From Producer to Creator, the Implications and Challenges for Ireland

Abstract

During the earlier period of the 20th century, following a brief flirtation with laissez-faire economic policies in the 1920's, there was a decisive shift towards economic nationalism and protectionism based on "infant-industry" arguments. This was in line with much conventional economic theory at the time. At the time those working in agriculture accounted for over 50% of the labour-force and agricultural based exports accounted for almost 90% of all exports. Over 90% of these exports went to the U.K. and Ireland was heavily dependent on imports from the U.K. for industrial products. From the 1930's determined efforts were made to build up an indigenous industrial capability by the introduction of duties, ranging from 15% to 75%, on a wide variety of imported goods and the parallel promotion of industrial enterprises in Ireland. At the same time legislation was introduced to provide that Irish nationals must hold a majority of the nominal share capital and voting rights in new manufacturing enterprises. Political and economic decisions taken in the middle part of the century, like the negotiation of the Anglo/Irish free trade agreement; the relaxing of company ownership rules; the establishment of the Industrial Development Authority to promote foreign direct investment, had a significant impact on the development of the economy over the following 50 years and changed Ireland from an agricultural economy to one where most of the top 10 companies worldwide in the pharmaceutical, electronic, medical devices, finance and software sectors now have significant and strategic operations in Ireland. Economic and industrial policy was used as a tool to create jobs and employment. The requirement that projects must be internationally trading helped to diversify the economy away from its dependence on UK markets and was also used as a way of encouraging the entrepreneurial spirit and the development of the indigenous industry sector. How has Ireland changed from an agricultural to an industrial economy and what have been the challenges for education and vocational training to meet the changing needs of industry in the first instance and the services sector in latter years. As the economy now moves from a cost competitive mode to a high cost mode how does Ireland prepare to adjust and what are the challenges. What is the next stage of FDI - Ireland must move from being the producer to being the creator of solutions to other people's challenges providing solutions that are superior to those provided by competing economies.