While the Financial Times may have the best coverage of the economic meltdown it isn’t hard to find candidates for the worst, starting with the Toronto Star. The business “section” in the Sunday Star now consists of one page, or half the space given to Malene Arpe’s weekly celeb photo foldout and snarkfest (now pretty much the best part of the paper). Anyway, in this week’s half-baked offering David Olive takes time out to celebrate the collapse of the Irish economy. The former Celtic tiger has been a stone in the shoe of tax-and-spend types for some time now. It slashed corporate taxes with the result that the economy blossomed – and that fiscal conservatives here started agitating for tax cuts with a view to producing similar results, an argument the left didn’t really have any good answers to. Until now. Fortunately, the Irish let their good fortune go to their head and now have a property bust, rising unemployment and a debt-to-GDP ratio of around 80% (very bad – that’s actually a little ahead of where Canada was in 1996). So now, we see Ireland heading for an 8.3 percent drop in GDP just this year alone. That’s what economic reform gets you.Of course, that doesn’t quite wipe out the growth it experienced in the last decade, to say nothing of the decades before that. According to figures here, the real growth rate (excluding inflation) averaged about 5.6 percent from 2000 to 2008, for a compounded total of 63 percent. So giving back 8 percent doesn’t exactly vitiate the pro-growth regime. In fact, if the Irish economy remained flat for the next ten years it would probably still outperform Canada over the 2000-2020 window. But never mind the facts. They got what was coming on account of their stupid corporate tax cuts.
Although when you dig a little deeper, the real reason that Ireland did so well pre-2008 wasn’t corporate tax cuts at all. It was EU subsidies:
Those who spoke with such confidence about the salutary effects of Ireland's pro-business climate had little understanding of what actually yielded Ireland's brief super-prosperity. Joining the European Economic Community (which eventually became part of the newly formed European Union in 1993) unleashed a flood of subsidies to pay for transportation and other basic infrastructure, and to support Irish farmers under Europe's notoriously protectionist Common Agricultural Policy.This used to be the progressive line (sweeping under the carpet the failure to explain why half a century of subsidies never turned Quebec or the Atlantic Provinces into “Tigers”). Mr Olive is maybe so used to repeating it that he can’t stop blurting it out through force of habit. So to summarize the whole position: tax cuts and other free-market reforms caused a fake prosperity which lead to overheating and a devastating collapse –so devastating that it may offset several whole years of the last two decades of growth; except that the prosperity was really caused by EU assistance because corporate tax cuts never work. Well, never mind the logic. It’s mud in the eye for capitalism and the Fraser Institute and that’s all that really matters.