Irish Performance since Independence and the Scottish Debate

This paper of mine just came out in a special issue of Oxford Review of Economic Policy on the question of Scottish independence.  I had been asked to reflect on Irish economic performance since independence, on the exercise of fiscal and monetary sovereignty, and on migration policy, without saying anything about Scotland.

From an earlier draft I attach a comparison of population growth in Ireland and Scotland and their respective peripheries.

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25 thoughts on “Irish Performance since Independence and the Scottish Debate”

  1. Good paper. Congratulations.

    But, it would have been even better if the population graph had gone back to 1841. This would have shown a continuous fall decade-by-decade in Ireland’s population at each census. Shown in that context, the flattening out in population between census 1926 and census 1951 is a much better performance than is usually given credit for by the anti-nationalist Dublin elites. Ireland’s population overall is up over 60 per cent since 1922, compared with a fall of 60 per cent between 1841 and 1922. Scotland has since 1922 occupied the position Ireland occupied from 1841 to 1922, namely having the lowest population growth in the western world. Scotland’s population has stagnated for almost a century, while Ireland’s has surged ahead. Scotland’s situation since 1922 isn’t as bad as Ireland’s 1841-1922, in that the population merely stagnated rather than falling. But, population in every other western country, including Ireland, has risen by circa 50/60 per cent in that time. Add in the fact that Ireland’s GDP per capita has gone from 55 per cent of the UK’s in 1922 to 120 per cent in 2014. Add in the fact that Ireland is now ahead of UK in education (PISA results), health and housing, whereas it languished miles behind the UK in all these areas in 1922. Taking all these into consideration, a ‘yes’ vote in Scotland is a no-brainer.

    In the event of a ‘no’ note, I fear for Scotland. The way the United Kingdom works is that (a) England is always top dog (b) Ireland, Scotland and Wales compete as to which gets kicked around the most by England. Ireland occupied that spot up to 1922. If Scotland votes ‘no’, it is very likely that England (probably with Boris Johnson as PM) will seek to punish Scotland for having had the effrontery to raise the question of independence at all, in which case Scotland’s population is likely to continue to stagnate.

  2. What about a comment, JtO, on Frank Barry’s Fig 1, indicating a startling 15-plus points fall in Irish GNI per capita relative to the UK since 2007, now just 92% and still falling, it would appear?

  3. @JtO:

    You say “Ireland, Scotland and Wales compete as to which gets kicked around the most by England”.

    Have you heard of the Barnett Formula, which gives Scotland a larger share of UK public expenditure than would accrue to it if it were financed like an English region. If that’s being kicked around…..

    Do you want to argue that the generous level of transfers has lead to a growth-inhibiting dependency culture in Scotland?

  4. @ JTO

    What do you make of the recent CSO stats? 37,900 as a natural increase number. Was it yourself that was predicting 50k increase a while back? It looks like we’re heading for the same rate of baby making as those miserable Germans. Only 67,700 babies born south of the artificial border, a big decrease on the broody days of 2009 (75,554).

    Not surprising really, considering a lack of jobs for some and for those with them: falling wages, pricey (&rising) rents and crazy high child care costs for most people i.e. those without a jolly, happy to rear another generation, grandparent living nearby.

  5. A truly invaluable paper both as a work of scholarship and reference.

    The title, however, prompts a number of questions.

    “Diversifying external linkages: the exercise of Irish economic sovereignty in
    long-term perspective.”

    Ireland’s membership of the EU cannot be viewed simply as a linkage and insofar as economic sovereignty exists at all in an increasingly interdependent world, Ireland simply swapped one dominant economic partnership for another, the essential difference being (i) the institutional arrangements which apply and (ii) the content of what the countries of Europe – the new partnership – had already agreed, notably the creation of a common agricultural policy.

    It is also true to say that were it not for the fact that the UK was eventually permitted to join the then EEC, Ireland would not now be a member.

    The historical experience of Scotland is so different to that of Ireland that no lessons whatsoever from the Irish experience – to date – can IMHO be drawn except, perhaps, one and that is that an independent state can act, so to speak, in a manner which would be considered as maverick were it still a member of a unitary state where the overall interest would have to be taken into account. The classic example in the current instance is what many states would consider as the predatory corporation tax policies of Ireland.

