Cllr J P Floru: Celtic Tiger through tax cuts, not EU subsidies

Dr. Terence Kealey (Vice Chancellor of Buckingham University) recently explained on Radio 4’s PM programme  that Ireland is now wealthier than the UK.  Indeed, Ireland’s per capita income is $38,504; the UK’s is $33,238.  It is probably for the first time ever that Ireland is wealthier than the UK.

In free market circles it has become common knowledge that the Celtic Tiger was created through tax cuts and cuts in regulation.  The usual counter-argument from the other side is that not the market, but EU subsidies caused the Irish boom.

I came across an article by Benjamin Powell  which explains how EU subsidies in fact did not help, but hindered Irish growth.  The article also makes an interesting comparison between EU countries which also received large amounts of subsidies, but who transformed into Tigers or Tiger Cubs.

Here’s the beef:

• Dr. Powell found no link between economic growth rates and EU transfers. Over a period of time the Irish growth rates were highest when the EU subsidies were lowest.  At its highest level subsidies were 4 % of GDP.  Greece also received 4 % of GDP – but its growth rates were nowhere near Ireland’s.
• Agricultural subsidies keep agricultural populations artificially high – when they would be more productive in other (urban) activities.
• EU subsidies retard growth in another way: large number of people are employed in the business of obtaining the subsidies, rather than in more productive sectors.

Comments

[Hardeep_Singh]

I couldn't agree more ..... life really isn't that complicated if you work hard for your money with little distraction you'll progress both in financial prosperity and socially too. You'll never get anywhere by being spoon fed and the economy isn't exempt from that notion. Subsidies for what exactly? To promote protectionism, state sponsored laziness, fraud? Any production line will flow better without disruption or distractions so why wouldn't the same apply to a national economy? However with the constant distraction of taxes and having to all slow and dumb down for the laziest within society we are getting no where fast. If we were able to get on with the job without being hammered by taxation (stealth included) we'd be in a far better position.

I've never really unbderstood the intervention of local or central government and the concept of subsidy just seems to be a smoke screen dreamt up by a bunch of freeloaders and crooks for a government desperate to win votes from vital sectors of society.