I've read many stories about the success of the Irish economy since they cut taxes over twenty years ago. The party line is that the Irish reduced taxes, which boosted private investment, which resulted in a booming economy.
Every time I read these articles, mostly from right wing commentators, something did not ring true. The thesis violated every study and conclusion about what happens when governments try to induce private investment with tax cuts and tax breaks. (It is government spending on public infrastructure that primes the pump for private investment but that is for another day.)
Not knowing the answer, I remained silent.
I am silent no more.
Last week The New Yorker had the story. The magazine that provides the astute commentary of Henrick Hertzberg and the timely and accurate revelations of Seymour Hersh, published The Risk Pool, by Malcolm Gladwell:
The key to understanding the pension business is something called the “dependency ratio,” and dependency ratios are best understood in the context of countries. In the past two decades, for instance, Ireland has gone from being one of the most economically backward countries in Western Europe to being one of the strongest: its growth rate has been roughly double that of the rest of Europe. There is no shortage of conventional explanations. Ireland joined the European Union. It opened up its markets. It invested well in education and economic infrastructure. It’s a politically stable country with a sophisticated, mobile workforce.
But, as the Harvard economists David Bloom and David Canning suggest in their study of the “Celtic Tiger,” of greater importance may have been a singular demographic fact. In 1979, restrictions on contraception that had been in place since Ireland’s founding were lifted, and the birth rate began to fall. In 1970, the average Irishwoman had 3.9 children. By the mid-nineteen-nineties, that number was less than two. As a result, when the Irish children born in the nineteen-sixties hit the workforce, there weren’t a lot of children in the generation just behind them. Ireland was suddenly free of the enormous social cost of supporting and educating and caring for a large dependent population. It was like a family of four in which, all of a sudden, the elder child is old enough to take care of her little brother and the mother can rejoin the workforce. Overnight, that family doubles its number of breadwinners and becomes much better off.
This relation between the number of people who aren’t of working age and the number of people who are is captured in the dependency ratio. In Ireland during the sixties, when contraception was illegal, there were ten people who were too old or too young to work for every fourteen people in a position to earn a paycheck. That meant that the country was spending a large percentage of its resources on caring for the young and the old. Last year, Ireland’s dependency ratio hit an all-time low: for every ten dependents, it had twenty-two people of working age. That change coincides precisely with the country’s extraordinary economic surge.(emphasis added)
By the way, the main focus of the Gladwell article is to show why Walter Reuther was correct fifty years ago, and America's corporate leaders were wrong in setting up the now-failing pension plans.
okay
competition AND birth control
Posted by: mandrake | August 30, 2006 at 12:05 PM