The Economic Lessons for Canada from Ireland's Success Story - Essay Example

The Economic Lessons for Canada from Irelands Success Story Table of Contents Introduction 3 The reasons behind the success of Irish economy 4 Canadian economy in contrast to Irish economy 5 Lessons to learn from Ireland’s success 6 Conclusion 6 References 8 Bibliography 9 Introduction In the recent years, the economy of Ireland has shifted its focus from being an agricultural economy to a more knowledge based economy. The focus is more on the trade, investment, service sectors and the high technology industries. Ireland is considered as one of the wealthiest economies among the OECD countries. According to the reports of PWC, the economy is expected to have a GDP growth rate of 0.8% in the year 2011 (BBC news, 2011). Ireland is a globalised economy with the second largest GDP in the EU. During the period of Celtic tiger; its GDP grew in a double digit figure (The economist, 2004). The countries GDP growth rate was consistent at 6% till 2008, after which it faced a drastic fall in its GDP owning to the global recession. The economic growth also resulted in a high inflation rate. However, the prices fell in light of the global recession, and as per the reports till 2009, the inflation rate fell by 4.5%. Fall in inflation rate is good for an economy as it also boosts the investment sector. The public finances also registered a positive growth due to strength of Ireland’s economy. The rate of employed people grew drastically and the unemployment figure fell. The average unemployment rate is expected to be 13% in the year 2011 (The economic and social research institute). The economy has only 5.5% of its population below the poverty line (Central intelligence agency. 2011). US investments is one of the factors that helped in Ireland’s growth as well as modernisation by increasing its employment opportunities, export potentials and enriching its technology (Trade documents systems, 2009). Thus the Irish economy is at the peak of its development. The reasons behind the success of Irish economy It is believed that Ireland could achieve a miraculous economic growth owning to its excellent education system which also included free university teaching and maintaining a low corporate tax (Hirsch, 2008). The Government also played an important role in implementing policies that accelerated the economic growth. Although Ms Jupp stated that the low corporate tax resulted in the country’s economic growth, still according to her the country’s level of personal tax is very high and is similar to Canada’s value added taxes being 21%. Vienna Jupp, who is the chairwomen of Ireland’s information society commission, mentioned that the country could register a positive economic growth due to low taxes being maintained. The Government run social contract program also created the base, that lead to the inflow of high technology oriented investment. Such an inflow of investment boosts the county’s economic growth. Another reason for the country’s development is the transformation of the economy from an agro based economy to a knowledge based economy. The country pays a huge amount of attention on the education system. This is clear from the fact that even at the university level the education is provided free. The country does not support brain drain rather it offers its citizens a well paid and a high quality job (Gerald, 1999, p.5). The information society commission also provides internet training at the school level and to the unemployed workers. Many European call centres are located in Ireland that provides employment to a large section of the population. The inflow of foreign direct investment especially from US was one of the factors that boosted Ireland’s economy. The credit for this large inflow of foreign direct investment goes to the substantial efforts put in by the Irelands industrial development authority. Many high tech companies were attracted to Ireland due to this. Apart from investing in high technology oriented industries, many government oriented industries were also put up to promote the indigenous business sectors in the country (Hirsch, 2008, p.11). On the other hand the country receives a large amount of subsidy from the European Union. This inflow of subsidy has also played an important role in generating positive economic growth for the country as it enhanced the investment portfolio. With the influx of many high technology oriented companies such as internet security firm Baltimore technologies ltd, TrinTech ltd which is the maker of credit cars equipments and Smart force which is computer training company, lead to an increase in the economies GDP. So it can be said that a well developed education system, am influx of high technology oriented companies and an inflow of European Union’s subsidy greatly helped in the country’s miraculous economic growth. (Hirsch, 2008.p.17) Canadian economy in contrast to Irish economy Canada is the second largest country in the globe after Russia. It is one of the affluent countries of the world. It is the world’s 8th largest economy (Economy watch.2011). Till 2008 it has been maintaining a stable GDP, but after that its GDP growth rate fell owning to the global recession. However, the major banks in Canada came up as the strongest banks after the recession due to strong capitalisation and stringent lending practices. As compared to Ireland, Canada has a higher unemployment rate of 8%. The population below the poverty line in Canada is also more than Ireland being 9.4%. The country also has a higher inflation rate than in Ireland (Central intelligence agency. 