For over 200 years Ireland has been at war with itself and with its “mother” country, England. Suddenly, however, centuries of strife and bitterness have been thrust away in an election in which the vast majority of Irish declared themselves for peace, and like an adolescent excited by a new job promising to transform his life, the war with its sibling, Northern Ireland, and its parent, England is over.
This time it’s a real peace, and except for bitter wackos on both sides of the peace equation, this time it will hold. It may be a zigzag peace, but it’s real.
Two hundred years of war—and all put away inside a few months! Partitioned 75 years ago—and now working together for mutual benefit! Curiously, this all happens at the same moment Ireland has become the fastest growing economy in Europe. It’s a real lesson in the adventures of nations to tease out how such twin miracles occurred in what has been for centuries one of the world’s most poverty-stricken backwaters.
First, some background to focus on some important obvious facts. Ireland is an island off the west coast of England (itself an island off the west coast of Europe) with 5.3-million people in a rich, green countryside just larger than Maine. It’s divided into two political entities, Northern Ireland (Protestant and part of the United Kingdom) and the Republic of Ireland (Catholic and an independent nation). Traditionally the Irish have exported citizens, livestock, dairy products, Irish whiskey, mining and engineering products, chemicals, and clothing, yet here of late they’ve been shipping out software and microelectronic products. Tourism is important to the economy.
Like island economies everywhere, Ireland is heavily dependant on foreign trade. Indeed, the export of its goods and services comes to almost 80% of its Gross National Product. Of the country’s Iº 42 billion of GNP, not only are 80% exports, but 40% of the exports are software and electronics products, the hottest products on the planet.
Its high-tech company roster looks like a who’s who of U. S. high-tech companies: Intel’s Irish works has a staff of 4,300; Dell Computer, a staff of 1,700; Motorola, 1,600; Gateway 2000, 1,600; and Seagate, 1,140. Other high-tech companies with operations in Ireland are Microsoft, 3Com, AT&T, Oracle, Novell, Hewlett-Packard, Apple, Sun, IBM, and NEC. Once Intel opens its second chip-fabrication plant at the end of 1998, it will have invested $3 billion in the Irish economy. Indeed, there are now 500 indigenous software companies and 100 overseas companies.
According to the U. S. Department of Commerce statistics, the annual return on U. S. investment in Ireland was 25.8% in 1992—the highest in Europe and enough to fix any investor’s attention.
Ireland has been a member of the European Union since 1973, and no country has taken more advantage of the gateway. This portal leads into a market larger in population (380-million consumers) and Gross National Product ($11.2 trillion) than the United States, a gateway American companies find more advantageous than almost any other in Europe. The Northern Ireland government estimates that as many as 70% of its firms already sell into EU markets, with another 20% active in other European, American, and Asian markets.
Ireland’s gross economic statistics are equally startling: its debt as a proportion of its GDP has fallen each year from 1987, from 112% to 60% in 1997. Its national growth has averaged 5.25% annually in real terms between 1988 and 1994. Its annual rate of inflation fell from more than 20% in 1981 to under 3% in recent years. From a deficit of Iº 650 million in 1985 its national budget has risen to an estimated surplus of Iº 2,420 million in 1994. For decades Ireland was a country steeped in poetry, poverty, and beer; today Irish living standards are converging on those of the continent. Indeed, per-capita GDP has risen from approximately 60% of the European average in the early seventies to over 70% of the European average in the 90s.
Ireland aggressively markets itself as a location for manufacturing, software creation, telemarketing, and financial services projects. The U. S. is the largest single foreign investor in Ireland, accounting for 37% of its total foreign investment.
But as yet all is not wine and shamrocks in Ireland. Unemployment remains over 10%, while Irish wages are among the continent’s lowest, disappointing surely for the Irish but one of its great appeals to foreign employers.
Its currency is the punt, and while for a long time the punt has been weaker than the pound sterling, it is now stronger. Importantly, while England is holding back from joining the European Monetary Union to see what happens to the Euro and whether further European unity is a good idea, Ireland has elected to join the EMU.
For centuries, Ireland–land of poetic despair–has watched its youthful sons and daughters go abroad in search of better fortunes, and yet in the past few years more thousands of these sons and daughters have returned than are leaving. After centuries of voting with their feet to leave the old sod, the Irish are now voting with their feet to live upon it again.
So how have the Irish—known as boozy dreamers, full of the blarney, more famous for writing in iambic pentameter than in C++–achieved such a miracle? What can we learn from them? What exactly have Irish leaders done right?
Well, just about everything. They’ve made it a long-term mission to educate their children in science, math, and languages, enabling them to handle software and negotiate abroad, and they’re lowered taxes for anybody who will invest in Ireland. The result is that Ireland is now the home of 25% of the U. S. electronics investment outside the U. S., and many other nationalities want to use Ireland as a gateway into Europe.
