1. Two Failures and a Success: Ireland 1970-2009 John Fitz Gerald The Economic and Social Research Institute, Ireland www.esri.ie

2. Format of Presentation n A Remarkable Transformation? n How Did it All Come About? Openness & EUOpenness & EU Foreign Direct Investment (FDI)Foreign Direct Investment (FDI) Human capitalHuman capital Demography and the labour marketDemography and the labour market n How Did Things Go Wrong? n Out of the Wilderness?

3. A Remarkable Transformation? n Budgetary Crisis in the 1980s n Turnaround in the late 1980s n Rapid expansion in the 1990s n Overall: A Story of Delayed ConvergenceA Story of Delayed Convergence n Icarus: 2001-7 Housing boom – and bustHousing boom – and bust Delusions of grandeurDelusions of grandeur

4. Average Growth in GNP

5. Employment Growth

6. Recent performance -Earnings

7. Decomposition of Growth

8. Growth Decomposition

12. Driving Forces n Primary Factors: Openness & EUOpenness & EU Foreign Direct Investment (FDI)Foreign Direct Investment (FDI) Human capitalHuman capital Demography and the labour marketDemography and the labour market n Secondary Factors: EU Structural FundsEU Structural Funds Consensus economic strategyConsensus economic strategy

13. Industrial Policy n Post 1960 Low Corporation TaxLow Corporation Tax Freeing of TradeFreeing of Trade n EU Membership in 1973 n Consistent Policy Low corporation taxLow corporation tax TransparencyTransparency Attract Foreign Direct Investment (FDI)Attract Foreign Direct Investment (FDI) Move to High Tech.Move to High Tech.

14. Educational Attainment, 2007

15. Investment in Human Capital

16. Population, 2005

17. Population, 2015

18. Dependency

19. Net Migration

20. Population Who Have Lived Abroad

22. Housing Investment, % of GNP

23. Government Surplus

24. Labour Force Shares

25. Trend GDP per capita: Finland Source: Wim Suyker, Netherlands Central Planning Bureau

26. Trend GDP per capita: Sweden Source: Wim Suyker, Netherlands Central Planning Bureau

27. GNP per Head, 2004 prices 2000 2014 2014

28. Output Gap, Ireland

29. Correcting the Imbalances n Lasting damage 10% loss of output?10% loss of output? n Improve competitiveness No devaluation, falling wage ratesNo devaluation, falling wage rates n Correct structural deficit Was 6-8% of GDP – 2010 3% of GDPWas 6-8% of GDP – 2010 3% of GDP Must implement 2010 budgetMust implement 2010 budget n Recovery Faster growth temporarilyFaster growth temporarily Returning to full employment?Returning to full employment?

30. Ireland’s Roller Coaster: Lessons n Globalisation is good for you! n Reinventing the Irish economy? Invest in Education and R&DInvest in Education and R&D n Fiscal Policy Matters Should have run surplusShould have run surplus Use Fiscal policy to manage housingUse Fiscal policy to manage housing n Develop Economic Consensus n Be Lucky!