Unemployment in Ireland in the 80’s - Reasons and consequences


Seminar Paper, 2003

18 Pages, Grade: 1,3


Excerpt

Contents:

1 Introduction:

2 A Brief History 1920 - 1980

3 Consequences of protectionism for indigenous Irish industry in the 80’s:
3.1 What were these consequences?

4 (Disappointed hopes in the job-creating potential of foreign companies)
4.1 The IDA approach – incentives and grants
4.2 Why did productivity and employment not rise to the same extend?
4.3 Dependency on foreign investment
4.4 Debate about foreign investment
4.5 Involvement of the state itself in creating unemployment in Ireland in the 80’s
4.6 Ireland’s demography
4.7 Consequences of high unemployment for the people and the state
4.8 Emigration

5 Conclusion

6 Bibliography:

1 Introduction:

This term paper will discuss and evaluate the reasons and consequences of Ireland’s extraordinarily high unemployment rate in the 80’s. (However, to analyze a period of time in a country’s history, one can not just take it out of its historical contexts.) To evaluate Ireland’s labour market situation in the 80’s one has to take a look at incidents that occurred and decisions that were made way back into Ireland’s history (especially focusing on its unemployment problem in the 80’s.) A lot of the reforms and changes initially made in Ireland to improve its economic performance thus creating employment were later to be seen to have had the opposite effect. (Therefore) a brief summary of events highlighting some of these decisions (is) illustrated below.

2 A Brief History 1920 - 1980

After gaining independence in 1922 a policy of protectionism was introduced. The intention was to protect the Irish industry from fierce foreign competition thus giving Ireland the chance to develop and prosper. To do so high import tariffs were introduced. Most countries pursued the same strategy as at the time the Great Depression and the Second World War reduced industrial supplies worldwide. Therefore the only option for any country was to rely on its own industry and resources to satisfy market-demands.

Post 1945 the situation improved considerably and world economy recovered. After about 20 years of Protectionism Irish politicians were disillusioned by its result and had to confess that “it had failed to meet the expectations”.[1] Indigenous economy was far from prospering and “by 1950, manufactured goods still accounted only for some 6 per cent of all exports, with food and food products making up 73 per cent of the total.”[2]

During the late 50’s protectionism was finally abandoned. By the end of more than two decades of protectionism, “Ireland had missed out on the industrial revolution of the mid nineteenth century. “It had remained a poor agricultural country”[3] as production had not increased fast enough to provide employment and acceptable living standards for the growing numbers of people. “In fact, between 1951 and 1958 the economy grew by less than 1 per cent annually.”[4] New ways had to be found to overcome this state of stagnation which was caused by Ireland’s isolation. Ireland had to open its markets to the world. The former ideal of a protected inward economy needed to be changed to an outwards investment friendly state. Ireland had to undergo profound change, from protectionism towards free-trade, and this change needed to happen rapidly. The late industrialization was a significant disadvantage because the advanced industrial economies, which abandoned protectionism earlier than Ireland, were established for much longer and thus gained the experience and the markets they needed to grow. ????It was vital for the time Ireland had lost over the past decades to be recovered rapidly as time meant money and thus economic stability for the people of Ireland.

The first economic program, “The Program for Economic Expansion’ was founded in 1959. It lasted for four years at the end of which it achieved a “4 per cent annual growth rate”[5], which was a big success in comparison to the yearly growth of only 1 per cent in the past. Things seemed to be working and with new self confidence more plans were made to accelerate the economic growth even further. In 1961 an application was made to join the European Economic Community (EEC). This proposal “put intense pressure on industry and agriculture to improve competitiveness and efficiency.”[6] The next step towards free-trade was the Anglo-Irish Free Trade Area Agreement in 1965, which put an end to all trade disputes between Britain and Ireland.[7] During this period of economical success the Industrial Development Authority (IDA), an agency founded in 1949 and responsible for the development of Irish economy, was provided with new funding, the importance of which will be discussed later.[8]

In 1973 Ireland’s efforts to establish free-trade were finally rewarded by joining the EEC. The IDA had made use of the new-founded benefits of free-trade and succeeded in attracting foreign investment. The foreign companies worked profitably and growth increased. Yet still it was noticed that economy did not grow evenly in all areas. The Irish indigenous industry could not use the new situation of free-trade to its advantage and jobs were being lost. Despite this development, Ireland’s future was still seen in the open-market strategy. This decision was seemingly confirmed through the growth figures. Between 1960 and 1973 the volume of the manufacturing industry doubled, […].[9] Although Ireland suffered from the short-lived recession during 1973-1976, the positive development pre 1973 seemed to continue as growth picked up again after 1976. It was strongly believed that international investment, which had declined as a consequence of the recession, would once again resume and compensate for job losses in the indigenous industry. Future prospects at the end of the 70’s were promising. Ireland was assured to be on the right path to a prosperous economy. The Irish had gained self-confidence and were determined to improve their situation further.[10]

