Individual case study analysis - Essay Example

Government spending was reduced and the ‘National Wage Partnership Programme’ was signed. As a result, wage increases were limited at 3 percent for three years. The comparative low wages and the fact that it was not rising, as in other countries, attracted FDI. With lower wages and higher productivity than the rest of Europe, Ireland attracted foreign direct investment (FDI). The economic transformation, that was taking place in the country, where a direct result of the political transformation.

The protectionist policies, tariffs and subsidies, had created an economy where exports fell and per capita income was low. There was no FDI and the economy in general was bleak. However, as political powers opened up the economy to foreign trade and investment, the economy improved. In the 1980’s, the government was following a fiscal policy that was conservative, to meet with the criterion set by the Economic and Monetary Union. The annual budget deficit and the level of national debt were lowered to create the environment for FDI.

Whereas previously the government was involved in key sectors such as energy, communication and transport, by the early 2000s, government involvement got limited to the state-owned enterprises such as Aer Lingus (airlines), electricity distributor ESB, natural gas distributor Bord gas, etc. With the opening up of the market, particularly with its exports to the US rising, the Irish GDP grew at a rate of 9.9 percent during 1996 and 2000. That the political system of a country can influence the economy through appropriate policies and laws can be best demonstrated through examples.

The growth of the Irish economy in computer software was a result of the government’s responsiveness and political will. When Microsoft decided not to locate a key web hosting operation in Ireland in 1998, because of the insufficient connectivity, the government responded by