The NYT's globalization cheerleader Thomas L. Friedman has a cure for what ails Old Europe: A taste of Irish medicine.
Did you know PM PM is spending two days there before he goes to the G8 summit in Gleneagles?
An excerpt from the July 1 column:
One of the first reforms Ireland instituted was to make it easier to fire people, without having to pay years of severance. Sounds brutal, I know. But the easier it is to fire people, the more willing companies are to hire people.
Harry Kraemer Jr., the former C.E.O. of Baxter International, a medical equipment maker that has made several investments in Ireland, explained that “the energy level, the work ethic, the tax optimization and the flexibility of the labor supply” all made Ireland infinitely more attractive to invest in than France or Germany, where it was enormously costly to let go even one worker. The Irish, he added, had the self-confidence that if they kept their labor laws flexible some jobs would go, but new jobs would keep coming – and that is exactly what has happened.
Ireland is “playing offense,” Mr. Kraemer said, while Germany and France are “playing defense,” and the more they try to protect every old job, the fewer new ones they attract.
But Ireland has started to play offense in a lot of other ways as well. It initially focused on attracting investments from U.S. high-tech companies by offering them a flexible, educated work force and low corporate taxes. But now, explained Ireland's minister of education, Mary Hanafin, the country has started a campaign to double the number of Ph.D.'s it graduates in science and engineering by 2010, and it has set up various funds to get global companies, and just brainy people, to come to Ireland to do research. Ireland is now actively recruiting Chinese scientists in particular.
From a June 29 column:
Ireland's turnaround began in the late 1960's when the government made secondary education free, enabling a lot more working-class kids to get a high school or technical degree. As a result, when Ireland joined the E.U. in 1973, it was able to draw on a much more educated work force.
By the mid-1980's, though, Ireland had reaped the initial benefits of E.U. membership – subsidies to build better infrastructure and a big market to sell into. But it still did not have enough competitive products to sell, because of years of protectionism and fiscal mismanagement. The country was going broke, and most college grads were emigrating.
“We went on a borrowing, spending and taxing spree, and that nearly drove us under,” said Deputy Prime Minister Mary Harney. “It was because we nearly went under that we got the courage to change.”
And change Ireland did. In a quite unusual development, the government, the main trade unions, farmers and industrialists came together and agreed on a program of fiscal austerity, slashing corporate taxes to 12.5 percent, far below the rest of Europe, moderating wages and prices, and aggressively courting foreign investment. In 1996, Ireland made college education basically free, creating an even more educated work force. …
In 1990, Ireland's total work force was 1.1 million. This year it will hit two million, with no unemployment and 200,000 foreign workers (including 50,000 Chinese). Others are taking notes. Prime Minister Bertie Ahern said: “I've met the premier of China five times in the last two years.”
Ireland's advice is very simple: Make high school and college education free; make your corporate taxes low, simple and transparent; actively seek out global companies; open your economy to competition; speak English; keep your fiscal house in order; and build a consensus around the whole package with labor and management – then hang in there, because there will be bumps in the road – and you, too, can become one of the richest countries in Europe.