Strategies for Economic Success
Comparitive advantage strategy
This strategy was a "safe strategy" taken by the government of Ireland. It basically continued to follow the strategy before Ireland's independence. It used the market forces to determine where to allocate its resources. It was a "conservative" startegy. They did not want to take any risks at this point. No bold steps were taken. "Comparitive advantage" and "free trade" were used as the strategies. It focussed on "agriculture based" trade with the U.K . Irish investment in U.K was twice as that of U.K's investment in Ireland. The climate and the topsoil of Ireland provided the ideal conditions for the "growing grass". It came to be known as the "emerald island". It gave the farmers the support to cultivate crops of commercial importance like wheat, barley , fruits and vegetables. Industrialization was not focussed on at all because that would have been against the whole comparitive advantage strategy. 60% of Ireland's male labor force was agricultural and only 16% industrial.The Great Depression occured in the 1930's and things changed. Ireland was shocked by the economic downturn. It could no longer sustain its level of production and employment and thus it had to abandon its free trade and comparitive advantage strategy. The "immediacy of unemployment" was a major problem faced by the government. U.K raised its tarrifs and froze its Irish immigration.
The Economic Autarky Strategy
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!
