The Irish Experience
description
Transcript of The Irish Experience
![Page 1: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/1.jpg)
The Irish ExperienceDavid O’Donovan
DirectorInvestment Promotion Agency Development
International Seminar, San SalvadorJanuary 10, 2011
www.communique.ie
![Page 2: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/2.jpg)
Six Themes
I. Brief Facts
II. Irish Economic Transformation
III. Success Factors
IV. Current Irish Crisis
V. Public-Private Alliance
VI. Conclusion
![Page 3: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/3.jpg)
Brief Facts – Republic of Ireland
• Small island on the western edge of Europe
• Area: 70,000 sq km (about 3 times size of El Salvador)
• Population: 4.24m • Capital: Dublin (1.5m)• 800 years of British rule• Independence: 1922• EU member since 1973
![Page 4: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/4.jpg)
Irish Economic Transformation
From poor to rich in one generation:
• 1970 – one of the poorest countries in Europe with GDP per capita of US$3,000
• Today Ireland, despite current financial crisis, is still one of the richest countries in the world
• GDP: US$224 billion
• Per Capita: US$52,000
• Population has risen 50% to 4.24 million – from 2.8 million in 1961
![Page 5: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/5.jpg)
Irish Economic Transformation
![Page 6: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/6.jpg)
Irish Economic Transformation
Irish exports have changed dramatically:
1970
Primarily agricultural products
2010
High value added, high technology products and services
![Page 7: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/7.jpg)
Ireland: Strategic Productive Transformation and Upgrading
Source: Devlin-Moguillasky (2009)
![Page 8: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/8.jpg)
Success Factors
Major factors underpinning rapid growth:
• NATIONAL CONSENSUS/SOCIAL PARTNERSHIP • PPA BODIES FOR SPECIFIC FUNCTIONS• LOW TAXES• AGGRESSIVE CAMPAIGN FOR FDI• MASSIVE INVESTMENT IN EDUCATION
![Page 9: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/9.jpg)
Current Irish Crisis
But what about the current severe economic crisis in Ireland which resulted in the recent ‘bailout’ by the IMF and EU in an €85 billion rescue package?…..
![Page 10: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/10.jpg)
Current Irish Crisis
Partly, as a result of phenomenal growth:
• Ireland over-invested in construction and property development
• Fuelled by massive and cheap borrowing by Irish banks
• Huge property bubble burst in 2008
• Government bailed out Irish banks to prevent collapse
• Result is massive public debt
• Government forced to raise €15 billion over next 4 years in reduced
expenditure and increased taxes to reduce deficit
![Page 11: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/11.jpg)
Current Irish Crisis
But also, institutional failure to anticipate crisis:
• Culture of ‘light-touch’ regulation meant Central Bank/Financial
Regulator failed to spot build-up of excessive borrowing by Irish banks
• Public-Private Alliance bodies failed to recognize shift from
investment/export led economy to property construction led economy
• Both the general public and policy makers ‘blinded’ by phenomenal
rises in incomes
![Page 12: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/12.jpg)
Public-Private Alliance
Role played by Public-Private Alliance bodies…
![Page 13: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/13.jpg)
Public-Private Alliance
Based on Public-Private Alliance at two levels:
1. National Level (Economic and Social Policy)
2. Sectoral/Thematic Level (Competitiveness and Industrial Policy)
![Page 14: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/14.jpg)
Public-Private Alliance
Public policy model adapted by Ireland was that of a ‘networked development state’:
• Different from more bureaucratic and authoritarian
development models adapted by Asian ‘tiger’ economies
• As a small, liberal European democracy Ireland could not
