The Irish Miracle of the 21st Century

In 2007, the bursting of the housing bubble in the United States led to a global recession that affected countries across the world, and Ireland was one of the countries that suffered the most. With the biggest real estate bubble of any place in the world, housing prices fell by a staggering 56%, and defaults across the country caused banks to go into crisis, leading to rampant layoffs. The Irish economy shrank by almost 25%, and it was on the verge of total collapse. Ireland managed to secure a bailout from the International Monetary Fund for $67 billion, which helped prevent things from totally falling apart. Yet, in 2013, Ireland was still struggling.

However, over the past decade, Ireland has gone from one of the poorest countries in the world to one of the richest. According to the International Monetary Fund, Ireland is currently the second-richest country in the world. In the last eight years, it has leapfrogged larger nations like the United States and rich nation-states like Qatar. In 2021, it had a GDP per capita of $101,509. But based on everything we know about economics, that should not have happened. So, what's really going on?

This article delves into Ireland's economic struggles dating back hundreds of years, including the Great Hunger in the mid-1840s, where roughly a million people died, and another million fled the country. After Ireland gained independence from England in 1922, it suddenly found itself in a dire economic situation. Up until then, it was primarily a country consisting of subsistence farmers with very little economic infrastructure set up at all. The only trade it had previously done was with its now-sworn enemy, England. At that point, the only immediate expansion it could hope to have was by growing its agriculture industry and hoped to begin trade with other countries. But archaic land ownership laws made that increasingly tricky.

As the Great Depression-era descended on the world, Ireland was in no position to grow its economy because, like most countries globally, it was suffering from the devastation of the depression. However, they soon noticed one country in particular was seen to do okay – the USSR. Since the USSR had a strictly isolationist trade and economic policy, it was somewhat more immune to the dips and bumps of the global economy. So the Irish government decided they'd adopt that kind of economic policy, rather than try to take advantage of its ability to make moves outside the British Monarchy and set up trade relationships with countries around the world. They adopted a strict USSR-style isolationist system; the government banned foreign investment and seized any major corporations it could find.

This was a poor decision for many reasons. The USSR already had enough resources and was so big, it could afford to be isolationist, especially in a time of depression. Ireland, on the other hand, wasn't set up for that kind of going-solo policy. It didn't have the kind of mass agricultural food production it needed to fully subsist on its own. And even if it had, there wasn't enough of a domestic workforce to provide the country with the industries it needed. And as economists have long pointed out, isolationist economic policies will most often lead to disaster in the long run, regardless of where a country started. So Ireland slid into an even worse economic situation than it had been before independence. Things got so bad half a million Irish citizens fled the country. And what's worse, when the world experienced an economic boom after WW2, Ireland missed out on it because of its existing protectionist policies.