Economy

Ireland is a small, modern, trade-dependent economy with growth averaging a robust 8% in 1995-2002. Agriculture, once the most important sector, is now dwarfed by industry, which accounts for 45% of GDP, about 80% of exports, and employs 28% of the labor force. Although exports remain the primary engine for Ireland's robust growth, the economy is also benefiting from a rise in consumer spending, construction, and business investment. Over the past decade, the Irish government has implemented a series of national economic programs designed to curb inflation, reduce government spending, increase labor force skills, and promote foreign investment. Ireland joined in launching the euro currency system in January 1999 along with 10 other EU nations. The economy felt the impact of the global economic slowdown in 2001-02, particularly in the high-tech export sector; the growth rate was cut by half.

Economic Stabilization and Growth

Although inflation and an unfavorable balance of trade continued to trouble the country’s economy, Ireland made significant strides toward economic stability through the 1950s and 1960s. The republic gradually abandoned protectionist economic policies in favor of long-term planning aimed at fostering economic expansion and international trade. A key figure in this strategy was Irish civil servant T. G. Whitaker, whose ideas were embodied in a study published during de Valera’s last government of 1957 to 1959. De Valera’s successor as prime minister, Sean Lemass, instituted Whitaker’s reforms. Under Lemass the government drew up a five-year plan for economic development that included generous tax incentives for foreign investors and new initiatives to promote Ireland’s export industries.

By 1964, upon completion of the first five-year plan, Ireland’s economic expansion had doubled anticipated growth goals. Partly as a result of such planning, the rate of economic growth increased from about 1 percent per year in the 1950s to more than 4.5 percent in the late 1960s. During this period hundreds of new factories opened production in Ireland, most with some foreign ownership. The dramatic increase in industrial production and exports accompanied a substantial decline in emigration, which had continued unabated for more than a century.

The economy of Ireland was traditionally based on agriculture and the processing of agricultural products. Since the 1950s, however, the country’s industrial base has expanded and diversified, as has the services sector. The gross domestic product (GDP) in 2001 was $103.3 billion. Services accounted for 55 percent of GDP and industry accounted for 42 percent, although manufactured goods were responsible for 87 percent of Ireland’s export income. Agriculture contributed only 4 percent to GDP. Ireland has a mixed economy of private and public ownership. Private enterprise is favored by the constitution and operates in most sectors of the economy.

Until the mid-20th century, industrialization in Ireland was handicapped by the comparative absence of raw materials and sources of energy. Heavy dependence on agriculture and lack of economic opportunity led to a high rate of emigration, which contributed to a long-term decrease in Ireland’s population. At the same time, Ireland was highly dependent on the United Kingdom as the primary market for its agricultural exports. These economic problems were aggravated by the partition of Ireland in the early 1920s into the Irish Free State (as the Irish Republic was then called) and Northern Ireland, which remained part of the United Kingdom. The economy of the republic was suddenly cut off from almost all the manufacturing that had developed in the 19th century in the north, notably the linen and shipbuilding industries. For a time the republic’s dependence on agriculture and the British market became even greater than before.

After 1922 Ireland’s economic policies sought to increase opportunities for employment. Programs were implemented to expand markets for agricultural goods and protective tariffs were introduced to shield emerging industries from foreign competition. However, these policies could not overcome the difficulties of the world economic depression in the 1930s or the disruptions of World War II (1939-1945). In 1959, following a period of economic stagnation and rising unemployment, Ireland pursued a new program of economic expansion. The government relaxed protective tariffs, backed efforts to increase agricultural and industrial production, and worked to enhance tourism. Ireland’s economic policies were also designed to prepare the country for membership in the European Community (EC), which became the European Union (EU) in 1993.

Ireland’s membership in the EC was postponed following the failure of the United Kingdom to secure admission in 1963, but both countries gained admission in 1973. Irish goods soon found their way into other European markets, a development that reduced Ireland’s heavy reliance on the United Kingdom. At the same time, Ireland benefited from increased foreign investment. The establishment of a single market within the EC during the 1980s—a process that required the removal of a wide range of lingering trade barriers—forced many enterprises in Ireland to reorganize to become more competitive. During the 1990s Ireland received substantial economic assistance from the EU to restructure agriculture, educate and train workers, and develop the nation’s infrastructure. By the mid-1990s Ireland’s economy was growing at a rate of more than double the EU average. In 1999 Ireland was among the first group of EU countries to meet the qualifying criteria to adopt the euro, the EU’s new single currency.

08/01/2003 03:08:49 PM