    If the vote is for independence, the ramifications are immense. What the current UK government will do in terms of managing the implications for EU membership, both its own and the near certain future membership of an independent Scotland, is impossible to predict. Not to mention the implications for Ireland!

  6. @Thats legal

    You make a valid point. But, This is still by far the largest increase in the EU. Even in 2013, the ratio of births to deaths in Ireland was 2.3 approx to 1. In the EU as a whole its 1 to 1. The birth rate did indeed fall between 2010 and 2013. That is disappointing. But it fell nearly everywhere in EU and Ireland’s birth rate is still by far the highest in EU. The natural increase was only 15,000 in the mid 90s. It then soared to 47,000 peak in 2010, and now back to 37,000. There were only 48,000 births in mid 90s. It then soared to 75,000 by 2010 and now back to 67,000. During the 1980s recession, the birth rate fell far more than during this recession, but then recovered strongly as the economy recovered. I expect the same will happen this time, although, for obvious reasons, there is a gap of at least 9 months between an economic upturn and an increase in births. The other CSO figures show net emigration falling sharply and population growth accelerating. If you check my posts back in July, I think I predicted that. I think the sharp acceleration in population growth to over 16,000 annually is probably one of the factors behind the surge in house prices.This is very similar to the pattern of the early 90s when net emigration fell from approx 50,000 annually to net immigration within the space of 2-3 years. The figures show a similar trajectory this time, but from a lower peak of around 33,000. The net emigration figure of approx 20,000 was for April 2013 to April 2014. Given that net emigration was running at around 30,000 per annum in early 2013, for it to total 20,000 for the year to April 2014, it must have been running at close to 10,000 per annum by the end of that period.

    @John Sheehan

    The higher public spending is simply due to the greater deprivation that is the inevitable result of economic underdevelopment. Scotland, N. Ireland and WAles all fare worse than England on nearly every economic and social measure. N. Ireland’s and Wales GDP per capita is far less than England and close to the lowest in western Europe. Scotland’s also is lower than England’s, but not by as much, thanks to N. Sea oil. Scotland’s health stats are far worse than England and the worst in western Europe. Wales’ education stats are far worse than England’s and close to the worst in western Europe. Because of emigration, all three have seen their share of UK population fall sharply since incorporation in the U. Kingdom. All three are economically underdeveloped compared with England. Add in cultural genocide, where the Welsh and Gaelic languages have been almost wiped out. Compare that with Nordic countries, where not only are these small countries prosperous, but have kept their culture and languages. If little Denmark had joined the U. Kingdom a couple of hundred years ago, which isn’t any less ridiculous than Scotland joining it, it too would now be a poor country and nobody would be speaking Danish.

    @P North

    You deserve a better reply than this. I’m producing my own research paper on GDP/GNI and many other things and it will cover the point you raise. I’ve been asked to do it by a pro-yes group in Scotland. I’m working frantically every minute of my free time on it at present. Its very extensive. I had hoped to have it ready by 1 Sep. But, it looks more like Sep 7/8 now. When its ready, I’ll post a link here. It will deal with your point in detail. But, for now all I can say is that I just checked the eurostat database and its figures indicate GNP per capita in Ireland in 2013 was almost identical to that of UK. Ireland’s GNP figures were recently revised up by about 8 per cent and I don’t think the eurostat figures take that into account (although I’m not 100 per cent certain). Ireland’s GNP per capita did fall relative to UK between 2007 and 2011 (not as much as 15 per cent), but the decline stopped in 2011 and it has since risen. Sorry for the lack of my usual depth in reply to your valid point, but I’ll get back to it in my blog in a week or so.

  7. @DOCM

    Presumably you believe Denmark should be part of Germany, Finland should be part of Russia, Portugal should be part of Spain, and Ireland should be part of the U. Kingdom again?

  8. Conditions in Scotland are vastly different than they were in Ireland from 1845 to 1922. After the famine we did not trust England and the consensus was that the ties should be severed, it took a long time.
    Scotland was not abused as badly as Ireland. The Highland clearances were done by the Scottish Lairds to push the peasants off the land. The Scots had the luxury of screwing themselves. I have traveled in Scotland and seen the results of the clearances in the outlines of abandoned cottages and small holdings.
    My heart cheers them on but my head says they have a tough row to hoe.

  9. 1. Prior to the 1950s it was rare for a poor country without lots of natural resources to become rich.

