talen and its wealth. Preventing foreign investments was a strategy that seemed to be terribly out of place. The national Economic and Social Report Prelude to Planning (1976) put it candidly:" If private foreign investment is needed to provide the new jobs that are required in Ireland and if it is not permitted or if it is discouraged, Irish people will still have to work with capital that is not owned by Irishmen-but they will be working with it outside Ireland rather than at home"
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!