adopt a centralized authority model like the Asian countries
• Irish state interventions operate through networks of public
agencies and advisory councils all with strong private sector
involvement
![Page 15: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/15.jpg)
1. PPA at National Level (Economic and Social Policy)
•Policy failures from 1930’s led to state of national crisis by 1960’s
•Severity of crisis brought recognition of need for Public-Private Alliance and National Consensus
•New direction for economic and industrial policy agreed
•Evidence-based approach adopted
![Page 16: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/16.jpg)
1. PPA at National Level (Economic and Social Policy)
New Direction Adopted (1970s onwards):
• Trade opening and expansion of market access
•Private sector investment-led growth, not government sector growth
•Private sector with strong state encouragement/support to be the engine of growth
![Page 17: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/17.jpg)
1. PPA at National Level (Economic and Social Policy)
•Cornerstone underpinning rapid Irish economic growth
•Government, employers, labour, farmers, academia and NGO sectors – all had voice in developing strategies
•Under the umbrella of the National Economic and Social Council (NESC) since early 1970s
•Chaired by Head of Prime Minister’s Department
![Page 18: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/18.jpg)
1. PPA at National Level (Economic and Social Policy)
• Representation within NESC:– Government – Secretaries General of 7 departments (ministries)– Private Sector – 5 from business associations– Labour – 5 from trades unions– Farmers – 5 from farmer organisations– Voluntary – 5 from NGO organisations– Other – 5 independent representatives, normally technical
experts or academics
• Term of Office is 3 years
![Page 19: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/19.jpg)
1. PPA at National Level (Economic and Social Policy)
In the early days, and up to 2008, strong recognition of:
• Interdependence between social partners
• Tradeoffs both between and within interest groups
![Page 20: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/20.jpg)
1. PPA at National Level (Economic and Social Policy)
• Trades unions included in policy making for first time• New deal with trades unions – wage moderation in
return for cuts in personal taxation and prospects for share in future growth
• Social cohesion was a fundamental component in the dialogue of the Alliance
.
![Page 21: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/21.jpg)
1. PPA at National Level (Economic and Social Policy)
• Private setting to facilitate frank discussion
• Representative but manageable number of private participants (25)
• Political relevance by meeting once a month for half day or more and presence of PM office
• Dialogue oriented to fact-based problem solving with support of neutral technical secretariat
• Representatives exclude themselves when discussion is on a topic where there may be a conflict of interest
• 3-year public report of Alliance conclusions and periodic publishing of Secretariat studies
![Page 22: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/22.jpg)
1. PPA at National Level (Economic and Social Policy)
• Led to industrial peace, wage moderation and low inflation with strong ‘buy-in’ from Trades Unions
Source: ILO (International Labor Organization)
![Page 23: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/23.jpg)
1. PPA at National Level (Economic and Social Policy)
But, unfortunately:• Current financial crisis has put intolerable strain on
public-private alliance model• Government implementing major cutbacks in
expenditure and increases in taxation• Public service staff reductions and pay-freeze for 4
years• Trades Unions strongly objecting to plans• Result – collapse of PPA at National Level in area of
economic and social policy
![Page 24: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/24.jpg)
