Cato Institute: Markets Not Government Sparked Ireland's Economic Growth

According to the Libertarian-based Cato Institute, markets had more to do with Ireland's economic recovery over the past decade than government assistance. Cato researchers say that "the country's astounding 10-year economic history has led some to dub Ireland the Celtic Tiger. Understanding the causes of Ireland's success can help Ireland avoid policy mistakes during its current slower growth that would undermine its future potential." What does this mean? It means that Cato and other conservative policy wonks believe that the private sector should lead future economic development efforts and government should focus on making national, state and local business climates more hospitable for economic growth.

Many outside observers attribute Ireland's success in improving its standard of living over the last 15 years to subsidies from the EU. Cato officials disagree and say instead that "agricultural subsidies are one component of EU transfers and are an example of how well-meaning transfers can get in the way of economic development. The subsidies boost rural incomes, but they retard economic adjustment by keeping rural populations artificially high. Some of these workers could produce more valuable products by moving to the cities. As long as people are subsidized to stay in particular professions, Ireland will not fully exploit its comparative advantage in the international division of labor. This depresses incomes and slows growth."

Have you noticed the debate that is gaining steam about whether the market or government should play the major role in economic development? The Bush Administration pretty much rejected the non-government organization (NGO) model for rebuilding Iraq. Administration officials instead say they will rely on the private marketplace to accomplish this job. Michigan and other states are debating whether the private or public sectors should lead future economic development efforts.

I take these as early signs of the path that economic development may follow in the future, especially if the conservatives have their way. Could this be an omen of what lies ahead for state and regional economic development in America in the post-war era? It's certainly something to think about.

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