1. Ireland The Road to Globalisation
Alan Dukes
Director General
IIEA, Dublin.
Institute of International Affairs
University of Iceland
Reykjavik, September 14, 2007.

2. Waypoints on a long road
Opening up in the 1960s
Education reform 1960s to 1990s - and today?
Corporate tax and FDI
EEC membership, 1973
Fiscal irresponsibility and the long cure
Social partnership
The picture today

3. Opening up Major reforms in 1960s. End of protectionism
Industrial restructuring
Education reforms
Tax and other measures to attract FDI

4. Education reforms 1960s Free secondary education
Reform of third-level education: structure and financing
1970s
Regional Technical Colleges, ESF funding
National Institutes of Higher Education
1990s
NIHEs upgraded to Universities
2000s
Abolition of third-level fees

5. Corporate taxation and FDI
1960s FDI attraction measures included:
“tax holiday” until 2000
generous establishment grants
Corporate taxation system favoured manufacturing activities:
profits tax rate of 10% for manufacturing
profits from other activities taxed at 35%

6. EEC 1973, EU today CAP brings rural Ireland into the consumer society
ERDF, Structural Funds, Cohesion Funds, all play a role in infrastructural development
Emphasis on training in Irish deployment of EU funds
EU Single Market programme favours Irish export development
EU liberalisation measures accelerate pace of Irish restructuring (aviation, telecoms, energy, finance, insurance)
Ireland participates in EMU from its beginning in 1979 and is founder participant in euro

7. Fiscal irresponsibility: the long cure
Addiction to deficit financing,
Reform efforts begin in 1981, results are slow because political commitment is tentative
Inflation fell from 20.4% in 1981 to 3.1% in 1987, remained <4% through 1990s, now highest in EU
External trade balance -16.5% GNP in 1981, overall balance 1984, +36.5% in 2002, today negative net exports constrain growth.
Current Budget Balance between -6% and -8% of GNP through 1980s, first surplus 1996, +6.1% in 2006, will be in deficit 2007

8. Fiscal irresponsibility: the long cure
Total employment continued to fall until 1990 but has increased steadily since then
National Debt reached 100% of GNP in 1980, peaked at 150% in the mid-1980s and by 2005 had fallen to 30.4% (for most of the 1980s, debt service financing absorbed the equivalent of the total annual revenue from income tax)
The economy was firmly established on a growth path by 1990: by the mid-1990s, Ireland had become a country of net immigration, reversing a 150-year trend
This could all have been done more quickly!

9. Social Partnership
1986: Government opens talks with trade unions, employer organisations and farm organisations to explore possibility of building agreement on appropriate and acceptable adjustment and development strategies.
Agreement reached in Autumn 1987.
The partnership principle has been continued in six subsequent agreements.

10. Social Partnership Core provision of the first agreement:
“8. An appropriate pattern of pay development has an essential part to play in the success of this Programme. Lower income taxation and a low level of inflation can help to bring about more moderate pay expectations. It is for this reason that the Government as part of tax reform under the Programme intend to make the income tax reductions outlined in Section III.”

11. The picture today or The dangers of complacency
Slowdown in growth rates
High inflation
Negative net exports
Emerging current budget deficit
Property bubble about to burst?
How far has the sub-prime mortgage infection spread?