    But then, a single industry always has a timeline.

    A century ago, thanks to the lush Pampas grasslands and the innovation of refrigerated steamships, Argentina was among the 10 richest economies in the world, after the likes of Australia, UK and the US, but ahead of France, Germany and Italy.

    A quarter of the workforce in Wales worked in coal mines in 1900.

    2. The most important policy decisions since Irish independence were made in the 1950s when emerging globalisation was embraced.

    Cutting of international trade tariffs had began soon after 1945.

    3. There is a myth in Europe that poorer countries can reach the top wealth rankings but if it happens at all, it can take a century or more. However, research shows that convergence is more likely to a regional level. I wrote on this last June:

    http://www.finfacts.ie/irishfinancenews/article_1027144.shtml

    So comparing the performance of different countries or regions is subject to lots of caveats.

    4. Using the metric Actual Individual Consumption per capita, based on Purchasing Power Standards that eliminate price differences, the Irish along with the Spanish and Italians are among the poorest in the Eurozone with Germany, Austria and Sweden on top (ignore Luxembourg as a chunk of its workforce lives in neighbouring countries). Link to data in next post.

    5. In the 1911 Census, the percentage of the Irish workforce employed in the manufacturing sector was down to 20% from 33% in 1841 and 36% in the UK as a whole in that year.

    In 1901 38% of the UK workforce were in manufacturing.

    The concentration of significant Irish manufacturing was in the north-east. I don’t know if research on the impact of partition on trade has been done.

    6. The UK remains a key trading partner for Ireland and vice-versa.
    When we joined the European Economic Community in 1973, the UK accounted for 55% of total exports. In 2012 that ratio was 18% (services location data for 2013 not yet available).

    The UK remains the largest market for indigenous industrial firms at about 45% of exports.

    The UK Trade & Investment agency says:

    “Ireland is the UK’s fifth largest export market and imports more from the UK than any other country. The UK accounts for 34% of imports into Ireland. In 2012, total trade in goods and services from the UK to Ireland was £27bn.

    Ireland is the UK’s largest export market in food and drink, and second largest market in clothing, fashion and footwear. Trade in other sectors continues to grow. Two way trade stands at €1bn per week.”

    Ireland had a goods trade deficit of €2.6bn in 2013: exports were valued at €14bn and imports amounted to €16.6bn.

    Ireland had a €7bn services surplus but €4.5bn of computer services mainly related to Google “exports’; the transport surplus of €2.2bn mainly relates to Ryanair and Aer Lingus; there was a slight deficit in travel/tourism while insurance/financial/business services/royalties mainly net out.

    7. Even though indigenous tradebale exports account for just 10% of headline exports, direct employment in these firms is greater than in teh foreign-owned exporting firms.

    8. This line in the paper may mislead non-Irish readers

    “Though a large majority of the Irish population voted for the separatist Sinn Féin party in the 1918 UK general election…”

    This was a pre-partition Ireland election and Sinn Féin won 73 of the 105 seats using the past-the-post British voting system.

    According to Wikipedia, the vote was as follows:

    Sinn Féin: 46.9%
    Irish Unionist 25.3%
    Irish Parliamentary Party: 21.7%

  10. Perhaps there are one or two undecided Scottish voters looking for a bit of guidance via this blog.

    Irish population, it’s asserted, has ‘surged ahead’ while Scotland’s has ‘stagnated’, since the 1920s.

    Baffling then, that according to official estimates the female Irish population aged 20-24 fell by more than a third between April 2009 and April 2014.

    That can’t be right, can it?

  11. @JtO:

    Leaving aside your frankly ludicrous remarks about cultural genocide – which in my view undermine your credibility generally – you have not addressed the point I made about the Barnett Formula, which allocated expenditure to Scotland on an extremely generous basis.

    Th latest year for which I have been able to get data is 2008 (see: http://webarchive.nationalarchives.gov.uk/20130129110402/http://www.hm-treasury.gov.uk/d/10(1).pdf). Identifiable public expenditure per head in Englans was £7301, Scotland £8893, Wales £8301. And Wales has a significantly lower GDP per head than Scotland. Mny English regions are also hard done by, but that’s for another day.

  12. @P North
    Emigration since the bust began has been at levels not seen since the mid fifties. Well educated young Irish women are well received abroad and have voted with their feet.

