The Globalized Irish Economy In Good Times And Bad

During 1986-2007, average Irish living standards rapidly converged to those of the leaders, while also consolidating its position among the most globalized economies, Outsiders began to look to Ireland as a highly successful model against which to evaluate their own growth strategies. But Ireland's navigation through the hazards of the emergent global economy hit severe shoals in 2007-8, since when an acute economic contraction has seen per capita GNP fall back to the levels of 2000, a return to high net emigration, and a temporary loss of access to international financial markets, as concerns grew at the extent of bank losses and the sustained jump also in other government borrowing. While Ireland's engagement with globalization over the past quarter century cannot be counted a failure, its earlier characterization as a success must now be qualified. This experience, studied here under the headings of macroeconomics, trade, inward investment and the labour market, has policy lessons for countries that have found globalization more of a challenge. Thus, globalization is a powerful transmitter of economic conditions and know-how, facilitating convergence of livng standards. It can also act as a buffer against specific national shocks. But, amplified by globalization, the danger of the anonymous market overshooting is considerable. National governments can be powerless against consequences of such overshooting, As has begun to be recognized in Europe, greater explicit mechanisms of external discipline and co-insurance at the supranational level than existed in the past are needed to cope with these risks.