2011). Lessons to learn from Ireland’s success According to many policy makers, the tax cuts in Ireland are expected to be one of the reasons for its miraculous success. However, apart from tax cuts, government involvement in many economic policies greatly enhanced the country’s growth. Therefore it cannot be said that only tax cuts helped in the country’s growth although the low taxes attracted the investors initially. So it cannot be said that Canada too can achieve the growth rate like Ireland by simply reducing its taxes. Entrepreneurism in a country can be enhanced by focussing on the market oriented economic principles. However a total laissez faire application to the market economy is not worthwhile. Therefore, Canada should not merely focus on the market oriented economic principles for its growth. Having a sound educational system is vital for a country’s growth as investment in education has a spill over effect that in future a more educated person will generate more income for the economy. Ireland puts large emphasis on investing in the human capital and it is one the important reasons for its economic development. Ireland was able to attract a large number of high technology oriented firms in the country due to the presence of a number of well trained and educated people. Every economy faces a slowdown after reaching a peak. Ireland, in the face of its economic slowdown however managed to regain its position through various policies such as cutting taxes, retraining the unemployed people and providing assistance to the homeless. Therefore, Canada too has to adopt such policies if it has to come over such economic slowdowns (Hirsch, 2008). Conclusion The economy of Ireland has shifted its focus from being an agricultural economy to a more knowledge based economy. Ireland is a globalised economy with the second largest GDP in the EU. During the period of Celtic tiger; its GDP grew in a double digit figure. The Irish economy is at the peak of its development. The success of the Irish economy is due to its sound educational system, low corporate taxes, investment in high technology firms and the inflow of a large amount of FDI as well as subsidy. Canada is the second largest country in the globe after Russia and is one of the affluent countries of the world. Canada too has developed in terms of its GDP growth rate but there are wide differences between the two economies. So if Canada has to achieve success like that of Ireland it has to follow the policies adopted by Ireland in reaching the peak. References Trade documents systems. 2009. Ireland- Europe [Online]. Available at: http://www.traveldocs.com/ie/economy.htm [Accessed on: September 12, 2011]. BBC News. 2011. Northern Ireland economic growth forecast downgraded [Online]. Available at: http://www.bbc.co.uk/news/uk-northern-ireland-14450277 [Accessed on: September 12, 2011]. Central intelligence agency. 2011. The world fact book [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ei.html [Accessed on: September 12, 2011]. The economist. 2004. The Irish economy [Pdf]. Available at: http://www.colorado.edu/geography/class_homepages/geog_4892_sm06/Irish%20Economic%20model.pdf [Accessed on: September 13, 2011]. Gerald, K. 1999. Understanding Ireland’s economic success: The economic and research institute [Pdf]. Available at: http://www.esri.ie/UserFiles/publications/20071114092120/WP111.pdf [Accessed on: September 12, 2011]. The economic and social research institute. No date. Irish economy [Online]. Available at: http://www.esri.ie/irish_economy/ [Accessed on: September 12, 2011]. Hirsch, T. 2008. More than just lucky Shamrocks: The reinvention of Ireland and lessons for Western Canada [Pdf]. Available at: http://cwf.ca/pdf-docs/publications/going-for-gold-4-more-than-just-lucky-shamrocks.pdf [Accessed on: September 12, 2011]. Economy Watch. 2011. Canada Economy [Online]. Available at: http://www.economywatch.com/world_economy/canada/ [Accessed on: September 12, 2011]. Bibliography Sweeney, P et al. 2008. Ireland’s economic success. Dunedin publishing. Berry, B. 2007. Why Ireland’s economic boom is no miracle [Online]. Available at: http://www.theglobalist.com/storyid.aspx?StoryId=6172 Read More