    The safety valve to the rescue yet again.

  13. The fascinating piece is on Irish monetary policy. I don’t know why Salmond let himself be wrong footed on this in the recent TV debate. For 50 very turbulent years Ireland operated a currency board sort of approach. As far as every citizen was concerned they were paid in sterling and their savings were similarly solidly linked to sterling. If Irish bonds had higher yields than UK bonds it was because of fear of plain default, there was no fear of a currency devaluation. JtO, if your campaign could benefit from one message it is that – if Scotland wants to maintain a sterling link and Salmond says he does, point out that Ireland had no difficulty doing so even through economic wars and of course a World War.

    @ DOCM

    Good point about EEC entry. De Gaulle would never have said Non to Irlande but still we had to wait until his successor said Oui to Blighty.

    The break with sterling in 1979 and the entry into the euro were mostly motivated by a post colonial desire to finally break away from Mother rather than any economic rationale.

  14. The Irish link to Sterling post-independence (initially via a currency board and then via a Central Bank which took some time to evolve effectively beyond a currency board) has little relevance to contemporary Scotland.

    For 50 years after independence Ireland had a financial sector which was relatively small and which operated almost entirely domestically. There was no equivalent of RBS or other large financial institutions which might prove too big for any Scottish government to save in a crisis. For that reason, independence might well lead them to re-locate to London.

  15. @ John Sheehan

    I am trying to isolate the currency fear. I can see a fear of a banking collapse which, without UK solidarity could be overwhelming. I can see the fear of an asymmetric shock which would need fiscal transfers from Mother which would no longer be automatic.

    But I think the fear of a weak currency per se is overblown.

  16. @ JTO

    Where on earth did you get that idea from my comments?

    @ BWS

    De Gaulle would certainly have said no had he been asked. The situation was akin to the notice one sees in shops from time to time; “Please do not ask for credit, as a refusal can offend”. We did not have the credit to join the then EEC on our own and we had the good sense to know it.

  17. @ JTO

    I suppose only time will tell whether the decrease in birth rate is part of a general trend to half less children or due to emigration/employment issues. Perhaps a mix of both.

    I don’t agree that the net increase of population is responsible for the rise in property prices. At least it’s not the primary factor. Not unless these people have large amounts of cash. As the market up until the last quarter has been driven by cash buyers. More than half of the properties bought since the bottom of the market have been in cash. I doubt many of the shafted 20/30 something generation have 200-300k lying around.

    Who are these mysterious cash buyers. My guess is the very people you deride. The last of the overpaid state employees. A very conservative unimaginative bunch who only ever have 2 investment strategies, savings or property. As Michael Noonan has gifted them a capital gains sweetie up to the end of this year. And as buy to lets enjoy zero legal downside in this country i.e. paying ones mortgage is optional. And as interest rates on deposits are pathetic. They consider rushing in to property a no brainer.

    Though as M.Noonans sweetie is to be fazed out by year end, my guess is that we’ll see cash buyers continue to decrease as the year goes on. In turn we’ll see a stabilisation in property prices by Q1 next year, as the market reverts to being driven by credit availability/demand. If T&C/wages/employment continue to stagnate for the 20/30 something shafted generation, that should be reflected in lack of credit demand as the next generations continue to stay at home with Mum and Dad, have their surplus income mopped up by rent increases or emigrate.

  18. @ TLS

    You nailed it there! But the cash buyers are all those who benefited from the boom/bubble, not just the lucky generation of the public sector.

  19. @Frank Barry

    I found the paper very interesting, thought provoking and readable. A few thoughts on reading the paper.

    1. The protectionist policies of the early State years, and in particular of the 1930s, could be viewed as, in their time, being essential from the point of view of economic, social and political cohesion of the fledgling State. There would after all have been little point in independence if the immediate result was the further impoverishment of the already impoverished labour force, by losing their jobs from competition from the products of the previous colonial power. The major problem was that protectionism was kept on long after it was expedient to keep it. [Not a first for or last for policy retention leading to near fatal consequences]

