Can Ireland become rich?

In 2007, the bursting of the U.S housing bubble triggered a global recession that hit Ireland particularly hard. The country had experienced one of the world's largest real estate bubbles, with housing prices plummeting by a staggering 56 percent, leading to widespread defaults and bank crises. The Irish economy shrank by nearly 25 percent, bringing it to the brink of total collapse. However, a bailout from the IMF of $67 billion helped prevent a complete collapse, but the country continued to struggle well into 2013.

Remarkably, over the past decade, Ireland has undergone a dramatic transformation, going from being one of the world's poorest countries to one of the wealthiest. According to the International Monetary Fund, Ireland is currently the second-richest country in the world, surpassing larger nations such as the U.S and wealthy nation-states like Qatar. As of 2021, its GDP per capita was $101,509.

This rapid economic growth is surprising given the country's lack of significant natural resources such as oil reserves, unlike Norway and other Middle Eastern countries, and traditional wealth that has helped other countries rebound such as Switzerland. Additionally, it is not a small country like Luxembourg, which benefits from a high per capita GDP due to its tiny population.

However, Ireland's economic struggles have a long history dating back centuries. Even before gaining independence from England, Ireland faced numerous famines that devastated its population. The most well-known of these was the Great Hunger in the mid-1840s, which claimed the lives of roughly one million people and caused another million to flee the country. Following independence in 1922, Ireland found itself in dire economic straits, with little economic infrastructure and an agricultural-based economy. Archaic land ownership laws made it difficult to expand the agriculture industry or engage in trade with other countries. The onset of the Great Depression further hindered the country's economic growth, leaving it in a precarious position for decades to come.

During the Great Depression, the Irish government observed the Soviet Union's economy and its ability to remain somewhat unaffected by global economic fluctuations due to its isolationist trade policies. Thus, the Irish government decided to adopt a similar economic policy rather than pursue opportunities to establish trade relationships with other countries outside of the British monarchy. This involved implementing a strict isolationist system, which included banning foreign investment and seizing major corporations.

However, this decision proved to be ill-advised for several reasons. Firstly, the USSR was already a large country with sufficient resources, enabling it to be self-sufficient during the depression. In contrast, Ireland lacked the necessary infrastructure and resources to sustain itself under isolationist policies. Moreover, the country did not have the necessary workforce to support the industries required for economic growth. Additionally, economists have long cautioned against the perils of isolationist economic policies, which inevitably lead to long-term disasters, regardless of a country's initial position.

Consequently, Ireland's economy deteriorated further, and half a million Irish citizens fled the country. Even during the post-World War II economic boom, Ireland missed out on the opportunities due to its existing protectionist policies.

Finally, in 1958, the Irish government realized the need to change its economic policies to stimulate growth. They began allowing state-held corporations to become privatized, lifted the bans on trade and foreign investment, and set up the Shannon free trade zone. This zone offered foreign companies special tax incentives on their profits and workforce, making it a highly attractive location for multinational corporations to operate from. Ireland also slashed its corporate tax rates and provided substantial grants to companies that incentivized investment. These policies encouraged huge multinational businesses like Intel and De Beers to invest in Ireland, creating new industries and driving the country's economic turnaround.

The Irish economy experienced remarkable growth in the 1960s due to its focus on education and passing the 1967 free education scheme, resulting in significant progress. However, this prosperity was short-lived, as the 1970s and 80s saw a series of detrimental events, including overspending by the government, two global oil crises, reliance on the UK economy, strikes by Irish banks, rising taxes, and unemployment reaching over 20%.

To counteract this downturn, Ireland implemented policies such as reducing taxes on corporations and the workforce and removing restrictions on firing Irish workers, which had previously limited foreign investment. These measures proved successful, resulting in a second economic boom that made Ireland the third most business-friendly country globally. The country underwent a dramatic transformation from one of the poorest to one of the richest nations worldwide within a decade.

Additionally, Ireland's membership in the EU provided access to trade with other members, resulting in an increase in the value of its exports, particularly agricultural goods. The country also attracted multinational corporations, particularly in tech, healthcare, and finance, due to its well-educated, English-speaking workforce.

However, the recession of 2008 led to a sharp decline in Ireland's economy, causing the cost of living to rise drastically. By 2013, it appeared that the era of Irish prosperity had come to an end. Yet, starting in 2015, the Irish economy began growing at a rate twice that of any other country, which raised suspicions. It turned out that large corporations, including Apple, had sent a considerable amount of money to their Irish subsidiaries due to tax benefits. This money was not truly part of the Irish economy but existed only on paper.

Ireland became the world's largest tax haven, and corporations used it as a big bank, avoiding domestic taxes on their large profits through dubious trade and tax policies. Despite being forced to change these policies, there were no penalties or ramifications, and it continued to boost Ireland's economy. Therefore, Ireland's recent economic prosperity is due to both sound economic decisions and good fortune. Despite the economic struggles Ireland has faced throughout history, it appears to be on track to potentially become the wealthiest country globally.