by Cal Thomas | April 21, 2016 12:03 am
DUBLIN — They called it the Celtic Tiger, a period of prosperity between 1995 and 2008, during which everything in Ireland appeared to come up shamrocks.
According to Wikipedia, between 1995 and 2000, the long-dormant Irish economy took off, expanding by a startling 9.4 percent. There was a building boom; roads were widened to accommodate more traffic; newly confident people started buying things they had long denied themselves, including bigger and nicer houses, which, it turns out, many could not afford.
Even after 2000 when the Irish economy continued to grow at an average rate of 5.9 percent, still well above the American average, confidence in the economy remained high. By 2008, a dramatic reversal had occurred with GDP contracting by 14 percent. Unemployment levels rose to 14 percent by 2011 and 15 percent the following year.
The reasons are familiar to Americans. Mostly it was a property bubble. Banks approved loans for people who could not handle big mortgages, which led to a recession, not unlike the one experienced in the United States.
As a much smaller country, Ireland’s comeback has progressed faster than in America where real unemployment is much higher than last month’s misleading Labor Department announcement of 5.0 percent.
The Irish economy has experienced a dramatic reversal under the leadership of Prime Minister Enda Kenny, who is struggling to form a new government after two elections denied his party a parliamentary majority from a less than thankful public that has tasted prosperity and wants more of it … now. Sound familiar?
Emerging from a joint European Union-International Monetary Fund bailout program, Ireland’s growth rate stood at a respectable 4.8 percent in 2014, declining slightly to 3.5 percent last year, but still better than any EU country.
While much credit belongs to the political leadership that has bitten the bullet and imposed austerity on government spending programs, causing howls from the left, and to the resilient Irish people who are experienced when it comes to suffering, foreign investment has also played a major role. Much of that investment has been driven by the anti-business tax policies imposed on corporations by the U.S. government, prompting many U.S. businesses to seek tax relief overseas.
According to a report last year in The Guardian newspaper, 700 U.S. companies now do business in Ireland. This has meant $277 billion of U.S. direct foreign investment in the past two decades. Ireland has gained more from American firms than Brazil, Russia, India and China combined, says the newspaper.
The response from the Obama administration has not been to push for a reduction in the U.S. corporate tax rate — one of the highest in the world — in hopes of enticing the fleeing corporations back to American shores. Instead, it has imposed new tax rules on those companies that remain in an effort to keep them at home, all but ensuring that fleeing businesses will not want to return.
This apparently is working on at least two companies. The Wall Street Journal writes, “A day after the Obama administration limited the ability of U.S. companies to do international deals to lighten their tax burdens, Pfizer Inc. and Allergan PLC terminated their planned $150 billion merger and other companies around the globe raced to assess the impact of the new rules.”
What has been largely good for Ireland has proved less so for American businesses.
Among the many proverbs for which Ireland is known is this one: “If you buy what you don’t need you might have to sell what you do.” Given the lessons of the recent economic recessions in the U.S. and Ireland, this proverb is worth memorizing and practicing by governments and individuals alike.
(Readers may email Cal Thomas at [email protected].)
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