Tuesday, March 29, 2005

When Irish Eyes Are Smiling

One of my very best friends left Ireland (his homeland) in the mid 1980's and immigrated to the United States in search of a job opportunity. Irish unemployment was 17% in the face of excessive taxation. As my friend said, the joke in Ireland was "last man out of Ireland; turn out the lights".

At Tech Central Station, Hans Labohm reports on a study conducted by Workforall ( an independent European think tank, based in Belgium ), that follows wealth-growth and government size in Belgium and Ireland between 1984 and 2002. The comparison provides dramatic evidence in support of "Reaganomics". In 1985, Ireland cut public spending by 20%, while Belgian government spending stayed the same. As a result, Ireland enjoyed an average of 5.6% annual growth from 1985 to 2002! This growth rate is 3 times the rate in Belgium over the same time period. Real growth in Ireland ( GNP per capita ) was 4 times that in Belgium. Of course, unemployment in Ireland fell dramatically. The investigators speculate that a 1% reduction in government spending will lead to an additional annual growth of 0.6%. Is anyone else in Europe paying attention?