For decades the Irish Republic gave artists—even foreign artists–tax incentives to live and work there. Over the past few years this program has expanded to encourage industry as well. Government incentive programs have been set up to help employers train workers in their new disciplines; the population is well educated; they speak the linga franca of the world, English; and wages are low enough to attract entrepreneurs from every country. Generous incentive grants are given for buildings, plants, and machinery. For many companies it’s a relief to deal with a government that welcomes and understands what’s needed to make a business plan work as opposed to wrestling with the inflexibility, regulations, and barriers put up by statist governments.
While the Republic of Ireland has 3.7 million people, its new partner, Northern Ireland has 1.6-million people and geographically is about a quarter the size of the Republic, about the size of Connecticut. If the two peoples cooperate, as they have now promised to do, instead of fighting, their future is even rosier than the prosperous recent past.
What does this northern partner bring to the new partnership?
While home to languishing shipyards and industry for decades, today Northern Ireland is healthier than it has been in many years. Its industrial production and manufacturing output is growing much faster than the United Kingdom as a whole. As reported by the Industrial Development Board for Northern Ireland, in the past year, Dupont, Fujitsu, Ryobi, Abbey National, British Telecom, Liberty Mutual, and IMR Inc. have announced investments totaling almost $800 million. Indeed, Seagate Technology alone has invested Iº 391 million since 1992. About 40 U. S. firms are currently operating in Northern Ireland, and they provide almost 9,000 jobs.
In Northern Ireland in 1993, 88% of 16-year-olds were in school compared with 77% for the UK as a whole. More students on a percentage basis obtain advanced-level high-school diplomas than in the UK.
Yet for all its peoples’ vaunted spunkiness, Northern Ireland seems to have the best labor relations in Europe. In 1991 Northern Ireland had 32 days of work lost per 1,000 employees due to work stoppages, while in Germany that figure was 452 days and in Spain, 463 days.
Labor is cheaper in Northern Ireland. The average hourly cost is $10.68, compared to the U. S. at $13.62, France at $14.17, and high-priced Germany at $22.10. (Reflecting the vigor of the Republic of Ireland, wages there are slightly higher at $11.18.)
Like its larger southern counterpart, Northern Ireland seeks to minimize the tax burden on both individuals and corporations, and its direct tax rates are among the lowest in the European Community.
The Common Market, with a larger population than the United States, has far less arable land. Ireland, with its rich soil and agricultural tradition, ships its meat, dairy products, and produce across Europe, earning hard currency.
In Europe it’s called the Celtic tiger, with a booming property market and excellent manufacturing advantages. Where for centures Ireland was poorer than England, now it’s slightly richer—certainly not in size and total wealth, but in the bustling feel of the place, and in the sense that a young fellow feels he can go farther in Dublin than in London. Not only is the punt stronger than the pound, but Ireland’s trade figures and budget are in better shape. It’s economy is more robust, and because of its core advantages—an educated population that speaks English, has a can-do attitude, and will work for modest wages—it’s extraordinarily well suited for a variety of back-office chores that English-speaking businesses in Canada, Australia, and the United States want done and the global telecom revolution now allows.
It’s amazing what prosperity can accomplish. It’s a universal political truth that when things go wrong political leaders blame others. This is not a political truth that ended when Hitler pointed the finger at innocent Jews; during their decades of poverty the southern Irish Catholics pointed the finger at the northern Irish Protestants and at the English, not only of a different religion but foreigners to boot while Protestants blamed “papism.”
In a comparison by a Swiss think tank using 259 criteria to rank 46 industrial countries in terms of competitiveness, Ireland went from a rank of 15th in 1996 to 11th in 1997, just behind Canada(10) but surprisingly before Britain (12)—and even Germany (14), Sweden (17), and Japan (18). (I’m pleased to report the U. S. was number 1 both years.)
In terms of the destiny of nations, everything changes when the money starts rolling in. Who has time for petty feuds when there’s money to be made?
True, many Irish codgers, north and south, aren’t going to forget the great wrongs done ‘em any time soon, but like 18-year-olds in Iran, who consider the older generation who moan on about the Great Satan to be dim-witted, the youth in Ireland have no time to hate the Northern Irish or fight the English when there’s a solid chance to make their fortunes. Likewise the youth of Ulster ignore cries of “papism” now that divorce and contraception are legal in the Republic. There’s nothing like the opportunity to make a pile of money to fix the mind on what’s important, to set the priorities straight.
However, with Northern Ireland and the Republic of Ireland now declaring peace, the resulting cooperation is like the merger of a blue-chip stock and a dynamic growth stock—both will benefit. The blue chip receives invigorating new blood, while the growth stock benefits from the stability of the blue-chip firm—a new “Emerald Isle.”