    2. The Export Profits Tax Incentives did help to transform the economy through FDI, but this was supposed to be a phase one in the landscape of a fully robust home based industry. The need for FDI in order to acquire markets in the initial phase was essential, but sadly 60 years on, FDI as your paper shows, remains the main stay of industry. Has the success of FDI inhibited a more broadly based and deeper rooted native industrial base?
    3. The break with sterling in 1979 was a policy shift of very dubious merit, motivated more by an anti-UK agenda and a naive (with hindsight) infatuation with all things European. The more logical approach from an economic point of view was to maintain a steady (and competitive as necessary) link with sterling, the main market for indigenous exporters, and the main source of employment. That is equally true today. The economy struggles when sterling weakens and has strengthened recently since sterling has strengthened to ~80 cents. The fact, news to me, than we lost 1.5% of our GDP in 1993 (following the sterling crisis), trying to avoid misalignment with sterling tells it own story. [That our defense was was led by a man without a bank account in any currency tells another story].
    4. The Fianna Fail attempt to get farmers to grow more crops instead of raising cattle, may have originated in a 19th century strand of thought, but was relevant at the time, and , imho, is still relevant. We now heavily subsidise farmers in the very low profit activity of producing beef, while perfectly good land would be be better employed in more profitable crop production.
    5. The concluding comments on the reasons behind our headlong tumble into crisis are interesting. It is clear that their was massive failure, but was it because of lack of independence of the civil service?
    There is no doubt that interest groups, pressure groups etc have influenced policy and that some parts of the civil service (Central Bank, as you mention) have been far too deferential to their political masters. But the civil service itself has been no slouch as an interest group, with the very set up of the regulator being highly influenced by the civil service, and not for altruistic reasons.
    But there are other aspects to this issue. Both ministers and civil service appear to lost control of banks, semi-states, the legal lobby, and other large and powerful organizations. Even in crisis, the banks seem to hold a totally undemocratic sway in the democracy. Why is that?

    6. Finally, one further gripe at the incoherence of current policy making or lack thereof, for which I would say the civil service is largely responsible. Who in this country is responsible for planning and managing housing on a national level?
    The ESRI, through John Fitzgerald, produces reports of housing requirements etc, but who does he hand the report to? Which minister has any interest in receiving it?
    The Dept of the Environment, from the link below, seems to responsible only for housing for the homeless and lining landlord pockets, but no department has any overall responsible to organise and stabilise a boom-bust-industry in the interests of the citizens of the country.
    No department appears responsible, and perhaps no department wants to be responsible.
    At the outbreak of the war, Lemass was immediately made Minister for Supplies, in recognition of the changed strategic focus that was called for. We have no such strategic insight into our national needs. The DOE seems more interested in eliminating plastic bags than in the provision of housing accommodation for the citizens.

    Your quote from Lee (1984, p5) on the the question of the ‘calibre of conceptualization’ of the issue at hand, rings very true in present times.

    An excellent and thought provoking paper.

    Link to DOE paper:
    http://www.environ.ie/en/PublicationsDocuments/FileDownLoad,38768,en.pdf

  20. Protectionism in Ireland provided a valuable stream of cash to politicians, bureaucrats, police. I am talking pre EEC.

    Take plywood for example. You are manufacturing furniture and the most efficient material is plywood (Fir, Spruce, Pine with a finish layer of hardwood) not made in Ireland. You need an import permit. In a normal country you fill out the for and mail it to the bureaucrats. In Ireland you filled out the form and gave it to a TD along with a campaign contribution to the bagman. You would then receive visits from bureaucrats (inspectors) as well as high ranking Gardai (Inspector usually). All of these have to be catered to with what in the general scheme of things would be characterised as wee gifties to move the process along. Half a year to get an import permit for plywood, it was worse for knives and forks.
    Things changed enormously after 1973 in the business sector. At the county and town level of government things actually got worse. My mother coined the phrase “Shooting would be too good for them bastards, slow hanging would be more appropriate.” in response to the level of corruption considered normal at the time.

    The EEC/EU forced us to clean up our act but it is still considered essential to involve a TD in all dealings with government, even things as simple as a passport application.

    I ask myself why?

  21. @ Jo Ryan

    I agree with your take on the currency. In 1979 we should have done a Luxembourg/Belgium type arrangement. The Lux franc remained inextricably at par with the Belgian franc and itself outside the snake mechanism.

    It is amazing to reflect that 5 years later the punt is more or less back on par with the pound.

  22. @ Mickey Hickey

    I’ve never applied for an Irish passport. Why can’t you get one without involving a TD?

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