During the 1980`s however things seemed to deteriorate once again. Ireland did not expect a second oil-crisis, and this time the resulting recession was not short lived. The impacts were devastating. As foreign investment declined, more countries tried to win over the companies still willing and able to invest. For the indigenous companies, which had managed to survive so far, it was a catastrophe. They had used large proportions of their resources to adjust to free trade and competition and thus did not have the capacities to endure a long recession. Furthermore they were selling largely to the home market, where domestic demand weakened considerably as people were not spending as much money as they had in the past.[11] Indigenous companies suffered badly and had to rationalize, one result of this being an increased unemployment rate. Padraic White describes the situation as following: “As recession intensified, unemployment rose, and the battle for investment between European countries became more aggressive and much ‘dirtier’.”[12]

The recession affected all industrialized nations including Ireland, the whole of Europe and the United states. Consequences for Ireland however seemed to be higher than for most, effecting employment rates more than was seen in other countries. The reasons for this discrepancy in effect and persistency of the recession shall be discussed in more detail later. Furthermore distinctive Irish features including high birth rates and emigration and their possible connections to rising unemployment in the 80’s shall be discussed. Firstly the consequences of the transition from protectionism to free-trade for Irish indigenous industry and thus for the Irish labor market will be addressed.

3 Consequences of protectionism for indigenous Irish industry in the 80’s:

When protectionism was abandoned in the late 1950’s, the economical state was devastating. The lasting effects could still be felt in the 70’s and the 80’s. ??? Protectionism not only failed to meet expectations of Ireland by over a period of twenty years being unable to increase the export rate, but it also had various negative consequences for the future of Irish economy.

3.1 What were these consequences?

Protectionism meant that Irish economy was sheltered from all foreign competition. The incentive for foreign companies to compete on the Irish market was taken away, not only by high tariff walls as mentioned earlier, but also by a ban on the majority of foreign ownership of industry.[13] As a result of these measures foreign companies avoided investing in Ireland. Irish industry isolated itself and produced only for the Irish market. Without any competition and only a small market to produce for, expansion and economic growth was not possible in the Irish economy. Irish products were overpriced and could not be sold on the world markets. Growth stagnated. The more the Irish state protected its industry the less it was able to compete and the more did it rely on this protection. The Irish state created a vicious circle for its own industry.

It was fair to say in summary that Ireland’s economy was not prepared for free-trade. It was not used to having to compete with foreign companies on world markets. The Irish state knew of the dangers for indigenous companies which they had fostered and supported for more than twenty years and grants were provided for indigenous industries to adjust to the new situation, however these did not help. As more and more steps towards free-trade were being taken, more and more native companies went to the wall not being able to cope without the protection from the state they so relied on, resulting in more jobs being lost.

“The casualty rate among Irish industry […] was horrendous. […] By 1980, one out of four jobs was lost and in the bigger companies with over 500 hundred employees, the losses were even more devastating – one out of two jobs disappeared.”[14]

As previously aforementioned, despite the job losses in indigenous industries which caused a feeling of uncertainty, the confidence in the job-creating potential of foreign companies was strong enough to stick to the open-market strategy. The outcomes were disappointing resulting once again in a rise in unemployment throughout the 80’s.

[...]


[1] Sharry and White 2000: 16.

[2] Sharry and White 2000: 18.

[3] Hussey 1993: 268.

[4] Sharry and White 2000: 21.

[5] Sharry and White 2000: 22.

[6] Sharry and White 2000: 22.

[7] Hussey 1993: 268-69.

[8] Hussey 1993: 269.

[9] Hussey 1993: 268.

[10] See Hussey 1993: 269-270.

[11] Goldthorpe 1992: 35.

[12] Sharry and White 2000: 204.

[13] See Sharry and White 2000: 18.

[14] Sharry and White 2000: 305

Excerpt out of 18 pages

Details

Title
Unemployment in Ireland in the 80’s - Reasons and consequences
College
University of Heidelberg  (Anglistisches Seminar)
Course
Cultural Studies: From Crisis to Celtic Tiger: Ireland at the End of the 20th century
Grade
1,3
Author
Year
2003
Pages
18
Catalog Number
V111560
ISBN (eBook)
9783640096107
ISBN (Book)
9783656237013
File size
410 KB
Language
English
Tags
Unemployment, Ireland, Reasons, Cultural, Studies, From, Crisis, Celtic, Tiger, Ireland
Quote paper
Christian Weckenmann (Author), 2003, Unemployment in Ireland in the 80’s - Reasons and consequences, Munich, GRIN Verlag, https://www.grin.com/document/111560

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