Public-Private Alliance
2. Public-Private Alliance at Sectoral/Thematic Level (Competitiveness and Industrial Policy)….
![Page 25: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/25.jpg)
• Combination of government departments, state agencies and advisory councils
• Each with its own specialist function
• All well funded by government with focused operational budgets
2.PPA at Sectoral/Thematic LevelCompetitiveness and Industrial Policy
![Page 26: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/26.jpg)
• Boards contain both public and private members
• Cross-board memberships for CEOs to help co-ordinate industrial policy support programs
• Professional, permanent public staff who do not change with changes of government
• High degree of operational autonomy for public executing agencies
2.PPA at Sectoral/Thematic LevelCompetitiveness and Industrial Policy
![Page 27: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/27.jpg)
2.PPA at Sectoral/Thematic LevelCompetitiveness and Industrial Policy
![Page 28: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/28.jpg)
2.PPA Sectoral/Thematic LevelCompetitiveness and Industrial Policy
National Competitiveness Council (NCC) has 16 Members:
• Government 4• Private Sector 8• Trades Unions 2• Academia 2
![Page 29: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/29.jpg)
2.PPA Sectoral/Thematic LevelCompetitiveness and Industrial Policy
• Secretariat and professional research facilities provided by Forfas, the State Strategic Planning Agency for Ministry of Enterprise, Trade and Employment
• Reports directly to Prime Minister of the day
![Page 30: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/30.jpg)
Strengths
At National Level (Economic and Social Policy)
• NESC represented all the social partners and its reports were
highly influential
• NESC argued for a ‘developmental welfare state’
• Good economic development and better social development not
opposed to each other but not guaranteed to occur together
• Argued successfully for better coordination between economic and
social policy
![Page 31: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/31.jpg)
Strengths
At National Level (Economic and Social Policy)
• Led to eight national wage agreements over two decades
• Facilitated Ireland’s long term development strategy – heavy
investment in education, attraction of inward investment and
full European integration
![Page 32: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/32.jpg)
Strengths
At Sectoral/Thematic Level (Competitiveness and Industrial Policy)
• National Competitive Council (NCC) reports also highly influential in
setting the agenda for improvements in Ireland’s competitiveness
• Forfas (strategic planning agency for DETE) reports focused
effectively on institutional capacity for the drive for inward investment
(IDA), building indigenous industry (Enterprise Ireland) and research
capability (Science Foundation Ireland)
• These bodies operate with a high degree of specialization and are well
connected and coordinated with each other
![Page 33: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/33.jpg)
Weaknesses
• PPA bodies at National Level (NESC) and
Sectoral/Thematic Level (Forfas and NCC)
developed parallel but weakly connected analyses
and policy recommendations
• Crisis of 2008-2010 exposed significant weaknesses
in Ireland’s overall policy approach
![Page 34: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/34.jpg)
Weaknesses
Major weaknesses seen to be:• Political
• Institutional
• Regulatory
![Page 35: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/35.jpg)
Weaknesses
Political:• Divergence between political decision making and policy analysis in
the institutons
• Led to policy capture by influential actors from construction and
banking closely aligned to governing party
• Won excessive tax incentives for construction further boosting a boom
already under way and created illusion – mistaking asset inflation for
real wealth creation
• Led to loss of previous developmental focus
![Page 36: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/36.jpg)
Weaknesses
Institutional:
• Trades Unions saw the creation of the National Competitiveness
Council as favouring the business agenda
• Regarded it as giving employers a separate and stronger institutional
channel of policy influence with the Government
• Probably was a mistake to create the NCC outside the institutional
structure of the NESC as it “balkanized” the social dialogue
• Major divergence between wage bargaining in the public sector (highly
centralized) and private sector (localized)
![Page 37: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/37.jpg)
Weaknesses
Regulatory:
• Complete failure of the Irish Central Bank and Financial
Regulator to see the build-up of massive and excessive
borrowing by Irish banks that fuelled the property boom
• Tragedy is that complacency at the macro/financial level and in
the Alliance created a crisis that undermined a very successful
strategic industrial policy for productive transformation at the
sectoral level
![Page 38: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/38.jpg)
Conclusion
• Ireland enjoyed phenomenal growth and success in the period
1970 to 2008
• Some lessons can be learned from that – what made it work so
well
• But our success blinded us to problems building up which
resulted in the current economic crisis
• Lessons can be learned from that too
• Nevertheless the economy still exhibits many sectoral strengths
in manufacturing, particularly high tech
![Page 39: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/39.jpg)
Conclusion
• The debate about the causes of the crisis and our
future development rages on in Ireland
• For those interested some interesting websites
containing these debates are:
• www.progressive-economy.ie
• www.irisheconomy.ie
![Page 40: The Irish Experience](https://reader036.fdocuments.us/reader036/viewer/2022062321/568142c5550346895daf153e/html5/thumbnails/40.jpg)
THANK YOU!