A number of people have insinuated that the problems in Ireland have something to do with the large scale foreign direct investment that has poured into that country over the past 25 years. The Irish miracle was driven by the attraction of global firms to the Emerald Isle.
The economic collapse of Ireland is primarily a problem of a housing bubble and a financial system that took on way to much risk and when the financial market burst and the housing bubble burst – Ireland collapsed.
There are ways the country could have mitigated the housing bubble (although this is hard) and the only reason why Irish banks are in trouble is hubris. Ireland wanted to be a player in the global financial market and decided to play with the big boys. Iceland had the same problem and its banking system collapsed early on in the recession.
But that doesn’t invalidate the approach to the Irish miracle of liberalizing trade, attracting global investment, expanding the labour market, free university education, low tax rates, etc. Microsoft, Amazon.com, Facebook, Pfizer, Novartis, Google, SAP, Siemens, IBM, Intel, Wyeth – all still alive and well in Ireland and many are growing. For anyone to say that attracting thse firms was a bad idea – they are living in fantasy land.
The real lesson of the Irish Miracle is the right way to deal with rapid, sustained growth for an unprecedented period of time. There was a stretch of something like eight straight years where Ireland attracted more investment than Canada (with a population of 4 million). The rapid need for migration/immigration, the housing boom, the feeling among certain stakeholders that what goes up will always go up – and many other impacts of unprecedented growth – that is what needs to be studied when the dust settles.