Every time free-market capitalism is given a chance to operate, the result is hailed as an “economic miracle.” Not to get picky, but there is nothing miraculous about capitalism producing wealth and spreading prosperity. Miracles by definition occur because of the suspension of natural law. Water becomes wine, food multiplies, and the dead are raised because the normal course of events — natural law — is somehow circumvented. Economic prosperity, on the other hand, results precisely because specific economic principles are followed to the letter. An example of an economic miracle, then, would be my cat turning into solid gold. Meow. The explosions of wealth in post-WWII Japan and Germany were not miracles at all, but the expected result of applied free-market capitalism.
Speaking of my mother’s homeland, the lessons learned while Germany was divided into East and West should have forever settled the argument raging between proponents of socialism and defenders of capitalism. For forty-five years the two nations stood side by side, sharing a common history and identical demographics. Here was the perfect test-case to determine the best economic system, and the West – capitalism – won hands down. Decades went by and the East still had rubble in the streets left over from Allied bombing raids! Poverty, lethargy, and despair reigned in the East. Things got so bad they had to build a wall to keep residents from fleeing to the prosperous West! The only East German accomplishment of note was the creation of the largest female athletes ever known to mankind.
Meanwhile in the West, prosperity spread like hangovers during Oktoberfest. The economic contrast between East and West Germany could not have been greater. Even during the unification process, following Ronald Reagan’s much derided yet brilliant ”Mr. Gorbachev, tear down this wall,” West Germans bitterly complained about the dullness and passivity evident in the majority of East Germans. Nearly a half century of socialism had left its mark. That today’s Germany has increasingly turned to the socialism that crippled East Germany is one of life’s enduring conundrums. The economic stagnation and high unemployment rates currently afflicting Germans were presaged in their nation’s recent past. “Those who cannot remember the past are condemned to repeat it” rides again.
The Irish did learn from Germany’s economic adventures, even if Germans didn’t. “Ireland was one of Europe’s poorest countries for more than two centuries. Yet, during the 1990s, Ireland was transformed from one of the poorest countries in Western Europe to one of the wealthiest,” reported the Celtic Countries Magazine in 2004. The Emerald Isle “was experiencing a 19.6% unemployment rate,” rivaling the average unemployment rate in America during the Great Depression. ”The Irish had the highest debt per head in the world, and the nation’s GDP per capita was only 63% of their neighbors, the United Kingdom. The Irish were then known as the beggars of Europe.” No wonder the pubs were full.
“The Irish Economic Miracle,” by Reuven Brenner, provides an overview of Ireland’s path to prosperity. “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.” The billions of dollars left in the private sector increased purchasing power, which in turn increased manufacturing and trade, which in turn improved the job market. Funny how that works.
Ireland “significantly lowered corporate tax rates to 12.5 percent, at a time when the lowest corporate tax rates in Europe were 30 percent and the U.S. rates stood at 35 percent. Since 2004, Ireland also has offered a 20 percent tax credit on research and development.” As a result, Ireland attracted “the headquarters of 1,000 international companies.” As Ireland made itself attractive to the international business community, Irish workers were the big winners. “Many leading US companies now use Ireland as a platform from which to operate in the European market. In 2003, overseas companies accounted for 51% of Ireland’s exports and generated more than 14 billion euros of expenditure in the economy, directly employing nearly 140,000 people.”
The next time Hillary threatens to “take those profits” from American energy companies, think about what you would do if you were running Exxon. The self-defeating badgering of great American companies is one more reason to reject socialists.
Ireland also introduced deregulation and – I hope you are sitting down — competition, a move which became ”a major stimulant in the services sector — the building of the International Financial Services Centre in Dublin led to the creation of 14,000 high-value jobs in the accounting, legal, and financial management sectors.”
“But the true miracle came,” writes Mr. Brenner, “when, due to these policies, Ireland attracted capital and pools of ambitious young people from around the globe, [some 400,000 newcomers -- an addition of 10% to the Irish population -- arriving throughout a decade of growth]. Now, Ireland has one of the youngest populations in the Western world.” Europe’s best and brightest are moving to where the action is.
The economic impact on Ireland, while not miraculous, is astounding. “From 1900 to 1995 Ireland’s economy grew at an average rate of 5.14% per year, and from 1996 to 2000 it increased at an average rate of 9.66%. By the end of the decade, unemployment went down to 4.5% and the nation’s GDP per capita stood at $25,500,” higher than those of the UK and Germany. “During a little over a decade, Ireland was transformed from one of the poorest countries in Europe to one of the EU’s richest countries.”
We would do well to learn from the Irish, because America is at a crossroad. To the left, following the trail blazed by FDR and LBJ, is increasing socialism and all its accompanying ills: economic stagnation, stifling regulation, character-killing dependence, high unemployment and ever-increasing taxation – an effective end to the American Dream. To the right is a little less of all that, a slower ride down the slope of despair. Neither party is presenting the conservative vision of an America re-energized by, to keep this short, following the Irish model. Ironically, Ireland formed its economic plan by studying pre-1930 America. Every contributing factor in Ireland’s recovery was utilized first, or best, in America. Now, like the Germans, we are leaving our roots for the rotten soil of socialism.
Those Irish eyes must be laughing at us.
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Posted by Jerry Pomeroy in Budgets, Economics, Limiting Government, Politics, Video