Another benefit the Irish are heir to comes from the overseas Irish, the Irish Diaspora. Overseas communities are often important to national economies. The overseas Chinese send money home, visit, and invest on a large scale. The overseas Russians don’t seem to long for the old country, but like the Chinese, the Irish yearn to return home. (Who can blame them? Ireland reeks with Celtic charm.) Thanks to emigration stretching back scores of years, the Irish live all around the world and many have done well. They will send money, put their expertise to work in the old country, and visit as often as they can; and their heart-felt, long-term investments will further prosperity. Some long to move back permanently, bringing their money and expertise with them. It’s estimated that as many as 35 million people of Irish descent live in the United States alone, ten times the native Irish population, while of course a large Irish community lives in England. Nearly 30% of Australians say they have Irish in their blood, and many other countries around the world have big contingents.
While Ireland is one of Europe’s smallest economies, it’s one of its most dynamic, along with parts of Italy, Scandinavia, and Spain. If an industrialist insists that his new European operation be in a country that speaks English (often a necessity for the linguistically challenged Americans), then there’s little question that Ireland is the place to be.
Over the past two decades, the Irish software industry has become one of the most important parts of its economy, employing 20,000 people. The Irish Software Association in its recent publication Strategy for Growth states that in the next four years Irish companies can increase their exports by five times, to more than $3 billion. In our land of software giants, this might not sound like much, but in an economy of $65 billion, it’s a huge boost. Since the Irish economy is too small to use much software itself, the Irish, who have demonstrated their ability to sell overseas, are sharpening their abilities in international sales, distribution, and support.
A fascinating example was Iona Technologies, born of all places in 1991 at Trinity College, in Dublin, the cradle of Edmund Burke and Samuel Becket. In 1997, Iona went public on Nasdaq—yes, our Nasdaq — raising $138 million, the fifth largest software float in Nasdaq’s history.
According to Chris Horn, founder and chief executive of Iona, “We could literally hop in the car and drive round the industrial estates to make presentations to all the significant U. S. companies, and several Japanese ones, too. If they weren’t doing the work here, they would tell us who to go to in the U. S.”
Sun Microsystems put in $600,000 at an early stage, on which it made $50 million when Iona went public. By 1997 Iona had revenues of $48 million and a staff of 470.
While some of the older citizens of Ireland are stuck on feuds of 50 and 100 years ago, its youth demands to know what ancient feuds have to do with them today. For their future they look to Brussels and beyond, not to Belfast, Dublin, and London. They fully understand that they are part of a dynamic, bustling continent that will offer huge opportunities, and they don’t have time for old feuds. After all, who in this country would join Kansas over a religious feud with Nebraska? Don’t the citizens of New York have more important business than going to war with Connecticut? As the Irish leapfrog Belfast, Dublin, and London, such sentiments will become even more commonplace.
Today a lot of people know all this about Ireland. Its stock market is up, as are its currency and property markets. According to Dr. Dan McLaughlin of ABN Amro, the exceptionally strong export growth could mean the Irish economy will expand at 12.5% this year. Naturally such growth will create jobs—and put upward pressure on wages. In 1997 Ireland’s all-important exports rose 17%. Through May car sales were up 14%. Despite the low rates and tax advantages given to investors, tax receipts were up 11.6% during the first five months of 1998. (Yet another case for the dynamism of lowering tax rates to increase revenues.) Credit growth is strong, unemployment is falling, and consumer spending is up.
In what will be decades of prosperity to come, however, there will inevitably be setbacks as well as booms. As an example, the punt has done extremely well in relation to other currencies. Interest rates across Europe are converging toward one rate, and thus rates in Ireland are falling. Falling interest rates will accelerate the Irish boom; indeed, one of the standard moves a central banker uses to cool an inflationary boom normally is to raise interest rates. In countries like Ireland—as part of the Brussels-managed EMU–this will not be possible, which opens the doors to speculative profits for alert investors. However, the situation also opens the doors to spectacular busts, as such accelerated booms will swing too far on the upside.
It’s the same as happened here. At the beginning of this century the United States started on a great boom, an extraordinary hundred-year roll the likes of which the world has rarely seen. Gigantic fortunes were made, often with a rapidity unheard of. None of this meant, however, that our country didn’t experience major setbacks. In 1907 the U. S. virtually went bankrupt, and then again in the early twenties. Of course we had the Great Depression, and a nasty turn in 1974. As another example of a highly prosperous country having setbacks, no country has become richer than the Japanese after the devastation of World War II; yet in the 60s the Japanese, too, went bust, and today they are stuck in an economic quagmire more political than economic.
Now that the Irish are prosperous, they have no need for war. The awful past is past and buried. The new partnership between the north and the south will bring benefits to this island that only five years ago would have appeared to be a pipe dream. There will be setbacks to the periodic overheating, but a major positive secular change is occurring.
And over the long haul buying into Ireland will mean the same kind of joy and suffering that occurred to investors in the United States and Japan, whether they invest in property, businesses, or company shares. Moreover, Ireland is a beautiful country and a joy in which to live. If you have any Irish blood and buy an estate there, you can go home again to your roots while the Emerald Isle finally moves forward into a bright, green future.