An Non-Irish Solution to an Irish Problem?

southsiderosie

There has been a lot of discussion over the last year about what kind of socio-economic institutions or models the Irish government should emulate moving forward. These have ranged from Hong Kong-style Liberalism to Swedish-style (or even Cuban-style) socialism.

The big problem I see with a lot of these models though is that they are products of a distinct history. The Hong Kong system 'works' due to a very specific combination of culture, geography, and political history. One could say the same for Sweden. Even if the Irish government announced that they were switching to a Hong Kong-style economic system tomorrow (flat tax, low regulation, limited social safety net), I don't necessarily think this would result in Hong Kong-style economic growth, due to differences in social structures, political culture, etc.

So is there a model that could potentially work to restore growth to Ireland? One that reflects (or restrains) Ireland's unique political culture, and takes into account both its formal relationship with the EU and its historical ties to the US and the UK?

Or am I being too pessimistic about the role of society and culture? Are other countries' models more transferrable than I give them credit for?

My sense is that it seems like things went best economically in the 1990s as the country tried to prepare for entry into the eurozone, but that period was a bit of a one-off, and I'm not sure how you could replicate and/or institutionalize those policies - the second the moneypot got full, it would be drained again.

p1akuw47h5r3it

southsiderosie wrote: »

There has been a lot of discussion over the last year about what kind of socio-economic institutions or models the Irish government should emulate moving forward. These have ranged from Hong Kong-style Liberalism to Swedish-style (or even Cuban-style) socialism.

The big problem I see with a lot of these models though is that they are products of a distinct history. The Hong Kong system 'works' due to a very specific combination of culture, geography, and political history. One could say the same for Sweden. Even if the Irish government announced that they were switching to a Hong Kong-style economic system tomorrow (flat tax, low regulation, limited social safety net), I don't necessarily think this would result in Hong Kong-style economic growth, due to differences in social structures, political culture, etc.

So is there a model that could potentially work to restore growth to Ireland? One that reflects (or restrains) Ireland's unique political culture, and takes into account both its formal relationship with the EU and its historical ties to the US and the UK?

Or am I being too pessimistic about the role of society and culture? Are other countries' models more transferrable than I give them credit for?

My sense is that it seems like things went best economically in the 1990s as the country tried to prepare for entry into the eurozone, but that period was a bit of a one-off, and I'm not sure how you could replicate and/or institutionalize those policies - the second the moneypot got full, it would be drained again.

What was done in this time period that was so good?

(I know the phrasing of this question is poor but I cant think of a better way to phrase it ha)

southsiderosie

DanDan6592 wrote: »

What was done in this time period that was so good?

(I know the phrasing of this question is poor but I cant think of a better way to phrase it ha)

My understanding was that during this period economic policy was designed to be in compliance with the Euro convergence criteria, which included:

1. Inflation rates: No more than 1.5 percentage points higher than the average of the three best performing member states of the EU.

2. Government finance:

Annual government deficit:
The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. If not, it is at least required to reach a level close to 3%. Only exceptional and temporary excesses would be granted for exceptional cases.

Government debt:
The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target cannot be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be
approaching the reference value at a satisfactory pace.

3. Exchange rate: Applicant countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for two consecutive years and should not have devalued its currency during the period.

4. Long-term interest rates: The nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.

Scofflaw

southsiderosie wrote: »

There has been a lot of discussion over the last year about what kind of socio-economic institutions or models the Irish government should emulate moving forward. These have ranged from Hong Kong-style Liberalism to Swedish-style (or even Cuban-style) socialism.

The big problem I see with a lot of these models though is that they are products of a distinct history. The Hong Kong system 'works' due to a very specific combination of culture, geography, and political history. One could say the same for Sweden. Even if the Irish government announced that they were switching to a Hong Kong-style economic system tomorrow (flat tax, low regulation, limited social safety net), I don't necessarily think this would result in Hong Kong-style economic growth, due to differences in social structures, political culture, etc.

So is there a model that could potentially work to restore growth to Ireland? One that reflects (or restrains) Ireland's unique political culture, and takes into account both its formal relationship with the EU and its historical ties to the US and the UK?

Or am I being too pessimistic about the role of society and culture? Are other countries' models more transferrable than I give them credit for?

My sense is that it seems like things went best economically in the 1990s as the country tried to prepare for entry into the eurozone, but that period was a bit of a one-off, and I'm not sure how you could replicate and/or institutionalize those policies - the second the moneypot got full, it would be drained again.

I was thinking something very similar in relation to the question of whether euro entry was good for Ireland, and the answer seemed to me to be that the preparation for euro entry was very good for Ireland, but that once we actually entered, fiscal discipline was thrown away in an ever-increasing set of giveaways.

In a sense, this period of austerity will probably also be good for Ireland - or the Irish economy - if only it were being done voluntarily and positively, as opposed to out of necessity to climb up from a wipeout.

The problem, as you say, is that once the moneypot was full, it would indeed be drained again - we'd elect a government that promised us good times, low taxes, great services. The thing is that that kind of auction politics is of its nature undisciplined - the point is to try and keep everybody happy, and the only way to square the circle of better public service and happier public servants is to throw money with both hands.

Essentially, I would say that it's not really a question of the institutions and structures - they were similar in the run-up to euro entry to during the boom - but of attitude. And I think that's the case everywhere. Scandinavian/Germanic social democracy works for those countries because they're disciplined about it, they want to make it work for everyone. Singaporean corporate oligarchy works for Singapore because they're disciplined about it, they want to make it work for Singapore. Our own corporatist democracy works when we're disciplined about it, when we want to make it work.

If we're disciplined about making Ireland work, our institutions and structures will be seen as good solutions. If we're not, they won't be. The political will reflects the public will, and political will to make things work well is what actually makes things work well.

I don't know whether you were in Ireland during the Nineties, but the feeling was one of making Ireland work as a country after the long and dreary failure of the Eighties. The feeling after 2001 or so was of making as much as one personally could. The difference was one of working together to get wealthier together versus working against each other to get ahead of each other.

cordially,
Scofflaw

Permabear

This post has been deleted.

Scofflaw

Permabear wrote: »

This post had been deleted.

I'm not suggesting there's anything wrong with wanting to get ahead personally - only, as you say, with how it's done. The great thing about the Nineties was it was obvious that hard work was what was needed, and hard work one person puts in to get ahead benefits everybody. What does not is the path you've described of being a combination of rentiér and credit junkie - that benefits nobody except financial institutions, and even those only until it gives them a case of extremely expensive indigestion.

Historically, dynamic trading economies have over time slowly been stifled by the growth of a rentiér culture - Venice, the United Provinces, for example - but I don't know whether any other economy has managed the switch in such a short time.

cordially,
Scofflaw